Document:

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                                                                   EXHIBIT 10.39

                               GENERAL MAGIC, INC.
                       NONSTATUTORY STOCK OPTION AGREEMENT

        THIS NONSTATUTORY STOCK OPTION AGREEMENT (the "OPTION AGREEMENT") is
made and entered into as of the Date of Option Grant by and between General
Magic, Inc. and Mark Phillips (the "OPTIONEE").

        The Company hereby grants to the Optionee an option (the "OPTION") to
purchase 125,000 shares of Stock, as adjusted from time to time pursuant to
Section 8, upon the following terms and conditions:

        1. DEFINITIONS AND CONSTRUCTION.

                1.1 DEFINITIONS. Whenever used herein, the following terms shall
have the meanings set forth below:

                        (a) "DATE OF OPTION GRANT" means September 5, 2001.

                        (b) "EXERCISE PRICE" means $0.65 per share of Stock, as
adjusted from time to time pursuant to Section 8.

                        (c) "VESTING COMMENCEMENT DATE" means September 5, 2001.

                        (d) "OPTION EXPIRATION DATE" means the date ten years
after the Date of Option Grant.

                        (e) "BOARD" means the Board of Directors of the Company.
If one or more Committees have been appointed by the Board to administer the
Option Agreement, "Board" shall also mean such Committee(s).

                        (f) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.

                        (g) "COMMITTEE" means the Compensation Committee or
other committee of the Board duly appointed to administer the Option Agreement
and having such powers as shall be specified by the Board. Unless the powers of
the Committee have been specifically limited, the Committee shall have all of
the powers of the Board in administering the Option Agreement.

                        (h) "COMPANY" means General Magic, Inc., a Delaware
corporation, or any successor corporation thereto.

                        (i) "CONSULTANT" means a person engaged to provide
consulting or advisory services (other than as an Employee or a Director) to a
Participating Company, provided that the identity of such person, the nature of
such services or the entity to which such

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services are provided would not preclude the Company from offering or selling
securities to such person in reliance on registration on a Form S-8 Registration
Statement under the Securities Act.

                        (j) "DIRECTOR" means a member of the Board or of the
board of directors of any other Participating Company.

                        (k) "DISABILITY" means the permanent and total
disability of the Optionee within the meaning of Section 22(e)(3) of the Code.

                        (l) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for this purpose.

                        (m) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.

                        (n) "FAIR MARKET VALUE" means, as of any date, the value
of the Stock determined as follows:

                                (i) If the Common Stock is listed on any
established stock exchange or traded on the Nasdaq National Market or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Common Stock shall be the
average of the high and low sales price for such stock as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the day of determination, as reported in The
Wall Street Journal or such other source as the Board deems reliable. If the
relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall be determined
by the Board, in its discretion.

                                (ii) In the absence of such markets for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Board.

                        (o) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code,
while such corporation is a "parent corporation" of the Company.

                        (p) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.

                        (q) "PARTICIPATING COMPANY GROUP" means, at any point in
time, all corporations collectively which are then Participating Companies.

                        (r) "SECURITIES ACT" means the Securities Act of 1933,
as amended.

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                        (s) "SERVICE" means the Optionee's employment or service
with the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. Furthermore,
the Optionee's Service with the Participating Company Group shall not be deemed
to have terminated if the Optionee takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company. The Optionee's Service
shall be deemed to have terminated either upon an actual termination of Service
or upon the corporation for which the Optionee performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its sole
discretion, shall determine whether the Optionee's Service has terminated and
the effective date of such termination.

                        (t) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 8.

                        (u) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code, while such subsidiary is a "subsidiary corporation" of the Company.

                1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.

        2. TAX STATUS OF OPTION.

                This Option is intended to be a nonstatutory stock option and
shall not be treated as an incentive stock option within the meaning of Section
422(b) of the Code.

        3. ADMINISTRATION.

                All questions of interpretation concerning this Option Agreement
shall be determined by the Board. All determinations by the Board shall be final
and binding upon all persons having an interest in the Option.

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        4. VESTING AND EXERCISE OF THE OPTION.

                4.1 VESTING SCHEDULE. One-fourth (1/4th) of the Option shares
shall vest six (6) months after the Vesting Commencement Date, and 1/4th of the
Option shares shall vest each six months thereafter until fully vested; provided
in each case that Optionee is continuously employed by the Company from the Date
of the Option Grant through the vesting date.

                4.2 RIGHT TO EXERCISE. Except as otherwise provided herein, the
Option shall first become exercisable on and after six (6) months following the
Vesting Commencement Date. The Option shall continue to be exercisable
thereafter and until the termination of the Option (as provided in Section 6) in
an amount not to exceed the number of Option shares which have vested according
to the vesting schedule set forth in Section 4.1 above less the number of shares
previously acquired upon exercise of the Option. In no event shall the Option be
exercisable for more shares than the number of Option shares granted under this
Option Agreement.

                4.3 METHOD OF EXERCISE. Exercise of the Option shall be by
written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Optionee's
investment intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by the
Optionee and must be delivered in person, by certified or registered mail,
return receipt requested, by confirmed facsimile transmission, or by such other
means as the Company may permit, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in Section 6, accompanied by full
payment of the aggregate Exercise Price for the number of shares of Stock being
purchased. The Option shall be deemed to be exercised upon receipt by the
Company of such written notice and the aggregate Exercise Price.

                4.4 PAYMENT OF EXERCISE PRICE.

                        (a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the aggregate Exercise Price for the number
of shares of Stock for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company, or
attestation to the ownership, of whole shares of Stock owned by the Optionee
having a Fair Market Value (as determined by the Company without regard to any
restrictions on transferability applicable to such stock by reason of federal or
state securities laws or agreements with an underwriter for the Company) not
less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise,
as defined in Section 4.4(b)(ii), or (iv) by any combination of the foregoing.

                        (b) LIMITATIONS ON FORMS OF CONSIDERATION.

                                (i) TENDER OF STOCK. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option

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may not be exercised by tender to the Company, or attestation to the ownership,
of shares of Stock unless such shares either have been owned by the Optionee for
more than six (6) months or were not acquired, directly or indirectly, from the
Company.

                                (ii) CASHLESS EXERCISE. A "CASHLESS EXERCISE"
means the assignment in a form acceptable to the Company of the proceeds of a
sale or loan with respect to some or all of the shares of Stock acquired upon
the exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.

                4.5 TAX WITHHOLDING. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares of Stock acquired upon exercise of
the Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares of Stock acquired upon exercise of the Option. The Optionee is
cautioned that the Option is not exercisable unless the tax withholding
obligations of the Participating Company Group are satisfied. Accordingly, the
Optionee may not be able to exercise the Option when desired even though the
Option is vested, and the Company shall have no obligation to issue a
certificate for such shares of Stock.

                4.6 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate(s) for the shares
as to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.

                4.7 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED

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UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT
BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED.
The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares of Stock subject to the
Option 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. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.

                4.8 FRACTIONAL SHARES. The Company shall not be required to
issue fractional shares of Stock upon the exercise of the Option.

        5. NONTRANSFERABILITY OF THE OPTION.

                The Option may be exercised during the lifetime of the Optionee
only by the Optionee or the Optionee's guardian or legal representative and may
not be assigned or transferred in any manner except by will or by the laws of
descent and distribution. Following the death of the Optionee, the Option, to
the extent provided in Section 7, may be exercised by the Optionee's legal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.

        6. TERMINATION OF THE OPTION.

                The Option shall terminate and may no longer be exercised on the
first to occur of (a) the Option Expiration Date, (b) the last date for
exercising the Option following termination of the Optionee's Service as
described in Section 7, or (c) a Corporate Transaction to the extent provided in
Section 8.

        7. EFFECT OF TERMINATION OF SERVICE.

                7.1 OPTION EXERCISABILITY.

                        (a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.

                        (b) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee's legal
representative or other person who acquired the right to exercise the Option by
reason of the Optionee's death at any time prior to the expiration of eighteen
(18) months after

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the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within three (3) months
after the Optionee's termination of Service.

                        (c) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee within three (3) months after the date on which the
Optionee's Service terminated, but in any event no later than the Option
Expiration Date.

                7.2 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.7, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

                7.3 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares of Stock acquired upon the exercise of the Option
would subject the Optionee to suit under Section 16(b) of the Exchange Act, the
Option shall remain exercisable until the earliest to occur of (i) the tenth
(10th) day following the date on which a sale of such shares by the Optionee
would no longer be subject to such suit, (ii) the one hundred and ninetieth
(190th) day after the Optionee's termination of Service, or (iii) the Option
Expiration Date.

        8. ADJUSTMENTS UPON CHANGES IN STOCK.

                8.1 CAPITALIZATION ADJUSTMENTS. If any change is made in the
Stock subject to the Option, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), any outstanding Option shares hereunder will be
appropriately adjusted in the nature, class(es) and number of securities and
price per share of Stock subject to such outstanding Option. The Board shall
make such adjustments, and its determination shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction "without receipt of consideration" by the
Company.)

                8.2 DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Company, then all outstanding Option shares shall terminate
immediately prior to such event.

                8.3 ASSET SALE, MERGER, CONSOLIDATION OR REVERSE MERGER. In the
event of (i) a sale, lease or other disposition of all or substantially all of
the assets of the Company, (ii) a merger or consolidation in which the Company
is not the surviving corporation, or (iii) a reverse merger in which the Company
is the surviving corporation but the shares of Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise (individually, a "Corporate
Transaction"),

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then any surviving corporation or acquiring corporation shall assume or continue
any Option shares outstanding hereunder or shall substitute similar options
(including an option to acquire the same consideration paid to the shareholders
in the Corporate Transaction for those outstanding hereunder). In the event any
surviving corporation or acquiring corporation refuses to assume or continue
such Option shares or to substitute similar options for those outstanding
hereunder and provided there is no interruption or termination of Optionee's
Service, then the vesting of the Option (and, if applicable, the time during
which the Option may be exercised) shall be accelerated in full, and the Option
shall terminate if not exercised at or prior to the Corporate Transaction. If
there is an interruption in Optionee's Service or Optionee's Service terminates
prior to a Corporate Transaction, the Option shall terminate if not exercised at
or prior to the Corporate Transaction.

        9. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT.

                The Optionee shall have no rights as a shareholder with respect
to any shares covered by the Option until the date of the issuance of a
certificate for the shares of Stock for which the Option has been exercised (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). No adjustment shall be made for
dividends, distributions or other rights for which the record date is prior to
the date such certificate is issued, except as provided in Section 8. If the
Optionee is an Employee, the Optionee understands and acknowledges that, except
as otherwise provided in a separate, written employment agreement between a
Participating Company and the Optionee, the Optionee's employment is "at will"
and is for no specified term. Nothing in this Option Agreement shall confer upon
the Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.

        10. LEGENDS.

                The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of Stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section.

        11. MISCELLANEOUS PROVISIONS.

                11.1 BINDING EFFECT. Subject to the restrictions on transfer set
forth herein, this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors, administrators,
successors and assigns.

                11.2 TERMINATION OR AMENDMENT. The Board may terminate or amend
the Option at any time; provided, however, that except as provided in Section
8.3 in connection with a Corporate Transaction, no such termination or amendment
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or

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amendment is necessary to comply with any applicable law or government
regulation. No amendment or addition to this Option Agreement shall be effective
unless in writing.

        11.3 INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein and supersedes any prior
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group with respect to such subject
matter other than those set forth or provided for herein. To the extent
contemplated herein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.

        11.4 APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.

        11.5 COUNTERPARTS. This Option Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                                            GENERAL MAGIC, INC.

                                            By:       /s/ Mary E. Doyle
                                                      --------------------------
                                            Title:    SVP Business Affairs
                                                      --------------------------
                                            Address:  420 N. Mary Ave.
                                                      --------------------------
                                                      Sunnyvale 94085
                                                      --------------------------

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        The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and hereby accepts the Option subject to all
of the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement. The undersigned acknowledges
receipt of a copy of the Option Agreement.

                                            OPTIONEE

Date:  11/15/2001                           /s/ Mark Phillips
      ------------------------------        ------------------------------------
                                            Mark Phillips

                                            Optionee Address:

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

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

                                       10<PAGE>

                                                                   EXHIBIT 10.17

October 25, 2001

Mr. Paul Franklin

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

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

        RE:     EMPLOYMENT TRANSITION AND SEPARATION AGREEMENT

Dear Paul:

This letter sets forth the terms of the employment transition and separation
agreement SONICblue Incorporated ("SONICblue" or the "Company") is offering to
you to assist in your employment transition with the Company ("Agreement "). You
may accept this offer by signing and returning a copy of this Agreement to the
Company as provided below.

1. SEPARATION. Your last day of employment with the Company will be not later
than March 2, 2003. You may terminate your employment earlier subject to the
provisions of Section 2(b) below. The last date of your employment as provided
in this Section 1 is hereafter referred to as the "Separation Date."

2. TRANSITION PERIOD. As a material term of this Agreement, you agree to the
following provisions which will be effective on the effective date of the
release described in Section 11 below.

(a) SERVICES AND AUTHORITY DURING TRANSITION PERIOD. From September 17, 2001,
through the Separation Date (the "Transition Period"), you will provide (or make
yourself available to provide) advisory services to the Company up to a total
100 hours. You will also assist in the transition of your job responsibilities
to other Company personnel. During the Transition Period, you will not have the
authority to enter into any contract or agreement with any third party, on
behalf of the Company, or to make any representation that might be binding upon
the Company.

(b) COMPENSATION AND BENEFITS DURING TRANSITION PERIOD. During the Transition
Period, you will continue to receive your current regular salary of $11,184.21
per Company pay period (less applicable withholdings and tax deductions) and
benefits, including coverage under the Company's medical, dental, and vision
plan, employee stock purchase plan and 401(k) plan, subject to the terms of
those plans, through the remainder of your employment with the Company,
provided, however, that you will not accrue any

<PAGE>

Mr. Paul Franklin
October 25, 2001
Page 2

additional personal time off during the Transition Period. If you elect to
terminate your employment earlier than the March 2, 2003, the Company will cease
to provide you benefits under the above plans but will continue to pay you the
salary that would otherwise be paid to you for the remainder of the original
Transition Period under this Agreement (less applicable withholdings and tax
deductions) in accordance with the Company's usual payroll schedule, which is
currently a 14 day pay period, over the remainder of the original transition
period, provided that you deliver to the Company the signed and effective
release described in Section 13 below within twenty-one (21) days of the
employment termination date. Your right to received these payments may be
assigned to your estate or heirs upon your death.

3. ACCRUED SALARY AND PAID TIME OFF. On the Separation Date, the Company will
pay you all accrued salary, and all accrued and unused personal time off, earned
by you through the Separation Date subject to applicable withholdings and tax
deductions. You are entitled to these payments as a matter of law, whether or
not you sign this Agreement.

4. SEVERANCE PAY. On September 22, 1998, the Company entered into an agreement
with you under which the Company would pay you a severance payment in the event
your employment with the Company is involuntarily terminated ("Agreement
Regarding Severance"). In consideration for this Agreement, which supercedes
your agreement regarding severance, you agree that your right to such severance
payment under that agreement is hereby waived.

5. HEALTH INSURANCE. After the Separation Date, to the extent provided by the
federal COBRA law or, if applicable, state insurance laws, and by the Company's
current group health insurance policies, you will be eligible to continue your
group health insurance benefits at your own expense. A separate notice of your
COBRA rights will be provided to you.

6. EXPENSE REIMBURSEMENT. You agree that, on or before the Separation Date, you
will submit your final documented expense reimbursement statement reflecting all
business expenses you incurred through the Separation Date, if any, for which
you seek reimbursement. The Company will reimburse you for these expenses
pursuant to its regular business practice.

7. STOCK OPTION. During your employment the Company granted you an option to
purchase 805,475 shares (the "Options") of the Company's common stock, pursuant
to the Company's 1989 Stock Plans (the "Plan"). These Options will cease vesting
effective September 17, 2001, and as of that date options to purchase a total of
338,657 shares were vested and exercisable under the terms of the Options and
the Plan. You agree that upon your termination of employment on the Separation
Date, you will be have 3 months after the Separation Date to exercise your
Options under the terms of the Options and the Plans, provided that you deliver
the signed and effective release in Section 13 below. If you die prior to the
termination of the Options, the Options will expire on the later of (a) 3 months
after the Separation Date or (b) the close of business at the Company's
headquarters on the

<PAGE>

Mr. Paul Franklin
October 25, 2001
Page 3

date six months after the date of your death. After your death and prior to
expiration of your Options, your estate or heirs may exercise the portions of
your Options that were vested and unexercised on the date of death.

8. OTHER COMPENSATION AND BENEFITS. Except as expressly provided in this
Agreement, you will not receive any additional compensation or benefits after
the Separation Date.

9. RETURN OF COMPANY PROPERTY. On the Separation Date or as earlier requested by
the Company, you agree to return to the Company all Company documents (and all
copies thereof) and other Company property in your possession or control,
including, but not limited to, Company files, correspondence, memos, notebooks,
notes, drawings, records, business plans and forecasts, financial information,
specifications, computer-recorded information, tangible property and equipment,
credit cards, entry cards, identification badges and keys; and any materials of
any kind that contain or embody any proprietary or confidential information of
the Company (and all reproductions thereof in whole or in part) (collectively,
the "Company Property"). You agree to conduct a good faith and diligent search
of your belongings in advance of the aforementioned deadline to ensure your
compliance with the provisions of this Section 9.

10. PROPRIETARY INFORMATION OBLIGATIONS. You acknowledge your continuing
obligation (both during and after the Transition Period) to comply with your
Proprietary Information and Inventions Agreement, a copy of which is attached
hereto as Exhibit B.

11. INITIAL RELEASE.

(a) TERMS OF RELEASE. Except for the obligations expressly set forth in this
Agreement, and in exchange for the Transition Period employment and other
consideration that is being provided to you under this Agreement to which you
are not otherwise entitled, you hereby release, acquit and forever discharge the
Company, its parents and subsidiaries, and its and their respective officers,
directors, agents, servants, employees, attorneys, shareholders, successors,
assigns and affiliates, of and from any and all claims, liabilities, demands,
causes of action, costs, expenses, attorneys' fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to agreements, events, acts or conduct at any time prior to
and including the date you sign this Agreement, including but not limited to:
all such claims and demands directly or indirectly arising out of or in any way
connected with your employment with the Company, that September 22, 1998
Agreement Regarding Severance and any other agreements or demands related to
salary, performance or other bonuses, commissions, stock, stock options, or any
other ownership interests in the Company, vacation pay, fringe benefits, expense
reimbursements, severance pay, or any other form of benefit or compensation;
claims pursuant to any federal, state or local law, statute, or cause of action
including, but not limited to, the federal Civil Rights Act of 1964, as amended;
the federal Americans with

<PAGE>

Mr. Paul Franklin
October 25, 2001
Page 4

Disabilities Act of 1990; the California Fair Employment and Housing Act, as
amended; tort law; contract law; wrongful discharge; discrimination; harassment;
fraud; defamation; emotional distress; and breach of the implied covenant of
good faith and fair dealing.

        (b) EFFECTIVE DATE OF THIS AGREEMENT AND THE INITIAL RELEASE. You hereby
have been advised and understand that you have twenty-one (21) days from the
date of receipt to decide whether or not to sign this Agreement which period may
be shortened and waived by you. This period is designed to allow you to consult
with a financial advisor, accountant, attorney or anyone else whose advice you
choose to seek. You hereby have been advised and understand that after signing
this document you have seven (7) days to revoke your agreement to the terms of
this document. Any revocation should be in writing and delivered to the David
Gershon, General Counsel of the Company, by close of business at the end of the
seventh business day after signing this document. This Agreement and the release
of claims herein will not become effective until the seven (7) day revocation
period has passed.

12. SECTION 1542 WAIVER. You hereby acknowledge your understanding that under
this Agreement you are releasing any known or unknown claims you may have. You
therefore acknowledge that you have read and understand Section 1542 of the
California Civil Code, which reads as follows:

        "A general release does not extend to claims which the creditor does not
        know or suspect to exist in his favor at the time of executing the
        release, which if known by him must have materially affected his
        settlement with the debtor."

You expressly waive and relinquish all rights and benefits under that section
and any law of any jurisdiction of similar effect with respect to your release
of claims.

13. SEPARATION RELEASE. As part of this Agreement, you must also execute and
return to the Company the Separation Release, attached hereto as Exhibit A. You
must sign the Separation Release on the Separation Date or within twenty-one
(21) days thereafter. (The Separation Release may not be signed before the
Separation Date.) As provided in the Separation Release, you will have seven (7)
days to revoke the Separation Release. You acknowledge that you are not entitled
to receive the remaining severance payments during the original Transition
Period, or to the exercise period for the Options described in Section 7 unless
and until you execute the Separation Release and it becomes effective.

14. NONDISPARAGEMENT. You agree that you will not engage in any action that
disparages the Company or its officers, directors, managers, employees or
practices; or that disrupts or impairs its normal operations or harms the
reputation of the Company with its customers, suppliers or the public; or
interferes with existing contractual relationships with customers, suppliers or
Company associates. Nothing in this Agreement prevents you from responding
accurately and fully to any question, inquiry or request for information when
required by legal process.

<PAGE>

Mr. Paul Franklin
October 25, 2001
Page 5

15. COOPERATION. You agree to cooperate with the Company following the
termination of your employment by being reasonably available to testify on
behalf of the Company or any subsidiary or affiliate in any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, and to
assist the Company, or any subsidiary or affiliate, in any such action, suit or
proceeding, by providing information and meeting and consulting with
representatives or counsel to the Company, or any subsidiary or affiliate, as
reasonably requested. The Company agrees to reimburse you for all expenses
actually incurred in connection with your provision of testimony or assistance
pursuant to this Section.

16. NO ASSISTANCE. You agree not to voluntarily provide assistance, information
or advice, directly or indirectly (including through any agent or attorney), to
any person or entity in connection with bringing any claim or cause of action of
any kind against the Company, nor will you induce or encourage any person or
entity to do so. Nothing in this Agreement prohibits you from testifying
truthfully under subpoena or providing other assistance under compulsion of law.

17. CONFIDENTIALITY. The provisions of this Agreement will be held in strictest
confidence by you and the Company and will not be publicized or disclosed in any
manner whatsoever; provided, however, that: (a) you may disclose this Agreement
in confidence to your immediate family; (b) the parties may disclose this
Agreement in confidence to their respective attorneys, accountants, auditors,
tax preparers, and financial advisors; (c) the Company may disclose this
Agreement as necessary to fulfill standard or legally required corporate
reporting or disclosure requirements; and (d) the parties may disclose this
Agreement insofar as such disclosure may be necessary to enforce its terms or as
otherwise required by law. In particular, and without limitation, you agree not
to disclose the provisions of this Agreement to any current or former Company
personnel.

18. ARBITRATION. I agree that any future disputes between me and the Company
(the "parties ") including but not limited to disputes arising out of or related
to this Agreement and Release of Claims, will be resolved by binding
arbitration, except where the law specifically forbids the use of arbitration as
a final and binding remedy, in Santa Clara County, California in accordance with
the rules of the American Arbitration Association by one arbitrator appointed in
accordance with said rules. The Company will pay for the cost of the arbitration
but each of the parties will be responsible for the legal fees of his or its
legal counsel. The Arbitrator will apply California law, without references to
rules of conflicts law or rules of statutory arbitration, to the resolution of
any dispute. Judgment on the award rendered by the arbitrator may be entered in
any court having competent jurisdiction thereof. Notwithstanding the foregoing,
the parties may apply to any court of competent jurisdiction for preliminary or
interim equitable relief, or to compel arbitration in accordance with this
Section.

BINDING ON SUCCESSORS. This Agreement will be binding upon the Company and any
entity which is a successor by merger, acquisition, consolidation or otherwise
to the business formerly carried on by the Company, or an affiliate of any such
entity, and becomes your

<PAGE>

Mr. Paul Franklin
October 25, 2001
Page 6

employer by reason of (or as the direct result of) any direct or indirect sale
or other disposition of the Company or substantially all of the assets of the
business currently carried on by the Company, without regard to whether or not
such person actively adopts this letter agreement.

20. MISCELLANEOUS. This Agreement, including all Exhibits, constitutes the
complete, final and exclusive embodiment of the entire agreement between you and
the Company with regard to the terms and conditions of your employment with the
Company and your anticipated termination of employment. It is entered into
without reliance on any promise or representation, written or oral, other than
those expressly contained herein, and it supersedes any other such promises,
warranties or representations and any other written or oral statements
concerning your rights to any compensation, equity or benefits from the Company,
its predecessors or successors in interest. This Agreement may not be modified
or amended except in a writing signed by both you and a duly authorized officer
of the Company. This Agreement will bind the heirs, personal representatives,
successors and assigns of both you and the Company, and inure to the benefit of
both you and the Company, their heirs, successors and assigns. If any provision
of this Agreement is determined to be invalid or unenforceable, in whole or in
part, this determination will not affect any other provision of this Agreement
and the provision in question will be modified by the court so as to be rendered
enforceable in a manner consistent with the intent of the parties insofar as
possible. Headings and subheadings in this Agreement are solely for convenience
and do not constitute terms of this Agreement. This Agreement may be signed in
counterparts and taken together will constitute one agreement. Facsimile
signatures will be deemed as effective as original signatures. This Agreement
will be deemed to have been entered into and will be construed and enforced in
accordance with the laws of the State of California as applied to contracts made
and to be performed entirely within California.

If this Agreement is acceptable to you, please sign below and return the
original, fully executed Agreement to Terese Farkas, Senior Vice President of
Human Resources and Administration, prior to 12:01 a.m. on November 15, 2001. (A
copy of the Agreement is also being provided to you for your records.) Please be
aware that the offer contained in this Agreement will automatically expire at
12:01 a.m. on November 15, 2001 if not accepted by you before that time.

If you have any questions regarding this letter, you may contact me directly at
__________.

I hope you agree to the terms set forth in this Agreement, I look forward to
your continued contributions to the Company in the months ahead.

Sincerely,

SONICBLUE INCORPORATED

<PAGE>

Mr. Paul Franklin
October 25, 2001
Page 7

By:     /s/ Terese Farkas
        ------------------------------
        Terese Farkas
        Senior Vice President, Human Resources and Administration

Exhibit A - Separation Release
Exhibit B - Proprietary Information and Inventions Agreement

AGREED AND ACCEPTED:

/s/ Paul Franklin                                  December 7, 2001
-----------------                                  ----------------
PAUL FRANKLIN                                      DATE

<PAGE>

                                    EXHIBIT A

                               SEPARATION RELEASE

1.      I, Paul Franklin, agree to a mutual separation of my employment. I
        understand that my employment with SONICblue Incorporated (the
        "Company") ended effective _______, ____("Separation Date"), and that my
        regular salary ended on that date.

2.      Pursuant to that certain Employment Transition and Separation Agreement
        dated October 25, 2001, with the Company ("Separation Agreement"), the
        Company had continued my employment to the Separation Date and continued
        my compensation and benefits under the Separation Agreement through that
        date. In consideration for such continued employment and compensation
        and benefits under the Separation Agreement, I agreed to deliver to the
        Company this Separation Release.

3.      I agree that in consideration for the provision of the compensation and
        benefits described in the Separation Agreement, I hereby release, acquit
        and forever discharge the Company, its parents and subsidiaries, and its
        and their respective officers, directors, agents, servants, employees,
        attorneys, shareholders, successors, assigns and affiliates, of and from
        any and all claims, liabilities, demands, causes of action, costs,
        expenses, attorneys' fees, damages, indemnities and obligations of every
        kind and nature, in law, equity, or otherwise, known and unknown,
        suspected and unsuspected, disclosed and undisclosed, arising out of or
        in any way related to agreements, events, acts or conduct at any time
        prior to and including the execution date of this Agreement, including
        but not limited to: all such claims and demands directly or indirectly
        arising out of or in any way connected with my employment with the
        Company or the termination of that employment; claims or demands related
        to salary, bonuses, commissions, stock, stock options, or any other
        ownership interests in the Company, vacation pay, fringe benefits,
        expense reimbursements, severance pay, or any other form of
        compensation; claims pursuant to any federal, state or local law,
        statute, or cause of action including, but not limited to, the federal
        Civil Rights Act of 1964, as amended; the federal Americans with
        Disabilities Act of 1990; the California Fair Employment and Housing
        Act, as amended; tort law; contract law; wrongful discharge;
        discrimination; harassment; fraud; defamation; emotional distress; and
        breach of the implied covenant of good faith and fair dealing.

4.      On September 17, 1992, I signed the attached Employee's Proprietary
        Information and Inventions Agreement regarding confidential information
        and intellectual property in which I agreed to protect Company
        confidential information both during and after my employment. That
        agreement is incorporated by reference here. As a condition of accepting
        the separation package set forth in Section 3 above, I reaffirm my
        obligation to keep secret all confidential information that belongs to
        the Company.

                                       1
<PAGE>

5.      I agree not to make any communications or engage in any conduct that is
        or can reasonably be construed to be disparaging of the Company, its
        officers, directors, founders, employees, agents, stockholders, products
        or services.

6.      I hereby expressly waive the provisions of California Civil Code section
        1542, regarding the waiver of unknown claims. California Civil Code
        section 1542 provides as follows:

        A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
        KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
        RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
        SETTLEMENT WITH THE DEBTOR.

7.      As a condition for the Separation Agreement, I agree to keep
        confidential the terms of this Agreement and Release of Claims and any
        negotiations or discussions leading thereto. I understand that I am
        permitted to disclose these terms to my accountant, attorney and spouse,
        if any, provided such recipient of the information agrees to be bound by
        the confidentiality requirement of this Section, or if otherwise
        required by law.

8.      If any term of this Agreement and Release of Claims is held to be
        invalid, void or unenforceable, the remainder of this Agreement and
        Release of Claims will remain in full force and effect and will in no
        way be affected, and the parties will use their best efforts to find an
        alternative way to achieve the same result.

9.      The provisions of the Separation Agreement and this Agreement and
        Release of Claims set forth the entire agreement between me and the
        Company concerning my separation package and the separation of my
        employment, provided however, that this Agreement and Release of Claims
        does not supersede my obligations to maintain the confidentiality of
        Company information, whether arising from the Employment Proprietary
        Information and Inventions Agreement referred to above in Section 5, or
        from operation of law. Any other promises, written or oral, are replaced
        by the provisions of this Agreement and Release of Claims, and are no
        longer effective unless they are contained in this document. This
        Agreement and Release of Claims can only be changed in writing, signed
        by me and the Chief Executive Officer of the Company.

10.     I agree that any future disputes between me and the Company (the
        "parties") including but not limited to disputes arising out of or
        related to this Agreement and Release of Claims, will be resolved by
        binding arbitration, except where the law specifically forbids the use
        of arbitration as a final and binding remedy, in Santa Clara County,
        California in accordance with the rules of the American Arbitration
        Association by one arbitrator appointed in accordance with said rules.
        The Company will pay for the cost of the arbitration but each of the
        parties will be responsible for the legal fees of his or its legal
        counsel. The Arbitrator will apply California law, without references to
        rules of conflicts law or rules of statutory arbitration, to the

                                       2
<PAGE>

        resolution of any dispute. Judgment on the award rendered by the
        arbitrator may be entered in any court having competent jurisdiction
        thereof. Notwithstanding the foregoing, the parties may apply to any
        court of competent jurisdiction for preliminary or interim equitable
        relief, or to compel arbitration in accordance with this Section.

11.     I have been advised and understand that I have twenty-one (21) days from
        the date of receipt to decide whether or not to sign this Agreement and
        Release of Claims which period may be shortened and waived by me. This
        period is designed to allow me to consult with a financial advisor,
        accountant, attorney or anyone else whose advice I choose to seek.

12.     I have been advised and understand that after signing this document I
        have seven (7) days to revoke my agreement to the terms of this
        document. Any revocation should be in writing and delivered to the Chief
        Executive Officer of the Company, by close of business at the end of the
        seventh business day after signing this document. This Agreement and
        Release of Claims will not become effective until the seven (7) day
        revocation period has passed.

13.     By signing below, I acknowledge that I am entering into this Agreement
        and Release of Claims knowingly and voluntarily. In addition, I hereby
        acknowledge by my signature that I have carefully read and fully
        understand all the provisions of this Agreement and Release of Claims.

.................................................................................

By my signature, I agree to and give this Separation Release to the Company.

Date: December 7, 2001              /s/ Paul Franklin
      ----------------              -----------------
                                    Paul Franklin

<PAGE>

                                    EXHIBIT B

                 PROPRIETARY INFORMATION ND INVENTIONS AGREEMENT

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