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EXHIBIT 10.25
 
EMPLOYMENT AGREEMENT

THIS AGREEMENT (“Agreement”) is effective as of the 16th day of April, 2007, by
and between ROBERT J. TONER, JR., an individual resident of the State of Georgia
(“Employee”), and INNOTRAC CORPORATION, a Georgia corporation (the “Employer”).

W I T N E S S E T H:

WHEREAS, Employee previously entered into an Employment Agreement with the
Employer, which has expired by its terms; and

WHEREAS, the parties hereto desire to enter into an agreement for the Employer’s
continued employment of Employee on the terms and conditions contained herein;
and

WHEREAS, this Employment Agreement supersedes any prior employment agreement or
promises between Employer and Employee regarding the terms of Employee’s
employment; and

NOW, THEREFORE, in consideration of the premises and the mutual promises and
agreements contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:

Section 1. Employment.

Subject to the terms hereof, the Employer hereby employs Employee, and Employee
hereby accepts such employment. Employee will serve as Senior Vice President or
in such other executive capacity as the Board of Directors of Employer (the
“Board of Directors”) may hereafter from time to time determine. Employee agrees
to devote his full business time and best efforts to the performance of the
duties that Employer may assign Employee from time to time.

Section 2. Term of Employment.

The term of Employee's employment (the “Term”) shall continue from the date
hereof until the earlier of (a) December 31, 2009, provided that this date shall
automatically extend until December 31, 2010 and until each December 31
thereafter, unless either the Employer or the Employee provides written notice
of non-renewal to the other party no later than the September 30th prior to the
upcoming December 31st expiration date, or (b) the occurrence of any of the
following events:

(i) The death or total disability of Employee (total disability meaning the
failure to fully perform his normal required services hereunder for a period of
three (3) months during any consecutive twelve (12) month period during the term
hereof, as determined by the Board of Directors, by reason of mental or physical
disability);

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(ii) The termination by Employer of Employee's employment hereunder, upon prior
written notice to Employee, for “good cause”, as determined by the Board of
Directors. For purposes of this Agreement, “good cause” for termination of
Employee's employment shall exist (A) if Employee is convicted of, pleads guilty
to, or confesses to any felony or any act of fraud, misappropriation, theft or
embezzlement, (B) if Employee fails to comply with the terms of this Agreement,
and, within thirty (30) days after written notice from Employer of such failure,
Employee has not corrected such failure or, having once received such notice of
failure and having so corrected such failure, Employee at any time thereafter
again so fails, (C) if Employee violates any of the provisions contained in
Section 4 of this Agreement, (D) if Employee tests positive for illegal drugs,
or (E) if Employee’s conduct is deemed unprofessional, unethical or detrimental
to the Employer; or

(iii) The termination of Employee’s employment by either party upon at least
ninety (90) days prior written notice.

Section 3. Compensation.

3.1 Term of Employment. Employer will provide Employee with the following
salary, expense reimbursement and additional employee benefits during the term
of employment hereunder:

(a) Salary. Employee will be paid a salary (the “Salary”) of no less than Two
Hundred Thousand Dollars ($200,000) per annum, less deductions and withholdings
required by applicable law. The Salary shall be paid to Employee in equal
monthly installments (or on such more frequent basis as other executives of
Employer are compensated). The Salary shall be reviewed by the Board of
Directors of Employer on at least an annual basis.

(b) Bonus. Employee will be entitled to an annual bonus, based on personal and
company performance, as awarded by the Board of Directors. The Bonus for each
calendar year, if any, shall be paid promptly upon the availability of annual
financial results and no later than March 15 of the following calendar year.

(c) Vacation. Employee shall receive four (4) weeks vacation time per calendar
year during the term of this Agreement. Any unused vacation days in any calendar
year may not be carried over to subsequent years.

(d) Expenses. Employer shall reimburse Employee for all reasonable and necessary
expenses incurred by Employee at the request of and on behalf of Employer.

(e) Benefit Plans. Employee may participate in such medical, dental, disability,
hospitalization, life insurance and other benefit plans (such as pension and
profit sharing plans) as Employer maintains from time to time for the benefit of
other senior executives of Employer, on the terms and subject to the conditions
set forth in such plans. Employer shall contribute to the premiums for
reasonable supplemental life and disability insurance coverage.

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3.2 Effect of Termination.

(a) Accrued Benefits. Except as hereinafter provided, upon the termination of
the employment of Employee hereunder for any reason, Employee shall be entitled
to all compensation and benefits earned or accrued under Section 3.1 as of the
effective date of termination (the “Termination Date”), but from and after the
Termination Date, no additional compensation or benefits shall be earned by
Employee hereunder. If Employee’s termination of employment is for any reason
other than by Employer pursuant to Section 2(b)(ii) above, Employee shall be
deemed to have earned any Bonus payable with respect to the calendar year in
which the Termination Date occurs on a prorated basis (based on the number of
days in such calendar year through and including the Termination Date divided by
365) based upon the year to date financials and performance of the Employer and
assuming performance at the target level for any individual performance
criteria. Any such prorated Bonus shall be payable as soon as administratively
practicable and no later than 30 days following the Employee’s Termination Date.

(b) Severance. If Employee's employment hereunder is terminated by Employer
pursuant to Section 2(b)(iii) hereof, then, in addition to any other amount
payable hereunder, Employer shall continue to pay Employee his normal Salary
pursuant to Section 3.1(a) for a three-month period (on the same basis as if
Employee continued to serve as an employee hereunder for such applicable
period); provided, however, that all such continued Salary payments shall be
paid to the Employee not later than the 15th day of the third month following
the end of the year in which the Termination Date occurs, and any such continued
Salary payment that would be payable after such date will be payable with the
last payment that would occur prior to such date.

(c) Stock Options. If Employee's employment is terminated pursuant to
Section 2(b)(i) hereof or if Employee's employment is terminated by Employer
pursuant to Section 2(b)(iii), all options to purchase stock of the Employer or
an affiliate of the Employer granted to Employee shall immediately become fully
vested and exercisable upon such termination. In the case of a termination
pursuant to Section 2(b)(i) hereof, the options will expire in accordance with
their respective scheduled expiration dates. In the case of a termination by
Employer pursuant to Section 2(b)(iii) hereof, the options will expire on the
earliest of (i) the first anniversary of the Employee’s Termination Date, (ii)
the later of the 15th day of the third month following the date at which, or
December 31 of the calendar year in which, the options would otherwise have
expired in accordance with their scheduled post-employment exercise term, and
(iii) the expiration of the maximum term provided in the options. Upon the death
of Employee, any options that Employee would otherwise be entitled to exercise
hereunder may be exercised by his personal representatives or heirs, as
applicable. If Employee's employment is terminated by Employer pursuant to
Section 2(b)(ii), all options not then exercisable shall be forfeited as of the
Termination Date and those options which are exercisable as of the Employee’s
Termination Date shall be exercisable for the period provided in the options, or
if longer, for a period of 60 days after the Termination Date, but in no event
beyond the maximum option term provided in the options, and after such 60-day
period, all unexercised options will expire. To the extent necessary, this
provision shall be deemed an amendment of any option agreement between the
Employee and the Employer or an affiliate of the Employer.

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3.3 Officer Retention Plan and Effect of Change in Control. Employee shall be
eligible to participate in the Innotrac Corporation Officer Retention Plan (the
“Retention Plan”), attached hereto and incorporated herein as Exhibit A to this
Agreement, as such Retention Plan may be modified from time to time. Pursuant to
the Retention Plan, Employee may be entitled to a retention bonus payment if a
Change in Control (as defined in the Retention Plan) occurs while the Employee
is employed by the Employer or if the Employer terminates the Employee’s
employment other than for good cause pursuant to Section 2(b)(ii) within 6
months prior to the date of a Change in Control. If Employee becomes entitled to
any payment under the Retention Plan, the Employee will not be entitled to any
payment under Section 3.2(b) above upon the Employee’s termination of
employment. If any amount was paid pursuant to Section 3.2(b) above prior to the
date of any payment under the Retention Plan, the amount payable under the
Retention Plan will be reduced by the amount previously paid the Employee
pursuant to Section 3.2(b).

Section 4. Partial Restraint on Post-termination Competition and
Non-Solicitation.

4.1 Definitions. For the purposes of this Section 4, the following definitions
shall apply:

(a) “Company Activities” means the business of providing fulfillment services,
order processing, call center and customer care services, technology solutions,
e-commerce services including e-commerce fulfillment and e-commerce return
services as well as other similar services that Innotrac or its subsidiaries is
involved in at the date of this agreement. 

(b) “Competitor” means any business, individual, partnership, joint venture,
association, firm, corporation or other entity, other than the Employer or its
affiliates or subsidiaries, engaged, wholly or partly, in Company Activities.

(c) “Competitive Position” means (i) the direct or indirect ownership or control
of all or any portion of a Competitor; or (ii) any employment or independent
contractor arrangement with any Competitor whereby Employee will serve such
Competitor in any managerial capacity.

(d) “Confidential Information” means any confidential, proprietary business
information or data belonging to or pertaining to Employer that does not
constitute a “Trade Secret” (as hereinafter defined) and that is not generally
known by or available through legal means to the public, including, but not
limited to, information regarding Employer’s customers or actively sought
prospective customers, suppliers, manufacturers and distributors gained by
Employee as a result of his employment with Employer.

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(e) “Customer” means actual customers or actively sought prospective customers
of Employer during the Term.

(f) “Noncompete Period” or “Nonsolicitation Period” means the period beginning
the date hereof and ending on (i) the first anniversary of the termination of
Employee's employment with Employer if Employee is not entitled to any payment
under the Retention Plan and (ii) the third anniversary of the termination of
Employee’s employment with Employer if Employee receives any payment under the
Retention Plan.

(g) “Territory” means the area within a hundred (100) mile radius of any
corporate office of Employer or any of its subsidiaries, affiliates or
divisions.

(h) “Trade Secrets” means information or data of or about Employer, including
but not limited to technical or non-technical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data, financial plans, products plans, or lists of actual or potential
customers, clients, distributees or licensees, information concerning Employer’s
finances, services, staff, contemplated acquisitions, marketing investigations
and surveys, that (i) derive economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from their disclosure or use; and
(ii) are the subject of efforts that are reasonable under the circumstances to
maintain their secrecy.

(i) “Work Product” means any and all work product, property, data documentation
or information of any kind, prepared, conceived, discovered, developed or
created by Employee for Employer or its affiliates, or any of Employer’s or its
affiliates’ clients or customers.

4.2 Trade Name and Confidential Information.

(a) Employee hereby agrees that (i) with regard to each item constituting all or
any portion of the Trade Secrets, at all times during the Term and all times
during which such item continues to constitute a Trade Secret under applicable
law; and (ii) with regard to any Confidential Information, during the Term and
the Noncompete Period:

(i) Employee shall not, directly or by assisting others, own, manage, operate,
join, control or participate in the ownership, management, operation or control
of, or be connected in any manner with, any business conducted under any
corporate or trade name of Employer or name similar thereto, without the prior
written consent of Employer;

(ii) Employee shall hold in confidence all Trade Secrets and all Confidential
Information and will not, either directly or indirectly, use, sell, lend, lease,
distribute, license, give, transfer, assign, show, disclose, disseminate,
reproduce, copy, appropriate or otherwise communicate any Trade Secrets or
Confidential Information, without the prior written consent of Employer; and

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(iii) Employee shall immediately notify Employer of any unauthorized disclosure
or use of any Trade Secrets or Confidential Information of which Employee
becomes aware. Employee shall assist Employer, to the extent necessary, in the
procurement or any protection of Employer’s rights to or in any of the Trade
Secrets or Confidential Information.

4.3  Noncompetition.

(a) The parties hereto acknowledge that Employee is conducting Company
Activities throughout the Territory. Employee acknowledges that to protect
adequately the interest of Employer in the business of Employer it is essential
that any noncompete covenant with respect thereto cover all Company Activities
and the entire Territory.

(b) Employee hereby agrees that, during the Term and the Noncompete Period,
Employee will not, in the Territory, either directly or indirectly, alone or in
conjunction with any other party, accept, enter into or take any action in
conjunction with or in furtherance of a Competitive Position. Employee shall
notify Employer promptly in writing if Employee receives an offer of a
Competitive Position during the Noncompete Term, and such notice shall describe
all material terms of such offer.

Nothing contained in this Section 4 shall prohibit Employee from acquiring not
more than five percent (5%) of any company whose common stock is publicly traded
on a national securities exchange or in the over-the-counter market.

4.4 Nonsolicitation of Customers

(a) During Employment Term. Employee hereby agrees that Employee will not,
during the Term, either directly or indirectly, alone or in conjunction with any
other party solicit, divert or appropriate or attempt to solicit, divert or
appropriate, any Customer for the purpose of providing the Customer with
services or products competitive with those offered by Employer during the Term.

(b) During Nonsolicitation Period. Employee hereby agrees that Employee will
not, during the Nonsolicitation Period, either directly or indirectly, alone or
in conjunction with any other party solicit, divert or appropriate or attempt to
solicit, divert or appropriate, any Customer for the purpose of providing the
Customer with services or products competitive with those offered by Employer
during the Term; provided, however, that the covenant in this clause shall limit
Employee’s conduct only with respect to those Customers with whom Employee had
substantial contact (through direct, managerial or supervisory interaction with
the Customer or the Customer’s account) during a period of time up to but no
greater than two (2) years prior to the last day of the Term.

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4.5 Nonsolicitation of Employees. Employee hereby agrees that Employee will not,
during the Term and Nonsolicitation Periods, directly or indirectly (i) hire any
employees of the Employer, or (ii) solicit or encourage any personnel employed
by the Employer to terminate his or her relationship with the Employer.

Section 5. Miscellaneous.

5.1 Severability. The covenants in this Agreement shall be construed as
covenants independent of one another and as obligations distinct from any other
contract between Employee and Employer. Any claim that Employee may have against
Employer shall not constitute a defense to enforcement by Employer of this
Agreement.

5.2 Survival of Obligations. The covenants in Section 4 of this Agreement shall
survive termination of Employee's employment, regardless of who causes the
termination and under what circumstances.

5.3 Notices. Any notice or other document to be given hereunder by any party
hereto to any other party hereto shall be in writing and delivered in person or
by courier, by telecopy transmission or sent by any express mail service,
postage or fees prepaid at the following addresses:

Employer

Innotrac Corporation
6655 Sugarloaf Parkway
Duluth, GA 30097
Attention: Mr. Scott Dorfman
                                                   Chief Executive Officer
Telephone No.: (678) 584-4010

Employee

Robert J. Toner, Jr.
4140 Homestead Ridge
Cumming, GA  30041

or at such other address or number for a party as shall be specified by like
notice. Any notice which is delivered in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or its agent.

5.4 Section 409A. To the extent applicable, this Agreement shall at all times be
operated in accordance with the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended, including the regulations promulgated
thereunder. The Employer shall have authority to take action, or refrain from
taking any action, with respect to the payments and benefits under this
Agreement that is reasonably necessary to comply with Section 409A.
Specifically, the Employer shall have the authority to delay the commencement of
payments to “specified employees” of the Employer to the extent such delay is
mandated by the provisions of Section 409A.

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5.5 Binding Effect. This Agreement inures to the benefit of, and is binding
upon, Employer and their respective successors and assigns, and Employee,
together with Employee's executor, administrator, personal representative,
heirs, and legatees.

5.6 Entire Agreement. This Agreement is intended by the parties hereto to be the
final expression of their agreement with respect to the subject matter hereof
and is the complete and exclusive statement of the terms thereof,
notwithstanding any representations, statements or agreements to the contrary
heretofore made. This Agreement may be modified only by a written instrument
signed by all of the parties hereto.

5.7 Governing Law. This Agreement shall be deemed to be made in, and in all
respects shall be interpreted, construed, and governed by and in accordance
with, the laws of the State of Georgia. No provision of this Agreement shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority or by any board of arbitrators
by reason of such party or its counsel having or being deemed to have structured
or drafted such provision.

5.8 Headings. The section and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

5.9 Specific Performance. Each party hereto hereby agrees that any remedy at law
for any breach of the provisions contained in this Agreement shall be inadequate
and that the other parties hereto shall be entitled to specific performance and
any other appropriate injunctive relief in addition to any other remedy such
party might have under this Agreement or at law or in equity.

5.10 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

5.11 Public Announcement. Neither party shall disclose that this Agreement has
been executed until such time as both parties mutually agree to such disclosure.

 

[Signatures continued on next page]
 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

                    INNOTRAC CORPORATION

                    By: /s/ Scott D.
Dorfman                                              
                                                                                                                                                                  
Scott D. Dorfman
                                                                                                                                                                  
Chief Executive Officer

                    EMPLOYEE

                    /s/ Robert J. Toner,
Jr.                                                      
                    Robert J. Toner, Jr.

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Exhibit A

INNOTRAC CORPORATION
OFFICER RETENTION PLAN

 
INTRODUCTION
 
Purpose. The Board of Directors of Innotrac Corporation (the “Company”) has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of its executives,
notwithstanding the possibility or occurrence of a significant restructuring or
change in control of the Company or of a parent company of the Company. The
Board of Directors (the “Board”) believes it is imperative to diminish the
inevitable distraction of such executives by virtue of the personal
uncertainties and risks created by such possibilities and to encourage the
executives’ full attention and dedication to the Company and its affiliates.
Therefore, in order to accomplish these objectives, the Board has approved and
adopted this Innotrac Corporation Officer Retention Plan (the “Plan”) to induce
certain executives of the Company and its affiliates to remain in their current
employment and to devote their time and energies to the successful performance
of their employment duties by providing such persons a measure of security.
 
Effective Date. The Plan was approved by the Board of Directors of the Company
on March 28, 2005 and shall be effective on that date (“Effective Date”).
 

 
ELIGIBILITY
 
Executives Eligible to Participate Plan. Initial Participants in the Plan have
been selected by the Board or the Committee and are reflected on Exhibit A
hereto. Exhibit A shall be adjusted from time to time as necessary to reflect
the addition or subtraction of Participants or the reallocation of Participation
Interests as determined by the Committee.
 

 
DEFINITIONS
 
Definitions. The following capitalized terms used in the Plan shall have the
meanings assigned to them below:
 
"Board" means the Board of Directors of the Company.
 
"Cause" for termination of employment of a Participant has the meaning assigned
such term or the term “good cause” in the Participant’s Employment Agreement
with the Company.

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A "Change in Control" as used herein means any change in the ownership of the
Company or effective control of the Company or any change in the ownership of a
substantial portion of the assets of the Company, as defined in Code Section
409A(a)(2)(A)(v) and the regulations promulgated thereunder.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Committee” means the committee responsible for the administration of the Plan,
which shall be the Compensation Committee of the Board, or such other committee
as may be designated by the Board.
 
"Company" means Innotrac Corporation, a Georgia corporation.
 
"Disability" of a Participant has the meaning assigned such term or the term
“total disability” in the Participant’s Employment Agreement with the Company.
If the Participant has no Employment Agreement, Disability shall have the
meaning ascribed to the term “Disabled” under Code Section 409A(a)(2)(C) and the
regulations promulgated thereunder.
 
“Employment Agreement” means the employment agreement entered into between the
Participant and the Company or an affiliate of the Company, which is in effect
as of the date of determination.
 
“Participant" means an executive of the Company or its affiliates who has been
selected by the Committee or the Board to participate in the Plan.
 
"Participation Interest" of a Participant means such Participant’s designated
percentage interest in the Retention Bonus Pool, reallocated from time to time
in accordance with Article Four of the Plan. Each Participant’s initial
Participation Interest is indicated opposite his or her name on Exhibit A
hereto.
 
"Payment Date" means the date on which a Participant becomes entitled to payment
of his or her Retention Bonus in accordance with Article Four of the Plan.
 
"Plan" means this Innotrac Corporation Officer Retention Plan, as it may be
amended.
 
"Restrictive Covenants" means the restrictive covenants contained in the
Participant’s Employment Agreement with the Company, including without
limitation, the covenants not to disclose confidential information, not to
compete with the Company, not to recruit the Company’s employees, and not to
solicit the Company’s clients or customers.
 
“Retention Bonus Pool” means an amount calculated in accordance with Article
Five which will be allocated in accordance with the terms of the Plan for the
payment of Retention Bonuses to Participants under the Plan.
 
“Retention Bonus (or Retention Bonuses)” means the amount payable to a
Participant under Article Four.

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“Special Restricted Stock” means the restricted shares of the Company’s common
stock, which were or will be granted to the Participant under the Company’s 2000
Stock Option and Incentive Award Plan as a special incentive to remain employed
with the Company, and which had or will have a value (without discount for the
restrictions) of $250,000 at the time of grant.
 

 
RETENTION BONUSES
 
Retention Bonus Upon a Change in Control. Upon the occurrence of a Change in
Control, each Participant who is an employee of the Company or its affiliates
shall be eligible to receive a Retention Bonus equal to the Participant’s
Participation Interest at the time of the Change in Control multiplied by the
amount of the Retention Bonus Pool, less the value of any shares of Special
Restricted Stock held by the Participant as of the time of the Change in
Control. To be eligible to receive the Retention Bonus, the Participant: (i)
must not have violated any of the Restrictive Covenants, (ii) if requested by
the Company, must, no later than the date of the Change in Control, execute an
amendment to the Employment Agreement or a separate agreement provided by the
Company which updates the Restrictive Covenants to properly reflect the business
and customers of the Company and the role and responsibilities of the
Participant as of the time of the Change in Control and which provides that the
Participant will be subject to the Restrictive Covenants for a period of two
years following the Participant’s termination of employment, and (iii) must be
employed by the Company or one of its affiliates on the date of the Change in
Control or must have terminated employment within 3 months prior to the date of
the Change in Control other than for Cause, as provided in Section 4.2 below. If
the Participant satisfies the above requirements, the Participant’s Retention
Bonus shall become 100% vested as of the date of the Change in Control and shall
be payable in a lump sum within fifteen (15) days of the Change in Control.
 
Termination of Employment Prior to a Change in Control. Except as provided in
the next sentence below, if, prior to a Change in Control, a Participant’s
employment is terminated by the Company or any of its affiliates for any reason
or the Participant terminates employment for any reason, then the Participant
shall forfeit his or her Participation Interest and no Retention Bonus shall be
payable to such Participant. Notwithstanding the above, if, within 3 months
prior to a Change in Control, the Participant’s employment is terminated by the
Company without Cause (including by reason of death or Disability), then the
Participant will be entitled to receive the Retention Bonus at the same time and
in the same manner as if the Participant were employed on the date of the Change
in Control provided that the Participant satisfies all the requirements in
Section 4.1 other than employment on the date of the Change in Control.
 
Forfeitures and Adjustments of Participation Interests. If a Participant becomes
ineligible to receive a Retention Bonus by reason of a disqualifying termination
of employment, the Participant shall immediately cease to be a Participant, and
he or she shall forfeit all rights under the Plan to receive any Retention
Bonus. In such event, the Board may, but need not, (i) select one or more new
Participants to replace the terminated Participant and/or (ii) increase the
Participation Interest of one or more existing Participants in any manner,
including on other than a prorata basis; provided that the aggregate
Participation Interests of any such new Participants and/or the increase in
Participation Interests for existing Participants shall not exceed the forfeited
Participation Interest of the terminated Participant. Any remaining portion of
the Participation Interest of the terminated Participant not specifically
reassigned to one or more new or existing Participants may, but need not be,
allocated prorata to all existing Participants, based on their relative
Participation Interests, or it may remain unallocated or subject to allocation
at a later date by the Committee in its discretion. At any time prior to the
date of a Change in Control, the Committee may add or remove Participants and
may revise the Participation Interests assigned to each Participant.

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RETENTION BONUS POOL
 
General. The Retention Bonus Pool shall be determined as of the date of the
Change in Control. The Retention Bonus Pool shall be equal to $5.0 million if
the Purchase Price (as defined in Section 5.2) of the Company is at least $90
million but less than $100 million. For each additional $10 million in Purchase
Price over $100 million, the Retention Bonus Pool will be increased by $1
million, such that a total Purchase Price of $200 million will result in a
Retention Bonus Pool of $16 million. The determination of the Purchase Price and
the Retention Bonus Pool shall be made by the Committee in good faith based upon
the financial and other information available to it. The Committee shall have
the discretion to change the formula for determining the Retention Bonus Pool
from time to time. Any such change shall be communicated to Participants.
 
Definitions. For purposes of this Article Five and the Plan, the following
definitions shall apply:
 
“Dilution Adjustment” means any increase in Third Party Interest Bearing Debt
associated with a recapitalization where the proceeds of the additional debt do
not remain in the Company.
 
“Enterprise Value” means the gross proceeds (cash and other consideration,
including any earn outs or deferred payments) of the sale of the stock of or
disposition of assets of, the Company in connection with a Change in Control,
provided that if less than 100% of the stock or assets is sold, the Enterprise
Value shall be calculated as if 100% of the stock or assets were sold.
 
“Non-Operating Cash Balances” means the cash in Company depository accounts on
the date of the Change in Control.
 
“Purchase Price” shall equal the Enterprise Value of the Company, minus Third
Party Interest Bearing Debt, plus Non-Operating Cash Balance and any Dilution
Adjustment; provided, that the Committee may make adjustments to the calculation
of Purchase Price if it determines such adjustments are necessary or desirable
because of unusual or extraordinary charges or income items or other events
which are distortive of financial results or because of changes in the Code or
tax laws.
 
“Third Party Interest Bearing Debt” means debt of the Company owed to a third
party which shall exclude debt owed to any affiliate of the Company.
 

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ADMINISTRATION
 
Plan Administration. The Plan is administered and interpreted by the Committee.
The Committee shall have complete discretion to determine eligible Participants,
to determine and adjust from time to time each Participant’s Participation
Interest, and to interpret the Plan. Any decision by the Committee reached in
accordance with the provisions contained herein shall be final and binding on
all parties.
 

 
NO FUNDING OBLIGATIONS
 
Funding. The obligations of the Company are not required to be funded under the
Plan. Nothing contained in the Plan shall give a Participant any right, title or
interest in any property of the Company, its subsidiaries or affiliates. The
Participant’s rights to a Retention Bonus shall be that of an unsecured creditor
of the Company.
 

 
LIMITATION ON BENEFITS
 
Notwithstanding anything in this Plan to the contrary, any benefits payable or
to be provided to a Participant by the Company or its affiliates, whether
pursuant to this Plan or otherwise, which are treated as Parachute Payments
shall, but only to the extent necessary, be modified or reduced in the manner
provided in Section 8.2 below so that the benefits payable or to be provided to
the Participant under this Plan that are treated as Parachute Payments, as well
as any payments or benefits provided outside of this Plan that are so treated,
shall not cause the Company to have paid an Excess Parachute Payment. In
computing such amount, the parties shall take into account all provisions of
Code Section 280G, and the regulations thereunder, including making appropriate
adjustments to such calculation for amounts established to be Reasonable
Compensation.
 
If a reduction of benefits is required to avoid treatment of any payment as an
Excess Parachute Payment, the Participant’s Retention Bonus under this Plan
shall be reduced to an amount which, when combined with all other payments or
benefits to the Participant related to the Change in Control, does not result in
payment of an Excess Parachute Payment.
 
This Article Eight shall be interpreted so as to avoid the imposition of excise
taxes on the Participant under Section 4999 of the Code and to avoid the
disallowance of a deduction to the Company pursuant to Section 280G(a) of the
Code with respect to amounts payable under this Plan or otherwise.
 
For purposes of this Article Eight, the following definitions shall apply:
 
“Excess Parachute Payment” shall have the same meaning as provided in Section
280G(b)(1) of the Code.
 
“Parachute Payment” shall have the same meaning as provided in Section
280G(b)(2) of the Code.
 
“Reasonable Compensation” shall have the same meaning as provided in Section
280G(b)(4) of the Code.

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“Present Value” shall have the same meaning as provided in Section 280G(d)(4) of
the Code.
 

 
MISCELLANEOUS
 
Rights Not Exclusive. Except as expressly provided in the Plan, a Participant's
right to receive a Retention Bonus under the Plan shall be in addition to and
not exclusive of his rights under any other agreement or plan of the Company or
its affiliates, including without limitation, any short- or long-term bonus or
other remuneration payable pursuant to the Participant’s Employment Agreement
with the Company.
 
No Contract for Employment. Nothing in the Plan shall be deemed to give any
Participant the right to be retained in the service of the Company or to deny
the Company any right it may have to discharge or demote any Participant at any
time.
 
Withholding. All amounts payable by the Company hereunder shall be subject to
withholding of such amounts related to taxes as the Company may be legally
obligated so to do.
 
Arbitration. Any dispute or controversy arising under or in connection with the
Plan shall be settled exclusively by arbitration in Atlanta, Georgia in
accordance with the rules of the American Arbitration Association then in
effect. Each party agrees to comply with any award made in any such proceeding,
which shall be final, and to the entry of judgment in accordance with applicable
law in any jurisdiction upon any such award. The costs of the arbitration,
including the costs of the facility, court reporter and arbitrator’s fee, shall
be shared equally by each party.
 
Notices. Notices will be considered effective upon receipt and shall be sent by
hand delivery or certified mail addressed as follows:
 
If to the Company:

Innotrac Corporation
6655 Sugarloaf Parkway
Duluth, Georgia 30097-4916
Attention: General Counsel

If to a Participant, at his or her last known address.

Severability. The invalidity and unenforceability of any particular provision of
the Plan shall not affect any other provision of the Plan, and the Plan shall be
construed in all respects as if such invalid or unenforceable provision were
omitted.
 
No Assignment or Alienation of Benefits by Participants. A Participant shall not
have any power or right to transfer, assign, anticipate, hypothecate, mortgage,
commute, modify or otherwise encumber in advance any of the benefits payable
under the Plan, nor shall these benefits be subject to seizure for the payment
of debt, judgment, alimony or separate maintenance owed by the Participant, or
any person claiming through the Participant, or be transferable by operation of
law in the event of bankruptcy, insolvency or otherwise. Any attempted
assignment, anticipation, hypothecation, transfer, or other disposal of the
benefits hereunder, shall be void.

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Governing Law. The Plan shall be governed by and construed in accordance with
the laws of the State of Georgia to the extent not preempted by federal law.
 
Successors and Assigns. The Plan shall be binding upon the Company and its
successors (including any successor to the Company by reason of any dissolution,
merger, consolidation, sale of assets or other reorganization of the Company)
and assigns.
 
Amendment; Termination. Subject to the provisions of Section 9.12, the Plan may
be amended or terminated at any time by the Board or the Committee; provided,
however, that no such amendment or termination may be made after the date of a
Change in Control without the written consent of affected Participants if such
amendment or termination would negatively affect the rights of Participants who
would otherwise be entitled to a Retention Bonus hereunder. The Plan shall
automatically terminate following a Change in Control once all Retention Bonuses
have been paid, and any portion of the Retention Bonus Pool not allocated to
Participant’s shall not be payable.
 
Headings. The headings of the Sections herein are for convenience only and shall
have no significance in the interpretation of the Plan.
 
Compliance with Section 409A. This Plan shall be operated in accordance with the
requirements of Section 409A. Any action that may be taken (and, to the extent
possible, any action actually taken) by the Company shall not be taken (or shall
be void and without effect), if such action violates the requirements of Section
409A and would result in an additional tax to the Participant. Any provision in
this Plan document that is determined to violate the requirements of Section
409A shall be void and without effect. In addition, any provision that is
required to appear in this Plan document to satisfy the requirements of Section
409A, but that is not expressly set forth, shall be deemed to be set forth
herein, and the Plan shall be administered in all respects as if such provision
were expressly set forth. In all cases, the provisions of this Section shall
apply notwithstanding any contrary provision of the Plan that is not contained
in this Section.
 

                    INNOTRAC CORPORATION

                    By:   /s/ Scott D. Dorfman             

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EXHIBIT A

Participants And Participation Interests

Participant
Participation Interest
In Retention Bonus Pool
   
David L. Ellin
%
Larry C. Hanger
%
James R. McMurphy
%
Robert J. Toner
%
 
 
Total
% *
   
* __% is currently reserved for future Participants and/or allocations.

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EXHIBIT A
(as revised ________________, 2007)

Participants And Participation Interests

Participant
Participation Interest
In Retention Bonus Pool
   
Larry C. Hanger
%
James R. McMurphy
%
Robert J. Toner
%
Total
% *
   
* __% is currently reserved for future Participants and/or allocations.