Exhibit 10.35


    Exhibit
      10.35

    
 

    INTERACTIVE
      INTELLIGENCE, INC.

    


    INCENTIVE
      STOCK OPTION AGREEMENT

    UNDER
      2006 EQUITY INCENTIVE PLAN

    


    This
      Agreement ("Agreement"), effective as of the ____ day of ______________, 20__
      ("Grant Date"), is by and between Interactive Intelligence, Inc. ("Company")
      and
      _____________ ("Grantee").

    


    The
      Grantee now serves the Company or a Subsidiary as an Employee, and in
      recognition of the Grantee's valued services, the Company, through the
      Committee, desires to provide an opportunity for the Grantee to increase his
      or
      her stock ownership in the Company pursuant to the provisions of the Interactive
      Intelligence, Inc. 2006 Equity Incentive Plan (the "Plan").

    


    In
      consideration of the terms and conditions of this Agreement and the Plan, the
      terms of which are incorporated as a part of this Agreement, the parties agree
      as follows:

     

    1.  Grant
      of Option.
      As of
      the date indicated above, the Company hereby grants to the Grantee the right
      and
      option ("Option") to purchase all or any part of an aggregate of ______________
      Shares.

     

    2.  Incentive
      Status.
      This
      Option is intended to qualify as an incentive stock option under Code Section
      422, and shall be subject to terms governing incentive stock options in the
      Plan
      and the Code.

     

    3.  Exercise
      Price.
      The
      Exercise Price of each Share covered by this Option is $__________ per
      Share.

     

    4.  Vesting
      of Option.
      Subject
      to the terms of the Plan and this Agreement, including paragraph 5 below, the
      Grantee will vest in and be entitled to exercise this Option at the time the
      Committee selects below:

     

    ______
      (a) this Option shall become exercisable as to _________ [insert
      fraction, such as 1/4]
      of the
      Shares on a cumulative basis, on each of the __________________ [insert
      anniversary dates, such as first, second, third and fourth]
      anniversaries of the Grant Date (time-based vesting (graded));

     

    ______
      (b) on __________ ___, 2____ (time-based vesting (cliff));

     

    ______
      (c) on the date or dates the Grantee achieves the Performance Measures, as
      specified in Attachment A to this Agreement (performance-based
      vesting).

     

    5.  Term
      of Option.
      This
      Option expires at the close of business on __________ ___, 20___ (not to exceed
      ten years from the Grant Date), unless it expires earlier pursuant to the
      following rules:

     

    (a)  Upon
      termination of the Grantee's employment for Cause, this Option will terminate
      immediately and the Grantee will (if the Committee, in its sole discretion,
      exercises its rights under this section within ten (10) days of the termination)
      repay to the Company within then (10) days of the Committee’s written demand the
      amount of any gain the Grantee had realized upon any exercise within the 90-day
      period prior to the termination of this Option;

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    (b)  Upon
      termination of the Grantee’s employment due to death or Disability, the Grantee
      or the Grantee’s beneficiary, as the case may be, may exercise this Option to
      the extent the Grantee was entitled to exercise this Option on the date of
      termination, but only within the one (1)-year period immediately following
      the
      Grantee’s termination due to death or Disability, and in no event after the date
      this Option expires in accordance with its terms; and

     

    (c)  Upon
      termination by the Company of the Grantee's employment without Cause, or upon
      termination of employment by the Grantee for a reason other than death or
      Disability, or upon the Grantee’s Retirement, the Grantee may exercise this
      Option to the extent that the Grantee was entitled to exercise this Option
      at
      the date of termination, but only within the one (1) month period immediately
      following the Grantee’s termination, and in no event after the date this Option
      expires in accordance with its terms.

     

    6.  Exercise.
      The
      Grantee may exercise this Option, to the extent vested, by delivering a written
      notice to the Company, specifying the number of Shares for which he or she
      is
      exercising the Option, and specifying the method of payment for the Exercise
      Price. The Grantee may pay the Exercise Price by any of the following
      means:

     

    (a)  in
      cash
      or its equivalent;

     

    (b)  by
      tendering (either actually or constructively by attestation) Shares having
      an
      aggregate Fair Market Value at the time of exercise equal to the Exercise Price
      that the Grantee has held for at least __________
      (___) months;
      

     

    (c)  Cashless
      Exercise; or

     

    (d)  by
      a
      combination of any of the permitted methods of payment in subparagraphs (a),
      (b), and (c) above.

     

    7.  Non-Assignability.
      Except
      as provided in the Plan or this Agreement, this Option is not assignable or
      transferable by the Grantee otherwise than by will or by the laws of descent
      and
      distribution and is exercisable, during the Grantee's lifetime, only by the
      Grantee or his or her guardian or legal representative.

     

    8.  Change
      in Control.
      Upon
      the
      occurrence of a Change in Control, Section
      19 of the Plan will govern this
      Option.

     

    9.  Withholding.
      Prior
      to the delivery of any Shares pursuant to this Option, the Company has the
      right
      and power to deduct or withhold, or require the Grantee to remit to the Company,
      an amount sufficient to satisfy all applicable tax withholding requirements.
      The
      Company may permit or require the Grantee to satisfy all or part of the tax
      withholding obligations in connection with this Option by (a) having the Company
      withhold otherwise deliverable Shares, or (b) delivering to the Company
      Shares already owned for a period of at least six (6) months (or such longer
      or
      shorter period as may be required to avoid a charge to earnings for financial
      accounting purposes), in each case having a value equal to the amount to be
      withheld, which shall not exceed the amount determined by the applicable minimum
      statutory tax withholding rate (or such other rate as will not result in a
      negative accounting impact). For these purposes, the value of the Shares to
      be
      withheld or delivered will be equal to the Fair Market Value as of the date
      that
      the taxes are required to be withheld.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    10.  Notices.
      All
      notices and other communications required or permitted under this Agreement
      shall be written and delivered personally or sent by registered or certified
      first-class mail, postage prepaid and return receipt required, addressed as
      follows: if to the Company, to the Company's executive offices in Indianapolis,
      Indiana, and if to the Grantee or his or her successor, to the address last
      furnished by the Grantee to the Company. Notwithstanding the foregoing, though,
      the Company may authorize notice by any other means it deems desirable or
      efficient at a given time, such as notice by facsimile or electronic
      mail.

     

    11.  No
      Employment Rights.
      Neither
      the Plan nor this Agreement confers upon the Grantee any right to continue
      in
      the employ of the Company or interferes in any way with the right of the Company
      to terminate the Grantee's employment at any time.

     

    12.  Defined
      Terms.
      All of
      the defined terms, or terms that begin with capital letters and have a special
      meaning for purposes of this Agreement, have the meaning ascribed to them in
      this Agreement. All defined terms to which this Agreement does not ascribe
      a
      meaning have the meaning ascribed to them in the Plan.

     

    13.  Plan
      Controlling.
      The
      terms and conditions set forth in this Agreement are subject in all respects
      to
      the terms and conditions of the Plan, which are controlling. All determinations
      and interpretations of the Committee are binding and conclusive upon the Grantee
      and his or her legal representatives. The Grantee agrees to be bound by the
      terms and provisions of the Plan.

     

    


     

    [SIGNATURES
      APPEAR ON THE FOLLOWING PAGE]

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the
      Company and the Grantee have executed this Agreement as of the date first above
      written.

     

    


    ________________________________

    [GRANTEE
      SIGNATURE]

     

    Print
      Name: ______________________

    


    


    


    INTERACTIVE
      INTELLIGENCE, INC.

    


    


    


    By:______________________________

     

    Print
      Name: _______________________

     

    Title:_____________________________


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ATTACHMENT
      A

    TO

    INCENTIVE
      STOCK OPTION AGREEMENT

    


    PERFORMANCE-BASED
      VESTING

    


    I. Performance
      Measures and Beginning of Performance Period

     

    Pursuant
      to the terms of the Plan and paragraph 4 of this Agreement, the Grantee will
      vest in this Option only upon the achievement, under the terms applicable in
      part II below and within the Performance Period that begins on the date
      specified in this part I, of the following Performance Measures: [specify
      the applicable Performance Measures and the first day of the Performance
      Period]:

     

    _________________________________________________________________

     

    _________________________________________________________________

     

    _________________________________________________________________

     

    _________________________________________________________________

     

    _________________________________________________________________

     

    _________________________________________________________________

     

    II. Performance
      Period (Vesting Schedule)

     

    The
      Performance Period, or vesting schedule, that the Committee selects below
      applies to the Grantee's Option:

     

    _____1. Prorated
      Vesting.
      The
      Performance Period for this Option is _____ years (at least one), beginning
      on
      the date specified in part I above. After the Performance Period expires, the
      Committee will determine the percentage of achievement for the Performance
      Measures in part I above. Based upon that determination, the Grantee will vest
      in a percentage of Shares subject to this Option in accordance with the
      following schedule [below
      is an example]:

     

    
      	
              PERCENTAGE
                ACHIEVEMENT OF

              PERFORMANCE
                MEASURES

            	
              PERCENTAGE
                OF SHARES

              THAT
                VEST

            
	
              Below
                85%

            	
              0%

            
	
              At
                least 85% but less than 90%

            	
              25%

            
	
              At
                least 90% but less than 95%

            	
              50%

            
	
              At
                least 95% but less than 100%

            	
              75%

            
	
              At
                least 100%

            	
              100%

            


    

     

    _____2. Graded
      Vesting.
      The
      Performance Period for this Option is _____ years (more than one), with the
      first year beginning on the date specified in part I above and each subsequent
      year beginning on its anniversary. After each year of the Performance Period,
      as
      specified below, the Committee will determine whether the Performance Measures
      applicable to the period were achieved, as specified in part I above. Based
      upon
      that determination, the Committee will determine whether the Grantee vested
      in
      the correlating fraction of this Option for that period, all in accordance
      with
      the following schedule [below
      is an example]:

     

    
      	
              YEAR
                OF THE PERFORMANCE PERIOD

            	
              FRACTION
                OF SHARES

              THAT
                VEST

            
	
              The
                first year

            	
              1/3

            
	
              The
                second year

            	
              1/3

            
	
              The
                third year

            	
              1/3

            


    

    


     

    _____3. Cliff
      Vesting.
      The
      Performance Period for this Option is _____ years (at least one), beginning
      on
      the date specified in part I above. After the Performance Period expires, the
      Committee will determine whether the Performance Measures specified in part
      I
      above were achieved. If the Performance Measures were achieved in full, the
      Grantee will vest in this entire Option. If the Performance Measures were not
      achieved in full, the Grantee will forfeit this entire
      Option.