IMMERSION CORP
EXHIBIT 10.32
<DOCUMENT>
<TYPE>EX-10.32
<SEQUENCE>5
<FILENAME>f70292ex10-32.txt
<DESCRIPTION>EXHIBIT 10.32
<TEXT>

<PAGE>   1
                                                                   Exhibit 10.32


                                  STOCK OPTION
                             CANCELLATION AGREEMENT


        THIS STOCK OPTION CANCELLATION AGREEMENT (the "Agreement") is made and
entered into as of this 25th day of October 2000, (the "Effective Date") by and
between Immersion Corporation, a Delaware corporation (the "Company") and Louis
Rosenberg, President and Chief Executive Officer of the Company
("Optionholder").

                                    RECITALS

        WHEREAS, the Company and Optionholder have previously entered into that
certain Stock Option Agreement dated as of February 3, 2000 (the "Option
Agreement") pursuant to the 1997 Immersion Corporation Stock Option Plan (the
"Plan"); and

        WHEREAS, pursuant to the Option Agreement, Optionholder holds an option
to purchase 500,000 shares of common stock of the Company, at an exercise price
of $34.75 per share (the "Option");

        WHEREAS, Optionholder believes it to be in his best interests as an
officer, director and stockholder of the Company to cancel the Option, so that
those options granted to Optionholder may be granted to various other employees
as incentives to continue their employment with the Company and achieve product
development and other goals which may increase the value of the Company and
other options held by Optionholder pursuant to the Plan;

        WHEREAS, the Company shall rely upon Optionholder's cancellation of the
Option when hereafter granting options pursuant to the Plan

        NOW, THEREFORE, in consideration of the mutual covenants hereinafter
recited, the sufficiency of which is hereby acknowledged, the parties agree as
follows:

        13. CONSIDERATION: For good and valuable consideration, Optionholder
hereby agrees to cancel the Option, and the Company hereby accepts such
cancellation tendered by Optionholder, effective as of the Effective Date.

                INCREASE IN OPTION POOL. Company shall treat the Option
                cancelled by the Optionholder, and the options released thereby,
                as an increase of the option pool available for future grants
                pursuant to section 4.1 ("Maximum Number of Shares Issuable") of
                the Plan.

        14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Optionholder and his successors and assigns.

        15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts made
between California residents and wholly to be performed in California.

        16. HEADINGS. The headings in this Agreement are intended principally
for convenience and shall not, by themselves, determine the rights and
obligations of the parties to this Agreement.

        17. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, such provision shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties to the

<PAGE>   2

maximum extent possible. In any event, all other provisions of this Agreement
shall be deemed valid and enforceable to the full extent possible.

        18. ENTIRE AGREEMENT. This Agreement contains all of the terms and
conditions agreed upon by the parties relating to the subject matter hereof and
supersedes any and all prior and contemporaneous agreements, negotiations,
correspondence, understandings and communications of the parties, whether oral
or written, respecting the subject matter hereof.



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



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

                                        COMPANY:
                                          IMMERSION CORPORATION

                                        By:           /s/ Robert G. O'Malley
                                           -------------------------------------
                                        Name:  Robert G. O'Malley
                                             -----------------------------------
                                        Title:        CEO & President
                                              ----------------------------------


                                        OPTIONHOLDER:               OPTIONHOLDER
                                                                         By:
                                            /s/ Louis Rosenberg
                                        ---------------------------
                                            Louis Rosenberg
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</DOCUMENT>
