Form 10-K

AMENDED AND RESTATED BY-LAWS

INNNOTRAC CORPORATION

(as amended April 16, 2007 to allow book-entry only share ownership)

ARTICLE I

OFFICES

Section 1. Registered Office. The registered office shall be in the State of Georgia, County of Gwinnett.

Section 2. Other Offices. The corporation may also have offices at such other places both inside and outside the State of Georgia as the board of directors may from time to time determine and the business of the corporation may require or make desirable.

ARTICLE II

SHAREHOLDERS MEETINGS

Section 1. Annual Meetings. The annual meeting of the shareholders of the corporation shall be held at the principal office of the corporation or at such other place inside or outside the United States as may be determined by the board of directors, on such date and at such time as may be determined by the board of directors, for the purpose of electing directors and transacting such other business as may properly be brought before the meeting.

Section 2. Special Meetings. Special meetings of the shareholders shall be held at the principal office of the corporation or at such other place inside or outside the United States as may be designated in the notice of said meetings, upon call of the chairman of the board of directors or the president and shall be called by the president or the secretary when so directed by the board of directors or at the request in writing of shareholders owning at least 25% of the issued and outstanding capital stock of the corporation entitled to vote thereat. Any such request shall state the purposes for which the meeting is to be called.

Section 3. Notice of Meetings. Written notice of every meeting of shareholders, stating the place, date and hour of the meetings, shall be given in a manner permitted by applicable law to each shareholder of record entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. Attendance of a shareholder at a meeting of shareholders shall constitute a waiver of notice of such meeting and of all objections to the place or time of meeting, or the manner in which it has been called or convened, except when a shareholder attends a meeting solely for the purpose of stating, at the beginning of the meeting, any such objection to the transaction of any business. Notice need not be given to any shareholder who signs a waiver of notice, in person or by proxy, either before or after the meeting.

Section 4. Quorum. At all meetings of shareholders, any Voting Group (as defined below) entitled to vote on a matter may take action on the matter only if a quorum of that Voting Group exists at the meeting, and if a quorum exists, the Voting Group may take action on the matter notwithstanding the absence of a quorum of any other Voting Group that may be entitled to vote separately on the matter. Unless the articles of incorporation, these by-laws or the Georgia Business Corporation Code (the “Code”) provides otherwise, the presence (in person or by proxy) of shares representing a majority of votes entitled to be cast on a matter by a Voting Group shall constitute a quorum of the Voting Group with regard to that matter. Once a share is present at any meeting other than solely to object to holding the meeting or transacting business at the meeting, the share shall be deemed present for quorum purposes for the remainder of the meeting and for any adjournments of that meeting, unless a new record date for the adjourned meeting is or must be set pursuant to Article V, Section 4 of these by-laws. If a quorum is not present at any meeting of the shareholders, the holders of a majority of the shares present (in person or represented by proxy) and entitled to vote thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting.

Section 5. Voting. Unless otherwise provided by law, the articles of incorporation, or board resolutions setting forth the preferences and other rights, restrictions or limitations of any class or series of preferred stock, each outstanding share, regardless of class or series, shall be entitled to one vote on each matter voted on at a shareholders meeting, and each class or series of the corporation’s shares entitled to vote generally on a matter shall for that purpose be considered a single voting group (a “Voting Group”). Unless the articles of incorporation, these by-laws, a resolution of the board of directors or applicable law require a different vote, action on a matter presented for consideration at a meeting where a quorum is present, shall be approved as follows: (a) directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present; and (b) all other matters shall be approved if the votes cast within the applicable Voting Group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation, a provision of these by-laws that has been adopted pursuant to Section 14-2-1021 of the Code (or any successor provision), or applicable law requires a greater number of affirmative votes. If either the articles of incorporation or the Code requires separate voting by two or more Voting Groups on a matter, action on that matter is taken only when voted upon by each such Voting Group separately. A shareholder may vote his shares in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for him by signing an appointment form. An appointment of a proxy is valid for eleven months unless a shorter or longer period is expressly provided in the appointment form.

Section 6. Consent of Shareholders. Any action required or permitted to be taken at any meeting of the shareholders may be taken without a meeting if all of the shareholders consent thereto in writing, setting forth the action so taken. Such consent shall have the same force and effect as a unanimous vote of shareholders.

Section 7. List of Shareholders; Inspection of Records. (a) The corporation shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving their names and addresses and the number, class and series, if any, of the shares held by each.

(b) Shareholders are entitled to inspect the corporate records as and to the extent provided by the Code; provided, however, that only shareholders owning more than two percent (2%) of the outstanding shares of any class of the corporation’s stock shall be entitled to inspect (1) the minutes from any board, board committee or shareholders meeting (including any records of action taken thereby without a meeting); (2) the accounting records of the corporation; or (3) any record of the shareholders.

ARTICLE III

DIRECTORS

Section 1. Powers. Except as otherwise provided by any legal agreement among shareholders, the property, affairs and business of the corporation shall be managed and directed by its board of directors, which may exercise all powers of the corporation and do all lawful acts and things which are not by law, by any legal agreement among shareholders, by the articles of incorporation or by these by-laws directed or required to be exercised or done by the shareholders.

Section 2. Number, Election, and Term. The board of directors shall consist of the number and shall be elected in the manner and serve the term as set forth in the Amended and Restated Articles of Incorporation. Except as provided in this Article with respect to filling vacancies on the board, the directors shall be elected by the shareholders as provided in Article II, and each director elected shall hold office until his successor is elected and qualified or until his earlier resignation, removal from office, or death. Directors shall be natural persons who have attained the age of 21 years, but need not be residents of the State of Georgia or shareholders of the corporation. The board, from time to time, may designate persons to act as advisory directors.

Section 3. Nominations. (a) If any shareholder intends to nominate or cause to be nominated any candidate for election to the board of directors (other than any candidate to be sponsored by and proposed at the instance of the management), such shareholder shall notify the president by first class registered mail sent not less than 14 nor more than 50 days before the scheduled meeting of the shareholders at which directors will be elected. However, if less than 21 days notice of the meeting is given to shareholders, such nomination shall be delivered or mailed to the president not later than the close of the seventh day following the date on which the notice of the shareholders’ meeting was mailed. Such notification shall contain the following information with respect to each nominee, to the extent known to the shareholder giving such notification:

(1) Name, address and principal present occupation;

(2) To the knowledge of the shareholder who proposed to make such nomination, the total number of shares that may be voted for such proposed nominee;

(3) The names and address of the shareholders who propose to make such nomination, and the number of shares of the corporation owned by each of such shareholders; and

(4) The following additional information with respect to each nominee: age, past employment, education, beneficial ownership of shares in the corporation, past and present financial standing, criminal history (including any convictions, indictments or settlements thereof), involvement in any past or pending litigation or administrative proceedings (including threatened involvement), relationship to and agreements (whether or not in writing) with the shareholder(s) (and their relatives, subsidiaries and affiliates) intending to make such nomination, past and present relationships or dealings with the corporation or any of its subsidiaries, affiliates, directors, officers or agents, plans or ideas for managing the affairs of the corporation (including, without limitation, any termination of employees, any sales of corporate assets, any proposed merger, business combination or recapitalization involving the corporation, and any proposed dissolution or liquidation of the corporation), and all additional information relating to such person that would be required to be disclosed, or otherwise required, pursuant to Sections 13 or 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”), in connection with any acquisition of shares by such nominee or in connection with the solicitation of proxies by such nominee for his election as a director, regardless of the applicability of such provisions of the Exchange Act.

(b) Any nominations not in accordance with the provisions of this Section may be disregarded by the chairman of the meeting, and upon instruction by the chairman, votes cast for each such nominee shall be disregarded. In the event, however, that a person should be nominated by more than one shareholder, and if one such nomination complies with the provisions of this Section, such nomination shall be honored, and all shares voted for such nominee shall be counted.

Section 4. Vacancies. (a) Subject to subsection 4(b), vacancies, including vacancies resulting from any increase in the number of directors and vacancies resulting from removal from office by the shareholders, may be filled only by the board of directors or by a majority of the directors then in office (if the directors remaining in office constitute less than a quorum), and a director so chosen shall hold office until the expiration of the term and until his successor is duly elected and qualified, unless sooner displaced; provided, however, that if there are no directors in office, then vacancies shall be filled through election by the shareholders.

(b) If any vacant office described in subsection 4(a) was held by a director elected by a particular Voting Group, only the remaining directors elected by that Voting Group shall be entitled to fill the vacancy; provided, however, that if the vacant office was held by a director elected by a particular Voting Group and there is no remaining director elected by that Voting Group, the other remaining directors or director (elected by another Voting Group or Groups) may fill the vacancy.

Section 5. Meetings and Notice. The board of directors of the corporation may hold meetings, both regular and special, either inside or outside the State of Georgia. Regular meetings of the board of directors may be held without notice at such time and place as shall from time to time be determined by resolution of the board. Special meetings of the board may be called by the chairman of the board or president or by any two directors upon one days notice given in a manner permitted by law. Such notice shall state a reasonable time, date and place of meeting, but the purpose need not be stated therein. A director may waive any notice required by the Code, the articles of incorporation, or these by-laws before or after the date and time of the matter to which the notice related, by a written waiver signed by the director and delivered to the corporation for inclusion in the minutes or filing with the corporate records. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of all objections to the place and time of the meeting, or the manner in which it has been called or convened except when the director states, at the beginning of the meeting, any such objection or objections to the transaction of business.

Section 6. Quorum. At all meetings of the board of directors, a majority of directors shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board, except as may be otherwise specifically provided by law, by the articles of incorporation, or by these by-laws. If a quorum shall not be present at any meeting of the board, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 7. Conference Telephone Meeting. Unless the articles of incorporation or these by-laws otherwise provide, members of the board of directors, or any committee designated by the board, may participate in a meeting of the board or committee by means of conference telephone or similar communications equipment whereby all persons participating in the meeting can hear each other. Participation in the meeting shall constitute presence in person.

Section 8. Consent of Directors. Unless otherwise restricted by the articles of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, setting forth the action so taken, and the writing or writings are filed with the minutes of the proceedings of the board or committee. Such consent shall have the same force and effect as a unanimous vote of the board.

Section 9. Committees. The board of directors may, by resolution passed by a majority of the whole board, designate from among its members one or more committees, each committee to consist of two or more directors. The board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of such committee. Any such committee, to the extent provided in the resolution, shall have and may exercise all of the authority of the board of directors in the management of the business and affairs of the corporation except as limited by law. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. A majority of each committee may determine its action and may fix the time and places of its meetings, unless otherwise provided by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.

Section 10. Removal of Directors. At any shareholders’ meeting with respect to which notice of such purpose has been given, any director may be removed from office, only for cause, by the vote of shareholders representing a majority of the issued and outstanding capital stock entitled to vote for the election of directors, provided that a director elected by a Voting Group may only be removed for cause by the vote of shareholders representing a majority of the issued and outstanding capital stock of the Voting Group that elected the particular director, and his successor may be elected at the same or any subsequent meeting of shareholders; provided that to the extent any vacancy created by such removal is not filled by such an election within 60 days after such removal, the remaining directors shall, by majority vote, fill any such vacancy.

Section 11. Compensation of Directors. Directors shall be entitled to such reasonable compensation for their services as directors or members of any committee of the board as shall be fixed from time to time by resolution adopted by the board, and shall also be entitled to reimbursement for any reasonable expenses incurred in attending any meeting of the board or any such committee.

ARTICLE IV

OFFICERS

Section 1. Number. The officers of the corporation shall be chosen by the board of directors and shall be a president and a treasurer. The board of directors may also choose a chairman of the board, one or more vice-presidents, a secretary, assistant secretaries and assistant treasurers. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.

Section 2. Compensation. The salaries of all officers and agents of the corporation shall be fixed by the board of directors or a committee or officer appointed by the board.

Section 3. Term of Office. Unless otherwise provided by resolution of the board of directors, the principal officers shall be chosen annually by the board at the first meeting of the board following the annual meeting of shareholders of the corporation, or as soon thereafter as is conveniently possible. Subordinate officers may be elected from time to time. Each officer shall serve until his successor shall have been chosen and qualified, or until his death, resignation or removal.

Section 4. Removal. Any officer may be removed from office at any time, with or without cause, by the board of directors whenever in its judgment the best interest of the corporation will be served thereby, or if appointed at the authorization of the board of directors, by a senior officer at any time, with or without cause, whenever in the officer’s judgment the best interest of the corporation will be served thereby.

Section 5. Vacancies. Any vacancy in an office resulting from any cause may be filled by the board of directors.

Section 6. Powers and Duties. Except as hereinafter provided, the officers of the corporation shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be conferred by the board of directors.

(a) Chairman of the Board. The chairman of the board (if there be one) shall preside at and serve as chairman of meetings of the stockholders and of the board of directors. The chairman of the board shall perform other duties and have other authority as may from time to time be delegated by the board of directors.

(b) Chief Executive Officer. The chief executive officer shall be charged with the general and active management of the corporation, shall see that all orders and resolutions of the board of directors are carried into effect, shall have the authority to select and appoint employees and agents of the corporation, and shall, in the absence or disability of the chairman of the board, perform the duties and exercise the powers of the chairman of the board. The chief executive officer shall also be responsible for the development, establishment, and implementation of the policy and strategic initiatives for the corporation. The chief executive officer shall perform any other duties and have any other authority as may be delegated from time to time by the board of directors, and shall be subject to the limitations fixed from time to time by the board of directors.

(c) President. If there shall be no separate chief executive officer of the corporation, then the president shall be the chief executive officer of the corporation, with the duties and authority provided in Section 6 (b). The president shall otherwise be the chief operating officer of the corporation and shall, consistent with the authority otherwise conferred upon the chief executive officer in Section 6 (b), have responsibility for the conduct and general supervision of the business operations of the corporation, including without limitation responsibility for the direction, supervision, and coordination of the activities of all operating subsidiaries and other business units of the corporation. The president shall perform such other duties and have such other authority as may from time to time be delegated by the board of directors. In the absence or disability of the chief executive officer, the president shall perform the duties and exercise the powers of the chief executive officer.

(d) Vice President. The vice president (if there be one) shall, in the absence or disability of the president, perform the duties and exercise the powers of the president, whether the duties and powers are specified in these by-laws or otherwise. If the corporation has more than one vice president, the one designated by the board of directors shall act in the event of the absence or disability of the president. Vice presidents shall perform any other duties and have any other authority as from time to time may be delegated by the board of directors, the chief executive officer, or the president.

(e) Secretary. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.

(f) Assistant Secretary. The assistant secretary or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

(g) Treasurer. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under this control belonging to the corporation.

(h) Assistant Treasurer. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

Section 7. Signatures. The signature of any officer, employee or agent upon any document of the corporation may be made by facsimile or machine signature under such limitations and circumstances as the board of directors or any appropriate committee of the board of directors may provide from time to time.

Section 8. Voting Securities of Corporation. Unless otherwise ordered by the board of directors, the chairman shall have full power and authority on behalf of the corporation to attend and to act and vote at any meetings of security holders of corporations in which the corporation may hold securities, and at such meetings shall possess and may exercise any and all rights and powers incident to the ownership of such securities which the corporation might have possessed and exercised if it had been present. The board of directors by resolution from time to time may confer like powers upon any other person or persons.

ARTICLE V

Section 1. Shares of Stock. The shares of stock of the corporation may be certificated or uncertificated, and may be evidenced by registration in the holder’s name in uncertificated, book-entry form on the books of the corporation in accordance with a direct registration system. Within a reasonable time after the issue or transfer of shares without certificates, the corporation shall, or shall direct its transfer clerk or transfer agent appointed as provided in Section 5 of this Article to, send the shareholder a written information statement required by Section 14-2-626(b) of the Code (or any successor provision). However, every holder of fully-paid stock in the corporation shall be entitled, upon request, to have a certificate in such form as the board of directors may from time to time prescribe.

Section 2. Lost Certificates. The board of directors may direct that a new certificate (or uncertificated shares in lieu of a new certificate) be issued in place of any certificate theretofore issued by the corporation and alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate (or uncertificated shares in lieu of a new certificate), the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

Section 3. Transfers. (a) Transfers of shares of the capital stock of the corporation shall be made only on the books of the corporation by the registered holder thereof, or by his duly authorized attorney, or with a transfer clerk or transfer agent appointed as provided in Section 5 of this Article, and the payment of all taxes thereon, and, if such shares are represented by a certificate or certificates, on surrender of the certificate or certificates for such shares properly endorsed, or for uncertificated shares, upon the presentation proper evidence of authority to transfer by the record holder.

(b) The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and for all other purposes, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

(c) If represented by a certificate or certificates, shares of capital stock may be transferred by delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificates or by separate written power of attorney to sell, assign and transfer the same, signed by the record holder thereof, or by his duly authorized attorney-in-fact, but no transfer shall affect the right of the corporation to pay any dividend upon the stock to the holder of record as the holder in fact thereof for all purposes, and no transfer shall be valid, except between the parties thereto, until such transfer shall have been made upon the books of the corporation as herein provided.

(d) The board may, from time to time, make such additional rules and regulations as it may deem expedient, not inconsistent with these by-laws or the articles of incorporation, concerning the issue, transfer and registration of certificated or uncertificated shares of the capital stock of the corporation.

Section 4. Record Date. In order that the corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than 70 days and, in the case of a meeting of shareholders, not less than 10 days prior to the date on which the particular action requiring such determination of stockholders is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of and to vote at any meeting of shareholders, the record date shall be at the close of business on the day next preceding the day on which the notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. If no record date is fixed for other purposes, the record date shall be at the close of business on the day next preceding the day on which the board of directors adopts the resolution relating thereto. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the board of directors shall fix a new record date for the adjourned meeting.

Section 5. Transfer Agent and Registrar. The board of directors may appoint one or more transfer agents or one or more transfer clerks and one or more registrars, and may require all certificates of stock to bear the signature or signatures of any of them.

ARTICLE VI

GENERAL PROVISIONS

Section 1. Distributions. Distributions upon the capital stock of the corporation, subject to the provisions of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meetings, pursuant to law. Distributions may be paid in cash, in property, or in shares of the corporation’s capital stock, subject to the provisions of the articles of incorporation. Before payment of any distribution, there may be set aside out of any funds of the corporation available for distributions such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing distributions, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

Section 2. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors.

Section 3. Seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal” and “Georgia”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. In the event it is inconvenient to use such a seal at any time, the signature of the corporation followed by the word “Seal” enclosed in parentheses shall be deemed the seal of the corporation.

ARTICLE VII

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 1. Indemnification of Directors and Officers. The corporation shall indemnify and hold harmless any person (an “Indemnified Person”) who is or was a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action or suit by or in the right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, against expenses (including, but not limited to, attorneys’ fees and disbursements, court costs and expert witness fees), and against any judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; provided, in any case, that no indemnification shall be made in respect of expenses, judgments, fines and amounts paid in settlement attributable to circumstances as to which, under applicable provisions of the Code as in effect from time to time, such indemnification may not be authorized by action of the board of directors, the shareholders or otherwise. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director did not meet the standards of conduct set forth in this Article.

Section 2. Indemnification of Directors and Officers for Derivative Actions. The corporation shall indemnify and hold harmless any Indemnified Person who is or was a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by or in the right of the corporation, by reason of the fact that he is or was a director or officer of the corporation, against expenses (including, but not limited to, attorneys’ fees and disbursements, court costs and expert witness fees) actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation. No indemnification shall be made pursuant to this Section for any claim, issue or matter as to which an Indemnified Person shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation, or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction shall determine upon application that such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.

Section 3. Indemnification of Employees and Agents. The board of directors shall have the power to cause the corporation to provide to any person who is or was an employee or agent of the corporation all or any part of the right to indemnification and other rights of the type provided under Sections 1, 2, 6 and 12 of this Article (subject to the conditions, limitations, obligations and other provisions specified herein), upon a resolution to that effect identifying such employee or agent (by position or name) and specifying the particular rights provided, which may be different for each employee or agent identified. Each employee or agent of the corporation so identified shall be an “Indemnified Person” for purposes of the provisions of this Article.

Section 4. Subsidiaries and Other Organizations. The board of directors shall have the power to cause the corporation to provide to any person who is or was a director, officer, employee or agent of the corporation or who also is or was a director, officer, trustee, partner, employee or agent of a Subsidiary (as defined below), or is or was serving at the corporation’s request in such a position with any other organization, all or any part of the right to indemnification and other rights of the type provided under Sections 1, 2, 6 and 12 of this Article (subject to the conditions, limitations, obligations and other provisions specified herein), with respect to service by such person in such position with a Subsidiary or other organization, upon a resolution identifying such person, the Subsidiary or other organization involved (by name or other classification), and the particular rights provided, which may be different for each person so identified. Each person so identified shall be an “Indemnified Person” for purposes of the provisions of this Article. As used in this Article, “Subsidiary” shall mean (i) another corporation, joint venture, trust, partnership or unincorporated business association more than 20% of the voting capital stock or other voting equity interest of which was, at or after the time of the circumstances giving rise to such action, suit or proceeding, owned, directly or indirectly, by the corporation; or (ii) a nonprofit corporation that receives its principal financial support from the corporation or its Subsidiaries.

Section 5. Determination. Notwithstanding any judgment, order, settlement, conviction or plea in any action, suit or proceeding of the kind referred to in Sections 1 and 2 of this Article, an Indemnified Person shall be entitled to indemnification as provided in such Sections 1 and 2 if a determination that such Indemnified Person is entitled to such indemnification shall be made (i) by the board of directors by a majority vote of a quorum consisting of directors who are not at the time parties to the proceeding; (ii) if a quorum cannot be obtained under (i) above, by majority vote of a committee duly designated by the board of directors (in which designation interested directors may participate), consisting solely of two or more directors who are not at the time parties to the proceeding; (iii) in a written opinion by special legal counsel selected as required by Section 14-2-855(b)(2) of the Code or any successor provision; or (iv) by the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the proceeding may not be voted on the determination. To the extent that an Indemnified Person has been successful on the merits or otherwise in defense of any action, suit or proceeding of the kind referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

Section 6. Advances. Expenses (including, but not limited to, attorneys’ fees and disbursements, court costs, and expert witness fees) incurred by an Indemnified Person in defending any action, suit or proceeding of the kind described in Sections 1 and 2 hereof (or in Section 4 hereof if applicable to such Indemnified Person) shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding as set forth herein. The corporation shall promptly pay the amount of such expenses to the Indemnified Person, but in no event later than ten days following the Indemnified Person’s delivery to the corporation of a written request for an advance pursuant to this Section, together with a reasonable accounting of such expenses; provided, however, that the Indemnified Person shall furnish the corporation a written affirmation of his good faith belief that he has met the standard of conduct set forth in the Code and a written undertaking and agreement, executed personally or on his behalf, to repay to the corporation any advances made pursuant to this Section if it shall be ultimately determined that the Indemnified Person is not entitled to be indemnified by the corporation for such amounts. The corporation shall make the advances contemplated by this Section regardless of the Indemnified Person’s financial ability to make repayment. Any advances and undertakings to repay pursuant to this Section shall be unsecured and interest-free.

Section 7. Non-Exclusivity. Subject to any applicable limitation imposed by the Code or the Articles of Incorporation, the indemnification and advancement of expenses provided by or granted pursuant to this Article shall not be exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any by-law, resolution or agreement specifically or in general terms approved or ratified by the affirmative vote of holders of a majority of the shares entitled to be cast thereon.

Section 8. Insurance. The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or who, while a director, officer, employee, or agent of the corporation, is or was serving as a director, officer, trustee, general partner, employee or agent of a Subsidiary or, at the request of the corporation, of any other organization, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article.

Section 9. Notice. If any expenses or other amounts are paid by way of indemnification, otherwise than by court order or action by the shareholders or by an insurance carrier pursuant to insurance maintained by the corporation, the corporation shall, not later than the next annual meeting of shareholders, unless such meeting is held within three months from the date of such payment, and in any event within 15 months from the date of such payment, send by first class mail to its shareholders of record at the time entitled to vote for the election of directors a statement specifying the persons paid, the amount paid and the nature and status at the time of such payment of the litigation or threatened litigation.

Section 10. Security. The corporation may designate certain of its assets as collateral, provide self-insurance or otherwise secure its obligations under this Article, or under any indemnification agreement or plan of indemnification adopted and entered into in accordance with the provisions of this Article, as the board of directors deems appropriate.

Section 11. Amendment. Any amendment to this Article that limits or otherwise adversely affects the right of indemnification, advancement of expenses, or other rights of any Indemnified Person hereunder shall, as to such Indemnified Person, apply only to claims, actions, suits or proceedings based on actions, events or omissions (collectively, “Post Amendment Events”) occurring after such amendment and after delivery of notice of such amendment to the Indemnified Person so affected. Any Indemnified Person shall, as to any claim, action, suit or proceeding based on actions, events or omissions occurring prior to the date of receipt of such notice, be entitled to the right of indemnification, advancement of expenses and other rights under this Article to the same extent as if such provisions had continued as part of the by-laws of the corporation without such amendment. This Section cannot be altered, amended or repealed in a manner effective as to any Indemnified Person (except as to Post Amendment Events) without the prior written consent of such Indemnified Person.

Section 12. Agreements. In addition to the rights provided in this Article, the corporation shall have the power, upon authorization by the board of directors, to enter into an agreement or agreements providing to any person who is or was a director, officer, employee or agent of the corporation indemnification rights substantially similar to, or greater than, those provided in this Article.

Section 13. Continuing Benefits. The indemnification and advancement of expenses provided by or granted pursuant to this Article shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 14. Successors. For purposes of this Article, the terms “the corporation” or “this corporation” shall include any corporation, joint venture, trust, partnership or unincorporated business association that is the successor to all or substantially all of the business or assets of this corporation, as a result of merger, consolidation, sale, liquidation or otherwise, and any such successor shall be liable to the persons indemnified under this Article on the same terms and conditions and to the same extent as this corporation.

Section 15. Severability. Each of the sections of this Article, and each of the clauses set forth herein, shall be deemed separate and independent, and should any part of any such section or clause be declared invalid or unenforceable by any court of competent jurisdiction, such invalidity or unenforceability shall in no way render invalid or unenforceable any other part thereof or any other separate section or clause of this Article that is not declared invalid or unenforceable.

Section 16. Additional Indemnification. In addition to the specific indemnification rights set forth herein, the corporation shall indemnify each of its directors and officers to the full extent permitted by action of the board of directors without shareholder approval under the Code or other laws of the State of Georgia as in effect from time to time.

Section 17. Mandatory Indemnification. Except to the extent limited by the Articles of Incorporation, to the extent that a director has been successful, on the merits or otherwise, in the defense of any proceeding to which he was a party, or in defense of any claim, issue, or matter therein, because he is or was a director of the corporation, the corporation shall indemnify the director against reasonable expenses incurred by him in connection therewith.

Section 18. Shareholder Approved Indemnification. If authorized by the Articles of Incorporation or a By-law, contract, or resolution approved or ratified by the shareholders by a majority of the votes entitled to be cast, a corporation may indemnify or obligate itself to indemnify a director made party to a proceeding including a proceeding brought by or in the right of the corporation. The corporation shall not indemnify a director under this Section 18 for any liability incurred in a proceeding in which the director is adjudged liable to the corporation or is subjected to injunctive relief in favor of the corporation: (1) for any appropriate, in violation of his duties, of any business opportunity of the corporation; (2) for acts or omissions which involve intentional misconduct or a knowing violation of law; (3) for an unlawful distribution as set out in the Code; or (4) for any transaction from which he received improper personal benefit.

ARTICLE VIII

AMENDMENTS

The board of directors shall have power to alter, amend or repeal the by-laws or adopt new by-laws by majority vote of all of the directors, but any by-laws adopted by the board of directors may be altered, amended or repealed and new by-laws adopted, by the shareholders by majority vote of all of the shares having voting power.

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 30^th prior to the upcoming December 31^st 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 15^th 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 15^th 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

& #160; 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.

Georgia		58-1592285
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6655 Sugarloaf Parkway, Duluth, Georgia		30097
(Address of principal executive offices)		(Zip Code)

		Page
PART I		4
ITEM 1.	BUSINESS	4
	CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS	10
	EXECUTIVE OFFICERS OF THE REGISTRANT	10
ITEM 1A.	RISK FACTORS	11
ITEM 1B.	UNRESOLVED STAFF COMMENTS	16
ITEM 2.	PROPERTIES	16
ITEM 3.	LEGAL PROCEEDINGS	17
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	18
PART II		18
ITEM 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	18
ITEM 6.	SELECTED FINANCIAL DATA	20
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	31
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	49
ITEM 9A.	CONTROLS AND PROCEDURES	49
ITEM 9B.	OTHER INFORMATION	50
PART III		52
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	52
ITEM 11.	EXECUTIVE COMPENSATION	52
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	52
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	52
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	53
PART IV		53
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	53
	SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS	S-1

	2006			2005
Retail/Catalog		38.2	%		32.2	%
Modems		21.9			21.2
Direct Marketing		21.8			23.2
B2B		11.2			11.2
Telecommunications products		6.9			12.2
		100.0	%		100.0	%

Name	Age	Position

Scott D. Dorfman	49	Chairman of the Board, President and Chief Executive Officer

Larry C. Hanger	52	Senior Vice President—Client Services

Robert J. Toner	43	Senior Vice President—Logistics

James R. McMurphy	47	Senior Vice President—Information Technology

Christine A. Herren	35	Principal Financial Officer, Principal Accounting Officer, Senior Director and Corporate Controller

	High		Low
2006
First Quarter	$	5.72	$	3.01
Second Quarter	$	3.92	$	1.79
Third Quarter	$	5.14	$	1.94
Fourth Quarter	$	5.64	$	2.00
Fiscal Year Ended December 31, 2006	$	5.72	$	1.79
2005
First Quarter	$	9.00	$	7.87
Second Quarter	$	8.94	$	7.33
Third Quarter	$	8.84	$	6.77
Fourth Quarter	$	8.99	$	3.57
Fiscal Year Ended December 31, 2005	$	9.00	$	3.57

Results For Year Ended December 31:	2006			2005			2004		2003			2002
(in 000’s, except per share amounts)
Revenues	$	82,343		$	73,892		$	78,322	$	74,740		$	82,420
Cost of revenues		45,794			37,656			37,925		35,157			46,444
Special (credits) charges		—			—			—		—			(293	)
Selling, general and administrative		37,409			34,978			34,579		34,873			36,811
Bad debt expense		54			1,248			221		1,571			521
Special (credits) charges		—			—			—		(30	)		404
Depreciation and amortization		3, 919			4,524			5,202		5,622			5,336
Total operating expenses		87,176			78,406			77,927		77,193			89,223

Operating income (loss)		(4,833	)		(4,514	)		395		(2,453	)		(6,803	)

Interest expense (income) , net		429			154			285		741			318
Other expense (income)		—			—			—		15			(124	)
Total other expense (income)		429			154			285		756			194

Income (loss) before income taxes		(5,262	)		(4,668	)		110		(3,209	)		(6,997	)
Income tax (provision) benefit		—			—			—		(8,772	)		2,578
Net income (loss)	$	(5,262	)	$	(4,668	)	$	110	$	(11,981	)	$	(4,419	)
Net income (loss) per share-basic	$	(0.43	)	$	(0.38	)	$	0.01	$	(1.04	)	$	(0.38	)
Net income (loss) per share-diluted	$	(0.43	)	$	(0.38	)	$	0.01	$	(1.04	)	$	(0.38	)

Common Stock Information:
Average number of common shares
outstanding-basic		12,281			12,196			11,865		11,542			11,516
Book value per common share⁽¹⁾	$	3.42		$	3.84		$	4.23	$	4.25		$	5.13

Year-End Financial Position:
Current assets	$	26,770		$	20,872		$	24,430	$	29,721		$	41,619
Current liabilities		27,930			9,743			11,716		20,117			20,143
Property and equipment, net		17,836			10,754			12,499		14,750			18,915
Total assets		71,540			57,972			63,373		70,962			95,499
Long-term obligations		1,576			1,038			1,098		1,083			15,497
Total liabilities		29,506			10,781			12,814		21,200			35,640
Total shareholders’ equity	$	42,034		$	47,191		$	50,559	$	49,762		$	59,859

Business Line/Vertical	2006			2005
Retail/Catalog		38.2	%		32.2	%
Modems		21.9			21.2
Direct Marketing		21.8			23.2
B2B		11.2			11.2
Telecommunications products		6.9			12.2
		100.0	%		100.0	%

	Year Ended December 31,
	2006			2005			2004
Revenues, net		100.0	%		100.0	%		100.0	%
Cost of revenues		55.6			51.0			48.4
Selling, general and administrative		45.4			47.3			44.1
Bad debt expense		0.1			1.7			0.3
Depreciation and amortization		4.8			6.1			6.7
Operating (loss) income		(5.9	)		(6.1	)		0.5
Other expense (income)		0.5			0.2			0.4
(Loss) income before taxes		(6.4	)		(6.3	)		0.1
Income tax (provision) benefit		—			—			—
Net (loss) income		(6.4	)%		(6.3	)%		0.1	%

	Payments Due by Period
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Operating leases	$	30,440	$	11,671	$	14,133	$	4,636	$	—

	December 31,
Assets	2006			2005
Current assets:
Cash and cash equivalents	$	1,014		$	2,068
Accounts receivable, net of allowance of $257 (2006) and $2,791 (2005)		22,939			12,745
Inventories, net		1,729			4,676
Prepaid expenses and other		1,088			1,383
Total current assets		26,770			20,872

Property and equipment:
Rental equipment		344			427
Computers, machinery and equipment		39,769			30,514
Furniture, fixtures and leasehold improvements		6,812			5,133
		46,925			36,074
Less accumulated depreciation and amortization		(29,089	)		(25,320	)
		17,836			10,754

Goodwill		25,169			25,169
Other assets, net		1,765			1,177
Total assets	$	71,540		$	57,972

	December 31,
Liabilities and Shareholders’ Equity	2006			2005

Current liabilities:
Accounts payable	$	14,363		$	6,707
Line of credit		8,586			—
Accrued salaries		1,451			871
Accrued expenses and other		3,530			2,165
Total current liabilities		27,930			9,743

Noncurrent liabilities:
Deferred compensation		1,019			885
Other noncurrent liabilities		557			153
Total noncurrent liabilities		1,576			1,038

Commitments and contingencies (see Note 5)		—			—

Shareholders’ equity:
Preferred stock: 10,000,000 shares authorized,
$0.10 par value, no shares outstanding		—			—
Common stock: 50,000,000 shares authorized, $0.10 par value,
12,280,610 shares issued and outstanding		1,228			1,228
Additional paid-in capital		66,016			65,911
Accumulated deficit		(25,210	)		(19,948	)
Total shareholders’ equity		42,034			47,191
Total liabilities and shareholders’ equity	$	71,540		$	57,972

	Common Stock
	Shares			Amount			Paid-in Capital			Retained Earnings (Accumulated Deficit)			Treasury Stock		Total
Balance at December 31, 2003		11,715		$	1,171		$	63,791		$	(15,200	)	$	—	$	49,762
Issuance of common stock from option exercises		258			26			1,133			—			—		1,159
Restricted stock grant, net		—			—			(186	)		—			—		(186	)
Shares retired		(24	)		(2	)		(94	)		(190	)		—		(286	)
Net income		—			—			—			110			—		110
Balance at December 31, 2004		11,949		$	1,195		$	64,644		$	(15,280	)	$	—	$	50,559
Issuance of common stock from option exercises		332			33			1,267			—			—		1,300
Net loss		—			—			—			(4,668	)		—		(4,668	)
Balance at December 31, 2005		12,281		$	1,228		$	65,911		$	(19,948	)	$	—	$	47,191
Stock option grants		—			—			105			—			—		105
Net loss		—			—			—			(5,262	)		—		(5,262	)
Balance at December 31, 2006		12,281		$	1,228		$	66,016		$	(25,210	)	$	—	$	42,034

Rental equipment		3 years
Computers and software		3-5 years
Machinery and equipment		5-7 years
Furniture and fixtures		7-10 years

	2005		2004

Risk-free interest rate		4.47%		4.23%
Expected dividend yield		0%		0%
Expected lives		2.1 Years		2.3 Years
Expected volatility		72.4%		75.1%

	2005		2004

Per share option value	$	1.96	$	4.78
Aggregate total	$	849,200	$	1,017,803

	2006			2005

Billed receivables	$	22,108		$	15,201
Unbilled receivables		1,088			335
		23,196			15,537
Less: Allowance for doubtful accounts		(257	)		(2,791	)
	$	22,939		$	12,745

	Operating Leases
2007	$	11,671
2008		9,042
2009		5,091
2010		3,675
2011		961
Thereafter		—
Total minimum lease payments	$	30,440

	2006			2005

Deferred tax assets:
Net operating loss carryforwards	$	17,802		$	14,317
Allowance for doubtful accounts		96			1,019
Reserves		433			215
Other		4			58
Total deferred tax assets		18,335			15,609
Valuation allowance		(14,032	)		(12,187	)
Net deferred tax assets		4,303			3,422
Deferred tax liabilities:
Goodwill		(2,942	)		(2,318	)
Depreciation		(1,361	)		(1,104	)
Net deferred taxes		—			—

Net deferred taxes:
Current deferred tax assets		—			—
Noncurrent deferred tax assets		—			—
	$	—		$	—

Property & Equipment	$	2,726
Customer Contracts		502
Purchase Price	$	3,228

	Options Outstanding						Options Exercisable
Range of Exercise Prices	As of December 31, 2006		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		As of December 31, 2006		Weighted Average Exercise Price
$1.77 - $3.54		280		5.0	$	3.37		280	$	3.37
$3.54 - $5.31		931		6.7		4.53		880		4.52
$5.31 - $7.07		—		—		—		—		—
$7.07 - $8.84		—		—		—		—		—
$8.84 - $10.61		170		0.9		9.10		170		9.10
$10.61 - $12.38		20		1.3		12.00		20		12.00
$12.38 - $14.15		—		—		—		—		—
$14.15 - $15.92		—		—		—		—		—
$15.92 - $17.68		17		2.3		17.02		17		17.02
		1,418		5.5	$	5.10		1,367	$	5.12

	Shares			Weighted Average Price
Outstanding at December 31, 2003		1,642		$	5.59
Granted		213			10.45
Exercised		(186	)		4.53
Forfeited		(154	)		6.63
Outstanding at December 31, 2004		1,515			6.30
Granted		433			5.52
Exercised		(328	)		4.54
Forfeited		(90	)		7.57
Outstanding at December 31, 2005		1,530			5.27
Granted		—			0.00
Exercised		—			0.00
Forfeited		(112	)		7.40
Outstanding at December 31, 2006		1,418		$	5.10

(000’s, except per share data)	First			Second			Third			Fourth (1)


2006 Quarters:
Revenues, net	$	17,329		$	16,577		$	19,091		$	29,346
Operating loss		(1,211	)		(743	)		(368	)		(2,511	)
Net loss		(1,278	)		(834	)		(488	)		(2,662	)
Net loss per share-basic		(0.11	)		(0.07	)		(0.04	)		(0.22	)
Net loss per share-diluted	$	(0.11	)	$	(0.07	)	$	(0.04	)	$	(0.22	)

2005 Quarters:
Revenues, net	$	19,239		$	18,942		$	17,543		$	18,168
Operating loss		(221	)		(577	)		(778	)		(2,938	)
Net loss		(288	)		(619	)		(796	)		(2,965	)
Net loss per share-basic		(0.02	)		(0.05	)		(0.07	)		(0.24	)
Net loss per share-diluted	$	(0.02	)	$	(0.05	)	$	(0.07	)	$	(0.24	)

Larry C. Hanger		17,730 shares of common stock of the Company
Robert J. Toner		17,730 shares of common stock of the Company
James R. McMurphy		17,730 shares of common stock of the Company
Christine A. Herren		$15,000

Exhibit Number		Description of Exhibits

2.1		Agreement and Plan of Merger dated December 8, 2000, by and among the Registrant, UDS, Patrick West, Daniel Reeves and The Estate of John R. West (incorporated by reference to Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001 (Commission File No. 000-23741), filed with the commission on March 28, 2002)

3.1		Amended and Restated Articles of Incorporation of the Registrant, (incorporated by reference to Exhibit 3.1 to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (Commission File No. 333-42373), filed with the Commission on February 11, 1998)

3.2	*	Amended and Restated By-laws of the Registrant

4.1		Form of Common Stock Certificate of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (Commission File No. 333-42373), filed with the Commission on February 11, 1998)

4.2	(a)	Rights Agreement between Company and Reliance Trust Company as Rights Agent, dated as of December 31, 1997 (incorporated by reference to Exhibit 4.2 to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (Commission File No. 333-42373), filed with the Commission on February 11, 1998)

	(b)	First Amendment to the Rights Agreement dated as of November 30, 2000 between the Company, Reliance Trust Company and SunTrust Bank (incorporated by reference to Exhibit 4.2(b) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000 (Commission File No. 000-23741), filed with the Commission on March 30, 2001)

	(c)	Second Amendment to the Rights Agreement dated as of August 14, 2003 between the Company and SunTrust Bank (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q/A for the quarterly period ended June 30, 2003 (Commission File No. 000-23741), filed with the Commission on August 20, 2003)

	(d)	Third Amendment to the Rights Agreement dated as of November 24, 2003 between the Company and SunTrust Bank (incorporated by reference to Exhibit 4.2(d) to Amendment No. 2 to the Registrant’s Registration of Securities on Form 8-A/A (Commission File No. 000-23741), filed with the Commission on November 25, 2003)

10.1	+	2000 Stock Option and Incentive Award Plan and amendment thereto (incorporated by reference to Exhibit 4.3 and 4.4 to the Registrant’s Form S-8 (Commission File No. 333-54970) filed with the Commission on February 5, 2001)

10.2	(a)	Sublease Agreement, dated May 26, 1999, by and between HSN Realty LLC and Universal Distribution Services, Inc. (incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000 (Commission File No. 000-23741), filed with the Commission on March 30, 2001)

	(b)	Lease, dated March 23, 2000 by and between Dermody Industrial Group and Universal Distribution Services, Inc. (incorporated by reference to Exhibit 10.2(b) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (Commission File No. 000-23741), filed with the Commission on March 31, 2003)

10.4	(a)	Amended and Restated Loan and Security Agreement between the Registrant and SouthTrust Bank, N.A., dated January 25, 1999 (incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1998 (Commission File No. 0-23741), filed with the Commission on March 26, 1999)

	(b)	First Amendment to Amended and Restated Loan and Security Agreement by and between the Registrant and SouthTrust Bank, N.A., dated April 29, 1999 (incorporated by reference to Exhibit 10.14(b) to the Registrant’s Registration Statement on Form S-1 (Commission File No. 333-79929), filed with the Commission on June 3, 1999)

	(c)	Letter Modification/Waiver to Amended and Restated Loan and Security Agreement, as amended, effective August 14, 2000 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000 (Commission File No. 0-23741), filed with the Commission on November 13, 2000)

	(d)		Letter of Amendment to Amended and Restated Loan and Security Agreement by and between the Registrant and SouthTrust Bank, N.A. effective September 10, 2001 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001 (Commission File No. 0-23741) filed with the Commission on November 13, 2001)

	(e)		Letter Modification/Waiver to Amended and Restated Loan and Security Agreement, as amended, effective May 31, 2002 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002 (Commission File No. 000-23740) filed with the Commission on August 13, 2002)

	(f)		Letter Modification/Waiver to Amended and Restated Loan and Security Agreement, as amended, effective November 13, 2002 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002 (Commission File No. 000-23740) filed with the Commission on November 19, 2002)

	(g)		Letter Modification to Amended and Restated Loan and Security Agreement, dated February 18, 2003, as amended, effective January 1, 2003 (incorporated by reference to Exhibit 10.4(g) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (Commission File No. 000-23741), filed with the Commission on March 31, 2003)

	(h)		Second Amended and Restated Loan and Security Agreement by and between the Registrant and SouthTrust Bank, N.A., dated April 3, 2003 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 (Commission File No. 000-23740), filed with the Commission on May 14, 2003)

	(i)		Letter Modification/Waiver to Second Amended and Restated Loan and Security Agreement, as amended, effective February 6, 2004 (incorporated by reference to Exhibit 10.4(i) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 (Commission File No. 000-23741), filed with the Commission on March 30, 2004)

	(j)		Letter Modification to Second Amended and Restated Loan and Security Agreement, as amended, effective February 26, 2004 (incorporated by reference to Exhibit 10.4(j) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 (Commission File No. 000-23741), filed with the Commission on March 30, 2004)

	(k)		Letter Modification/Wavier to Second Amended and Restated Loan and Security Agreement, as amended, effective March 26, 2004 (incorporated by reference to Exhibit 10.4(k) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 (Commission File No. 000-23741), filed with the Commission on March 30, 2004)

	(l)		Loan Documents Modification Agreement between the Registrant and SouthTrust Bank, dated May 10, 2004 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 (Commission File No. 000-23740), filed with the Commission on May 14, 2004)

	(m)		Loan Documents Modification Agreement between the Registrant and Wachovia Bank, National Association, Successor by merger to SouthTrust Bank, dated May 20, 2005 (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 (Commission File No. 000-23740), filed with the Commission on August 12, 2005)

	(v)	Third Amended and Restated Loan and Security Agreement by and between the Registrant and Wachovia Bank, National Association, Successor by merger to SouthTrust Bank, dated March 28, 2006 (incorporated by reference to Exhibit 10.4(v) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 (Commission File No. 000-23741), filed with the Commission on March 31, 2006)

	(w)	First Amendment Agreement to the Third Amended and Restated Loan and Security Agreement by and between the Registrant and Wachovia Bank, National Association, Successor by merger to SouthTrust Bank, dated July 24, 2006 (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006 (Commission File No. 000-23740), filed with the Commission on August 14, 2006)

	(x)	Waiver and Amendment Agreement to the Third Amended and Restated Loan and Security Agreement by and between the Registrant and Wachovia Bank, National Association, Successor by merger to SouthTrust Bank, dated November 14, 2006 (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 (Commission File No. 000-23740), filed with the Commission on November 14, 2006)

	(y)*	Second Waiver and Amendment Agreement to the Third Amended and Restated Loan and Security Agreement by and between the Registrant and Wachovia Bank, National Association, Successor by merger to SouthTrust Bank, dated April 16, 2007

10.5	+	2002 Senior Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001 (Commission File No. 000-23741), filed with the Commission on March 28, 2002)

10.13	(a)	Lease, dated July 23, 2001, by and between The Lincoln National Life Insurance Company and iFulfillment, Inc. (incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001 (Commission File No. 000-23741), filed with the Commission on March 28, 2002)

	(b)	Lease, dated August 5, 2002, by and between The Lincoln National Life Insurance Company and the Registrant (incorporated by reference to Exhibit 10.13(b) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (Commission File No. 000-23741), filed with the Commission on March 31, 2003)

10.16	(a)	Lease, dated April 23, 2002, by and between ProLogis Development Services Incorporated and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002 (Commission File No. 000-23740) filed with the Commission on November 19, 2002)

	(b)	First Amendment to Lease Agreement dated October 15, 2002 by and between ProLogis Development Services Incorporated and the Registrant (incorporated by reference to Exhibit 10.16(b) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (Commission File No. 000-23741), filed with the Commission on March 31, 2003)

	(c)	Second Amendment to Lease Agreement dated March 5, 2003 by and between ProLogis-Macquarie Kentucky I LLC and the Registrant (incorporated by reference to Exhibit 10.16 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 (Commission File No. 000-23740), filed with the Commission on August 12, 2005)

	(d)	Third Amendment to Lease Agreement dated September 21, 2006 by and between ProLogis-Macquarie Kentucky I LLC and the Registrant (incorporated by reference to Exhibit 10.16 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 (Commission File No. 000-23740), filed with the Commission on November 14, 2006)

10.17	(a)	Lease, dated September 17, 2002, by and between The Prudential Insurance Company of America and the Registrant (incorporated by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (Commission File No. 000-23741), filed with the Commission on March 31, 2003)

	(b)	First Amendment to Lease Agreement dated April 4, 2003 by and between The Prudential Insurance Company of America and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 (Commission File No. 000-23740), filed with the Commission on May 14, 2003)

	(c)	Second Amendment to Lease Agreement dated June 23, 2005 by and between The Prudential Insurance Company of America and the Registrant (incorporated by reference to Exhibit 10.17 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 (Commission File No. 000-23740), filed with the Commission on August 12, 2005)

10.19	(a)	Agreement dated August 14, 2003 by and between IPOF Fund, LP, an Ohio limited partnership (“IPOF”), David Dadante, an individual resident of Ohio and the general partner of IPOF and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q/A for the quarterly period ended June 30, 2003 (Commission File No. 000-23740), filed with the Commission on August 20, 2003)

	(b)	First Amendment dated November 24, 2003 to the Agreement by and between IPOF Fund, LP, an Ohio limited partnership (“IPOF”), David Dadante, an individual resident of Ohio and the general partner of IPOF and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (Commission File No. 000-23740), filed with the Commission on November 24, 2003)

10.20	(a)	Lease, dated August 16, 2004, by and between Centerpoint 800 LLC and the Registrant (incorporated by reference to Exhibit 10.20 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004 (Commission File No. 000-23740), filed with the Commission on November 12, 2004)

	(b)	First Amendment to Lease Agreement, dated May 1, 2004, by and between Centerpoint 800 LLC and the Registrant (incorporated by reference to Exhibit 10.16(b) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 (Commission File No. 000-23741), filed with the Commission on March 31, 2006)

	(c)	Second Amendment to Lease Agreement, dated August 15, 2006, by and between Centerpoint 800 LLC, Centerpoint 1000, LLC and the Registrant (incorporated by reference to Exhibit 10.20 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 (Commission File No. 000-23740), filed with the Commission on November 14, 2006)

10.21		Fourth Lease Extension and Modification Agreement dated July 8, 2005 by and between Teachers Insurance and Annuity Association of America, for the Benefit of its Separate Real Estate Account and the Registrant (incorporated by reference to Exhibit 10.21 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 (Commission File No. 000-23740), filed with the Commission on August 12, 2005)

10.22		Lease dated December 28, 2005 by and between Duke Realty Limited Partnership and the Registrant (incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 (Commission File No. 000-23741), filed with the Commission on March 31, 2006)

	(a)	First Amendment to Lease Agreement, dated October 19, 2006, by and between Duke Realty Limited Partnership and the Registrant (incorporated by reference to Exhibit 10.22 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 (Commission File No. 000-23740), filed with the Commission on November 14, 2006)

10.23	+*	Employment Agreement dated April 16, 2007, by and between Scott D. Dorfman and the Registrant

10.24	+*	Employment Agreement dated April 16, 2007, by and between Larry C. Hanger and the Registrant

10.25	+*	Employment Agreement dated April 16, 2007, by and between Robert J. Toner, Jr. and the Registrant

10.26	+*	Employment Agreement dated April 16, 2007, by and between James McMurphy and the Registrant

10.27	+*	Innotrac Corporation Officer Retention Plan

10.28	+*	Restricted Stock Award Agreement

21.1	*	List of Subsidiaries

23.1	*	Consent of BDO Seidman, LLP

24.1	*	Power of Attorney (included on signature page)

31.1	*	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)

31.2	*	Certification of principal financial officer Pursuant to Rule 13a-14(a)/15d-14(a)

32.1	*	Certification of Chief Executive Officer Pursuant to 18 U.S.C.ss.1350

32.2	*	Certification of principal financial officer Pursuant to 18 U.S.C.ss.1350

*	Filed herewith.

+	Management contract or compensatory plan or arrangement required to be filed as an exhibit.

Description	Balance at Beginning of Period		Charged to Expenses		Charged to Other Accounts		Deductions			Balance at End of Period
(in 000’s)
Provision for uncollectible accounts
Year ended December 31,
2006	$	2,791	$	54	$	—	$	(2,588	)	$	257
2005	$	1,624	$	1,248	$	—	$	(81	)	$	2,791
2004	$	1,696	$	221	$	—	$	(293	)	$	1,624

Provisions for returns and allowances
Year ended December 31,
2006	$	5	$	—	$	—	$	(5	)	$	—
2005	$	5	$	12	$	—	$	(12	)	$	5
2004	$	12	$	5	$	—	$	(12	)	$	5


	INNOTRAC CORPORATION

		/s/ Scott D. Dorfman

		Scott D. Dorfman Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

Signature		Title

/s/ Scott D. Dorfman		Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)
Scott D. Dorfman

/s/ Christine A. Herren		Senior Director and Controller (Principal Financial Officer and Principal Accounting Officer)
Christine A. Herren

/s/ Thomas J. Marano		Director
Thomas J. Marano

/s/ Bruce V. Benator		Director
Bruce V. Benator

/s/ Martin J. Blank		Director
Martin J. Blank

/s/ Joel E. Marks		Director
Joel E. Marks

Average Excess Availability (90)	Base Rate Loans	LMIR Loans
< $5,000,000	0.00%	2.00%
> $5,000,000 but < $7,500,000	0.00%	1.50%
> $7,500,000 but < $10,000,000	0.00%	1.25%
> $10,000,000	0.00%	1.00%