Exhibit 10.4

 

EMPLOYMENT AGREEMENT

          THIS AGREEMENT ("Agreement") is made and entered into as of this 31st
day of August, 2000, by and between LARRY C. HANGER, 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, the parties hereto desire to enter into an agreement for the
Company's continued employment of Employee on the terms and conditions contained
herein;

          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 - Business Development of the Employer 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; provided that the Employee may also serve
as an officer or director of Return.com Online, Inc. and may perform services
for Return.com Online, Inc.; and provided further that the Employee may also
serve on boards of directors or trustees of other companies and organizations,
as long as such service does not materially interfere with the performance of
his duties hereunder.

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, 2005 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);

          (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 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, or (D) if Employee
tests positive for illegal drugs; or

          (iii)          The termination of this Agreement 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 One Hundred Fifty Thousand Dollars ($150,000) 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 (the
"Bonus") of 60% of Salary at Plan (to be defined) with a 3-up-3-down formula.
The Bonus shall be paid promptly upon the availability of annual financial
results (which is expected to occur in early February of each 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.

3.2          Effect of Termination.

          (a)          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. 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 Bonus shall be
payable upon termination.

          (b)          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 six-month period (on the same basis as
if Employee continued to serve as an employee hereunder for such applicable
period). 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 Company or an affiliate
of the Company granted to Employee shall immediately become 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. Except as provided in Section 3.3 , in the case of a
termination by Employer pursuant to Section 2(b)(iii) hereof, the options will
expire on the first anniversary after the effective date of the termination of
Employee's employment hereunder. 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. Except as provided in
Section 3.3, if Employee's employment is terminated by Employer pursuant to
Section 2(b)(ii) or by Employee pursuant to Section 2(b)(iii), those options
which are exercisable as of the date of such termination shall be exercisable
for a period of 90 days after such termination (and all other options not then
exercisable shall be forfeited as of such date), and after such 90-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 .

          3.3          Effect of Change in Control. Notwithstanding Section
3.2(b) above, if there is a Change in Control (as defined below) of the Employer
and the Employee's employment is terminated within 18 months following the date
of the Change in Control, the following provisions shall apply.

          (a)          If Employee's employment hereunder is terminated by
Employer pursuant to Section 2(b)(iii) hereof or by Employee for "Good Reason"
as defined below, then, in addition to any other amount payable pursuant to
Section 3.2(a), the Employee shall be entitled to received the compensation and
benefits set forth in subsections (i) through (iv) below:

          (i)          Base Salary. Employee will continue to receive his Salary
as then in effect (subject to withholding of all applicable taxes) for a period
of eighteen (18) months from his date of termination in the same manner as it
was being paid as of the date of termination.

          (ii)          Health, Dental and Life Insurance Coverage. The health,
dental and group term life insurance benefits coverage provided to Employee at
his date of termination shall be continued at the same level and in the same
manner as if his employment under this Agreement had not terminated (subject to
the customary changes in such coverages if Employee retires, reaches age 65 or
similar events), beginning on the date of such termination and ending on the
date eighteen (18) months from the date of such termination. Any additional
coverages Employee had at termination, including dependent coverage, will also
be continued for such period on the same terms, to the extent permitted by the
applicable policies or contracts. Any costs Employee was paying for such
coverages at the time of termination shall be paid by Employee by separate check
payable to the Company each month in advance or by re duction of amounts owed to
Employee by the Employer. If the terms of any benefit plan referred to in this
Section, or the laws applicable to such plan, do not permit continued
participation by Employee, then the Company will arrange for other coverage at
its expense providing substantially similar benefits. The coverages provided for
in this paragraph shall be applied against and reduce the period for which COBRA
will be provided.

          (iii)          Stock Options. Notwithstanding any provision in any
option agreement, all outstanding stock options granted to Employee by Employer
or an affiliate of Employer shall become fully vested on the date of Employee's
termination of employment and shall remain exercisable as provided in the
applicable option agreement or, if longer, for a period of three (3) years
following the date of termination of employment. 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.

          (b)          If Employee's employment hereunder is terminated by
Employee pursuant to Section 2(b)(iii) hereof other than for "Good Reason" as
defined below, then, in addition to any other amount payable pursuant to Section
3.2(a), the Employee shall be entitled to receive the compensation and benefits
set forth in subsections (i) through (iii) of Subsection 3.3(a) above, provided,
however, that a period of 12 months shall be substituted for 18 months in
subsections 3.3(a)(i) and (ii).

          3.4          Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:

                      (a)          "Change in Control" means any of the
following events:

          (i)          The acquisition (other than from the Employer) by any
person of beneficial ownership of fifty percent (50%) or more of the combined
voting power of the Employer's then outstanding voting securities; provided,
however, that for purposes of this Section, person shall not include any person
who on the date hereof owns 25% or more of the Employer's outstanding
securities, and a Change in Control shall not be deemed to occur solely because
fifty percent (50%) or more of the combined voting power of the Employer's then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by the Employer
or any of its subsidiaries, or (ii) any corporation, which, immediately prior to
such acquisition, is owned directly or indirectly by the shareholders of the
Employer in the same proportion as their ownership of stock in the Employer
immediately prior to such acquisition.

          (ii)          Approval by shareholders of the Employer of (1) a merger
or consolidation involving the Employer if the shareholders of the Employer,
immediately before such merger or consolidation do not, as a result of such
merger or consolidation, own, directly or indirectly, more than fifty percent
(50%) of the combined voting power of the then outstanding voting securities of
the corporation resulting from such merger or consolidation in substantially the
same proportion as their ownership of the combined voting power of the voting
securities of the Employer outstanding immediately before such merger or
consolidation, or (2) a complete liquidation or dissolution of the Employer, or
(3) an agreement for the sale or other disposition of all or substantially all
of the assets of the Employer.

          (iii)          A change in the composition of the Board such that the
individuals who, as of the date of this Agreement, constitute the Board (such
Board shall be hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however, for
purposes of this Section that any individual who becomes a member of the Board
subsequent to the Effective Date whose election, or nomination for election by
the Employer's shareholders, was approved by a vote of at least a majority of
those individuals who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered as though such individual were a member of the Incumbent Board; but,
provided, further, that any such individual whose initial assumption of office
occurs as a result of either an actual or t hreatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act, including any successor to such Rule), or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board, shall not be so considered as a member of the Incumbent Board.

          (iv)          The occurrence of any other event or circumstance which
is not covered by (i) through (iii) above which the Board determines affects
control of the Company and adopts a resolution that such event or circumstance
constitutes a Change in Control for the purposes of this Agreement.

          (b)          A "Good Reason" for termination by Employee of Employee's
employment shall mean the occurrence (without the Employee's express written
consent), within the eighteen (18) month period following the date of a Change
in Control, of any one of the following acts by the Employer, or failures by the
Employer to act, unless, in the case of any act or failure to act described in
paragraph (i) or (iv) below, such act or failure to act is corrected within 30
days after notice by the Employee to the Employer of the act or failure to act:

          (i)          the assignment to Employee of any duties inconsistent
with Employee's title and status set forth herein, or a substantial adverse
alteration in the nature or status of Employee's responsibilities at the
Employer from those in effect immediately prior to the Change in Control;

          (ii)          a substantial reduction by the Employer in Employee's
Base Salary;

          (iii)          the relocation of Employee's principal office to a
place more than 50 miles from Atlanta, Georgia;

          (iv)          the failure by the Employer to continue in effect any
compensation or benefit plan or program in which Employee participates
immediately prior to the Change in Control, which is material to Employee's
total compensation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan, or the
failure by the Employer to continue the Employee's participation in such plan
(or in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level of
Employee's participation relative to other participants, as existed at the time
of the Change in Control.

          The Employee's right to terminate the Employee's employment for Good
Reason shall not be affected by the Employee's incapacity due to physical or
mental illness, except for a total disability as defined in Section 2 above. The
Employee's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.

Section 4.          Partial Restraint on Post-termination Competition.

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

          (a)          "Company Activities" means the business of selling caller
ID technology and hardware, fulfillment services, 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.

          (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 the first anniversary of the
termination of Employee's employment with Employer.

          (g)          "Territory" means the area within a thirty-five (35) 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

          (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 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.

          4.5          Nonsolicitation 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 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.

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 Office r
                    Telephone No.: (678) 584-4000

                    Employee

                    Mr. Larry C. Hanger
                    3440 Greenside Ct.
                    Dacula, GA 30019

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          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.

          5.5          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.

          5.6          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.

          5.7          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.

          5.8          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.

          5.9          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.

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

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

 

INNOTRAC CORPORATION

 

 

 

 

 

By:           /s/ Scott Dorfman                     

 

       Scott D. Dorfman

 

      Chief Executive Officer

 

 

 

 

 

EMPLOYEE

 

 

 

 

 

         /s/ Larry C. Hanger                               

 

Larry C. Hanger