Exhibit 10.17


    

      Exhibit
        10.17

       

      SEPARATION
        AND RELEASE AGREEMENT

       

      This
        Separation and Release Agreement (this “Agreement”) is entered into by and
        between INTERACTIVE INTELLIGENCE, INC. (the “Company”) and JEREMIAH J. FLEMING
        (“Fleming”).

       

      Recitals

       

      A.  Fleming
        has been employed with the Company in various executive positions pursuant
        to
        that certain Employment Agreement dated as of March 1, 1997, as amended by
        that
        certain Employment Agreement Amendment A dated as of May 14, 1999 and by
        that
        certain Second Amendment to Employment Agreement dated as of February 23,
        2000
        (as so amended the “Employment Agreement”).

       

      B.  Fleming
        and the Company desire for Fleming to voluntarily resign and terminate his
        employment with the Company effective March 6, 2007, under the terms of this
        Agreement.

       

      C.  In
        consideration of Fleming’s release and waiver of any and all claims he may have
        against the Company Released Parties (as defined below), his re-affirmation
        of
        his non-competition and non-disclosure covenants under the Employment Agreement
        and his compliance with the other covenants of this Agreement, the Company
        is
        willing to provide certain special severance compensation to Fleming and
        to
        release Fleming from certain claims the Company may have against him in
        accordance with the terms of this Agreement. In exchange for certain special
        severance compensation and the Company’s release of claims as described in this
        Agreement, Fleming is willing to waive, and to release the Company Released
        Parties from, any and all rights or claims that he may have against the Company
        Released Parties, including, but not limited to, any claims under the Age
        and
        Discrimination in Employment Act of 1967 (29 U.S.C. § 621 et seq.),
        to
        re-affirm his non-competition and non-disclosure covenants under the Employment
        Agreement and to abide by the covenants and provisions contained in this
        Agreement.

       

      Agreement

       

      In
        consideration of the covenants and promises hereby provided, the actions
        taken
        pursuant thereto, and other good and valuable consideration, the receipt
        and
        sufficiency of which are hereby acknowledged, the Company and Fleming agree
        as
        follows:

       

      1.  Resignation/Separation
        of Employment.
        Fleming
        hereby voluntarily resigns his employment with the Company effective as of
        March
        6, 2007, and the Company accepts such resignation. The Company and Fleming
        agree
        that Fleming’s employment with the Company has terminated effective March 6,
        2007 (the “Separation Date”) as a result of Fleming’s voluntary resignation.
        Fleming further hereby resigns any and all positions he holds with the Company
        or any of its affiliates, including, but not limited to, any officer positions,
        effective as of the Separation Date.

       

      2.  Salary;
        Submission of Business Expense Reimbursement Request.
        The
        Company will pay Fleming his base salary through the Separation Date. The
        Company will make such final salary payment to Fleming in accordance with
        the
        Company’s customary payroll practices. Fleming acknowledges and agrees that the
        Company has paid him all wages and other compensation, including, but not
        limited to, commissions, bonuses, incentive compensation and vacation pay,
        to
        which he is entitled under the Employment Agreement or otherwise in connection
        with his employment with the Company and that, except as expressly provided
        in
        this Agreement, Fleming is not entitled to any additional compensation from
        the
        Company. Fleming shall submit to the Company any request for reimbursement
        of
        business expenses together with all required supporting documentation by
        no
        later than March 19, 2007. The Company will evaluate and pay any such business
        expense reimbursement request timely submitted by Fleming in accordance with
        the
        Company standard expense reimbursement policies and practices. Fleming agrees
        that he is not entitled to any reimbursement if he does not submit such
        reimbursement request and the applicable supporting documentation to the
        Company
        by March 19, 2007.

       

      3.  Termination
        of Employee Benefits.
        Fleming’s eligibility to participate in and/or his receipt of, all employee
        benefits and perquisites will terminate as of the Separation Date, except
        for
        any applicable COBRA rights and any vested benefits under any Company-sponsored
        qualified retirement plans.

       

      4.  Severance
        Compensation.
        The
        Company agrees to pay Fleming the following special severance compensation,
        which absent this Agreement Fleming would not otherwise be entitled to receive:
        The Company will pay Fleming severance compensation in the total gross sum
        of
        One Hundred Seventy-Five Thousand Dollars ($175,000.00). Such severance
        compensation shall be paid in a single lump-sum payment, less all applicable
        payroll tax deductions/withholdings, within five (5) calendar days after
        this
        Agreement becomes effective. 

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      5.  Fleming’s
        Release of Claims.
        Fleming
        hereby generally, irrevocably and unconditionally releases and forever
        discharges and covenants not to sue the Company and all of its current and/or
        former employees, officers, shareholders, directors, employee benefit plans
        and
        their fiduciaries, representatives and agents, and all persons acting by,
        through, or under or in concert with any of them, both individually and in
        their
        representative capacities (collectively, including without limitation the
        Company, the “Company Released Parties”) from any and all complaints, claims,
        demands, liabilities, obligations, injuries, actions or rights of action
        of any
        nature whatsoever (including without limitation claims for damages, attorneys’
fees, interest and costs), whether known or unknown, disclosed or undisclosed,
        administrative or judicial, suspected or unsuspected, that exist in whole
        or in
        part as of the date Fleming signs this Agreement, including, but not limited
        to,
        any claims based upon, arising out of or in any manner connected with Fleming’s
        employment with the Company or the separation of Fleming’s employment with the
        Company, but excluding Fleming’s rights under Sections 3 and 4 of this
        Agreement. Without limiting the generality of the foregoing, Fleming
        acknowledges that the foregoing release/covenant not to sue is to be construed
        as broadly as possible and includes, but is not limited to, and constitutes
        a
        complete waiver of, any and all possible claims against the Company Released
        Parties under the Age Discrimination in Employment Act of 1967 (29 U.S.C.
§ 621
et seq.),
        as
        amended (including the Older Workers Benefit Protection Act), Title VII of
        the
        Civil Rights Act of 1964, the Civil Rights Act of 1991, the Equal Pay Act,
        the
        Americans With Disabilities Act, the Family and Medical Leave Act, the Employee
        Retirement Income Security Act and all other federal, state and local laws
        and
        statutes. Fleming represents that he has not filed with any agency or court
        any
        charges, complaints or legal actions against any of the Company Released
        Parties. Should any administrative agency or other person bring a complaint,
        charge or legal action on Fleming’s behalf against any of the Company Released
        Parties based on any acts, omissions or events occurring up through the date
        Fleming signs this Agreement, Fleming will notify such agency or person promptly
        that the matter has been resolved to his satisfaction and that he does not
        wish
        to have the matter pursued. If such agency or other person independently
        determines to initiate or pursue a complaint, charge or legal action on
        Fleming’s behalf against any of the Company Released Parties based on any acts,
        omissions or events occurring up through the date Fleming signs this Agreement,
        Fleming hereby waives any rights to, and will not accept, any remedy obtained
        through the efforts of such agency or person. 

       

      6.  The
        Company’s Release of Claims.
        The
        Company hereby generally, irrevocably and unconditionally releases and forever
        discharges and covenants not to sue Fleming from any and all complaints,
        claims,
        demands, liabilities, obligations, injuries, actions or rights of action
        of any
        nature whatsoever (including without limitation claims for attorneys’ fees,
        interest and costs), whether known or unknown, disclosed or undisclosed,
        administrative or judicial, suspected or unsuspected, that exist in whole
        or in
        part as of the date the Company executes this Agreement, including but not
        limited to, any claims based upon, arising out of or in any manner connected
        with Fleming’s employment with the Company or the separation of Fleming’s
        employment with the Company; provided, however, the foregoing release/covenant
        not to sue does not affect, release, or constitute a waiver of, Fleming’s
        obligations (and the Company’s rights) under the provisions of the Employment
        Agreement that survive this Agreement and the termination of Fleming’s
        employment with the Company, including Fleming’s obligations (and the Company's
        rights) pursuant to Sections 7, 8, 9, 10 and 11 of the Employment Agreement,
        which such provisions of the Employment Agreement remain effective and in
        full
        force.

       

      7.  Return
        of Company Property.
        Fleming
        represents and covenants (a) that he has returned, or will immediately return,
        to the Company all property belonging to the Company, including, but not
        limited
        to, keys, access cards, files, equipment, business plans, financial statements,
        computer disks or files, documents and/or any such other Company property
        in
        Fleming’s possession or custody or under Fleming’s control, and (b) that he has
        not retained and will not retain copies of any the Company’s files, documents,
        electronic data or other property, including, but not limited to, any documents,
        materials or data containing any confidential information of the
        Company.

       

      8.  Non-Disparagement.
        Fleming
        agrees and covenants that he will not make any statements, oral or written,
        that
        disparage, or damage the reputation of any of the Company Released Parties
        or
        the Company’s business. The Company agrees and covenants that it will not make
        any statements, oral or written, that disparage, or damage the reputation
        of,
        Fleming. Nothing in this section is intended to preclude or restrict in any
        way
        Fleming or the Company from making any disclosures as may be required by
        law,
        whether in response to any legal process, subpoena or otherwise.

       

      9.  Employment
        Agreement.
        Fleming
        acknowledges and agrees that this Agreement does not affect his obligations
        (and
        the Company’s rights) under Section 7 (Covenant Not to Compete), Section 8
        (Covenant Not to Disclose Confidential Information), Section 9 (Remedies),
        Section 10 (Inventions), and Section 11 (Surrender of Records) of the Employment
        Agreement and all related procedural and enforcement provisions of the
        Employment Agreement, and Fleming hereby re-affirms such covenants and
        obligations under the Employment Agreement. Fleming acknowledges that he
        does
        not have any continuing rights under the Employment Agreement.

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


       

      10.  Age
        Act Advisements.
        Fleming
        acknowledges that: (a) the Company has advised him that his employment with
        the
        Company was covered by the Age Discrimination in Employment Act of 1967 (29
        U.S.C. § 621 et seq.),
        as
        amended (including the Older Workers Benefit Protection Act) (the "Age Act"),
        and by this Agreement Fleming is releasing and waiving all claims under such
        Age
        Act; (b) the Company has advised him to consult with an attorney prior to
        signing this Agreement; (c) the Company has advised him that he has up to
        twenty-one (21) calendar days to consider and accept this Agreement by signing
        and returning this Agreement to the Company; and (d) the Company has advised
        him
        that for a period of seven (7) calendar days following Fleming’s signing of this
        Agreement, Fleming may revoke this Agreement by written notice to the Company
        and that this Agreement will not become binding and enforceable until the
        seven-day revocation period has expired, without Fleming having exercised
        his
        revocation right.

       

      11.  No
        Admission.
        This
        Agreement and the actions taken pursuant to this Agreement do not constitute
        an
        admission by any party of any wrongdoing or liability, and each party expressly
        denies any wrongdoing or liability. 

       

      12.  Successors.
        This
        Agreement shall be binding upon and shall inure to the benefit of the heirs,
        personal representatives, successors, and assigns of each of the parties.
        

       

      13.  Entire
        Agreement; Limited Survival of Employment Agreement
        Provisions.
        This
        Agreement constitutes the entire agreement of the parties with respect to
        the
        subject matter addressed herein and supersedes any prior agreements,
        understandings or representations, oral or written, with respect to the subject
        matter addressed herein, except for the provisions of Section 7 (Covenant
        Not to
        Compete), Section 8 (Covenant Not to Disclose Confidential Information),
        Section
        9 (Remedies), Section 10 (Inventions), and Section 11 (Surrender of Records)
        of
        the Employment Agreement, and except for the related procedural and enforcement
        provisions of the Employment Agreement, all of which shall remain in effect.
        Fleming acknowledges he is not relying on any representations, promises or
        inducements, whether oral or written, made by the Company or its representatives
        except those expressly stated in this Agreement. The parties acknowledge
        that,
        except for this Agreement and those provisions of the Employment Agreement
        that
        remain in effect, there are no other agreements, oral or written, between
        them.


       

      14.  Modification.
        This
        Agreement may not be amended, supplemented, or modified except by a written
        document signed by both Fleming and a duly authorized officer of the
        Company.

       

      15.  Governing
        Law.
        This
        Agreement shall be governed by and construed and enforced in accordance with
        the
        laws of the State of Indiana. Any legal action relating to this Agreement
        shall
        be commenced and maintained exclusively in the state or federal courts located
        in Marion County, Indiana, and the parties hereby consent to the jurisdiction
        and venue of such courts.

       

      16.  Severability.
        The
        provisions of this Agreement are severable, and the invalidity of any one
        or
        more provisions shall not affect or limit the enforceability of the remaining
        provisions. Should any covenant or provision be held unenforceable for any
        reason, then such covenant or provision shall be enforced to the maximum
        extent
        permitted by law.

       

      17.  Counterparts.
        This
        Agreement may be executed in one or more counterparts (or upon separate
        signature pages bound together into one or more counterparts), all of which
        taken together shall constitute but one agreement. The parties acknowledge
        that
        signatures transmitted by facsimile or other electronic means are acceptable
        as
        much as original signatures for execution of this Agreement.

       

      18.  Language
        Construed As A Whole.
        The
        language of this Agreement shall in all cases be construed as a whole, according
        to its fair meaning, and not strictly for or against any of the parties.
        

       

      19.  Acknowledgement.
        Fleming
        acknowledges that he has read this Agreement, that he has had ample time
        to
        consider this Agreement, that he has had the opportunity to consult with
        his own
        legal counsel concerning this Agreement if he so chooses and that he is
        knowingly and voluntarily entering into this Agreement.

       

      IN
        WITNESS WHEREOF, the Company and Fleming have executed this Agreement on
        the
        date(s) indicated below, intending it to become effective seven (7) days
        after
        Fleming signs the Agreement.

       

      
        	
                FLEMING

              	 	
                INTERACTIVE
                  INTELLIGENCE, INC.

              
	 	 	 
	
                By:
                  /s/ Jeremiah J. Fleming

              	 	
                By:
                  /s/ Donald E. Brown

              
	
                Jeremiah
                  J. Fleming

              	 	
                Donald
                  E. Brown, M.D., President

              
	 	 	 
	
                Date:
                  March 7, 2007

              	 	
                Date:
                  March 7, 2007