PATENT LICENSE AGREEMENT

directly or indirectly, the power to elect a majority of the Board of Directors of Interactive Intelligence.

1.2                                  Change Event .  “Change Event” means a Change of Control or any transaction described in Paragraphs 10, 11.1, 11.2 or 11.3 below.

1.3                                  Excluded Market Products .  “Excluded Market Products” means any product or service made for, used by or sold directly or indirectly to any Person who owns or controls or operates one or more hotels, motels, or similar businesses in the lodging industry identified by the same Standard Industrial Classification (1987 ed.) for the sole purpose of providing in-room guest-related services to guests who are lodging with that Person.  Such guest-related services are not intended to include back office or administrative uses.  For the purpose of this definition only, “Person” means an individual, a corporation, a partnership, an association, a limited liability company, a trust, any unincorporated organization or a government or a political subdivision thereof.

1.4                                  Licensed Patents .  “Licensed Patents” means United States Patent No. 4,994,926, No. 5,291,302, No. 5,459,584, No. 6,643,034, and No. 6,785,021; Canadian Patent No. 1329852 and No. 2101327; and any divisional, continuation, continuation-in-part, reexamination, reissue or foreign counterpart of any of these patents; and any patent owned by AudioFAX that issues from a patent application pending before a patent office on the effective date and any divisional, continuation, continuation-in-part, reexamination, reissue or foreign counterpart of any such patent.

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1.5                                  Interactive Intelligence’s Licensed Products .  “Interactive Intelligence’s Licensed Products” means all products, including software and hardware, and services sold by Interactive Intelligence and/or its Subsidiaries, which products and services are covered by one or more claims of the Licensed Patents.

1.6                                  First [*] Date .   “First [*] Date” means the date on which Interactive Intelligence and/or its Subsidiaries reports in its and/or their financial statements [*] in the aggregate during [*] consecutive fiscal quarters.

1.7                                  Second [*] Date .   “Second [*] Date” means the date on which Interactive Intelligence and/or its Subsidiaries reports in its and/or their financial statements [*] in the aggregate during [*] consecutive fiscal quarters.

1.8                                  Third [*] Date .   “Third [*] Date” means the date on which Interactive Intelligence and or its Subsidiaries reports in its and/or their financial statements [*] in the aggregate during [*] consecutive fiscal quarters.

1.9                                  Subsidiary .  “Subsidiary” means a corporation, partnership, limited liability company or other legal entity currently Controlled by Interactive Intelligence, but only for so long as such Control exists.  

1.10                            Controlled/Control .  “Controlled” or “Control” means the ownership of more than fifty percent (50%) of the voting stock of a Subsidiary or other legal entity.

2.                                        License .

2.1                                  Grant .  AudioFAX grants to Interactive Intelligence a worldwide, non-exclusive, non-divisible, fully paid-up license under the claims of the Licensed Patents to import, make, use, offer to sell or sell Interactive Intelligence’s Licensed Products, except as limited herein.  This license does not include any license or

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right to import, make, use, offer to sell or sell any Excluded Market Products or any products or services that are not Interactive Intelligence’s Licensed Products.  This license does not include any right to grant or issue sub-licenses except as set forth in Paragraph 2.2 below.  Any other attempt to grant or issue sub-licenses without the express written consent of AudioFAX, which may be withheld by AudioFAX for any reason, shall be void.  This license shall become effective only upon Interactive Intelligence’s full and timely compliance with the terms of Paragraphs 4 and 5 below.

2.2                                  Sub-licenses .  Interactive Intelligence may grant a sub-licenses to any or all of its Subsidiaries and Interactive Intelligence’s and such Subsidiaries’ respective customers, resellers, distributors and value added resellers (“VARs”) of Interactive Intelligence’s Licensed Products; provided, however, that each of the following conditions is met:  (a) said sub-license shall be strictly limited to the re-sale or use of Interactive Intelligence’s Licensed Products only; (b) said sub-license is entirely derivative of and dependant on the license and rights granted in this License Agreement to Interactive Intelligence; and (c) said sub-license is subject to all of the terms, conditions, restrictions and definitions set forth in this License Agreement;  (d) said sub-license granted to a Subsidiary shall terminate on the date such Subsidiary ceases to be a Subsidiary; and (e) said sub-license shall terminate upon any termination of the License Agreement or the license granted herein to Interactive Intelligence; provided, however, said sub-license granted prior to such termination shall survive with respect to those units of Interactive Intelligence’s Licensed Products sold before termination.

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3.                                        Records .

Interactive Intelligence, and any assignee, transferee, successor and person or entity controlling Interactive Intelligence, shall furnish to AudioFAX once per year appropriate and relevant information that AudioFAX may reasonably request to enable AudioFAX to determine which products and services are covered under this License Agreement and whether the First [*] Date, Second [*] Date and Third [*] Date has occurred.

4.                                        License Fee .

In consideration of the license granted herein, Interactive Intelligence shall pay and deliver to AudioFAX a License Fee as follows:  Interactive Intelligence shall pay to AudioFAX a non-refundable license fee in the total amount of One Million Dollars ($1,000,000.00) (“License Fee”), to be paid by Interactive Intelligence and received by AudioFAX by wire transfer in the following installments on or before the following dates:

5.                                        Processing Fee .

Interactive Intelligence shall pay to AudioFAX a one-time, non-refundable license processing fee of Twenty-Five Thousand Dollars (US $25,000.00) (“Processing Fee”).  The Processing Fee shall be paid by Interactive Intelligence and received by AudioFAX by wire transfer on or before January 24, 2005.

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6.                                        Late Payment Charge .

Payments provided for in this License Agreement when overdue, shall be subject during the delinquency period to a late payment charge calculated at a rate of interest equal to one and one quarter percent (1.25%) per month; provided, however, that if the amount of such late payment charge exceeds the maximum permitted by law for any such charge, such charge shall be reduced to such maximum amount.

7.                                        Taxes .

AudioFAX is not responsible for any sales, use, value-added, personal property or other taxes imposed on Interactive Intelligence’s manufacture, use, possession, offer of sale or sale of Interactive Intelligence’s Licensed Products.  Each party shall be solely responsible for any taxes based on its own net income.

8.                                        Term and Termination .

8.1                                  The term of this License Agreement shall be from the Effective Date until the expiration of the last to expire of the Licensed Patents.

8.2                                  AudioFAX may terminate this License Agreement after written notice to Interactive Intelligence that Interactive Intelligence has materially breached any of the terms and conditions of this License Agreement, and Interactive Intelligence fails to cure such breach within thirty (30) days after receipt of such notice.

8.3                                  This License Agreement may be, without opportunity for cure, immediately and automatically terminated at AudioFAX’s option if full and timely payment of the License Fee has not been made to AudioFAX in accordance with Paragraphs 4 and 5 above.

8.4                                  In the event of termination of this License Agreement, Interactive Intelligence shall not be entitled to a refund of any payments made to AudioFAX.

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8.5                                  This License Agreement may be terminated by AudioFAX, in its sole discretion, if a petition in Bankruptcy or for receivership or liquidation of Interactive Intelligence is filed or an assignment is made for the benefit of creditors of Interactive Intelligence.

9.                                        Limitations .

9.1                                  Nothing contained in this License Agreement shall be construed as creating any form of license or rights under any copyrights, mask works, trademarks, tradenames, service marks, service names, trade secrets or confidential information owned or controlled by AudioFAX.

9.2                                  Disclaimer .  ALL WARRANTIES EXPRESSLY SET FORTH HEREIN, IF ANY, ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED (INCLUDING THE IMPLIED WARRANTIES OF FITNESS FOR PARTICULAR USE OR OF MERCHANTABILITY) OR ASSERTED TO ARISE BY IMPLICATION UNDER ANY STATUTE, RULE OR REGULATION OF ANY JURISDICTION.  ALL SUCH OTHER WARRANTIES ARE HEREBY DISCLAIMED.

9.3                                  Marking .  Interactive Intelligence shall permanently mark the user manuals and materials associated with Interactive Intelligence’s Licensed Products, in the manner required by 35 U.S.C. § 287, with the numbers of the United States and Canadian Licensed Patents.  Interactive Intelligence may adver