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                                                                     EXHIBIT 4.1
                                     LAYER 5

                            1999 STOCK INCENTIVE PLAN

        1. Purposes of the Plan. The purposes of this Stock Incentive Plan are
to attract and retain the best available personnel, to provide additional
incentive to Employees, Directors and Consultants and to promote the success of
the Company's business.

        2. Definitions.  As used herein, the following definitions shall apply:
"Administrator" means the Board or any of the Committees appointed to administer
the Plan.

"Applicable Laws" means the legal requirements relating to the administration of
stock incentive plans, if any, under applicable provisions of federal and state
securities laws, the corporate laws of California and, to the extent other than
California, the corporate law of the state of the Company's incorporation, the
Code, the rules of any applicable stock exchange or national market system, and
the rules of any foreign jurisdiction applicable to Awards granted to residents
therein.

"Award" means the grant of an Option, Restricted Stock, or other right or
benefit under the Plan.

"Award Agreement" means the written agreement evidencing the grant of an Award
executed by the Company and the Grantee, including any amendments thereto.

"Board" means the Board of Directors of the Company.

"Code" means the Internal Revenue Code of 1986, as amended.

"Committee" means any committee appointed by the Board to administer the Plan.

"Common Stock" means the common stock of the Company.

"Company" means Layer 5, a California corporation.

"Consultant" means any person (other than an Employee or a Director, solely with
respect to rendering services in such person's capacity as a Director) who is
engaged by the Company or any Related Entity to render consulting or advisory
services to the Company or such Related Entity.

"Continuous Service" means that the provision of services to the Company or a
Related Entity in any capacity of Employee, Director or Consultant, is not
interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
among the Company, any Related Entity, or any successor, in any capacity of
Employee, Director or Consultant, or (iii) any change in status as long as the
individual remains in the service of the Company or a Related Entity in any
capacity of Employee, Director or Consultant (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include sick leave,
military leave, or any other authorized personal leave. For purposes of
Incentive Stock

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Options, no such leave may exceed ninety (90) days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract.

"Corporate Transaction" means any of the following transactions to which the
Company is a party:

a merger or consolidation in which the Company is not the surviving entity,
except for a transaction the principal purpose of which is to change the state
in which the Company is incorporated;

the sale, transfer or other disposition of all or substantially all of the
assets of the Company (including the capital stock of the Company's subsidiary
corporations) in connection with the complete liquidation or dissolution of the
Company;

any reverse merger in which the Company is the surviving entity but in which
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities are transferred to a person or
persons different from those who held such securities immediately prior to such
merger; or

acquisition by any person or related group of persons (other than the Company or
by a Company-sponsored employee benefit plan) of beneficial ownership (within
the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Company's
outstanding securities, but excluding any such transaction that the
Administrator determines shall not be a Corporate Transaction.

"Director" means a member of the Board or the board of directors of any Related
Entity.

"Disability" means that a Grantee would qualify for benefit payments under the
long-term disability policy of the Company or the Related Entity to which the
Grantee provides services regardless of whether the Grantee is covered by such
policy or, if such policy does not exist, is permanently unable to carry out the
responsibilities and functions of the position held by the Grantee by reason of
any medically determinable physical or mental impairment. A Grantee will not be
considered to have incurred a Disability unless he or she furnishes proof of
such impairment sufficient to satisfy the Administrator in its discretion.

 "Employee" means any person, including an Officer or Director, who is an
employee of the Company or any Related Entity. The payment of a director's fee
by the Company or a Related Entity shall not be sufficient to constitute
"employment" by the Company.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Fair Market Value" means, as of any date, the value of Common Stock determined
as follows:

Where there exists a public market for the Common Stock, the Fair Market Value
shall be (A) the closing price for a Share for the last market trading day prior
to the time of the determination (or, if no closing price was reported on that
date, on the last trading date on which a closing price was reported) on the
stock exchange determined by the Administrator to be the primary market for the
Common Stock or the Nasdaq National Market, whichever is applicable or (B) if
the Common Stock is not traded on any such exchange or national market system,
the average of the closing bid and

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asked prices of a Share on the Nasdaq Small Cap Market for the day prior to the
time of the determination (or, if no such prices were reported on that date, on
the last date on which such prices were reported), in each case, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable; or

In the absence of an established market for the Common Stock of the type
described in (i), above, the Fair Market Value thereof shall be determined by
the Administrator in good faith and in a manner consistent with Section
260.140.50 of Title 10 of the California Code of Regulations.

 "Grantee" means an Employee, Director or Consultant who receives an Award under
the Plan.

"Incentive Stock Option" means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code.

"Non-Qualified Stock Option" means an Option not intended to qualify as an
Incentive Stock Option.

"Officer" means a person who is an officer of the Company or a Related Entity
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

"Option" means an option to purchase Shares pursuant to an Award Agreement
granted under the Plan.

"Parent" means a "parent corporation," whether now or hereafter existing, as
defined in Section 424(e) of the Code.

 "Plan" means this 1999 Stock Incentive Plan.

"Post-Termination Exercise Period" means the period specified in the Award
Agreement of not less than three (3) months commencing on the date of
termination of the Grantee's Continuous Service, or such longer period as may be
applicable upon death or Disability.

"Registration Date" means the first to occur of (i) the closing of the first
sale to the general public of (A) the Common Stock or (B) the same class of
securities of a successor corporation (or its Parent) issued pursuant to a
Corporate Transaction in exchange for or in substitution of the Common Stock,
pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission under the Securities Act of 1933, as amended;
and (ii) in the event of a Corporate Transaction, the date of the consummation
of the Corporate Transaction if the same class of securities of the successor
corporation (or its Parent) issuable in such Corporate Transaction shall have
been sold to the general public pursuant to a registration statement filed with
and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, on or prior to the date of consummation of
such Corporate Transaction.

"Related Entity" means any Parent, Subsidiary and any business, corporation,
partnership, limited liability company or other entity in which the Company, a
Parent or a Subsidiary holds a substantial ownership interest, directly or
indirectly.

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"Restricted Stock" means Shares issued under the Plan to the Grantee for such
consideration, if any, and subject to such restrictions on transfer, rights of
first refusal, repurchase provisions, forfeiture provisions, and other terms and
conditions as established by the Administrator.

"Share" means a share of the Common Stock.

"Subsidiary" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.

        3. Stock Subject to the Plan.

Subject to the provisions of Section 11(a) below, the maximum aggregate number
of Shares which may be issued pursuant to all Awards (including Incentive Stock
Options) is Nine Hundred Thousand (900,000) Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.

Any Shares covered by an Award (or portion of an Award) which is forfeited or
canceled, expires or is settled in cash, shall be deemed not to have been issued
for purposes of determining the maximum aggregate number of Shares which may be
issued under the Plan. If any unissued Shares are retained by the Company upon
exercise of an Award in order to satisfy the exercise price for such Award or
any withholding taxes due with respect to such Award, such retained Shares
subject to such Award shall become available for future issuance under the Plan
(unless the Plan has terminated). Shares that actually have been issued under
the Plan pursuant to an Award shall not be returned to the Plan and shall not
become available for future issuance under the Plan, except that if unvested
Shares are forfeited, or repurchased by the Company at their original purchase
price, such Shares shall become available for future grant under the Plan.

        4. Administration of the Plan.

Plan Administrator. With respect to grants of Awards to Employees, Directors, or
Consultants, the Plan shall be administered by (A) the Board or (B) a Committee
(or a subcommittee of the Committee) designated by the Board, which Committee
shall be constituted in such a manner as to satisfy Applicable Laws. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board.

Multiple Administrative Bodies. The Plan may be administered by different bodies
with respect to Directors, Officers, Consultants, and Employees who are neither
Directors nor Officers.

Powers of the Administrator. Subject to Applicable Laws and the provisions of
the Plan (including any other powers given to the Administrator hereunder), and
except as otherwise provided by the Board, the Administrator shall have the
authority, in its discretion:

to select the Employees, Directors and Consultants to whom Awards may be granted
from time to time hereunder;

to determine whether and to what extent Awards are granted hereunder;

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to determine the number of Shares or the amount of other consideration to be
covered by each Award granted hereunder;

to approve forms of Award Agreements for use under the Plan;

to determine the terms and conditions of any Award granted hereunder;

to establish additional terms, conditions, rules or procedures to accommodate
the rules or laws of applicable foreign jurisdictions and to afford Grantees
favorable treatment under such rules or laws; provided, however, that no Award
shall be granted under any such additional terms, conditions, rules or
procedures with terms or conditions which are inconsistent with the provisions
of the Plan;

to amend the terms of any outstanding Award granted under the Plan, provided
that any amendment that would adversely affect the Grantee's rights under an
outstanding Award shall not be made without the Grantee's written consent;

to construe and interpret the terms of the Plan and Awards, including without
limitation, any notice of award or Award Agreement, granted pursuant to the
Plan; and

to take such other action, not inconsistent with the terms of the Plan, as the
Administrator deems appropriate.

        5. Eligibility. Awards other than Incentive Stock Options may be granted
to Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.

        6. Terms and Conditions of Awards.

Type of Awards. The Administrator is authorized under the Plan to award any type
of arrangement to an Employee, Director or Consultant that is not inconsistent
with the provisions of the Plan and that by its terms involves or might involve
the issuance of (i) Shares, (ii) an Option or similar right with a fixed or
variable price related to the Fair Market Value of the Shares and with an
exercise or conversion privilege related to the passage of time, the occurrence
of one or more events, or the satisfaction of performance criteria or other
conditions, or (iii) any other security with the value derived from the value of
the Shares. Such awards include, without limitation, Options or sales or bonuses
of Restricted Stock, and an Award may consist of one such security or benefit,
or two (2) or more of them in any combination or alternative.

Designation of Award. Each Award shall be designated in the Award Agreement. In
the case of an Option, the Option shall be designated as either an Incentive
Stock Option or a Non-Qualified Stock Option. However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of Shares
subject to Options designated as Incentive Stock Options which become
exercisable for the first time by a Grantee during any calendar year (under all
plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options, to the extent of the Shares covered

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thereby in excess of the foregoing limitation, shall be treated as Non-Qualified
Stock Options. For this purpose, Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the grant date of the relevant Option.

Conditions of Award. Subject to the terms of the Plan, the Administrator shall
determine the provisions, terms, and conditions of each Award including, but not
limited to, the Award vesting schedule, repurchase provisions, rights of first
refusal, forfeiture provisions, form of payment (cash, Shares, or other
consideration) upon settlement of the Award, payment contingencies, and
satisfaction of any performance criteria. The performance criteria established
by the Administrator may be based on any one of, or combination of, increase in
share price, earnings per share, total shareholder return, return on equity,
return on assets, return on investment, net operating income, cash flow,
revenue, economic value added, personal management objectives, or other measure
of performance selected by the Administrator. Partial achievement of the
specified criteria may result in a payment or vesting corresponding to the
degree of achievement as specified in the Award Agreement.

Acquisitions and Other Transactions. The Administrator may issue Awards under
the Plan in settlement, assumption or substitution for, outstanding awards or
obligations to grant future awards in connection with the Company or a Related
Entity acquiring another entity, an interest in another entity or an additional
interest in a Related Entity whether by merger, stock purchase, asset purchase
or other form of transaction.

Award Exchange Programs. The Administrator may establish one or more programs
under the Plan to permit selected Grantees to exchange an Award under the Plan
for one or more other types of Awards under the Plan on such terms and
conditions as determined by the Administrator from time to time.

Separate Programs. The Administrator may establish one or more separate programs
under the Plan for the purpose of issuing particular forms of Awards to one or
more classes of Grantees on such terms and conditions as determined by the
Administrator from time to time.

Early Exercise. The Award Agreement may, but need not, include a provision
whereby the Grantee may elect at any time while an Employee, Director or
Consultant to exercise any part or all of the Award prior to full vesting of the
Award. Any unvested Shares received pursuant to such exercise may be subject to
a repurchase right in favor of the Company or a Related Entity or to any other
restriction the Administrator determines to be appropriate.

Term of Award. The term of each Award shall be the term stated in the Award
Agreement, provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. However, in the case of an Incentive Stock
Option granted to a Grantee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option shall be five (5) years from the date of grant thereof or such
shorter term as may be provided in the Award Agreement.

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Transferability of Awards. Non-Qualified Stock Options shall be transferable (i)
to the extent provided in the Award Agreement and in a manner consistent with
Section 260.140.41 of Title 10 of the California Code of Regulations and (ii) by
will, and by the laws of descent and distribution. Incentive Stock Options and
other Awards may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Grantee, only by
the Grantee.

Time of Granting Awards. The date of grant of an Award shall for all purposes be
the date on which the Administrator makes the determination to grant such Award,
or such other date as is determined by the Administrator. Notice of the grant
determination shall be given to each Employee, Director or Consultant to whom an
Award is so granted within a reasonable time after the date of such grant.

        7. Award Exercise or Purchase Price, Consideration, Taxes and Reload
Options.

Exercise or Purchase Price. The exercise or purchase price, if any, for an Award
shall be as follows:

In the case of an Incentive Stock Option:

granted to an Employee who, at the time of the grant of such Incentive Stock
Option owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be not less than one hundred ten percent (110%) of
the Fair Market Value per Share on the date of grant; or

granted to any Employee other than an Employee described in the preceding
paragraph, the per Share exercise price shall be not less than one hundred
percent (100%) of the Fair Market Value per Share on the date of grant.

In the case of a Non-Qualified Stock Option:

granted to a person who, at the time of the grant of such Option, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise price
shall be not less than one hundred ten percent (110%) of the Fair Market Value
per Share on the date of grant; or

granted to any person other than a person described in the preceding paragraph,
the per Share exercise price shall be not less than eighty-five percent (85%) of
the Fair Market Value per Share on the date of grant.

In the case of the sale of Shares:

granted to a person who, at the time of the grant of such Award, or at the time
the purchase is consummated, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share purchase price shall be not less than one hundred
percent (100%) of the Fair Market Value per Share on the date of grant; or

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granted to any person other than a person described in the preceding paragraph,
the per Share purchase price shall be not less than eighty-five percent (85%) of
the Fair Market Value per Share on the date of grant.

In the case of other Awards, such price as is determined by the Administrator.

Notwithstanding the foregoing provisions of this Section 7(a), in the case of an
Award issued pursuant to Section 6(d), above, the exercise or purchase price for
the Award shall be determined in accordance with the principles of Section
424(a) of the Code.

Consideration. Subject to Applicable Laws, the consideration to be paid for the
Shares to be issued upon exercise or purchase of an Award including the method
of payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant). In addition
to any other types of consideration the Administrator may determine, the
Administrator is authorized to accept as consideration for Shares issued under
the Plan the following:

cash;

check;

delivery of Grantee's promissory note with such recourse, interest, security,
and redemption provisions as the Administrator determines as appropriate ;

if the exercise or purchase occurs on or after the Registration Date, surrender
of Shares or delivery of a properly executed form of attestation of ownership of
Shares as the Administrator may require (including withholding of Shares
otherwise deliverable upon exercise of the Award) which have a Fair Market Value
on the date of surrender or attestation equal to the aggregate exercise price of
the Shares as to which said Award shall be exercised (but only to the extent
that such exercise of the Award would not result in an accounting compensation
charge with respect to the Shares used to pay the exercise price unless
otherwise determined by the Administrator);

with respect to Options, if the exercise occurs on or after the Registration
Date, payment through a broker-dealer sale and remittance procedure pursuant to
which the Grantee (A) shall provide written instructions to a Company designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased Shares and (B) shall provide written directives to the Company
to deliver the certificates for the purchased Shares directly to such brokerage
firm in order to complete the sale transaction; or

any combination of the foregoing methods of payment.

Taxes. No Shares shall be delivered under the Plan to any Grantee or other
person until such Grantee or other person has made arrangements acceptable to
the Administrator for the satisfaction of any foreign, federal, state, or local
income and employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of Shares or the disqualifying
disposition of Shares received on exercise of an Incentive Stock Option. Upon
exercise of an Award

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the Company shall withhold or collect from Grantee an amount sufficient to
satisfy such tax obligations.

Reload Options. In the event the exercise price or tax withholding of an Option
is satisfied by the Company or the Grantee's employer withholding Shares
otherwise deliverable to the Grantee, the Administrator may issue the Grantee an
additional Option, with terms identical to the Award Agreement under which the
Option was exercised, but at an exercise price as determined by the
Administrator in accordance with the Plan.

        8. Exercise of Award.

Procedure for Exercise; Rights as a Shareholder.

Any Award granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator under the terms of the Plan and
specified in the Award Agreement but in the case of an Option, in no case at a
rate of less than twenty percent (20%) per year over five (5) years from the
date the Option is granted, subject to reasonable conditions such as continued
employment. Notwithstanding the foregoing, in the case of an Option granted to
an Officer, Director or Consultant, the Award Agreement may provide that the
Option may become exercisable, subject to reasonable conditions such as such
Officer's, Director's or Consultant's Continuous Service, at any time or during
any period established in the Award Agreement.

An Award shall be deemed to be exercised when written notice of such exercise
has been given to the Company in accordance with the terms of the Award by the
person entitled to exercise the Award and full payment for the Shares with
respect to which the Award is exercised, including, to the extent selected, use
of the broker-dealer sale and remittance procedure to pay the purchase price as
provided in Section 7(b)(v). Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to Shares subject to an Award, notwithstanding the exercise of an Option or
other Award. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in the Award Agreement or Section 11(a), below.

Exercise of Award Following Termination of Continuous Service. In the event of
termination of a Grantee's Continuous Service for any reason other than
Disability or death (but not in the event of a Grantee's change of status from
Employee to Consultant or from Consultant to Employee), such Grantee may, but
only during the Post-Termination Exercise Period (but in no event later than the
expiration date of the term of such Award as set forth in the Award Agreement),
exercise the Award to the extent that the Grantee was entitled to exercise it at
the date of such termination or to such other extent as may be determined by the
Administrator. In the event of a Grantee's change of status from Employee to
Consultant, an Employee's Incentive Stock Option shall convert automatically to
a Non-Qualified Stock Option on the day three (3) months and one day following
such change of status. To the extent that the Grantee is not entitled to
exercise the Award at the date of termination, or if the Grantee does not
exercise such Award to the extent so entitled within the Post-Termination
Exercise Period, the Award shall terminate.

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Disability of Grantee. In the event of termination of a Grantee's Continuous
Service as a result of his or her Disability, Grantee may, but only within
twelve (12) months from the date of such termination (and in no event later than
the expiration date of the term of such Award as set forth in the Award
Agreement), exercise the Award to the extent that the Grantee was otherwise
entitled to exercise it at the date of such termination; provided, however, that
if such Disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall automatically convert to a Non-Qualified Stock Option on the
day three (3) months and one day following such termination. To the extent that
the Grantee is not entitled to exercise the Award at the date of termination, or
if Grantee does not exercise such Award to the extent so entitled within the
time specified herein, the Award shall terminate.

Death of Grantee. In the event of a termination of the Grantee's Continuous
Service as a result of his or her death, or in the event of the death of the
Grantee during the Post-Termination Exercise Period or during the twelve (12)
month period following the Grantee's Termination of Continuous Service as a
result of his or her Disability, the Grantee's estate or a person who acquired
the right to exercise the Award by bequest or inheritance may exercise the
Award, but only to the extent that the Grantee was entitled to exercise the
Award as of the date of termination, within twelve (12) months from the date of
death (but in no event later than the expiration of the term of such Award as
set forth in the Award Agreement). To the extent that, at the time of death, the
Grantee was not entitled to exercise the Award, or if the Grantee's estate or a
person who acquired the right to exercise the Award by bequest or inheritance
does not exercise such Award to the extent so entitled within the time specified
herein, the Award shall terminate.

        9. Conditions Upon Issuance of Shares.

Shares shall not be issued pursuant to the exercise of an Award unless the
exercise of such Award and the issuance and delivery of such Shares pursuant
thereto shall comply with all Applicable Laws, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any Applicable Laws.

        10. Repurchase Rights. If the provisions of an Award Agreement grant to
the Company the right to repurchase Shares upon termination of the Grantee's
Continuous Service, the Award Agreement shall (or may, with respect to Awards
granted or issued to Officers, Directors or Consultants) provide that:

the right to repurchase must be exercised, if at all, within ninety (90) days of
the termination of the Grantee's Continuous Service (or in the case of Shares
issued upon exercise of Awards after the date of termination of the Grantee's
Continuous Service, within ninety (90) days after the date of the Award
exercise);

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the consideration payable for the Shares upon exercise of such repurchase right
shall be made in cash or by cancellation of purchase money indebtedness within
the ninety (90) day periods specified in Section 10(a);

the amount of such consideration shall (i) be equal to the original purchase
price paid by Grantee for each such Share; provided, that the right to
repurchase such Shares at the original purchase price shall lapse at the rate of
at least twenty percent (20%) of the Shares subject to the Award per year over
five (5) years from the date the Award is granted (without respect to the date
the Award was exercised or became exercisable), and (ii) with respect to Shares,
other than Shares subject to repurchase at the original purchase price pursuant
to clause (i) above, not less than the Fair Market Value of the Shares to be
repurchased on the date of termination of Grantee's Continuous Service; and

the right to repurchase Shares, other than the right to repurchase Shares at the
original purchase price pursuant to clause (i) of Section 10(c), shall terminate
on the Registration Date.

        11. Adjustments Upon Changes in Capitalization or Corporate Transaction.

Adjustments upon Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, as well as any other terms that the Administrator determines
require adjustment shall be proportionately adjusted for (i) any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Shares, or
similar transaction affecting the Shares, (ii) any other increase or decrease in
the number of issued Shares effected without receipt of consideration by the
Company, or (iii) as the Administrator may determine in its discretion, any
other transaction with respect to Common Stock to which Section 424(a) of the
Code applies or a similar transaction; provided, however that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator and its determination shall be final, binding and conclusive.
Except as the Administrator determines, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason hereof shall be made with respect to,
the number or price of Shares subject to an Award.

Corporate Transaction.

Termination of Award if Not Assumed. In the event of a Corporate Transaction,
each Award will terminate upon the consummation of the Corporate Transaction,
unless the Award is assumed by the successor corporation or Parent thereof in
connection with the Corporate Transaction.

Acceleration of Award Upon Corporate Transaction.

               Except as provided otherwise in an individual Award Agreement, in
the event of any Corporate Transaction there will not be any acceleration of
vesting or exercisability of any Award.

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        12. Effective Date and Term of Plan. The Plan shall become effective
upon the earlier to occur of its adoption by the Board or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 16, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.

        13. Amendment, Suspension or Termination of the Plan.

The Board may at any time amend, suspend or terminate the Plan. To the extent
necessary to comply with Applicable Laws, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.

No Award may be granted during any suspension of the Plan or after termination
of the Plan.

Any amendment, suspension or termination of the Plan (including termination of
the Plan under Section 12, above) shall not affect Awards already granted, and
such Awards shall remain in full force and effect as if the Plan had not been
amended, suspended or terminated, unless mutually agreed otherwise between the
Grantee and the Administrator, which agreement must be in writing and signed by
the Grantee and the Company.

        14. Reservation of Shares.

The Company, during the term of the Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

The inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.

        15. No Effect on Terms of Employment/Consulting Relationship. The Plan
shall not confer upon any Grantee any right with respect to the Grantee's
Continuous Service, nor shall it interfere in any way with his or her right or
the Company's right to terminate the Grantee's Continuous Service at any time,
with or without cause.

        16. No Effect on Retirement and Other Benefit Plans. Except as
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Awards shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The Plan
is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement
Income Security Act of 1974, as amended.

        17. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under Applicable Laws. Any Award exercised
before shareholder approval is obtained shall be rescinded if

                                                                              12
<PAGE>   13

shareholder approval is not obtained within the time prescribed, and Shares
issued on the exercise of any such Award shall not be counted in determining
whether shareholder approval is obtained.

        18.Information to Grantees. The Company shall provide to each Grantee,
during the period for which such Grantee has one or more Awards outstanding,
copies of financial statements at least annually.

                                                                              13<PAGE>   1

                                                                     EXHIBIT 4.1

            AMENDMENT NO. 2 TO THE COMMON STOCK INVESTMENT AGREEMENT

     This Amendment No. 2 (the "Amendment") to the Common Stock Investment
Agreement dated as of July 30, 1999 (the "Investment Agreement"), by and
between General Magic, Inc. (the "Company") and Cripple Creek Securities, LLC
(the "Investor"), as previously amended on August 4, 1999, is made as of March
10, 2000 by and between the Company and the Investor.

                                    RECITALS

     WHEREAS, Section 1(d) of the Investment Agreement gives the Investor the
right, under certain circumstances, to purchase additional Shares during a
Purchase Period, and the Company and the Investor desire to increase the ability
of the Investor to purchase Shares pursuant to such provision, it being
understood that the parties do not desire to increase the aggregate dollar
amount of shares of Common Stock issuable under the Investment Agreement; and

     WHEREAS, the parties desire to modify the provisions contained in Section
1(e) of the Investment Agreement;

     NOW, THEREFORE, in consideration of the foregoing:

     1.   Amendment to the Agreement. The parties hereby agree that the
Investment Agreement should be amended as follows:

          1.1  Amendment to Section 1(d). The number "30%" in said paragraph
shall be deleted and in place thereof the number "100%" shall be inserted. The
parties acknowledge and agree that nothing herein shall be deemed to amend the
aggregate dollar amount of shares of Common Stock issuable under the Investment
Agreement, which shall remain at $26,000,000 as provided in Section 1(a).

          1.2  Amendment to Section 1(e). Section 1(e) shall be deleted in its
entirety, and the following shall be substituted in lieu thereof:

     (e)  Limitations on Investor's Obligation and Right to Purchase Shares.

          (1)  Notwithstanding anything to the contrary in the Transaction
Documents, in no event shall the Investor be required or permitted to purchase,
and a Required Dollar Amount shall be deemed not to include, a number of Shares
which, when added to the number of shares of Common Stock otherwise
beneficially owned within the meaning of Section 13(d) of the 1934 Act as
amended (the "1934 Act") (other than by virtue of the ownership of convertible
preferred stock, warrants or other securities or rights to purchase that have
limitations on the Investor's (or aggregation party, as defined below) right to
convert, exercise or purchase similar to the limitation set forth herein) by
the Investor or by any "affiliate" (as defined in Rule 144 of the 1934 Act) of
the Investor that would be aggregated for purposes of determining whether a
group under such Section 13(d) exists as of the date with respect to which this
determination is being made ("aggregation party"), would exceed the Restricted
Ownership Percentage (as hereinafter defined) of the number of shares of Common
Stock outstanding on such date, as determined in accordance with such Section
13(d). The Restricted Ownership Percentage shall

<PAGE>   2
be 9.9%; provided, however, that the Investor shall have the right to adjust
said percentage from time to time, so long as it is never more than 9.9% nor
less than 4.99%.

          (2)  Each time (a "Covenant Time") the Investor makes a Triggering
Acquisition (as defined below) of shares of Common Stock pursuant to this
Agreement (the "Triggering Shares"), the Investor will be deemed to covenant
that it will not, during the balance of the day on which such Triggering
Acquisition occurs, and during the 61-day period beginning immediately after
that day, acquire additional shares of Common Stock pursuant to
rights-to-acquire existing at that Covenant Time, if the aggregate amount of
such additional shares so acquired (without reducing that amount by any
dispositions) would exceed (x) the Restricted Ownership Percentage of the number
of shares of Common Stock outstanding at that Covenant Time (including the
Triggering Shares) minus (y) the number of shares of Common Stock actually owned
by the Investor or an aggregation party at that Covenant Time (regardless of how
or when acquired, and including the Triggering Shares). "Triggering Acquisition"
means (i) the giving of a Purchase Notice (as defined below), (ii) a Closing, or
(iii) any other acquisition of Common Stock by the Investor or an aggregation
party; provided, however, that with respect to each event described in the
preceding clauses "i", if the associated issuance of shares of Common Stock does
not occur, such event shall cease to be a Triggering Acquisition and the related
covenant under this paragraph shall terminate. At each Covenant Time, the
Investor shall be deemed to waive any right it would otherwise have to acquire
shares of Common Stock to the extent that such acquisition would violate any
covenant given by the Investor under this paragraph. Notwithstanding anything to
the contrary in this Agreement, in the event of a conflict between any covenant
given under this paragraph and any obligation of the Investor to buy shares
pursuant to this Agreement, the former shall supersede the latter, and the
latter shall be reduced accordingly. The Investor shall endeavor in good faith
to avoid such a conflict. For the avoidance of doubt:

          (i)  The covenant to be given pursuant to this paragraph will be given
     at every Covenant Time and shall be calculated based on the circumstances
     then in effect. The making of a covenant at one Covenant Time shall not
     terminate or modify any prior covenants.

          (ii) The Investor may therefore from time to time be subject to
     multiple such covenants, each one having been made at a different Covenant
     Time, and some possibly being more restrictive than others. The Investor
     must comply with all such covenants then in effect.

          (3)  Each Put Notice shall include a representation of the Company as
to the number of shares of Common Stock outstanding on the related Put Notice
Date as determined in accordance with Section 13(d) of the 1934 Act. In the
event that the number of shares of Common Stock outstanding as determined in
accordance with Section 13(d) of the 1934 Act is different on any date during a
Purchase Period than on the Put Notice Date associated with such Purchase
Period, then the number of shares of Common Stock outstanding on such date
during such Purchase Period shall govern for purposes of determining whether
the Investor would have acquired more than [9.9%] of the number of shares of
Common Stock outstanding during such period.

<PAGE>   3
     2.   Miscellaneous.

          2.1  Capitalized Terms. All capitalized terms not otherwise defined
herein will have the meanings set forth in the Investment Agreement.

          2.2  Other Provisions. All provisions of the Investment Agreement, as
previously amended, shall remain in full force and effect.

          2.3  Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which together
shall constitute one instrument.

     IN WITNESS WHEREOF, the undersigned has caused this amendment to be duly
executed and delivered by its proper and duly authorized officers.

COMPANY:                                INVESTOR:

GENERAL MAGIC, INC.                     CRIPPLE CREEK SECURITIES, LLC

By: /s/ MARY E. DOYLE                   By: /s/ ROBERT CHENDER
    -----------------                       ------------------

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