<PAGE>

                                                                    Exhibit 10.5


CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
EXHIBIT, WHICH PORTIONS HAVE BEEN OMITTED AND REPLACED WITH [****] AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                              SUBLICENSE AGREEMENT

      THIS SUBLICENSE AGREEMENT ("SUBLICENSE AGREEMENT") is entered into and is
effective on this 25th day of July, 2003 (the "EFFECTIVE DATE") by and between
MICROSOFT CORPORATION, a Washington corporation with principal offices in
Redmond, Washington ("MICROSOFT") and IMMERSION CORPORATION, a Delaware
corporation with principal offices in San Jose, California ("IMMERSION"), each a
"PARTY" and collectively, the "PARTIES."

                                    RECITALS

      WHEREAS, Immersion has the right to grant a license to Microsoft and its
Subsidiaries to enable Microsoft and its Subsidiaries to grant the below
described sublicenses to third parties, under certain patent rights more fully
described below; and

      WHEREAS, Microsoft desires to acquire a sublicensing right under such
patent rights and Immersion desires to grant such a sublicensing right, all on
the terms and conditions set forth in this Agreement.

      NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Parties agree as follows:

                                    AGREEMENT

1.    DEFINITIONS.

      A.    "ADULT PRODUCT" means: [****].

      B.    "CONDITIONAL PATENTS" means [****].

      C.    "FOUNDRY PRODUCT" means [****].

      D.    "GAME PLATFORM" means: [****].

      E.    "GAME PLATFORM VENDOR" means an entity which distributes a Game
            Platform under its own name.

      F.    "LICENSED PATENTS" means all Patents under which Immersion or any of
            its present or future Subsidiaries owns or has as of the Effective
            Date (or as of the acquisition date in the case of future
            Subsidiaries), or thereafter obtains, the ability or right to grant
            licenses, releases or freedom from suit, with the exception of
            Conditional Patents.

      G.    "MEDICAL PRODUCT" means [****]. General purpose hardware or software
            whose primary function is not the delivery of one of the foregoing
            is not a Medical Product.
<PAGE>
                             PROVIDED UNDER RULE 408


      H.    "PATENT" means any patent, patent application, provisional
            application, continuation, continuation-in-part, divisional,
            reissue, renewal, reexamination, utility model, design patent, and
            foreign counterparts thereof.

      I.    "ROYALTY-BEARING [****] PRODUCTS" means:

            (I)   [****] except to the extent that such devices constitute Adult
                  Products, Medical Products, or Foundry Products; and

            (II)  [****], except to the extent that such devices constitute
                  Adult Products, Medical Products, or Foundry Products.

            A handheld device having a primary purpose of playing games shall be
            deemed to fall within the "Game Platform" definition and is not a
            Royalty-Bearing [****] Product.

      J.    [****]

      K.    [****]

      L.    "SUBLICENSEE" means any entity to which Microsoft may grant a
            sublicense in accordance with this Sublicense Agreement.

      M.    "SUBSIDIARY" means a corporation, company or other entity: (i) fifty
            percent (50%) or more of whose outstanding shares or securities
            (representing the right to vote for the election of directors or
            other managing authority) are, now or hereafter, owned or
            controlled, directly or indirectly, by a given entity, but such
            corporation, company or other entity shall be deemed to be a
            Subsidiary only so long as such ownership or control exists; or (ii)
            which does not have outstanding shares or securities, as may be the
            case in a partnership, joint venture or unincorporated association,
            but fifty percent (50%) or more of whose ownership interest
            representing the right to make the decisions for such corporation,
            company or other entity is, now or hereafter, owned or controlled,
            directly or indirectly, by a given entity, but such corporation,
            company or other entity shall be deemed to be a Subsidiary only so
            long as such ownership or control exists.

      N.    "TOUCH TECHNOLOGY" means technology related to calculating,
            processing, amplifying, communicating, transmitting, controlling,
            applying, producing, using, or enhancing touch sensations or
            information related to the sense of touch (e.g., resistance,
            texture, force). Examples include force feedback, vibration, and
            tactile response applications.

2.    SUBLICENSING RIGHTS AND PAYMENTS.

      A.    SUBLICENSE RIGHTS FOR GAME PLATFORM VENDORS.

            (I)   Grant of Rights. Immersion on behalf of itself and its
                  Subsidiaries, hereby grants to Microsoft and its Subsidiaries
                  the worldwide, irrevocable, non-terminable right, subject to
                  and during the period set forth in Section 2(j), to sublicense
                  Game Platform Vendors and their Subsidiaries under the
                  Licensed Patents (excluding Patents not directed to Touch
                  Technology) to:

                  (1)   make, have made, use, lease, distribute, have
                        distributed, publish, have published, import, provide as
                        a service, offer to sell, sell or


                                       2
<PAGE>
                             PROVIDED UNDER RULE 408


                        otherwise dispose of such Game Platform Vendor's and its
                        Subsidiaries' Game Platforms; and

                  (2)   further sublicense third party software developers to
                        use such Game Platform Vendor's and its Subsidiaries'
                        Game Platform software development tools to develop
                        games solely for such Game Platforms.

            (II)  Delivery of Copy of Game Platform Sublicense. Microsoft's
                  grant of such a sublicense to a Game Platform Vendor is
                  referred to herein as a "GAME PLATFORM SUBLICENSE." Except as
                  set forth in the last sentence of Section 2(c), Microsoft
                  shall provide Immersion with a copy of the fully executed Game
                  Platform Sublicense within ten (10) days after the Game
                  Platform Sublicense is executed by Microsoft and the
                  applicable Game Platform Vendor.

      B.    COMPENSATION FOR GAME PLATFORM VENDORS [****]. As Immersion's entire
            compensation with respect to each individual sublicense granted
            under Section 2(a) above to a particular Game Platform Vendor
            [****], (a) Microsoft shall pay Immersion [****] within ten (10)
            days of Microsoft's granting any such Game Platform Sublicense, and
            (b) thereafter Microsoft shall pay Immersion [****] of the cash
            amounts (if any, and including royalty payments and upfront, annual
            or other license fees) received by Microsoft from such Game Platform
            Vendor for the Game Platform Sublicense in excess of [****]
            ("ADDITIONAL SUBLICENSING REVENUE") within thirty (30) days of
            Microsoft's receipt of any such Additional Sublicensing Revenue.

      C.    COMPENSATION FOR [****] GAME PLATFORM SUBLICENSE. In the event
            Microsoft grants [****] a Game Platform Sublicense on the terms set
            forth in Section 2(a) above, the following terms shall apply in
            place of the terms of Section 2(b). Within ten (10) days after
            Microsoft grants [****] the Game Platform Sublicense, Microsoft
            shall pay Immersion:

            (I)   [****] if the Game Platform Sublicense is entered into prior
                  to the date that is thirty (30) days prior to the then most
                  recently [****];

            (II)  [****] if the Game Platform Sublicense is entered into within
                  the thirty (30) day period immediately prior to the then most
                  recently [****];

            (III) [****] if the Game Platform Sublicense is entered into during
                  the time period the [****] is underway, but prior to the
                  delivery of [****] to Immersion (if any) [****]; or

            (IV)  the greater of [****] or the amount that is [****] of any
                  [****] that has been [****] if the Game Platform Sublicense is
                  entered into after the delivery of the [****] referenced in
                  (3) above. Microsoft shall be entitled to deduct [****] of the
                  cash amount received by Microsoft [****] for the Game Platform
                  Sublicense from the amounts payable under this clause (4);
                  provided that the amount payable by Microsoft under this
                  clause (4) will in no event be less than [****].


                                       3
<PAGE>
                             PROVIDED UNDER RULE 408


            In any of the cases described under clauses (1) - (4) above, the
            Parties shall each be entitled to [****] of the cash amounts (if
            any, and including royalty payments and upfront, annual or other
            license fees) received by Microsoft [****] for the Game Platform
            Sublicense in excess of the applicable amount specified in such
            clauses (1) - (4) (after implementation of the calculation specified
            in clause (4)). Any license grant [****] under the Game Platform
            Sublicense shall not become effective until [****] renders all
            compensation required under the Game Platform Sublicense to be paid
            by [****] as of the effective date of such Game Platform Sublicense.
            At the time of making payment to Immersion for the [****] Game
            Platform Sublicense, Microsoft shall also provide Immersion with a
            fully executed copy of the [****] Game Platform Sublicense.

      D.    MICROSOFT'S RIGHT TO SUBLICENSE [****] FOR ADDITIONAL
            [****]PRODUCTS. Immersion on behalf of itself and its Subsidiaries,
            hereby grants to Microsoft and its Subsidiaries the worldwide,
            irrevocable, non-terminable right, subject to and during the period
            set forth in Section 2(j), to sublicense [****] under the Licensed
            Patents (excluding Patents not directed to Touch Technology) to
            make, have made, use, offer to sell and sell or otherwise distribute
            Royalty-Bearing [****] Products, subject to the royalty obligations
            set forth in Exhibit A. In the event Microsoft and [****] execute an
            agreement for such a sublicense, Immersion shall pay Microsoft
            [****] within ten (10) days after the execution thereof. Within ten
            (10) days after execution of any sublicense under this Section 2(d),
            Microsoft shall provide a fully executed copy thereof to Immersion.

      E.    PAYMENTS TO MICROSOFT IN THE EVENT IMMERSION [****] PRIOR TO
            MICROSOFT GRANTING [****] A GAME PLATFORM SUBLICENSE. In the event
            Immersion elects in its discretion to [****] prior to Microsoft's
            granting [****] the Game Platform Sublicense (and regardless of
            whether such [****] occurs during or after the twenty-four (24)
            month period following the Effective Date), then Immersion shall pay
            Microsoft an amount determined as follows:

            (I)   If Immersion [****] for an amount of [****] up to and
                  including [****], then Immersion shall pay Microsoft the sum
                  of [****].

            (II)  If Immersion [****] for an amount in excess of [****] up to
                  and including [****], then Immersion shall pay Microsoft the
                  sum of [****] plus an additional amount equal to [****] of the
                  amount of the settlement in excess of [****] up to and
                  including [****].

            (III) If Immersion [****] for an amount in excess of [****], then
                  Immersion shall pay Microsoft the sum specified in the
                  preceding clause (3) plus an additional amount equal to [****]
                  of the amount of the settlement in excess of [****].

            The [****] amounts specified in clauses (i) - (iii) above shall
            include all amounts, including all royalty payments and upfront,
            annual or other license fees (regardless of when received), received
            by Immersion on account of any license, [****], or similar
            consideration granted by Immersion to [****] in respect of the
            Licensed Patents, including for fields of use outside of the area of
            Game Platforms, and(a) in connection with the [****], including any
            agreement, license,


                                       4
<PAGE>
                             PROVIDED UNDER RULE 408


            sublicense, option, investment, or other transaction associated with
            [****], and (b) with respect to any other agreement, license,
            sublicense, option, investment, or other transaction entered into
            during the time period that is the lesser of (1) the period set
            forth in Section 2(j), or (2) eighteen (18) months after [****]. Any
            amounts due under this Section 2(e) shall be paid to Microsoft
            within ten (10) days of Immersion's [****]. Immersion further agrees
            to promptly provide Microsoft with sufficient documentation of
            [****] to enable Microsoft to determine and confirm the payment owed
            to Microsoft in the event of such [****].

      F.    [****]. Within five (5) days after Microsoft grants [****] a Game
            Platform Sublicense and pays Immersion the amount due under Section
            2(c), Immersion, for no additional consideration or payment
            whatsoever (whether from Microsoft or [****]) will: (i) [****]; and
            (ii) [****] licensees, distributors, and customers, direct and
            indirect, [****]. The Immersion obligations set forth in the
            foregoing sentence shall be contingent on [****] (for no additional
            consideration or payment whatsoever from Immersion) [****].

      G.    SUBLICENSING REVENUE FROM [****] JOINT VENTURE. If, during the
            period set forth in Section 2(j), Immersion grants a third party the
            right to grant licenses for the equivalent of Royalty-Bearing [****]
            Products to [****], Microsoft shall be entitled to receive [****] f
            all amounts received on account of the grant of such rights,
            including all royalty payments and upfront, annual or other license
            fees (regardless of when received). All such amounts shall be paid
            to Microsoft no than thirty (30) days after receipt by Immersion. In
            the event that [****], the aforementioned percentage shall be
            increased to [****].

      H.    CONDITIONAL PATENTS. Immersion on behalf of itself and its
            Subsidiaries, agrees that [****].

      I.    OWNERSHIP. Except as expressly licensed to Microsoft in this
            Sublicense Agreement, Immersion retains all right, title and
            interest in and to the Licensed Patents. Immersion reserves all
            rights not expressly granted in this Sublicense Agreement.

      J.    LIMITATION. Microsoft's right to grant sublicenses to [****] or
            other third parties pursuant to this Section 2 shall only be
            effective during the [****] month period following the Effective
            Date; provided, however, that any such sublicense granted by
            Microsoft pursuant to this Section 2 during such [****] month period
            shall be effective for the life of the Licensed Patents or for such
            lesser duration as Microsoft and the applicable sublicensee may
            agree, in their sole discretion.


                                       5
<PAGE>
                             PROVIDED UNDER RULE 408


3.    PAYMENT. Within five (5) days after the Effective Date, Microsoft shall
      pay Immersion by cashier's check, wire transfer or other immediately
      available funds, one hundred thousand dollars (USD $100,000), in
      consideration of the rights and covenants set forth herein. The payment
      referenced in this Section 3 is in addition to any payments that Microsoft
      may be obligated to make to Immersion under Sections 2(b), 2(c) or 2(h) of
      this Sublicense Agreement.

4.    CONFIDENTIALITY.  The terms, conditions, and existence of this
      Sublicense Agreement shall be treated as confidential information by
      the Parties, and neither Party shall disclose the existence, terms or
      conditions of this Sublicense Agreement to any third party (other than,
      in the case of Microsoft, to [****] and to any other Game Platform
      Vendor entering into a Game Platform Sublicense) without the prior
      written permission of the other Party.  Each Party, however, shall have
      the right to make disclosures to the extent required by an order of
      court, regulation of another governmental body, or otherwise by law or
      by a stock exchange, provided that the Party shall promptly provide
      written notice to the non-disclosing Party of the intended disclosure
      and of the court order or regulation prior to such disclosure and that
      the Party shall take all reasonable steps to minimize such disclosure
      by, for example, obtaining a protective order and/or appropriate
      confidentiality provisions requiring that such information to be
      disclosed be used only for the purpose for which such law, order,
      regulation or requirement was issued.  Additionally, (i) each Party may
      disclose the terms and conditions of this Sublicense Agreement to the
      extent reasonably necessary, under a suitable confidentiality
      agreement, to its accountants, attorneys, financial advisors and in
      connection with due diligence activities relating to the sale of the
      stock or a portion of the business of a Party or its Subsidiaries, and
      (ii) Immersion shall be permitted to disclose to [****] and any other
      Game Platform Vendor entering into a Game Platform Sublicense the
      permitted scope of Microsoft's sublicense rights under this Sublicense
      Agreement, provided that Immersion gives Microsoft notice of such
      proposed disclosure and Microsoft does not respond within thirty (30)
      days after such notice.

5.    WARRANTIES.

      A.    IMMERSION. Immersion represents, warrants, and covenants that:

            (I)   it has the full power and has taken the necessary and
                  appropriate steps to enter into this Sublicense Agreement and
                  assume the obligations hereunder;

            (II)  it has the right to license the Licensed Patents, and it has
                  the full power and has taken the necessary and appropriate
                  steps to enter into this Sublicense Agreement and assume the
                  obligations hereunder, and to grant the license rights and
                  covenants set forth herein;

            (III) it has not previously and will not grant any rights in the
                  Licensed Patents to any third party that are inconsistent with
                  the rights granted to Microsoft herein;

            (IV)  it has not previously and will not grant during the period set
                  forth in Section 2(j) to any third party the right to grant
                  [****] the sublicense rights granted in Sections 2(a) herein;


                                       6
<PAGE>
                             PROVIDED UNDER RULE 408


            (V)   it has not assigned or otherwise transferred or subrogated any
                  interest [****], and, except in connection with an assignment
                  by Immersion permitted by Section 8(d), will not assign or
                  otherwise transfer or subrogate any interest [****];

            (VI)  [****];

            (VII) [****];

            (VIII) as of the Effective Date, there are no actual or threatened
                  lawsuits or claims relating to the Licensed Patents other than
                  the action in the United States District Court for the
                  Northern District of California entitled Immersion Corporation
                  v. Sony Computer Entertainment of America, Inc., Sony Computer
                  Entertainment Inc., and Microsoft Corporation, Northern
                  District of California Case No. C02-00710 CW (WDB), contract,
                  business or licensing discussions with existing or potential
                  licensees and customers, and as set forth in Schedule 3.12 to
                  the Series A Redeemable Convertible Preferred Stock Purchase
                  Agreement executed by the Parties on even date herewith; and

            (IX)  as of the Effective Date, Immersion believes, in good faith,
                  that the issued Licensed Patents owned by Immersion are valid
                  and enforceable.

      B.    BY MICROSOFT. Microsoft represents, warrants, and covenants that it
            has the full power and has taken the necessary and appropriate steps
            to enter into this Sublicense Agreement and assume the obligations
            hereunder.

      C.    DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN SECTIONS 5(a) AND 5(b)
            ABOVE, THE PATENTS ARE PROVIDED "AS IS" AND WITHOUT WARRANTY OF ANY
            KIND. EACH PARTY DISCLAIMS ALL IMPLIED WARRANTIES OF
            MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
            NON-INFRINGEMENT.

            Nothing in this Sublicense Agreement shall be construed (i) as a
            warranty or representation by Immersion as to the validity or scope
            of any Licensed Patents; (ii) as a warranty or representation that
            anything made, used, sold or otherwise disposed of under any license
            or sublicense granted in or under this Sublicense Agreement is or
            will be free from infringement by patents, copyrights, trade
            secrets, trademarks, or other rights of third parties; (iii) as
            granting by implication, estoppel or otherwise any licenses or
            rights under patents or other intellectual property rights of
            Immersion other than expressly granted herein; or (iv)(a) to require
            Immersion to file any patent application, (b) as a warranty that
            Immersion will be successful in securing the grant of any patent or
            any reissue or extensions thereof, or (c) to require Immersion to
            pay any maintenance fees or take any other steps to maintain
            Immersion's patent rights. Immersion does not assume any
            responsibility for the manufacture of any product that is
            manufactured or sold by or for Microsoft or Microsoft's
            Subsidiaries, or their sublicensees. All warranties in connection
            with such products shall be made by the manufacturer or seller of
            such products.

6.    TERM; TERMINATION.


                                       7
<PAGE>
                             PROVIDED UNDER RULE 408


      A.    TERM. Unless terminated by Microsoft pursuant to Section 6(b), the
            term of this Sublicense Agreement shall be from the Effective Date
            until the expiration of the last to expire of the Licensed Patents.

      B.    TERMINATION. The parties expressly agree that this Sublicense
            Agreement may not be terminated by Immersion, even in the event of
            Microsoft's breach of this Sublicense Agreement. Notwithstanding the
            foregoing, Microsoft may terminate this Sublicense Agreement in its
            sole discretion and at any time upon thirty (30) days' written
            notice in advance to Immersion. In the event Microsoft elects to
            terminate this Sublicense Agreement, (i) such termination shall not
            terminate or otherwise affect any sublicenses granted by Microsoft
            under this Sublicense Agreement prior to such termination, and (ii)
            Sections 4, 5, 6(b), 7, 8, and 9 shall survive. Termination of this
            Sublicense Agreement by Microsoft shall not in any way affect or
            relieve either of the Parties of the payment obligations set forth
            in Sections 2(b), 2(c), 2(d) and 2(h) of this Sublicense Agreement.

7.    LIMITATION OF LIABILITIES.

NEITHER PARTY WILL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL,
PUNITIVE OR SPECIAL DAMAGES RELATING TO THIS SUBLICENSE AGREEMENT, EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

8.    GENERAL.

      A.    NOTICES. All notices and requests in connection with this Sublicense
            Agreement will be given in writing and will be deemed given as of
            the day they are received either by messenger, delivery service, or
            in the mails of the United States of America, postage prepaid,
            certified or registered, return receipt requested, and addressed as
            follows:

<TABLE>
<CAPTION>
     TO: MICROSOFT                            TO: IMMERSION
<S>                                           <C>
     Microsoft Corporation                    Immersion Corporation
     Attention:  Vice President,              Attention:  Vice President,
     Intellectual Property                    Legal Affairs
     One Microsoft Way                        801 Fox Lane
     Redmond, Washington  98052-6399          San Jose, California 95131
     Phone: (425) 882-8080                    Phone:  (408) 467-1900
     Fax: (425) 936-7329                      Fax:  (408) 467-1901
     Copy to: Vice President, Litigation
     Fax:  (425) 936-7409
</TABLE>

            or to such other address as the Party to receive the notice or
            request so designates by written notice to the other.

      B.    INDEPENDENT CONTRACTORS. The Parties are independent contractors,
            and nothing in this Sublicense Agreement will be construed as
            creating an employer-employee relationship, a partnership, or a
            joint venture between the Parties. Neither Party will have the power
            to bind the other Party or incur obligations on the other Party's
            behalf without the other Party's prior written consent.


                                       8
<PAGE>
                             PROVIDED UNDER RULE 408


      C.    DISPUTE RESOLUTION. This Sublicense Agreement shall be construed and
            controlled by the laws of the State of Washington, and each Party
            consents to exclusive jurisdiction and venue in the federal courts
            sitting in King County, Washington, unless no federal subject matter
            jurisdiction exists, in which case each Party consents to exclusive
            jurisdiction and venue in the Superior Court of King County,
            Washington. Each Party waives all defenses of lack of personal
            jurisdiction and forum non-conveniens. Process may be served on
            either Party in the manner authorized by applicable law or court
            rule. In any action to enforce any right or remedy under this
            Sublicense Agreement or to interpret any provision of this
            Sublicense Agreement, the prevailing Party shall be entitled to
            recover its reasonable attorneys' fees, costs and other expenses.

      D.    ASSIGNMENT. This Sublicense Agreement will be binding upon and inure
            to the benefit of each Party's respective successors and lawful
            assigns. Microsoft will have the right to assign this Sublicense
            Agreement or any or all of its rights under this Sublicense
            Agreement, in whole or in part (in any case together with all
            restrictive terms continuing with such assignment) to any purchaser
            of any Microsoft business that grants the sublicenses authorized
            herein; provided, that Microsoft may not make any such assignment to
            [****]. This Sublicense Agreement may be assigned by Immersion to
            any acquiror of all or substantially all of the business or assets
            of Immersion, or in connection with a merger. Microsoft and
            Immersion will each have the right to merge or consolidate without
            the prior approval of the other Party. Except as permitted above,
            assignment of this Sublicense Agreement, whether by contract,
            operation of law, or otherwise, will be void.

      E.    CONSTRUCTION. If for any reason a court of competent jurisdiction
            finds any provision of this Sublicense Agreement, or portion
            thereof, to be unenforceable, that provision of the Sublicense
            Agreement will be enforced to the maximum extent permissible so as
            to effect the intention of the Parties, and the remainder of this
            Sublicense Agreement will continue in full force and effect. Failure
            by either Party to enforce any provision of this Sublicense
            Agreement will not be deemed a waiver of future enforcement of that
            or any other provision. This Sublicense Agreement has been
            negotiated by the Parties and their respective counsel and will be
            interpreted fairly in accordance with its terms and without any
            strict construction in favor of or against either Party.

      F.    ENTIRE AGREEMENT. This Sublicense Agreement constitutes the entire
            agreement between the Parties with respect to the subject matter
            hereof and merges all prior and contemporaneous communications
            regarding the subject matter hereof. This Sublicense Agreement will
            not be modified except by a written agreement dated subsequent to
            the Effective Date and signed on behalf of Immersion and Microsoft
            by their respective duly authorized representatives. This Sublicense
            Agreement may be executed in any number of counterparts, each of
            which when so executed shall be deemed to be an original, and all of
            which taken together shall constitute one and the Sublicense
            Agreement. Delivery of an executed counterpart of this Sublicense
            Agreement by facsimile transmission shall be


                                       9
<PAGE>
                             PROVIDED UNDER RULE 408


            effective as delivery of an originally executed counterpart of this
            Sublicense Agreement.

                  [Remainder of page intentionally left blank]


                                       10
<PAGE>
                   -------------------------------------------
                              SIGNATURE PAGE TO THE
                        GAME CONSOLE SUBLICENSE AGREEMENT
                   -------------------------------------------

      IN WITNESS WHEREOF, the Parties have entered into this Sublicense
Agreement as of the Effective Date written above.

<TABLE>
<S>                                      <C>
                                         IMMERSION CORPORATION

                                         By:
                                              ----------------------------------
                                              VICTOR VIEGAS
                                              President, Chief Executive Officer
                                              and Chief Financial Officer

                                         MICROSOFT CORPORATION

                                         By:
                                              ----------------------------------
                                              Name:
                                              Title:


                                         By:
                                              ---------------------------------
                                              Name:
                                              Title:


                                         By:
                                              ---------------------------------
                                              Name:
                                              Title:


                                          By:
                                               ---------------------------------
                                               Name:
                                               Title:
</TABLE>
<PAGE>
                                    EXHIBIT A

                  ROYALTIES FOR ROYALTY-BEARING [****] PRODUCTS

1.    In the event Microsoft grants [****] the additional license rights
      referenced in Section 2(d), Microsoft shall arrange for [****] to pay
      royalties directly to Immersion as described below.

      A.    The royalty applicable to each unit of a given type of
            Royalty-Bearing [****] Product that is licensed, sold, or otherwise
            distributed or disposed of by any entity licensed under the
            sublicense granted pursuant to Section 2(d) of the Sublicense
            Agreement (a "UNIT") shall be the greater of:

            (I)   [****] per Unit; or

            (II)  [****] of the wholesale cost of production of such Unit.

      B.    Alternatively, at [****] option, in the event that Immersion has
            entered into an agreement with a party other than [****] (excluding
            (i) the License Agreement entered into by Microsoft and Immersion
            simultaneously with the execution of this Agreement, (ii) any other
            agreement with a third party in connection with the [****]; and
            (iii) any agreement under which Immersion receives a license or
            [****] from such third party) (a "THIRD PARTY AGREEMENT") in which
            Immersion grants such third party rights under the Licensed Patents
            of equivalent scope to the rights sublicensed to [****] under
            Section 2(d), if, taken as a whole, the terms of such Third Party
            Agreement are more favorable than the terms of the agreement entered
            into by [****] and Microsoft pursuant to Section 2(d) ("SECTION 2(D)
            AGREEMENT"), [****] may elect that all material terms of such Third
            Party Agreement shall apply to [****] in place of the Section 2(d)
            Agreement. In the event of such an election by [****] and Microsoft
            shall terminate the Section 2(d) Agreement, and Immersion and [****]
            will enter into an agreement containing all such material terms of
            such Third Party Agreement.

2.    Except as otherwise agreed by [****] and Immersion, royalties payable for
      Units shall be paid within 30 days after the end of the calendar quarter
      in which [****] receives revenue for such Unit and to a bank account
      designated by Immersion.

3.    [****] bundled with [****] shall not bear a separate royalty; the only
      royalty payable shall be on the underlying [****] which such [****]
      intended to be used.


                                      A-1