Exhibit 10.26


    
      

    

    EXHIBIT
      10.26

     

    
      EMPLOYMENT
        AGREEMENT

      


      THIS
        AGREEMENT (“Agreement”) is effective as of the 16th day of April, 2007, by and
        between JAMES
        R. MCMURPHY,
        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
        dated
        December 10, 2001, 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);

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      (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

      


      Mr.
        James
        R. McMurphy

      8975
        Moor
        Park Run

      Duluth,
        GA 30097

      


      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/
        James R.
        McMurphy                                                 
    

                          James
        R.
        McMurphy

      


      


      


      
        
          
          

        

        
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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.

      
        


        
          
            
            

          

          
            -12-

            
              

            

          

          
            
            

          

        

      

       

      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.

       

      
        


        
          
            
            

          

          
            -13-

            
              

            

          

          
            
            

          

           

        

      

      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. 

      
        


        
          
            
            

          

          
            -14-

            
              

            

          

          
            
            

          

           

        

      

      “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.

      
        


        
          
            
            

          

          
            -15-

            
              

            

          

          
            
            

          

           

        

      

      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             



      


      
        
          
          

        

        
          -16-

          
            

          

        

        
          
          

        

         

      

      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.

              


      

      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          



      

      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.