Edgar Filing: IMMERSION CORP

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

IMMERSION CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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IMMERSION LOGO

April 25, 2001

TO THE STOCKHOLDERS OF IMMERSION CORPORATION

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of Immersion Corporation (the "Company"), which will be held
at the Silicon Valley Convention Center, 2161 North First Street, San Jose,
California 95131, on Tuesday, June 5, 2001, at 10:00 a.m.

Details of the business to be conducted at the Annual Meeting are given in
the attached Proxy Statement and Notice of Annual Meeting of Stockholders.

It is important that your shares be represented and voted at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. Returning the proxy does NOT deprive you of your right to attend the
Annual Meeting. If you decide to attend the Annual Meeting and wish to change
your proxy vote, you may do so automatically by voting in person at the meeting.

On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company. We look
forward to seeing you at the Annual Meeting.

Sincerely,

/s/ ROBERT O'MALLEY
Robert O'Malley
President and Chief Executive Officer
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IMMERSION CORPORATION
801 FOX LANE
SAN JOSE, CALIFORNIA 95131
------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 2001
------------------------

The Annual Meeting of Stockholders (the "Annual Meeting") of Immersion
Corporation (the "Company") will be held at the Silicon Valley Convention
Center, 2161 North First Street, San Jose, California 95131, on Tuesday, June 5,
2001, at 10:00 a.m. for the following purposes:

1. To elect one (1) member of the Board of Directors to serve for a
three-year term as a Class II director;

2. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent public accountants for the fiscal year ending December 31,
2001; and

3. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.

The foregoing items of business are more fully described in the attached
Proxy Statement.

Only stockholders of record at the close of business on April 10, 2001 are
entitled to notice of, and to vote at, the Annual Meeting and at any
adjournments or postponements thereof. A list of such stockholders will be
available for inspection at the Company's headquarters located at 801 Fox Lane,
San Jose, California 95131 during ordinary business hours for the ten-day period
prior to the Annual Meeting.

BY ORDER OF THE BOARD OF DIRECTORS,

/s/ CRAIG FACTOR
Craig Factor
Secretary

San Jose, California
April 25, 2001

IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF
YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU
MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
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IMMERSION CORPORATION
801 FOX LANE
SAN JOSE, CALIFORNIA 95131
------------------------

PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 2001
------------------------

These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Immersion Corporation, a
Delaware corporation (the "Company"), for the Annual Meeting of Stockholders
(the "Annual Meeting") to be held at the Silicon Valley Convention Center, 2161
North First Street, San Jose, California 95131, on Tuesday, June 5, 2001, at
10:00 a.m., and at any adjournment or postponement of the Annual Meeting. These
proxy materials were first mailed to stockholders on or about April 25, 2001.

PURPOSE OF MEETING

The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this Proxy Statement.

VOTING RIGHTS AND SOLICITATION OF PROXIES

The Company's Common Stock is the only type of security entitled to vote at
the Annual Meeting. On April 10, 2001, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 18,544,593
shares of Common Stock outstanding. Each stockholder of record on April 10, 2001
is entitled to one vote for each share of Common Stock held by such stockholder
on April 10, 2001. Shares of Common Stock may not be voted cumulatively in the
election of directors. All votes will be tabulated by the inspector of elections
appointed for the meeting, who will separately tabulate affirmative and negative
votes, abstentions, and broker non-votes.

QUORUM REQUIRED

The Company's bylaws provide that the holders of a majority of the
Company's Common Stock issued and outstanding and entitled to vote at the Annual
Meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at the Annual Meeting. Abstentions and broker
non-votes will be counted as present for the purpose of determining the presence
of a quorum.

VOTES REQUIRED

Generally, stockholder approval of a matter, other than the election of
directors, requires the affirmative vote of a majority of the shares present in
person or represented by proxy and entitled to vote on the matter. Directors are
elected by a plurality of the votes of the shares present in person or by proxy
and entitled to vote on the election of directors. Shares voted to abstain on a
matter will be treated as entitled to vote on the matter and will thus have the
same effect as "no" votes. Broker non-votes are not counted as entitled to vote
on a matter in determining the number of affirmative votes required for approval
of the matter, but are counted as present for quorum purposes. The term "broker
non-votes" refers to shares held by a broker in street name which are present by
proxy but are not voted on a matter pursuant to rules prohibiting brokers from
voting on non-routine matters without instructions from the beneficial owner of
the shares. The election of directors and ratification of the appointment of
independent public accountants are generally considered to be routine matters on
which brokers may vote without instructions from beneficial owners.
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PROXIES

Whether or not you are able to attend the Company's Annual Meeting, you are
urged to complete and return the enclosed proxy, which is solicited by the
Company's Board of Directors and which will be voted as you direct on your proxy
when properly completed. In the event no directions are specified, such proxies
will be voted as follows: (i) FOR the election of the Board nominee named in
this Proxy Statement or otherwise nominated as described in this Proxy
Statement; (ii) FOR Proposal No. 2; and (iii) in the discretion of the proxy
holders as to other matters that may properly come before the Annual Meeting.
You may also revoke or change your proxy at any time before the Annual Meeting.
To do this, send a written notice of revocation or another signed proxy with a
later date to Victor Viegas, Vice President, Finance and Chief Financial Officer
of the Company, at the Company's principal executive offices to be received
before the beginning of the Annual Meeting. You may also automatically revoke
your proxy by attending the Annual Meeting and voting in person. All shares
represented by a valid proxy received prior to the Annual Meeting will be voted.

SOLICITATION OF PROXIES

The cost of solicitation of proxies will be borne by the Company, and in
addition to soliciting stockholders by mail through its regular employees, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company registered
in the names of a nominee and, if so, will reimburse such banks, brokers and
other custodians, nominees and fiduciaries for their reasonable out-of-pocket
costs. Solicitation by officers and employees of the Company may also be made of
some stockholders in person or by mail or telephone following the original
solicitation.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

Pursuant to the Company's Amended Certificate of Incorporation (the
"Certificate of Incorporation"), the Company's Board is divided into three
classes -- Class I, II and III directors. Each director is elected for a three
year term of office, with one class of directors being elected at each annual
meeting of stockholders. Each director holds office until his successor is
elected and qualified or until his earlier death, resignation or removal. In
accordance with the Certificate of Incorporation, one Class II director is to be
elected at the Annual Meeting, Class III directors are to be elected at the
annual meeting in 2002 and Class I directors are to be elected at the annual
meeting in 2003.

One Class II director is to be elected to the Board at the Annual Meeting,
to serve until the annual meeting of stockholders to be held in 2004 and until
his successor has been elected and qualified, or until his earlier death,
resignation or removal.

NOMINEES

The nominee for election as the Class II Director is Jonathan Rubinstein.
The nominee is presently serving as a director of the Company. Shares
represented by all proxies received by the Board and not so marked as to
withhold authority to vote for Mr. Rubinstein (by writing Mr. Rubinstein's name
where indicated on the proxy) will be voted (unless Mr. Rubinstein is unable or
unwilling to serve) FOR the election of Mr. Rubinstein. The Board knows of no
reason why Mr. Rubinstein would be unable or unwilling to serve, but if such
should be the case, proxies may be voted for the election of another nominee of
the Board.

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The information below sets forth the current members of the Board of
Directors, including the nominee for Class II Director:

CLASS OF DIRECTOR
NAME AGE DIRECTOR PRINCIPAL OCCUPATION SINCE
---- --- -------- -------------------- --------

Jonathan Rubinstein...... 44 II Senior Vice President of Hardware Engineering, Apple 1999
Computer, Inc.
Steven Blank............. 47 I Private Investor 1996
Charles Boesenberg....... 52 I President, Post PC Ventures 2000
Robert O'Malley.......... 55 III President and Chief Executive Officer, Immersion 2000
Corporation
Louis Rosenberg.......... 31 III Chairman, Immersion Corporation 1993

NOMINEE TO SERVE AS A DIRECTOR FOR A TERM EXPIRING AT THE 2004 ANNUAL MEETING OF
STOCKHOLDERS (CLASS II DIRECTOR):

Jonathan Rubinstein

Mr. Rubinstein has served as a member of the Board since October 1999.
Since February 1997, Mr. Rubinstein has served as senior vice president of
hardware engineering at Apple Computer, Inc., a personal computer company. From
August 1993 to August 1996, Mr. Rubinstein was executive vice president and
chief operating officer of Fire Power Systems, a developer and manufacturer of
Power PC-based computer systems. Mr. Rubinstein has a bachelors and masters of
science degree in electrical engineering from Cornell University and a master of
science degree in computer science from Colorado State University.

DIRECTORS SERVING FOR A TERM EXPIRING AT THE 2003 ANNUAL MEETING OF STOCKHOLDERS
(CLASS I DIRECTOR):

Steven Blank

Mr. Blank has served as a member of the Board since October 1996. From
November 1996, until August 1999, Mr. Blank served as executive vice president
of marketing for E.piphany, an enterprise software company that Mr. Blank
co-founded. From February 1993 to October 1996, Mr. Blank served as chief
executive officer of Rocket Science Games, a video game software company. From
February 1990 to January 1993, Mr. Blank served as vice president of marketing
of SuperMac, a supplier of Macintosh peripherals.

Charles Boesenberg

Mr. Boesenberg has served as a member of the Board since February 2000.
Since February 2000, Mr. Boesenberg has served as President of Post PC Ventures,
a management consulting group. From February 2000 to December 2000, Mr.
Boesenberg served as a member of the merger transition and integration team of
Wind River Systems, Inc., an embedded systems software company, which was the
surviving corporation of a merger with Integrated Systems, Inc. From December
1998 to February 2000, Mr. Boesenberg served as president and chief executive
officer of Integrated Systems, Inc., an embedded systems software company. From
December 1997 to December 1998, Mr. Boesenberg served as president and chief
executive officer of Magellan Corporation, a satellite access products company,
which was the surviving corporation of a merger with Ashtech, Inc., a
business-to-business global positioning systems company, where Mr. Boesenberg
served as president and chief executive officer from January 1995 to January
1997. Mr. Boesenberg currently serves as a director of Symantec Corporation and
Epicor Software. Mr. Boesenberg has a bachelor of science degree in mechanical
engineering from the Rose Hulman Institute of Technology and a master of science
degree in business administration from Boston University.

DIRECTORS SERVING FOR A TERM EXPIRING AT THE 2002 ANNUAL MEETING OF STOCKHOLDERS
(CLASS III DIRECTOR):

Robert O'Malley

Mr. Robert O'Malley has served as our President and Chief Executive Officer
since October 2000. From June 1999 to July 2000, he served as president of
Intermec Technologies Corporation, a supply chain management company, a
subsidiary of Unova, Inc., an industrial technologies company. From May 1995 to
June 1999, Mr. O'Malley held several executive positions at MicroAge, an
information technologies company,

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and its wholly-owned subsidiary Pinacor, a distributor of communications product
solutions, including serving as its chief executive officer from March 1998
until June 1999 and President of MicroAge from November 1996 until February
1998. From 1976 to 1995, Mr. O'Malley held a variety of management positions at
IBM, an information systems company, including general manager of desktop
systems from September 1994 to February 1995. Mr. O'Malley holds a bachelor of
science degree in aeronautical engineering from the University of Minnesota, and
a master of business administration from Arizona State University. Mr. O'Malley
is a board member of the University of North Dakota Aerospace Foundation, serves
on the board of regents of Brophy College Preparatory, and is a member of the
Global Advisory Council for Thunderbird Graduate School of International
Management. Mr. O'Malley served as a captain in the United States Air Force from
1967 to 1973.

Louis Rosenberg

Dr. Louis Rosenberg is a founder of Immersion and has served as Chairman
since May 1993. Dr. Rosenberg also served as our President and Chief Executive
Officer from May 1993 until October 2000. Since April 1997, Dr. Rosenberg has
also served as a manager of MicroScribe LLC, a licensing company in which we
hold a membership interest. Dr. Rosenberg holds bachelor of science, master of
science and doctorate degrees in mechanical engineering from Stanford
University. Dr. Rosenberg currently serves as a director of the Humane Society
of Silicon Valley.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE CLASS II DIRECTOR NOMINEE LISTED HEREIN.

BOARD OF DIRECTORS MEETINGS AND COMMITTEES

During the year ended December 31, 2000, the Board held six meetings. Each
of the current directors attended at least 75% of the total number of meetings
of the Board and meetings held by all Committees of the Board on which each such
director served during the year. The Board has a standing audit committee,
compensation committee and executive committee.

Audit Committee

The audit committee met four times in 2000. The audit committee reviews
with the Company's independent auditor the scope and timing of its audit
services and any other services that the auditor is asked to perform, the
auditor's report on the Company's consolidated financial statements following
completion of its audit, and the Company's policies and procedures with respect
to internal accounting and financial controls. In addition, the audit committee
makes annual recommendations to the Board regarding the appointment of an
independent auditor for the upcoming year. The members of the audit committee
are Mr. Blank, Mr. Rubinstein and Mr. Boesenberg.

Compensation Committee

The compensation committee met six times in 2000. The compensation
committee reviews and approves the compensation of the Company's executives and
administers the Company's stock plans. The members of the compensation committee
are Mr. Blank and Mr. Rubinstein.

Executive Committee

The executive committee met four times in 2000. The executive committee
exercises certain powers of the Board during intervals between meetings of the
Board. The members of the executive committee are Mr. Rosenberg, Mr. Boesenberg
and Mr. O'Malley.

DIRECTOR COMPENSATION

No cash compensation is paid to directors. Under guidelines adopted by the
Board in July 2000, each director of the Company is granted an option to
purchase 25,000 shares of common stock under the

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Company's 1997 Stock Option Plan on the date the director first becomes a member
of the Board. In addition, each director who has served for at least eleven
months, receives an additional 7,500 share option grant at the first meeting of
the Board following each annual meeting of the Company's stockholders. Subject
to continued service to the Company, options granted to directors vest as to 25%
of the shares on the first anniversary of their grant date, with the remaining
portion vesting as to 2.083% per month thereafter.

In 2000, the Company granted options to purchase the Company's common stock
to its directors. The options granted to Messrs. O'Malley and Rosenberg, the
Company's employee directors, are described in the Summary Compensation Table.
The options granted to Messrs. Blank, Boesenberg and Rubinstein, the Company's
non-employee directors, are described in the following table.

SHARES SUBJECT EXERCISE PRICE
DATE OF GRANT TO OPTION PER SHARE
------------- -------------- --------------

Mr. Blank........................... 7/26/00 7,500 $23.13
Mr. Boesenberg...................... 2/16/00 25,000 $36.00(1)
2/16/00 60,000 $36.00(1)
7/26/00 7,500 $23.13
Mr. Rubinstein...................... 7/26/00 7,500 $23.13

---------------
(1) These option grants were subsequently cancelled as of October 25, 2000
pursuant to Stock Option Cancellation Agreements dated October 25, 2000.

EXECUTIVE COMPENSATION AND RELATED INFORMATION

The following table presents information concerning compensation earned
during the years ended December 31, 2000 and December 31, 1999 by each person
who served as the Company's chief executive officer in 2000 and the Company's
four other most highly compensated executive officers in 2000 (collectively, the
"Named Executive Officers"). In accordance with the rules of the Securities and
Exchange Commission (the "SEC"), the compensation described in this table does
not include perquisites and other personal benefits received by these executive
officers that do not exceed the lesser of $50,000 or 10% of the total salary and
bonus reported for these officers.

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS(1) OPTIONS(2)
--------------------------- ----------- --------- -------- ------------

Robert O'Malley.............................. 2000 $ 42,244(3) -- 500,000
President and Chief Executive Officer
Louis Rosenberg, Ph.D. ...................... 2000 $211,539 -- 7,500
Chairman(4) 1999 $179,587 $ 50,000 227,894
Victor Viegas................................ 2000 $150,206 $ 18,750 --
Vice President, Finance and 1999 $ 66,154(5) $ 6,250 564,900
Chief Financial Officer
J. Stuart Mitchell,.......................... 2000 $151,287 $114,193 100,000
Executive Vice President, Business Groups 1999 $ 49,333(6) $ 6,250 356,660
Bruce Schena................................. 2000 $147,479 $ 26,365 --
Vice President, Chief Technology Officer 1999 $141,963 -- 49,087
Kenneth Martin............................... 2000 $125,858 $ 36,685 187,500
Vice President, Engineering 1999 $117,275 $ 10,000 14,526

---------------
(1) Bonuses are reported in the year earned, even if actually paid in a
subsequent year.

(2) All figures in this column represent options to purchase the Company's
common stock.

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(3) Mr. O'Malley was appointed President and Chief Executive Officer in October
2000. Compensation is for partial year.

(4) Dr. Rosenberg served as President and Chief Executive Officer until October
2000.

(5) Mr. Viegas joined the Company in August 1999. Compensation is for partial
year.

(6) Mr. Mitchell joined the Company in August 1999. Compensation is for partial
year.

OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 2000.

The following table presents information with respect to stock options
granted during 2000 to the Named Executive Officers.

STOCK OPTION GRANTS IN THE LAST FISCAL YEAR

POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF
UNDERLYING GRANTED TO STOCK APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OPTION TERM(2)
GRANTED DURING PRICE EXPIRATION -------------------------
NAME (#)(3) PERIOD (%) ($/SHARE) DATE 5% 10%
---- ---------- ------------- --------- ---------- ----------- -----------

Robert O'Malley........... 500,000 13.57 $ 9.00 10/20/10 $ 2,830,026 $ 7,171,841
Louis Rosenberg, Ph.D. ... 500,000(1) 13.57 $34.75 2/3/10 $10,927,044 $27,691,275
7,500 0.2 $23.13 7/26/10 $ 109,036 $ 276,377
Victor Viegas............. -- -- -- -- -- --
J. Stuart Mitchell........ 100,000 2.71 $16.38 8/30/10 $ 1,029,815 $ 2,609,753
Bruce Schena.............. 125,000(1) 3.39 $34.75 2/3/10 $ 2,731,761 $ 6,922,819
47,300(1) 1.28 $39.00 2/7/10 $ 1,160,122 $ 2,939,977
Kenneth Martin............ 125,000 3.39 $34.75 2/3/10 $ 2,731,761 $ 6,922,819
62,500 1.70 $ 8.09 10/25/10 $ 318,142 $ 806,234

---------------
(1) These options were subsequently cancelled on October 25, 2000 pursuant to a
Stock Option Cancellation Agreement dated October 25, 2000.

(2) The potential realizable value represents the hypothetical gains of the
options granted based on assumed annual compound stock appreciation rates
over the exercise price per share (before taxes). Actual gains, if any, on
stock option exercises are dependent on the future performance of the
Company's Common Stock. There can be no assurance that any of the value
reflected in this table will be achieved.

(3) Each option vests as to 25% of the underlying shares 12 months after the
date of grant and as to 2.0833% monthly thereafter over the next 36 months.
The option has a maximum term of ten years measured from the option grant
date, subject to earlier termination in the event of the optionee's
cessation of service with the Company.

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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

The following table presents information for the Named Executive Officers
concerning option exercises during 2000 and the value of exercisable and
unexercisable options held as of December 31, 2000 by these officers:

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END AT FISCAL YEAR END($)(2)
ACQUIRED ON VALUE REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------

Robert O'Malley............... -- -- -- 500,000 -- --
Louis Rosenberg, Ph.D. ....... 90,340 $1,379,262 1,055,721 84,932 $7,076,325 $270,702
Victor Viegas................. -- -- 188,300 376,600 -- --
J. Stuart Mitchell............ -- -- 118,886 337,774 -- --
Bruce Schena.................. 58,300 $1,063,631 400,242 8,940 $2,779,202 $ 34,473
Kenneth Martin................ 40,175 $1,079,517 68,023 190,224 $ 448,841 $ 10,504

---------------
(1) Upon exercise of the options, an option holder did not necessarily receive
the amount reported above under the column "Value Realized." The amounts
reported above under the column "Value Realized" merely reflect the amount
by which the fair market value of the Common Stock of the Company on the
date the option was exercised exceeded the exercise price of the option. The
option holder does not realize any cash until the shares of Common Stock
issued upon exercise of the options are sold.

(2) Based on the closing price of the Common Stock of the Company as reported on
The Nasdaq National Market System at December 31, 2000, the last day of
trading of the Company's Common Stock during fiscal year 2000, of $7.516 per
share, less the exercise price payable for such shares.

EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS

The options granted to Robert O'Malley, President and Chief Executive
Officer of the Company, accelerate in the event of a change in control of the
Company and, as a result, he is terminated, if he resigns due to a material
reduction in his duties or if the Company moves his principal office more than
60 miles from San Jose. If one of these events occurs, 50% of the unvested
shares will become vested. In addition, if the Company terminates Mr. O'Malley's
employment other than for cause, the Company will pay him a severance payment
equal to twelve months of base salary (or, if lesser, the number of months
before he finds other employment) and a portion of his options will also
accelerate. If the termination occurs before the first anniversary of his start
date, 25% of the shares will become vested, and if the termination occurs after
his first anniversary, vesting will be accelerated by 6 months.

The options granted to Victor Viegas, Vice President, Finance and Chief
Financial Officer of the Company, accelerate in the event of a change in control
of the Company, if he resigns due to a material reduction in his duties or if
the Company moves his principal office more than 60 miles from San Jose. If one
of these events occurs within 18 months of his start date, vesting will be
accelerated by 12 months and if one of these events occurs more than 18 months
after his start date, 50% of the unvested shares will become vested. In
addition, if the Company terminates Mr. Viegas' employment other than for cause,
the Company will pay him a severance payment equal to six months of base salary
(or, if lesser, the number of months before he finds other employment) and a
portion of his options will also accelerate. If the termination occurs before
the first anniversary of his start date, 37.5% of the shares will become vested,
and if the termination occurs after his first anniversary but within 18 months
of his start date, vesting will be accelerated by 12 months.

The options granted to J. Stuart Mitchell, Executive Vice President of the
Company's Business Groups, accelerate in the event that the Company moves his
principal office more than 60 miles from San Jose within 12 months of his start
date, there is a change in the Company's control that results in his termination
of employment or if he resigns due to a material reduction in his duties. If one
of the events occurs, vesting will be accelerated by 12 months. In addition, if
the Company terminates Mr. Mitchell's employment other than

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for cause, the Company will pay him a severance payment equal to three months of
base salary (or, if lesser, the number of months before he finds other
employment) and the vesting of his options will be accelerated by three months.

The Company's 1994 stock option plan provides that, in the event of a
change in control, the Board may either arrange with the acquiring corporation
that outstanding options be assumed or that equivalent options be substituted by
the acquiring corporation; or provide that any unexercisable or unvested
portions of the outstanding options shall be immediately exercisable and vested
in full. The options terminate if they are not assumed, substituted or exercised
prior to a change of control.

AUDIT COMMITTEE REPORT

Under the guidance of a written charter adopted by the Board of Directors,
the purpose of the Audit Committee is to monitor the integrity of the financial
statements of the Company, oversee the independence of the Company's independent
auditor, and recommend to the Board the selection of the independent auditor.
During fiscal 2000, the Audit Committee met four times, and discussed the
interim financial information contained in each quarterly earnings announcement
with the Vice President of Finance, Controller and the Company's independent
auditor prior to the public release. Each of the members of the Audit Committee
meets the independence requirements of Nasdaq. A copy of the charter is included
in Appendix A to this proxy statement.

Management has the primary responsibility for the system of internal
controls and the financial reporting process. The independent auditor has the
responsibility to express an opinion on the financial statements based on an
audit conducted in accordance with generally accepted auditing standards. The
Audit Committee has the responsibility to monitor and oversee these processes.

In this context and in connection with the audited financial statements
contained in the Company's Annual Report on Form 10-K, the Audit Committee:

- reviewed and discussed the audited financial statements with the
Company's management;

- discussed with Deloitte & Touche LLP, the Company's independent auditor,
the matters required to be discussed by Statement of Auditing Standards
No. 61, Communication with Audit Committees, as amended;

- reviewed the written disclosures and the letter from Deloitte & Touche
LLP required by the Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, discussed with the
auditor its independence, and concluded that the nonaudit service
performed by Deloitte & Touche LLP are compatible with maintaining its
independence;

- based on the foregoing reviews and discussions, recommended to the Board
of Directors that the audited financial statements be included in the
Company's 2000 Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 filed with the Securities and Exchange Commission; and

- instructed the independent auditor that the Committee expects to be
advised if there are any subjects that require special attention.

AUDIT COMMITTEE

Steven Blank
Charles Boesenberg
Jonathan Rubinstein

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12

RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS

Deloitte & Touche LLP has been the independent accounting firm that audits
the financial statements of the Company since 1997. In accordance with standing
policy, Deloitte & Touche LLP periodically changes the personnel who work on the
audit.

PRINCIPAL ACCOUNTING FIRM FEES

Aggregate fees billed to the Company for the fiscal year ended December 31,
2000 by the Company's principal accounting firm, Deloitte & Touche LLP, the
member firms of Deloitte Touche Tohmatsu, and their respective affiliates:

Audit Fees............................................... $0.2 million
Financial Information Systems Design and Implementation
Fees................................................... $0
All Other Fees........................................... $0.3 million(1)(2)

---------------
(1) Includes fees for tax consulting and other non-audit services.

(2) The audit committee has considered whether the provision of these services
is compatible with maintaining the principal accountant's independence.

COMPENSATION COMMITTEE REPORT

This Compensation Committee Report describes the compensation policies and
rationale applied to the compensation paid to the Company's executive officers
for the fiscal year ended December 31, 2000. The compensation committee has the
authority to administer the Company's stock option plans, establish the level of
base salary payable to the Chief Executive Officer ("CEO") and the other
executive officers of the Company and the responsibility of approving the bonus
program to be in effect for the CEO and the other executive officers.

General Compensation Policy. The Committee's fundamental compensation
policy is to align compensation with business objectives and performance, and to
enable the Company to attract, retain and reward executive officers whose
contributions are necessary for the long term success of the Company.
Accordingly, each executive officer's compensation package consists of: (i) base
salary; (ii) annual cash bonus; and (iii) long-term stock-based incentive
awards.

Base Salary. The base salary for each executive officer is set on the basis
of personal performance, taking into account the average salary levels in effect
for comparable positions with companies having total revenues similar to the
Company's. Each individual's base pay is positioned relative to the total
compensation package, including cash bonus incentives and long-term stock-based
incentives.

Cash Bonuses. Certain of the Company's executive officers are paid
mandatory quarterly bonuses in accordance with the terms of their offer letters
with the Company. In addition, certain of the Company's executive officers are
eligible for annual bonuses based on the achievement of both corporate and
functional objectives, including sales targets and patent issuances. Effective
as of January 2001, the Company has adopted a revised annual cash bonus program
applicable to all of the Company's executive officers that provides for the
payment of bonuses based upon the Company meeting certain revenue objectives.

Long-term Incentive Compensation. During the fiscal year ended December 31,
2000, the Committee made discretionary option grants to all of the executive
officers of the Company other than Mr. Viegas under the Company's 1997 Stock
Option Plan based on each officer's personal performance. Option grants were
generally made at varying times and in varying amounts in the discretion of the
Committee. Typically, the size of each grant was set at a level that is deemed
appropriate to create a meaningful opportunity for stock ownership based upon
the individual's position with the Company, the individual's potential for
future responsibility and promotion, the individual's performance in the recent
period and the number of unvested options held by the individual at the time of
the new grant. The relative weight given to each of these factors varied from
individual to individual.

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13

Options generally vest over four years. Thus, the vesting of each option is
contingent upon the executive officer's continued employment with the Company.
Accordingly, the options provided compensation to the executive officer only if
he remained in the Company's employ, and then only if the market price of the
Company's Common Stock appreciated over the option term.

CEO Compensation. On October 22, 2000, Mr. Robert O'Malley was hired as
President and Chief Executive Officer of the Company after an extensive search
conducted by the Board, with the assistance of an executive search firm. Mr.
O'Malley's fiscal year 2000 compensation was governed by an offer letter
relating to his hiring. In approving Mr. O'Malley's compensation, the Committee
focused on the importance of hiring a President and Chief Executive Officer with
an outstanding business and leadership record. The final determination of his
compensation was made primarily on the basis of Mr. O'Malley's qualifications
for the position. For 2001, Mr. O'Malley will receive a base salary of $250,000
and a one-time relocation bonus of $150,000. In addition, he is eligible to
participate with other executives of the Company in a bonus pool, the size of
which depends upon the Company's revenues exceeding certain targets. Pursuant to
the offer letter, Mr. O'Malley was granted a nonstatutory option to purchase,
within 10 years, 500,000 shares of the Company's common stock at a purchase
price of $9.00 per share. Subject to earlier vesting, and continued employment,
the option will vest as to 25% of the shares on the first anniversary of
employment, with the remaining portion vesting as to 2.083% per month
thereafter. The terms of Mr. O'Malley's option agreement are further described
in the section entitled "Employment Contracts and Change In Control
Arrangements."

From 1993 to October 2000, Mr. Rosenberg, the Company's Chairman, served as
the Company's CEO. The Committee's decision with respect to Mr. Rosenberg's 2000
salary, bonus and options was based primarily on Mr. Rosenberg's performance of
his duties. In February 2000, the Committee approved an option to Mr. Rosenberg
of 500,000 shares of the Company's common stock. In October 2000, Mr. Rosenberg
and the Company mutually agreed to the cancellation of this option. Mr.
Rosenberg did not receive a cash bonus in 2000.

COMPENSATION COMMITTEE

Steven Blank
Jonathan Rubinstein

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Neither of these individuals serving on the Compensation Committee was at
any time during fiscal year 2000, or at any other time, an officer or employee
of the Company. No executive officer of the Company serves as a member of the
board of directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Board or the Compensation
Committee.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Since January 1, 2000, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which the Company is or was
a party in which the amount involved exceeds $60,000 and in which any of its
directors, executive officers or holders of more than 5% of the Company's
capital stock had or will have a direct or indirect material interest other
than: the salaries, options, share repurchase and other agreements that are
described in the transactions described below.

OTHER TRANSACTIONS

Logitech Agreements.

In addition to Logitech being a holder of more than 5% of the Company's
capital stock, Logitech is a licensee that accounts for a large portion of the
Company's licensing and consulting services revenue. In 2000, the Company
recorded revenue of approximately $1.3 million from Logitech. In October 1996,
the Company entered into a royalty-based license agreement and a technology
product development agreement with

10
14

Logitech. The license agreement grants Logitech a world-wide, irrevocable,
non-exclusive license under the Company's patents for touch-enabled gaming
products. Pursuant to the technology product development agreement, the Company
provided Logitech consulting services with respect to the development of a
touch-enabled joystick. In March 2000, the Company and Logitech amended this
technology product development agreement in response to Logitech's desire for
the Company's assistance in developing an updated joystick product. Pursuant to
the license agreement, Logitech is required to pay the Company a royalty of 5%
of the revenue it receives when it sells a gaming product incorporating the
Company's technology to third parties. If Logitech ships more than 100,000 units
in a single year without a modification in technical specifications, the royalty
for that product will be reduced by 0.67% for the following year. If Logitech
ships more than 200,000 units in subsequent years without a modification in
technical specifications, the royalty will be reduced in each subsequent year by
a further 0.67%. However, the royalty rate may not drop below 3%. In September
2000, the Company and Logitech signed a letter agreement affirming that
Logitech's Wingman Rumblepad product is considered a royalty-bearing product
under the license agreement.

In April 1998, the Company entered into a royalty-based license agreement
and a technology product development agreement with Logitech. Pursuant to the
technology product development agreement, the Company provided Logitech
consulting services with respect to the development of a touch-enabled mouse.
Under the development agreement, the Company also agreed that it would not
enable a third-party to ship a similar touch-enabled mouse product until October
23, 1999. Pursuant to the license agreement, the Company granted Logitech an
irrevocable, non-exclusive, worldwide license to technology incorporated by
Logitech into a touch-enabled mouse product. Pursuant to the license agreement,
Logitech is required to pay the Company a royalty of 5% of the revenue it
receives from the sale of touch-enabled mouse products. In March 2000, the
Company and Logitech amended this license agreement to cover a new technology
developed by the Company for a lower-cost, touch-enabled mouse to be targeted
for use with productivity and web applications. Under the amendment, the Company
and Logitech have agreed to promote the existing mouse technology together with
the new lower-cost mouse technology as a product family. The amendment also
requires Logitech to pay the Company a royalty of 5% of the revenue it receives
from products based upon this new tactile mouse technology.

The Company signed a co-marketing agreement with Logitech in November 1999
in which the Company agreed to assist Logitech with the launch and promotion of
its touch-enabled mice. Under the terms of the agreement, for a period of five
calendar quarters, beginning in the first calendar quarter of 2000, the Company
will reimburse Logitech for certain marketing related expenses not to exceed
$200,000 per quarter. Only third-party marketing services that are targeted at
promoting Logitech's touch-enabled mice are eligible for reimbursement. In
addition, all promotional activities will have to be approved by the Company in
advance. In order to remain eligible for reimbursement, Logitech will have to
include the Company's brand and slogan on all its marketing materials that
reference touch-enabled functionality or products, and commit to other
conditions regarding its touch-enabled mice.

MicroScribe Agreements.

On July 1, 1997, the Company formed MicroScribe LLC ("MicroScribe"), a
privately-held limited liability company with two types of outstanding
membership interests -- class 1 membership interests and class 2 membership
interests.

In July 1997, the Company entered into an exchange agreement, a patent
license agreement and an intellectual property license agreement with
MicroScribe. Pursuant to the exchange agreement and the patent license
agreement, the Company assigned its patents and associated intellectual property
relating to three-dimensional digitizing products and the Pin-Point arm, a
medical device used for image-guided biopsies whose design is based on the
Company's three-dimensional digitizing product, to MicroScribe in exchange for a
worldwide, royalty-free, exclusive, irrevocable license and all of the class 1
membership interests and class 2 membership interests in MicroScribe. The
Company retained the class 1 membership interest and distributed

11
15

the class 2 membership interests to the stockholders of the Company at the time
of the exchange agreement, including:

PERCENTAGE INTEREST
NAME OF BENEFICIAL HOLDER OWNED IN MICROSCRIBE
------------------------- --------------------

Louis Rosenberg, Ph.D. ................................... 25.9%
Bruce Schena.............................................. 8.6
Timothy Lacey............................................. 10.8

There are no membership interests in MicroScribe other than the class 1 and
class 2 membership interests. MicroScribe has not issued any additional
membership interests other than the initial issuance of the class 1 and class 2
membership interests to the Company. Accordingly, stockholders who have acquired
shares of the Company after the one-time distribution do not own any membership
interests in MicroScribe. The following table presents information regarding the
percentage interest in MicroScribe of each director, officer and 5% stockholder
who has an interest in MicroScribe and each member of the immediate family of
such director, officer and 5% stockholder.

PERCENTAGE INTEREST
NAME OF BENEFICIAL HOLDER OWNED IN MICROSCRIBE
------------------------- --------------------

5% STOCKHOLDERS
Timothy Lacey............................................. 10.78

DIRECTOR AND EXECUTIVE OFFICERS
Steven Blank.............................................. 1.0
Kenneth Martin............................................ 2.0
Louis Rosenberg, Ph.D. ................................... 25.94
Bruce Schena.............................................. 8.56
Craig Factor.............................................. 0.08

IMMEDIATE FAMILY OF 5% STOCKHOLDER, DIRECTOR AND OFFICER
Max and Helen Johnston.................................... 0.36
Patrick Lacey............................................. 0.37
Patrick and Nina Lacey.................................... 0.29
Arthur and Marilynn Rosenberg............................. 0.79
Arthur Rosenberg.......................................... 0.32
Marilynn Rosenberg........................................ 0.21

The total distribution paid to these persons pursuant to their percentage
interests owned in MicroScribe in 2000 was approximately $47,820.

MicroScribe's sole business is the licensing of its patents and associated
intellectual property to the Company. Distributable cash from its licensing
activities is distributed 99% to the class 2 members and 1% to the Company, as
the sole class 1 member. Pursuant to the terms of the license agreement,
MicroScribe granted the Company rights to use intellectual property of
MicroScribe for the development and distribution of three-dimensional digitizing
products. Under the intellectual property license agreement, the Company pays
MicroScribe a formula-based royalty that varies between 5% and 10% of the net
receipts the Company receives from selling products incorporating MicroScribe
technology. Based upon the formula-based royalty with MicroScribe, the Company
recorded an expense of $116,000 in 1998, $132,000 in 1999 and $117,000 in 2000.
The agreement, which has a term of ten years and is scheduled to expire in 2007,
also provides that beginning in 2002 the royalty rate will be set at 10% for the
remainder of the license term. Products for which the Company currently pays
MicroScribe a royalty include the Company's MicroScribe-3D digitizing product
and the Pin-Point arm, a medical device used for image-guided biopsies whose
design is based upon the MicroScribe-3D. The agreement also requires MicroScribe
to indemnify the Company against claims that the technology it has delivered to
us infringes a third party's intellectual property rights.

12
16

Cybernet Agreements.

In March 1999, the Company acquired patents and in-process technology from
Cybernet Systems Corporation in exchange for 1,291,200 shares of the Company's
common stock. In addition, the Company entered into a consulting services
agreement with Cybernet, under which the Company issued Cybernet a warrant to
purchase 322,800 shares of Common Stock at an exercise price of $3.66 and agreed
to pay Cybernet $300,000. The Company paid $150,000 of this amount in March 1999
and $75,000 of this amount in January 2000. The Company paid the remaining
$75,000 to Cybernet in January 2001. In connection with this acquisition and
consulting arrangement, the Company agreed to provide Cybernet with registration
rights with respect to their common stock and the common stock issuable upon
exercise of this warrant. As a result of these transactions, Cybernet is a
holder of more than 5% of the Company's capital stock.

There Agreements.

In October 1999, the Company entered into a marketing agreement with There.
In addition, in April 2000, the Company purchased 540,540 shares of Series D
Preferred Stock of There for approximately $1.0 million. Mr. Blank, a member of
the Board, serves as a director and is a minority shareholder of There. Pursuant
to the marketing agreement, There has agreed to promote the Company's
touch-enabling technologies and its licensees' touch-enabled products. The
Company also has agreed to promote There's services through a number of means,
including providing There up to $300,000 for its advertising and marketing
programs. In February 2001, the Company and There amended the marketing
agreement. The amendment reduced by $100,000 the amount that the Company will
make available to There for its advertising and marketing programs, and further
specified how the Company's touch-enabling technologies will be incorporated
into There's products.

Indemnification.

In addition to indemnification provisions in the Company's bylaws, the
Company has entered into agreements to indemnify its directors and executive
officers. These agreements provide for indemnification of the Company's
directors and executive officers for some types of expenses, including
attorney's fees, judgments, fines and settlement amounts incurred by persons in
any action or proceeding, including any action by or in the right of the
Company, arising out of their services as the Company's director or executive
officer. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers.

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STOCK PERFORMANCE GRAPH

The graph set forth below compares the cumulative total stockholder return
on the Company's Common Stock between November 12, 1999 (the date the Company's
Common Stock commenced public trading) and December 31, 2000, with the
cumulative total return of (i) the Nasdaq Stock Market Total Return Index (U.S.
Companies) (the "Nasdaq Stock Market-U.S. Index") and (ii) the JP Morgan H&Q
Technology Index, over the same period. This graph assumes the investment of
$100.00 on November 12, 1999, in the Company's Common Stock, The Nasdaq Stock
Market-U.S. Index and the JP Morgan H&Q Technology Index, and assumes the
reinvestment of dividends, if any.

The comparisons shown in the graph below are based upon historical data and
the Company cautions that the stock price performance shown in the graph below
is not indicative of, nor intended to forecast, the potential future performance
of the Company's Common Stock. Information used in the graph was obtained from a
source believed to be reliable, but the Company is not responsible for any
errors or omissions in such information.

COMPARISON OF 13 MONTH CUMULATIVE TOTAL RETURN*
AMONG IMMERSION CORPORATION,
THE NASDAQ STOCK MARKET-U.S. INDEX
AND THE JP MORGAN H&Q TECHNOLOGY INDEX

[PERFORMANCE GRAPH]

------------------------------------------------------------------------------------
Cumulative Total Return 11/12/99 12/99 3/00 6/00 9/00 12/00
------------------------------------------------------------------------------------

IMMERSION CORPORATION 100.00 206.04 322.15 161.07 83.22 40.35
NASDAQ STOCK MARKET-
U.S. INDEX 100.00 126.13 141.58 123.09 113.28 75.91
JP MORGAN H&Q
TECHNOLOGY INDEX 100.00 129.28 145.84 130.99 128.61 83.58
------------------------------------------------------------------------------------

---------------
* $100 invested on 11/12/99 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.

The Company effected its initial public offering on November 12, 1999 at a
per share price of $12.00. The graph above, however, commences with the closing
price of $18.625 per share on November 12, 1999, the date the Company's Common
Stock commenced public trading.

14
18

Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate this Proxy
Statement or future filings made by the Company under those statutes, the Audit
Committee Report, the Compensation Committee Report and Stock Performance Graph
are not deemed filed with the Securities and Exchange Commission and shall not
be deemed incorporated by reference into any of those prior filings or into any
future filings made by the Company under those statutes.

PROPOSAL NO. 2

RATIFICATION OF INDEPENDENT ACCOUNTANTS

The Company is asking the stockholders to ratify the appointment of
Deloitte & Touche LLP as the Company's independent accountants for the fiscal
year ending December 31, 2001. In the event the stockholders fail to ratify the
appointment, the Board of Directors will reconsider its selection. Even if the
appointment is ratified, the Board of Directors, in its discretion, may direct
the appointment of a different independent accounting firm at any time during
the year if the Board of Directors feels that such a change would be in the
Company's and its stockholders' best interests. Deloitte & Touche LLP has
audited the Company's financial statements since 1997. Representatives of
Deloitte & Touche LLP are expected to be present at the Annual Meeting, will
have the opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions.

The Audit Committee considered whether the non-audit services rendered by
Deloitte & Touche LLP were compatible with maintaining Deloitte & Touche LLP's
independence as auditor of the Company's financial statements.

THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" PROPOSAL 2.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The members of the Board of Directors, the executive officers of the
Company and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, which require them to file reports
with respect to their ownership of the Company's Common Stock and their
transactions in such Common Stock. Based upon (i) the copies of Section 16(a)
reports that the Company received from such persons for their fiscal year 2000
transactions in the Common Stock and their Common Stock holdings and (ii) the
written representations received from one or more of such persons that no annual
Form 5 reports were required to be filed by them for fiscal year 2000, the
Company believes that all reporting requirements under Section 16(a) for such
fiscal year were met in a timely manner by its executive officers, Board members
and greater than 10% stockholders, except that Mr. O'Malley inadvertently failed
to timely file a Form 4 covering one transaction relating to a purchase of
Immersion common stock. The report was promptly filed upon discovery of the
oversight.

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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of March 20, 2001 certain information
with respect to shares beneficially owned by (i) each person who is known by the
Company to be the beneficial owner of more than 5% of the Company's outstanding
shares of Common Stock, (ii) each of the Company's directors, and the executive
officers named in the Summary Compensation Table and (iii) all current directors
and executive officers as a group. Beneficial ownership has been determined in
accordance with Rule 13d-3 under the Exchange Act. Under this rule, certain
shares may be deemed to be beneficially owned by more than one person (if, for
example, persons share the power to vote or the power to dispose of the shares).
In addition, shares are deemed to be beneficially owned by a person if the
person has the right to acquire shares (for example, upon exercise of an option
or warrant) within 60 days of the date as of which the information is provided;
in computing the percentage ownership of any person, the amount of shares is
deemed to include the amount of shares beneficially owned by such person (and
only such person) by reason of such acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in the following table
does not necessarily reflect the person's actual voting power at any particular
date.

AMOUNT AND
NATURE OF OPTIONS
BENEFICIAL INCLUDED IN
OWNERSHIP BENEFICIAL PERCENT OF
BENEFICIAL OWNER (1)(2) OWNERSHIP CLASS(3)
---------------- ---------- ----------- ----------

Jundt Associates, Inc.,................................... 1,485,200 -- 8.0
1550 Utica Avenue South, Suite 950
Minneapolis, Minnesota 55416
Mazama Capital Management Inc............................. 1,423,750 -- 7.7
One SW Columbia, Suite 1860
Portland, Oregon 97258
Cybernet Systems Corporation.............................. 1,216,110 311,502 6.5
727 Airport Boulevard
Ann Arbor, Michigan 48108-1639
Logitech International S.A................................ 1,172,329 -- 6.4
6505 Kaiser Drive
Fremont, CA 94555-3615
Timothy Lacey............................................. 980,251 189,552 5.3
EXECUTIVE OFFICERS AND DIRECTORS
Robert G. O'Malley........................................ 5,000 -- *
Kenneth Martin............................................ 223,145 109,506 1.2
J. Stuart Mitchell........................................ 159,959 156,038 *
Bhartendu Parekh.......................................... -- -- *
Louis Rosenberg(4)........................................ 2,352,780 1,066,440 12.0
Bruce Schena(5)........................................... 732,875 408,188 3.9
Victor Viegas............................................. 250,289 247,143 1.4
Craig Factor.............................................. 110,096 72,997 *
Steven Blank.............................................. 154,513 63,779 *
Charles Boesenberg........................................ 2,550 -- *
Jonathan Rubinstein....................................... 60,878 48,808 *
All executive officers and directors as a group (11
persons)................................................ 4,052,085 2,172,899 19.6

---------------
* Less than 1% of the outstanding shares of Common Stock.

(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock. To
the Company's knowledge, the entities named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them. Except as otherwise indicated, the address of
each of the persons in this table is as follows: c/o Immersion Corporation,
801 Fox Lane, San Jose, California 95131.

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20

(2) The number of shares of Common Stock deemed outstanding includes shares
issuable pursuant to stock options that may be exercised within 60 days
after March 20, 2001 held by the person whose percentage of outstanding
stock is calculated.

(3) Based on 18,542,335 shares of Common Stock deemed outstanding as of March
20, 2001.

(4) Includes 4,400 shares held of record by Mr. Rosenberg's wife and trust for
minor child.

(5) Includes 4,734 shares held of record by Mr. Schena's mother as custodian for
minor child.

STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING

Stockholders who intend to have a proposal considered for inclusion in the
Company's proxy materials for presentation at the 2002 Annual Meeting of
Stockholders or who intend to present a proposal without inclusion of such
proposal in the Company's proxy materials must submit the proposal to the
Company no later than December 28, 2001. The Company reserves the right to
reject, rule out of order, or take other appropriate action with respect to any
proposal that does not comply with these and other applicable requirements.

It is important that your stock be represented at the meeting, regardless
of the number of shares that you hold. You are, therefore, urged to execute and
return, at your earliest convenience, the accompanying Proxy Card in the
envelope which has been enclosed.

OTHER MATTERS

The Board knows of no other matters to be presented for stockholder action
at the Annual Meeting. However, if other matters do properly come before the
Annual Meeting or any adjournments or postponements thereof, the Board intends
that the persons named in the proxies will vote upon such matters in accordance
with their best judgment.

BY ORDER OF THE BOARD OF DIRECTORS,

/s/ CRAIG FACTOR
Craig Factor
Secretary

San Jose, California
April 25, 2001

THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.

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APPENDIX A

AUDIT COMMITTEE CHARTER

ADOPTED BY THE BOARD OF DIRECTORS OF

IMMERSION CORPORATION

COMPOSITION:

The audit committee shall be composed of three or more directors, as
determined by the board of directors, each of whom shall meet the independence
and financial literacy requirements of NASDAQ, and at least one of whom shall
have past employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.

Unless a chair is designated by the board of directors, the committee
members may appoint their own chair by majority vote.

RESPONSIBILITIES:

1. Recommend to the board of directors the selection of the independent
auditor, evaluate the performance of the independent auditor and, if so
determined by the audit committee, recommend to the board of directors
replacement of the independent auditor; it being acknowledged that the
independent auditor is ultimately accountable to the board of directors and the
audit committee, as representatives of the stockholders.

2. Ensure the receipt of, and evaluate, the written disclosures and the
letter that the independent auditor submits to the audit committee regarding the
auditor's independence in accordance with Independence Standards Board Standard
No. 1, discuss such reports with the auditor and, if so determined by the audit
committee in response to such reports, recommend that the board of directors
take appropriate action to address issues raised by such evaluation.

3. Discuss with the independent auditor the matters required to be
discussed by SAS 61, as it may be modified or supplemented.

4. Instruct management and the independent auditor that the committee
expects to be informed if there are any subjects that require special attention
or if they perceive any significant weaknesses in the company's information and
reporting systems.

5. Meet with management and the independent auditor to discuss the annual
financial statements and the report of the independent auditor thereon, and to
discuss significant issues encountered in the course of the audit work,
including restrictions on the scope of activities, access to required
information and the adequacy of internal financial controls.

6. Review the management letter delivered by the independent auditor in
connection with the audit.

7. Meet quarterly with management and the independent auditor to discuss
the quarterly financial statements prior to the filing of the Form 10Q; provided
that this responsibility may be delegated to the chairman of the audit
committee.

8. Meet at least once each year in separate executive sessions with
management and the independent auditor to discuss matters that any of them or
the committee believes could significantly affect the financial statements and
should be discussed privately.

9. Have such meetings with management and the independent auditor as the
committee deems appropriate to discuss significant financial risk exposures
facing the company and management's plans for monitoring and controlling such
exposures.

A-1
22

10. Review significant changes to the company's accounting principles and
practices proposed by the independent auditor or management.

11. Conduct or authorize such inquiries into matters within the committee's
scope of responsibility as the committee deems appropriate. The committee shall
be empowered to retain independent counsel and other professionals to assist in
the conduct of any such inquiries.

12. Provide minutes of audit committee meetings to the board of directors,
and report to the board of directors on any significant matters arising from the
committee's work.

13. At least annually, review and reassess this charter and, if
appropriate, recommend proposed changes to the board of directors.

14. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the company's annual proxy statement.

15. In the performance of its responsibilities, the Audit Committee is the
representative of the shareholders. However, it is not the responsibility of the
Audit Committee to plan or conduct audits, or to determine whether the company's
financial statements are complete and accurate or in accordance with generally
accepted accounting principles.

A-2
23

1929-PS-01
24
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
IMMERSION CORPORATION
IN CONJUNCTION WITH THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 5, 2001

The undersigned stockholder of IMMERSION CORPORATION, a Delaware corporation
(the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April, 25 2001, and hereby appoints
Robert O'Malley and Victor Viegas, or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the Annual Meeting of
Stockholders of IMMERSION CORPORATION to be held on Tuesday, June 5, 2001, at
10:00 a.m., local time, at the Silicon Valley Convention Center, 2161 North
First Street, San Jose, California 95131, and for any adjournment or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth below. Under Delaware law and the Company's By-laws, no
business shall be transacted at an annual meeting other than the matters stated
in the accompanying Notice of Meeting, which matters are set forth below.
However, should any other matter or matters properly come before the Annual
Meeting, or any adjournment or adjournments thereof, it is the intention of the
proxy holders named above to vote the shares they represent upon such other
matter or matters in their discretion.

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR APPROVAL OF THE PROPOSAL TO ELECT ONE DIRECTOR AND
FOR PROPOSAL 2 AND IN THE DISCRETION OF THE PROXIES UPON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE MEETING.

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY.

--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
--------------------------------------------------------------------------------

1. Proposal to elect as director Jonathan Rubinstein to serve for a three-year
term as a Class II director.

For Withhold

[ ] [ ]

2. Proposal to ratify the appointment of Deloitte & Touche LLP as the
Company's independent public accountants for the year ending December 31,
2001.

For Against Abstain

[ ] [ ] [ ]

(This Proxy should be marked, dated and signed by the stockholder(s)
exactly as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If shares
are held by joint tenants or as community property, all such stockholders should
sign.)

Signature(s):

---------------------------------------------

Dated: , 2001
---------------------------------
(Be sure to date Proxy.)

Please mark, sign, date and return the proxy card promptly, using the
enclosed return-addressed and postage-paid envelope.