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                                                                    EXHIBIT 10.1

                              RETENTION AGREEMENT

        This Retention Agreement is made and entered into as of August 29, 2001,
by and between Immersion Corporation (the "Company") and Rodney G. Hilton (the
"Employee").

                                   BACKGROUND

        A. The Employee is employed by Immersion Medical, Inc. ("Immersion
Medical") (formerly HT Medical Systems, Inc.), a wholly-owned subsidiary of the
Company, pursuant to an Employment Agreement dated as of September 22, 1999
between the Employee and Immersion Medical (the "Employment Agreement").

        B. Under Section 2.C. of the Employment Agreement, Phase III of the
Employee's employment commenced on September 28, 2000, and the current one-year
term of the Employee's employment continues from that date until September 28,
2001. The Employment Agreement will be renewed automatically after September 28,
2001 for successive additional terms of one year each unless either party
notifies the other party at least 90 days prior to the expiration of any term of
such party's determination not to renew the Employment Agreement beyond the then
existing term.

        C. The Employee has been instrumental in facilitating the Company's
integration of Immersion Medical and in managing Immersion Medical's operations.

        D. The Company and the Employee wish to provide for certain enhancements
to the Employment Agreement in consideration of the Employee's continued
employment by Immersion Medical.

        NOW, THEREFORE, in consideration of the premises and covenants set forth
in this Agreement, and intending to be legally bound hereby, the parties agree
as follows:

        1. Annual Retention Payments. In addition to the compensation and
benefits payable to the Employee under the Employment Agreement, the Company
shall pay the Employee the bonuses set forth below, provided that the Employee
continues to be employed by Immersion Medical on the respective payment date:

            (a) The Company shall pay the Employee a bonus equal to $220,000 on
January 7, 2002; and

            (b) The Company shall pay the Employee a bonus equal to $220,000 on
January 6, 2003.

        2. Payments upon Termination.

            (a) Notwithstanding anything to the contrary set forth in this
Agreement or the Employment Agreement, in the event that the Employee's
employment terminates on or before

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January 6, 2003 for any reason specified in Section 2(b), the Company shall (i)
pay the Employee an amount equal to $440,000, less any amounts paid to the
Employee pursuant to Section 1 above, and (ii) cause Immersion Medical to pay to
the Employee, in lieu of any severance previously payable under the Employment
Agreement, a severance payment equal to (A) an amount equal to the Employee's
Base Salary as then in effect under the Employment Agreement for a period of 12
months plus (B) the portion, if any, of the Employee's Base Salary as then in
effect for the balance of the then existing term of the Employment Agreement (as
described in paragraph B of the Background section of this Agreement), plus (C)
any unpaid expense reimbursements. The obligations of the Company and Immersion
Medical under this Section 2(a) shall survive the termination of the Employment
Agreement until these obligations are performed and discharged in full.

            (b) The payments specified in Section 2(a) shall be payable in full
immediately upon the termination of the Employee's employment for any of the
following reasons: (i) the Employee's death, (ii) the Employee's Total
Disability, as defined in the Employment Agreement, (iii) the discharge of the
Employee by Immersion Medical for any reason, (iv) the failure of Immersion
Medical to renew the Employment Agreement upon the expiration of any term, or
(v) the resignation of the Employee for Good Reason (as defined in Section
2(c)). Upon any such termination of the Employee's employment, the Employment
Agreement shall terminate, and neither party shall have any further obligations
thereunder except with respect to those obligations that expressly survive the
termination of the Employment Agreement.

            (c) For purposes of this Agreement, "Good Reason" shall mean the
occurrence, without the Employee's express written consent, of any of the
following: (i) any material diminution of the Employee's positions, duties or
responsibilities or the assignment to the Employee of duties or responsibilities
that are inconsistent with the Employee's position as president of Immersion
Medical; (ii) removal of the Employee from, or the nonreelection of the Employee
to, the officer positions currently held by him; (iii) relocation of the
Employee's place of employment to a location more than 25 miles from its current
location; (iv) failure by the Company or Immersion Medical (A) to continue any
bonus plan, program or arrangement in which the Employee is entitled to
participate (the "Bonus Plans"), provided that any such Bonus Plans may be
modified at the Company's discretion from time to time but shall be deemed
terminated if (x) any such plan does not remain substantially in the form in
effect prior to such modification and (y) if plans providing the Employee with
substantially similar benefits are not substituted therefor ("Substitute
Plans"), or (B) to continue the Employee as a participant in the Bonus Plans and
Substitute Plans on at least the same basis as to potential amount of the bonus
and substantially the same level of criteria for achievability thereof as the
Employee participated in immediately prior to any change in such plans or
awards, in accordance with the Bonus Plans and the Substitute Plans; (v) any
material breach of any provision of this Agreement or the Employment Agreement
by the Company or Immersion Medical; (vi) the occurrence of a Change of Control
(as defined in the Employment Agreement, except that the term "Employer" as used
in that definition, shall refer to each and either of the Company and Immersion
Medical for purposes of this Section 2(c); (vii) the failure of the Company to
become cash flow positive during the fourth quarter of 2001; (viii) if the
Company's market capitalization falls below

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$100,000,000 at any time; (ix) if the Company's employees in San Jose,
California are compensated on a preferential basis over the employees of
Immersion Medical, based upon the timing or percentages of salary increases, the
type or level of benefits and/or the timing or amounts of bonuses; (x) if the
demands of the Employee's position cause a health problem that substantially
interferes with the quality of life of the Employee, (xi) if Robert O'Malley is
no longer the Chief Executive Officer or Chairman of the Company or if the
Employee no longer reports directly to Mr. O'Malley; or (xii) if there is a
change in the organizational structure of the Company or Immersion Medical, as a
result of which one or more of Immersion Medical's existing departments or
functions no longer reports to the Employee as President of Immersion Medical.

        3. Offset. The Company shall be entitled to offset any amount payable to
the Employee pursuant to this Agreement against any indebtedness owed by the
Employee to the Company, whether or not any such indebtedness is due and payable
at the time any amount would otherwise be paid to the Employee hereunder.

        4. Amendment to Employment Agreement. Sections 4 and 5 of the Employment
Agreement are hereby terminated and shall have
no further force or effect, except that the definition of "Total Disability" in
Section 4.B. shall continue for purposes of this Agreement.

        5. Inconsistent Agreements. In the event any of the provisions of this
Agreement are inconsistent with any of the provisions of the Employment
Agreement, the provisions of this Agreement shall prevail.

        6. Modification. This Agreement may be amended only by an agreement in
writing signed by the parties hereto.

        7. Invalidity. Should any provision(s), portion(s) or part(s) of this
Agreement be held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions, portions or parts shall be unaffected
and shall continue in full force and effect, and said invalid, void or
unenforceable provision(s), portion(s) or part(s) shall be deemed not to be part
of this Agreement.

        8. Governing Law. The terms of this Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland. If any provision
of this Agreement is found to be void or unenforceable, this shall in no way
affect any other provision of this Agreement or the enforceability of this
Agreement.

        9. Counterparts. This Agreement may be executed in counterparts, and
each counterpart shall be the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.

        IN WITNESS WHEREOF, the parties hereto have executed this Retention
Agreement as of the date first above written.

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                                                 IMMERSION CORPORATION

                                                 By: /s/ ROBERT G. O'MALLEY
                                                    ----------------------------
                                                 Name: Robert G. O'Malley
                                                      --------------------------
                                                 Title: Chairman & CEO
                                                       -------------------------

                                                 IMMERSION MEDICAL, INC.

                                                 By: /s/ RODNEY G. HILTON
                                                    ----------------------------
                                                 Name: Rodney G. Hilton
                                                      --------------------------
                                                 Title: President
                                                       -------------------------

                                                  /s/ RODNEY G. HILTON
                                                 -------------------------------
                                                 Rodney G. Hilton

                                       4<PAGE>
                                                                    EXHIBIT 10.2

                                PROMISSORY NOTE

$420,000                                                         August   , 2001

     FOR VALUE RECEIVED, Rodney G. Hilton (the "Employee") promises to pay to
Immersion Corporation (the "Company"), at 801 Fox Lane, San Jose, California
95131, or at such place or places as the holder of this promissory note (the
"Note") may from time to time designate in writing, the principal sum of Four
Hundred Twenty Thousand Dollars ($420,000) (the "Principal"). The amount of the
Principal outstanding from time to time shall bear interest at a rate equal to
four percent (4%) per annum, compounded quarterly from the date hereof.

     This Note and all accrued interest shall be payable in full on the earlier
of: (i) January 6, 2003, and (ii) thirty days following the date of the
termination of the Employee's employment with the Company. Interest not paid
when due shall thereafter bear like interest as the principal.

     The Employee waives diligence, presentment, protest, demand and notice of
protest, demand, dishonor and nonpayment of this Note, and expressly agrees
that this Note, or any payment under it, may be extended and any security may
be accepted, released or substituted by the Company from time to time without
in any way affecting the liability of Employee.

     At the election of the Employee, any amount payable by the Employee to the
Company under this Note, whether or not such amount shall be currently due and
payable, may be set off against any amount payable to the Employee by the
Company.

     The Employee agrees to reimburse the holder of this Note for all costs of
collection or enforcement of this Note, whether or not suit if filed
(including, but not limited to, reasonable attorneys' fees) incurred by the
holder.

     This Note shall be governed by and construed in accordance with the laws
of the State of Maryland.

     This Note may not be assigned by the Company.

                                        /s/ RODNEY G. HILTON
                                        -----------------------------------
                                        Rodney G. Hilton

                                        Acknowledged and agreed, intending
                                        to be legally bound hereby:

                                        IMMERSION CORPORATION

                                        By: /s/ ROBERT G. O'MALLEY
                                            -------------------------------
                                            Name:  Robert G. O'Malley
                                            Title: Chairman & CEO

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