Exhibit 10.1

EXECUTIVE RETENTION AGREEMENT

The parties to this Retention Agreement (the “Agreement”) are ________________
(“Employee”) and Interlink Electronics, Inc. (“Company”).

R E C I T A L S:

WHEREAS, the Company from time to time will consider strategic alternatives
which may include the divestiture of one or more of the business units of the
Company ;

WHEREAS, Employee has knowledge and experience necessary for the successful
operation and management of the Company until its business units are sold;

WHEREAS, this Agreement shall supersede all existing agreements between the
Employee and Company, either verbal or written, regarding retention
compensation, severance benefits and change of control benefits; and

WHEREAS, in the event of a divestiture of one or more of the business units, the
Company desires to retain the services of Employee during the period of time
that Company continues its operations and for Employee to provide services to
any successor for the first nine (9) months following a Change of Control of the
Company.;

NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties agree as follows:

1. SERVICES AND COMPENSATION

Employee agrees to devote Employee’s full time, attention, and skills in the
position of ___________________ during the term of this Agreement, as defined in
Paragraph 2 below. Employee further agrees to perform such services diligently,
for the best interest of Company or any successor owner of Interlink
Electronics, Inc., and in a manner consistent with the standards customarily
applicable to persons rendering similar services. If in the pursuit of a
strategic alternative the Company or one of both of the business unit is sold,
Employee shall receive Incentive Compensation in the form and amount set forth
in Exhibit A hereto at the closing of the sale of the Company or at the closing
of each of the transactions involving the individual business units if he is an
active employee of the Company at the time of the closing(s). Additionally,
Employee shall receive Change of Control benefits in the form and amount set
forth in Exhibit A hereto in the event that prior to a Change of Control event
Employee is terminated by the Company for any reason other than cause; or in the
event that prior to a Change of Control event Employee resigns for good reason;
or for nine (9) months following a Change of Control event if Employee is
terminated by a successor owner for any reason other than cause; or for nine
(9) months following a Change of Control event if Employee resigns for good
reason. As a condition to Employee’s receipt of any Incentive Compensation or
Change in Control benefits pursuant to Exhibit A, Employee shall be required to
execute a general release

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of claims relating to Employee’s employment by the Company and any successor
employer and termination of employment at the Company or at any successor
employer, within the deadline set forth in the general release, which shall be
no sooner than twenty-one (21) days after, nor later than forty-five (45) days
after, Employee’s separation from service within the meaning of section 409A of
the Internal Revenue Code of 1986 (the “Code”). Payment shall be made within ten
(10) days of the Employee’s execution of the release and the expiration of any
applicable revocation period, which shall be in a form substantially similar to
the form attached hereto as Exhibit B. Company shall provide Employee with the
final form of the release within thirty (30) days following Employee’s
separation from service.

2. TERM

This Agreement shall become effective upon execution by all parties and shall
automatically terminate nine (9) months following the effective date of a Change
of Control as defined in Section 3 of this Agreement. Company may also terminate
this Agreement for “cause” prior to the automatic termination, Employee may
terminate this Agreement for “good reason” prior to the automatic termination,
or this Agreement may terminate automatically due to the resignation, death, or
disability of Employee.

Termination for “cause” by Company shall mean a termination on account of any
one or more of the following:

A. Employee commits an act of dishonesty, fraud, deception, misrepresentation or
engages in other willful misconduct which is reasonably believed to be injurious
to the interest, property, operations, business or reputation of Company;

B. Employee engages in willful misconduct, gross negligence, malfeasance or
misfeasance in the course of employment;

C. Employee fails to obey a lawful direction of Company and does not cure such
failure within a reasonable period of time, not to exceed three (3) business
days of being notified of such failure;

D. Employee breaches any material provision of this Agreement and does not cure
such breach within a reasonable period of time, not to exceed ten (10) days;

E. Employee is convicted of a felony or enters a nolo contendere plea to a
felony, or is convicted of a misdemeanor involving dishonesty or moral
turpitude, or enters a nolo contendere plea to a misdemeanor that involves
dishonesty or moral turpitude; or

F. Employee engages in theft or embezzlement, or attempted theft or
embezzlement, of money or tangible or intangible assets or property of Company.

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Termination for “good reason” by Employee shall mean a resignation by Employee
on account of any one or more of the following:

A. a material diminution of Employee’s responsibilities from those
responsibilities of Employee in effect at the time of execution of this
Agreement, except in connection with the termination of Employee’s employment
for cause, disability or death, or voluntarily by Employee other than for good
reason;

B. a material reduction by the Company, or any successor employer, of Employee’s
rate of base salary;

C. a material change in the geographic location at which the Employee must
perform his services hereunder (at least fifty (50) miles) from the location
immediately prior to the Change in Control, except for reasonably required
travel on business of the Company or of any successor employer; or

D. any other action or inaction by the Company or any successor employer that
constitutes a material breach of this Agreement and that is not cured within ten
(10) days following written notice to the Company of such breach.

If Employee is terminated for “cause” or voluntarily resigns prior to the
termination of this Agreement for reasons other than “good reason”, then
Employee will not be eligible for the compensation set forth in paragraph 1 and
Exhibit A.

The failure of Company to timely exercise its right of termination of this
Agreement in the event of the occurrence of “cause,” or failure of Employee to
timely exercise his right of termination in the event of the occurrence of “good
reason,” shall not constitute a waiver of either party’s right to terminate this
Agreement for any subsequent occurrence of “cause” or “good reason.”

“Disability” shall mean the absence of Employee from Employee’s duties with the
Company or that of any successor employer on a full time basis for one hundred
eighty (180) consecutive days as a result of Employee’s incapacity due to
physical or mental illness, unless, within thirty (30) days after a notice of
termination is given to Employee following such absence, Employee shall have
returned to the full performance of Employee’s duties.

3. CHANGE IN CONTROL

“Change in Control” of the Company shall mean the occurrence of any of the
following events:

A. any consolidation, merger, plan of share exchange, or other reorganization
involving the Company (a “Merger”) as a result of which the holders of
outstanding securities of the Company ordinarily having the right to vote for
the election of directors (“Voting Securities”) immediately prior to the

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Merger do not continue to hold at least fifty percent (50%) of the combined
voting power of the outstanding Voting Securities of the surviving or continuing
corporation immediately after the Merger, disregarding any Voting Securities
issued or retained by such holders in respect of securities of any other party
to the Merger;

B. any sale, lease, exchange or other transfer of all, or substantially all, the
assets of the Company, or, in the event the assets of the eTransactions business
unit and the Specialty Products business unit are sold separately, any sale,
lease, exchange or other transfer of all, or substantially all, the assets of
the business unit in which Employee had been providing services immediately
prior to such sale;

C. the adoption of any plan or proposal for the liquidation or dissolution of
the Company; or

D. any Person (i.e., any individual, corporation, partnership, group,
association or other “person”, as such term is used in Section 14(d) of the
Exchange Act, other than the Company, any subsidiary of the Company or any
employee benefit plan(s) sponsored by the Company) shall have become the
beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934 (the “Exchange Act”)), directly or indirectly, of securities of the
Company ordinarily having the right to vote for the election of directors
representing fifty (50%) or more of the combined voting power of the then
outstanding voting securities.

Employee shall receive the Change in Control benefits as set forth in Exhibit A
if Employee is terminated without cause prior to a Change in Control as defined
above or terminated without cause within nine (9) months following a Change in
Control.

4. APPLICATION OF CODE §409A

A. If Employee is a “specified employee” within the meaning of Code §
409A(a)(2)(B)(i) and any payment required to be made or benefit required to be
provided pursuant to this Agreement is subject to Code § 409A and not exempt
from those requirements under any applicable regulations or other guidance of
general applicability, then any such payment otherwise payable on account of
Employee’s separation from service during the period ending on the date that is
six (6) months after the separation from service shall be paid in a lump sum on
the date that is six (6) months after Employee’s separation from service instead
of the date on which it would otherwise be paid; provided, however, that
deferred compensation to which Employee is entitled under Exhibit A of this
Agreement need not be delayed under this subparagraph to the extent those
payments would comply with the requirements of Treasury Regulation
§1.409A-1(b)(9)(iii), which generally requires that the total of such payments
not exceed two (2) times the

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lesser of (1) Employee’s annualized compensation based on his annual rate of pay
in the year before the Employee’s separation from service or (2) the Code
Section 401(a)(17) limit applicable to qualified plans during the year of
Employee’s separation from service. In determining whether Employee is a
“specified employee” the Company (or its delegate) may, but need not, elect in
writing, subject to the applicable limitations under Code § 409A, any of the
special elective rules prescribed in Treasury Regulation §1.409A-1(i).

B. To the extent applicable, it is intended that this Agreement comply with the
provisions of Code § 409A, so as to prevent inclusion in gross income of any
amounts payable or benefits provided hereunder in a taxable year that is prior
to the taxable year or years in which such amounts or benefits would otherwise
actually be distributed, provided or otherwise made available to Employee. This
Agreement shall be construed, administered, and governed in a manner consistent
with this intent and the following provisions of this paragraph shall control
over any contrary provisions of this Agreement.

C. Payments and benefits hereunder upon Employee’s termination or severance of
employment with the Company that constitute deferred compensation under Code §
409A shall not be paid or provided prior to Employee’s “separation from service”
within the meaning of Code § 409A.

D. For purposes of Code § 409A, the right to a series of installment payments
under this Agreement shall be treated as a right to a series of separate
payments so that each payment is designated as a separate payment for purposes
of Code § 409A.

E. References in this Agreement to Code § 409A include both that Section of the
Code itself and any guidance promulgated thereunder.

F. Company makes no representation or warranty and shall have no liability to
Employee or any other person if any provisions of this Agreement are determined
to constitute deferred compensation subject to Code § 409A but do not satisfy an
exemption from, or the conditions of, such Section.

5. CONFIDENTIALITY

Employee agrees that he will keep the fact, terms, and amount of this Agreement
completely confidential to the extent that such information is not made public
by the Company, and that Employee will not disclose any information concerning
this Agreement to anyone except his legal counsel, spouse or domestic partner,
tax advisors and accountants, provided that Employee may make such disclosures
as are required by law and as are necessary for legitimate law enforcement or
compliance purposes. Those individuals shall be informed of the provisions of
this confidentiality clause and shall agree to be bound by it. Employee agrees
to keep confidential and not to publish, communicate, furnish, divulge, disclose
or use, or otherwise make

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available, directly or indirectly, for Employee’s own benefit or the benefit of
others, any trade secrets or confidential or proprietary information regarding
the finances, marketing, practices, processes or operations of Company in any
way obtained by Employee during the course of Employee’s employment. Such trade
secret and confidential or proprietary information includes, but is not limited
to, compilations of information, files, notes, memoranda, price lists, catalogs,
customer lists, vendor lists, records, specifications, programs, methods,
techniques, processes, non-public financial information, computer programs,
business plans, compilations of non-public business information, sales
procedures, customer requirements, pricing techniques, methods of doing
business, or information concerning customers or vendors, product, marketing,
advertising and/or design. Employee further agrees to use such confidential
information only for purposes of Employee’s employment with Company or any
authorized successor. Employee also agrees to abide by any confidentiality
agreement or clause to which he has previously become obligated as a result of
his employment by the Company.

6. ASSIGNMENTS

This Agreement, and all duties and obligations of Employee herein are personal
in nature. Accordingly, Employee shall not assign any part of this Agreement
without the prior written consent of Company. This Agreement shall be binding
upon the parties hereto and upon their administrators, representatives,
successors and assigns, and shall inure to the benefit of the parties and to
their administrators, representatives, successors and assigns. Company shall
take all steps necessary to bind any successor owner to this Agreement in the
event of a Change in Control.

7. ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between the parties with respect
to the subject matter of the Agreement, and fully supersedes any and all prior
negotiations, agreements or understandings, written or oral, between the parties
pertaining to the subject matter of this Agreement, including, but not limited
to, compensation benefits, severance benefits, and change of control benefits.

8. MODIFICATIONS

None of the provisions of this Agreement may be waived, changed or altered
except by an instrument in writing signed by both parties.

9. VALIDITY

The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.

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10. HEADINGS

Headings used throughout this Agreement are for administrative convenience only
and shall be disregarded for the purpose of construing and enforcing this
Agreement.

11. WAIVER OF BREACH OR VIOLATION NOT DEEMED CONTINUING

The waiver by either party of a breach or violation of any provision of this
Agreement shall not operate as, or be construed to be, a waiver of any
subsequent breach or violation.

12. GOVERNING LAW

This Agreement and all matters relating to its meaning, validity or
enforceability and the performance of services hereunder shall be governed by
the laws of the State of California.

13. COUNTERPARTS

This Agreement may be executed in several counterparts, each of which shall be
deemed to be an original, but all of which together will constitute one and the
same instrument.

14. ARBITRATION

Any controversy or claim arising out of or relating to Employee’s employment
relationship with or its termination by Company or arising out of or relating to
this Agreement, its performance or breach, including the knowing and voluntary
nature of any waiver set forth in this Agreement, and/or the validity, scope and
enforceability of this Agreement to arbitrate, shall be settled by final and
binding arbitration in accordance with the currently applicable employment
dispute resolution rules of the American Arbitration Association. THIS INCLUDES
ALL CLAIMS REGARDING ANY ALLEGED DISCRIMINATION OR HARASSMENT. Unless a request
for arbitration is made within the time limits of applicable law, the right to
arbitrate shall be deemed waived and no further action may be taken by the
waiving party in any forum.

The parties may conduct discovery that will allow them to adequately support
their claims and defenses, including the identification of relevant documents
and witnesses, under the rules referenced above and as ordered by the
arbitrator.

The costs of arbitration (the arbitrator’s fee and other administrative costs)
shall be borne by Company. Each party shall be responsible for its own
attorney’s fees, unless, upon a party’s application, the arbitrator makes an
award of fees according to applicable law.

The arbitrator must render a written decision including the factual and legal
findings which support the award. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction and shall be
subject to limited review under Cal. Code of Civil Procedure §1285 et seq.

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Nothing in this Agreement shall prohibit the Company from seeking injunctive
relief under applicable law before arbitration or while arbitration is pending
if deemed necessary to protect the rights of the Company. This Agreement shall
be interpreted and enforced under the laws of the State of California.

15. VOLUNTARY ENTRY INTO AGREEMENT

Employee acknowledges and represents that Employee is entering into this
Agreement freely and voluntarily after having had time to review the Agreement,
ask questions, and consult legal counsel. Employee acknowledges and represents
that he understands the consequences of his agreement to arbitrate any disputes
he may have with Company and has freely and voluntarily entered into the
agreement to arbitrate.

 

Date:         ______________________________________________,   Employee        
        By:                   Date:         INTERLINK ELECTRONICS, INC.        
By:        

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EXHIBIT A

Incentive Compensation (Section 1)

_____________ percent (XX%) of the purchase price paid to Interlink Electronics,
Inc. for the Company or in the event the business units are sold separately, the
purchase price paid for the ________________________ business units. Purchase
price shall mean the net cash paid, plus the value of any marketable securities
or other property paid, for the acquisition of the business unit and shall not
include any earn out provisions or assumed debt in the structure of the
transaction.

Change in Control Benefits (Section 6)

In the event of a Change in Control as defined in this Agreement and Employee is
terminated without cause within nine (9) months following a Change of Control or
is terminated without cause prior to a Change of Control or terminates for “good
reason”, the Employee shall receive:

 

  (i) Nine (9) months base salary at the rate in effect on the date of
separation from service, performance bonus, and car allowance. For the
calculation of performance bonus amount, it is assumed that the Employee has
achieved one hundred percent (100%) of his or her agreed performance objectives,
multiplied by their agreed bonus multiplier (XX%), multiplied by their current
base salary.

 

  (ii) Payment of all accrued and banked, but unused vacation pay.

 

  (iii) Nine (9) months of COBRA insurance premiums, paid in lump sum.

 

  (iv) COBRA benefits as provided by law, premiums to be paid by Employee.

 

  (v) One hundred percent (100%) of unvested stock options shall be accelerated
so that such options are immediately exercisable.