**EXHIBIT
      10.26**




***Compensation
      Committee Actions***




On
      February 15, 2007, the Compensation Committee of the Board of Directors of
      Interactive Intelligence, Inc. (the “Company”) took the following
      actions:





·
            Approved
                2007 Executive Officer Compensation


·
            Approved
                Amendments to Certain Stock Option
                Agreements


·
            Approved
                revised Board of Director
                Compensation





On
      June
      8, 2007, the Compensation Committee of the Board of Directors of the Company
      took the following actions:





·
            Approved
                the Form of Non-Employee Director Stock Option Agreement under 2006
                Equity
                Incentive Plan


·
            Approved
                the Form of Non-Employee Director Change of Control
                Agreement





***2007
      Executive Officer Compensation***





The
      Compensation Committee of the Board of Directors of the Company approved
      compensation arrangements, for the period beginning January 1, 2007, for the
      Company’s Executive Officers. The Compensation Committee also approved stock
      option arrangements beginning January 1, 2007, for each of the Company’s
      Executive Officers. Certain of these executive officers are classified as Named
      Executive Officers, as defined in Item 402(a)(3) of Regulation S-K of the
      Exchange Act. The Company’s Named Executive Officers are:





**Name**
            
            **Title/Position**Donald
                E. Brown, M.D.
            
            Chairman
                of the Board of Directors, President and Chief Executive Officer
              (Principal
                Executive Officer)Stephen
                R. Head
            
            Chief
                Financial Officer, Vice President of Finance and Administration,
              Secretary
                and Treasurer
              (Principal
                Financial Officer and Principal Accounting Officer)Gary
                R. Blough
            
            Executive
                Vice President of Worldwide SalesJeremiah
                J. Fleming
            
            Vice
                President of Business DevelopmentJoseph
                A. Staples
            
            Senior
                Vice President of Worldwide
                Marketing





Mr.
      Fleming voluntarily resigned effective March 6, 2007.





The
      information regarding the annual base salaries and performance bonuses and
      stock
      options for the Company’s Named Executive Officers, appearing in the Company’s
      Current Report on Form 8-K filed February 22, 2007, is incorporated herein
      by
      reference. The Compensation Committee also approved annual base salaries,
      performance bonuses and stock options for 2007 for Pamela J. Hynes and Melinda
      W. Marshall, current executive officers who are not designated as Named
      Executive Officers.





***Amendments
      to Stock Option Agreements – Officers***





The
      Board
      of Directors and the Compensation Committee also adopted a form of each of
      an
      Incentive Stock Option Agreement and a Nonqualified Stock Option Agreement
      to be
      used for grants of incentive stock options and nonqualified stock options,
      respectively, under the 2006 Equity Incentive Plan. The information required
      by
      this item appearing in the Company’s Current Report on Form 8-K filed February
      22, 2007 is incorporated herein by reference. The copy of the Form of Incentive
      Stock Option Agreement Under 2006 Equity Incentive Plan filed as Exhibit 10.35
      to the Company’s Current Report on Form 8-K filed February 22, 2007, is
      incorporated herein by reference and constitutes a part of this report. In
      addition, the copy of the Form of Nonqualified Stock Option Agreement Under
      2006
      Equity Incentive Plan filed as Exhibit 10.36 to the Company’s Current Report on
      Form 8-K filed February 22, 2007, is incorporated herein by reference and
      constitutes a part of this report.










***2007
      Board of Director Compensation***





The
      Compensation Committee of the Board of Directors of the Company approved
      compensation arrangements, for the period beginning January 1, 2007, for the
      Company’s non-employee Board of Director members.  Each member will
      receive an annual retainer, paid quarterly, of $25,000.  For each
      meeting of the Board of Directors and any meeting of the Audit Committee,
      Compensation and Stock Option Committee and Nominating and Corporate Governance
      Committee (the “Committees”), members will be paid $1,500 if the meeting is
      attended in person and $750 if the meeting is attended by
      teleconference.





The
      Audit
      Committee Chairman will receive an annual retainer, paid quarterly, of $15,000
      and the Chairman of the Compensation and Stock Option Committee and the
      Nominating and Corporate Governance Committee will each receive an annual
      retainer, paid quarterly, of $5,000.





A
      stock
      option award will be granted to each Board of Director member every year at
      the
      Annual Meeting of Shareholders.  The option to purchase 8,000 shares
      of the Company’s stock will vest in four equal annual installments and the
      exercise price of the option will be the closing price on the previous business
      day.  Any new member of the Board of Directors will receive an option
      to purchase 20,000 shares of the Company’s stock that will vest in four equal
      annual installments and will be granted on the day of appointment of the member
      at an exercise price equal to the previous business day closing
      price.




***Stock
      Option Agreements – Directors***





The
      Board
      of Directors and the Compensation Committee adopted a form of non-employee
      director stock option agreement to be used for grants of nonqualified stock
      options under the 2006 Equity Incentive Plan. A copy of the Form of Non-Employee
      Director Stock Option Agreement under 2006 Equity Incentive Plan, filed as
      Exhibit 10.37 to this Quarterly Report for the period ended June 30, 2007,
      is
      incorporated herein by reference and constitutes a part of this
      report.





***Change
      of Control Agreements – Directors***





The
      Board
      of Directors and the Compensation Committee also adopted a form of non-employee
      director change of control agreement to be used for events triggering a change
      of control of the Company. A copy of the Form of Non-Employee Director Change
      of
      Control Agreement, filed as Exhibit 10.38 to this Quarterly Report for the
      period ended June 30, 2007, is incorporated herein by reference and constitutes
      a part of this report.