Document:

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                                                                    EXHIBIT 10.6

                           [GENERAL MAGIC LETTERHEAD]

June 15, 2001

Ms. Rose M. Marcario
c/o General Magic, Inc.
420 North Mary Avenue
Sunnyvale, California 94086

Dear Rose:

This will confirm our agreement concerning your employment with General Magic
(sometimes also called the "Company"). Currently you are serving as Senior Vice
President, Finance and Administration, and Chief Financial Officer of the
Company. You have indicated your desire to resign your position and return to
the Los Angeles area for personal reasons. To recognize your loyal and effective
service to the Company, we have agreed to provide you with the severance
benefits described in this letter agreement.

General Magic hereby accepts your resignation as an officer of the Company,
effective upon employment of your successor. In the interim, you will diligently
continue to serve the interests of the Company. Commencing July 1, 2001, through
and including the earlier of December 31, 2001, or such time as you obtain
alternative employment (the "Term"), the Company shall retain you as a part-time
employee, reporting to me or to my designee. During the Term, you will devote
your best efforts to such business and strategic matters as may be assigned to
you consistent with your skills and experience, including the transition of your
current management responsibilities to your successor, provided that you will
not be called on to work in excess of an average of ten days per month. At the
conclusion of the Term, your employment with General Magic will terminate.

During the Term, you will be compensated at your current base rate of pay, less
all applicable state and federal payroll taxes, payable on ordinary Company
payroll dates in accordance with Company policy and procedures then in effect.
On June 30, 2001, you will be paid the balance of accrued but unused paid time
off accumulated for your account through that date, and will be reimbursed all
expenses incurred by you through that date in connection with the business of
General Magic, all in accordance with the Company's policies and procedures then
in effect. In addition, you will be paid a bonus in the amount of ninety-three
thousand seven hundred fifty dollars ($93,750), less all applicable federal and
state payroll taxes. Said sum will be payable in two equal installments, each in
the amount of forty-six thousand eight hundred and seventy-five dollars
($46,875), due on June 30, 2001 and August 15, 2001, respectively. Lastly,
General Magic will reimburse you for reasonable and necessary out-of-pocket
expenses incurred by you in connection with services provided by you during the
Term; provided that any expenses in excess of $250 must first be approved in
writing by me or my designee, and further provided that all requests for
reimbursement must be accompanied by such supporting documentation as may be
reasonably requested by the Company.

You will be eligible during the Term to participate in Company benefit programs
on the same terms and conditions applicable to Company employees working
comparable hours during the same period, except that you will not be entitled to
accrue paid time off nor will you be entitled to a 2001 bonus. Should the
reduction in your hours from and after July 1, 2001, trigger a termination of
your medical, dental and vision benefits under applicable law or the Company's
insurance policies, General Magic will reimburse the amount of any COBRA
premiums paid by you during the Term for continued group medical, dental and
vision insurance coverage under the Company's plans. You will be responsible for
your own tax liability, if any, associated with the COBRA reimbursements.
Finally, the

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Rose M. Marcario
June 15, 2001
Page 2

stock options in which you would have vested had you remained continuously
employed with the Company through December 31, 2001, shall become fully vested
immediately upon your execution of this letter agreement ("Execution Date").
Otherwise, effective upon the Execution Date, your options will cease to vest.
Finally, the period in which you may exercise any options vested through the
Execution Date shall be extended through and including July 30, 2002. Please
note that, as a consequence of this change in the vesting and exercise schedule,
your options will automatically become nonstatutory stock options and will not
be qualified for the preferential tax treatment afforded incentive stock
options.

You hereby acknowledge and agree that, except as provided by this agreement, no
further, additional or other sums, benefits or consideration are due and owing,
or will hereafter become due and owing, to you in consideration of your
employment with General Magic.

In consideration of the foregoing, during the Term, and for a period of six (6)
months thereafter, you will not, on behalf of yourself or any other person or
entity, directly or indirectly (i) recruit, solicit or hire any of the
employees, contractors or service providers of the Company, or in any manner
attempt to persuade any such person or entity to discontinue or in any way limit
any relationship with the Company, (ii) induce any customer, partner or supplier
of the Company to discontinue or in any way limit its relationship with the
Company, (iii) disparage the Company, its business, products, services or
employees; or (iv) make any public statement or statements to analysts or the
press concerning General Magic, its business, prospects, products, services or
employees, without first obtaining written approval from General Magic. In
further consideration of the foregoing, during the Term, you shall not
participate directly or indirectly on behalf of yourself or any other person or
entity in a business principally engaged in creating, developing, marketing,
distributing or selling voice applications or technologies, or licensing others
to do so, except as may be agreed by us in writing.

You further acknowledge that the Proprietary Rights and Information Agreement,
between you and General Magic, dated November 9, 1999, imposes obligations on
you that survive the termination of your employment, and you hereby agree to
honor such obligations.

Except with respect to the obligations created by, acknowledged by, or arising
out of this agreement, you, on behalf of yourself, your heirs, administrators,
representatives, executors, successors and assigns, and each of them, hereby
release General Magic, its current and former stockholders, directors, officers,
employees, agents, attorneys, successors and assigns, and each of them (the "
General Magic Released Parties") of and from any and all claims, actions and
causes of action, whether now known or unknown, which you now have, ever had, or
shall or may hereafter have against the General Magic Released Parties, or any
of them, based upon or arising out of any matter, cause, fact, thing, act or
omission whatsoever occurring or existing at any time up to and including the
date you sign this letter agreement, including, but not limited to, any claims
arising from or related to your employment with the Company or the termination
of that employment, and any claims of breach of contract, wrongful termination,
fraud, defamation, infliction of emotional distress or discrimination due to
national origin, race, religion, age, sex, sexual orientation, disability or
other discrimination or harassment under the Civil Rights Act of 1964, the Age
Discrimination in Employment Act of 1967, the Americans with Disabilities Act,
the California Fair Employment and Housing Act or any other applicable law. The
foregoing release shall not extend to any right of indemnification you have or
may have for liabilities arising from your actions within the course and scope
of your employment for the Company.

In connection with the foregoing general release, the you acknowledge that you
have read and understand Section 1542 of the Civil Code of the State of
California, which provides in full as follows:

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Rose M. Marcario
June 15, 2001
Page 3

            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 hereby expressly waive and relinquish all rights and benefits that you have
or may have under Section 1542 with respect to the release of unknown claims
granted in this agreement. You acknowledge that you or your agents may hereafter
discover facts or claims in addition to or different from those you now know or
believe to exist, but that you nevertheless intend to fully and finally settle
all claims released herein.

You further warrant and represent that you have not voluntarily, by operation of
law, or otherwise, assigned or transferred to any other person or entity any
interest in all or any portion of those matters released by this agreement.

This agreement will be governed by and construed according to the laws of the
State of California as such laws are applied to agreements entered into and to
be performed entirely within California between California residents.

The parties agree that in the event any claim or dispute arises between them
based on or relating to the interpretation, performance or breach of this
agreement, whether in tort, contract or otherwise, we shall attempt to resolve
such claim or dispute first on an amicable basis through good faith discussions.
If we are not able to resolve any dispute through good faith discussions within
a reasonable period of time given the nature of the claim or dispute (not in any
case to exceed 30 days), we hereby agree promptly to submit any such claim or
dispute to non-binding mediation by JAMS ("JAMS") in San Jose, California.
Neither party nor the mediator shall disclose the existence, content or results
of any mediation hereunder without the prior written consent of all parties.
Nothing in this provision shall prevent either party from seeking injunctive
relief from a court to avoid irreparable harm.

If any provision of this agreement, or the application thereof, shall for any
reason and to any extent be held invalid or unenforceable under any applicable
law by a court of competent jurisdiction, the remainder of this agreement shall
be interpreted so as best to reasonably effect the intent of the parties hereto.
We further agree to replace any such invalid or unenforceable provision with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of the invalid or unenforceable provision.

This agreement, together with the Proprietary Rights and Information Agreement
between you and General Magic dated November 9, 1999, constitute the entire
understanding and agreement between you and General Magic with respect to the
subject matter contained herein and therein, and supersede any prior
negotiations, agreements and understandings, whether written or oral, with
respect thereto.

Any waiver, modification or amendment of any provision of this agreement shall
be effective only if in writing and signed by the parties hereto.

This Agreement is not assignable by either party, except that General Magic may
assign it in connection with an acquisition, merger, consolidation or sale of
all or substantially all of the assets of the Company. In the event of any such
merger or transfer of assets, the surviving corporation or the transferee of
General Magic's assets shall be bound by and shall have the benefit of the
provisions of this agreement, and General Magic shall take all actions necessary
to insure that any such corporation or transferee is bound by the provisions of
this agreement.

If the provisions of this letter accurately set forth our understanding, please
acknowledge your agreement by signing the enclosed copy of this letter and
returning it to me.

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Rose M. Marcario
June 15, 2001
Page 4

Rose, I very much appreciate your dedication to the business of General Magic,
and will look forward to your continued advice and counsel.

Sincerely,

/s/ K. M. LAYTON
----------------------
Kathleen M. Layton

Accepted and agreed:

/s/ ROSE M. MARCARIO
----------------------
Rose M. Marcario<PAGE>   1

                                                                    EXHIBIT 10.7

                           (GENERAL MAGIC LETTERHEAD)

                                 July 15, 2001

Ms. Kathleen M. Layton
c/o General Magic, Inc.
420 North Mary Avenue
Sunnyvale, California  94085

            Re:   Employment Agreement

Dear Kathie:

            This Letter Agreement confirms the terms of your employment with
General Magic, Inc. (the "Company") as well as our understanding with respect to
any termination of that employment relationship.

            1. POSITION AND DUTIES: You will be employed by the Company as its
President and Chief Executive Officer, reporting to the Company's Board of
Directors (the "Board"). The Company will undertake its best efforts to have you
elected to the Board upon your employment, and you agree that upon the
termination of your employment for any reason you shall promptly resign from the
Board should the Board so request. You accept employment with the Company on the
terms and conditions set forth in this Agreement, and you agree to devote your
full business time, energy and skill to your duties at the Company. However, you
shall be entitled to engage in other professional activities, including, but not
limited to, participating on other boards of directors (provided that you
receive advance approval from the Board of your participation on such other
boards), so long as such activities do not materially interfere with the
performance of your duties for the Company. Your duties shall include, but not
be limited to, the overall general management of the Company, as well as any
other reasonable duties that may be assigned to you from time to time by the
Board. This Paragraph 1 shall not be construed as preventing you from investing
your assets in such form and manner as will not require any substantial services
on your part in the operation of the affairs of the business entities in which
such investments are made.

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Ms. Kathleen Layton
Employment Agreement
Page 2

            2. TERM OF EMPLOYMENT: Your employment under this Agreement will
start on January 1, 2001 ("Start Date"), will be for no specified term, and may
be terminated by you or the Company at any time, for any reason, with or without
cause, subject to the provisions of Paragraphs 4 and 5 below. You understand and
agree that no facts or circumstances arising out of your employment, including
the length of employment or any statements or conduct by the Company, can alter
the "at-will" employment relationship between you and the Company, unless
specifically set forth in writing and signed by you and the Board or its
authorized representative.

            3. COMPENSATION: The Company will compensate you for your services
as follows:

                  (a) Salary: Commencing on the Start Date, you will be paid an
annual salary of $350,000 in accordance with the Company's normal payroll
procedures, less applicable withholding. Your salary will be reviewed by the
Board on an annual basis, and may be subject to upward adjustment based upon
various factors including, but not limited to, your performance and the
Company's financial performance. Any upward adjustment to your salary shall be
in the sole discretion of the Board.

                  (b) Bonus: During your employment, you will be eligible to
receive a bonus based upon your achievement of performance-based objectives and
the Company's achievement of various financial and/or other goals payable
quarterly in accordance with the Company's Executive Bonus Plan, as it may be
amended by the Board from time to time. The goals that govern your bonus
eligibility will be set in discussions between you and the Board, and placed in
writing within 90 days following the start of each fiscal year. Your target
eligibility will equal 60% of your then-current annual base salary; your actual
bonus will vary, depending on the extent to which you have achieved or exceeded
the goals that govern your bonus eligibility. During the first 12 months of your
employment, payment of your bonus will be guaranteed at a rate of not less than
60% of your current salary, and will be paid on a quarterly basis in accordance
with the Company's normal payroll procedures. All bonuses paid to you shall be
subject to applicable withholding.

                  (c) Relocation Expenses. You are eligible for reimbursement of
up to $180,000 (net of applicable payroll taxes) in relocation and temporary
living expenses reasonably incurred by you during the first twenty-four (24)
months of your employment, subject to presentation of documentation reasonably
satisfactory to the Company. The Company will gross up all taxable relocation
and temporary living expenses reimbursed to you or paid by the Company on your
behalf. The gross-up shall be in the amount of applicable federal and state
income taxes, at 39.6% and 5.62%, respectively, together with social security,

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Ms. Kathleen Layton
Employment Agreement
Page 3

Medicare and SDI taxes, at 6.20%, 1.45% and 0.90%, respectively, until the
applicable caps are met. If you voluntarily terminate your employment with the
Company within the first twelve (12) months, you will be obligated to
immediately repay the Company the net amount of relocation and temporary living
expenses paid to you or on your behalf.

                  (d) Benefits: You will have the right, on the same basis as
other executive employees of the Company, to participate in and to receive
benefits under any Company medical, disability or other group insurance plans,
as well as under the Company's 401(k) plan and business expense reimbursement
and vacation policies except that, in each of the first five years of your
employment, you will be eligible to accrue a total of 20 days of paid time off,
in addition to the Company-paid shutdown from Christmas Day through New Year's
Day each year.

                  (e) Initial Stock Options: Subject to the approval of the
Board, you will be granted options to purchase an aggregate of 1,500,000 shares
of the Company's common stock at an exercise price per share equal to the
average of the high and low bid prices of the stock on your option grant date.
750,000 of such options shall become vested and exercisable during your service
with the Company at the rate of one quarter on the first anniversary of the
Start Date, and thereafter at the rate of one thirty-sixth of the unvested
balance for each additional full month of your service with the Company. The
remaining 750,000 of such options shall become vested and exercisable during
your service with the Company at the rate of one quarter on the date six months
following the Start Date, and thereafter at the rate of one third of the
unvested balance for each additional full six months of your service with the
Company. All of the options will be granted to you outside of the Company's
existing stock option plans, and shall be governed by and subject to the terms
and conditions of stock option agreements in substantially the form attached
hereto as Exhibit A (which you will be required to sign in connection with the
issuance of the stock options). The Company will undertake, as soon as
practicable following the grant of such options, to register the shares
underlying the options on Form S-8 under the Securities Act of 1933, and shall
keep such Form S-8 in effect for the entire period the options remain
outstanding.

            4. VOLUNTARY TERMINATION:

                  (a) Resignation. In the event that you voluntarily resign from
your employment with the Company other than for Good Reason as defined in
Subparagraph 5(d), you will be entitled to no compensation or benefits from the
Company other than those earned under Paragraph 3 through the date of your
termination of employment. In particular, you shall not be entitled to any bonus
or pro rata portion thereof under Subparagraph 3(b), for the quarter in which
your employment so terminates. You agree that in the event you voluntarily
terminate

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Ms. Kathleen Layton
Employment Agreement
Page 4

your employment with the Company other than for Good Reason as defined in
Subparagraph 5(d), you shall provide the Company with sixty days' written notice
of your resignation. The Company may, in its sole discretion, elect to waive all
or any part of such notice period and accept your resignation at an earlier
date, provided that the Company shall continue your salary, bonus and all
benefits, and your stock options shall continue to vest, during the balance of
the notice period.

                  (b) Death or Disability. In the event that your employment
terminates as a result of your death or disability (meaning that you are unable
to perform your duties for any 120 days in any one year period as a result of a
physical and/or mental impairment), you or your heirs will continue to be paid
at your then applicable salary rate, less applicable withholding, for a period
of five (5) months following the termination of your employment due to death or
disability. During such five-month period you will continue to vest in any
unvested stock options previously granted to you by the Company. Such stock
options shall remain exercisable for a period of eighteen (18) months following
the later of (i) the date of your termination of service as Chief Executive
Officer of the Company, or (ii) the date of such option vesting; provided,
however, that such stock options shall not be exercisable following the
expiration of the option term.

            5. OTHER TERMINATION: The Company may terminate your employment
under the circumstances set forth below.

                  (a) Termination for Cause: The Company may terminate your
employment for cause. If your employment is terminated by the Company for cause
as defined below, you shall be entitled to no compensation or benefits from the
Company other than those earned under Paragraph 3 through the date of your
termination for cause. In particular, you shall not be entitled to any bonus or
pro rata portion thereof under Subparagraph 3(b) for the quarter in which your
termination occurs.

                  For purposes of this Agreement, a termination "for cause"
occurs if you are terminated for any of the following reasons, as determined by
the Board in good faith: (i) your willful dishonesty or fraud with respect to
the business affairs of the Company; (ii) your intentional falsification of any
employment or Company records; (iii) your misappropriation of or intentional
material damage to the business or property of the Company, including the
improper use or disclosure of the confidential or proprietary information of the
Company; (iv) your conviction (including by plea of guilty or nolo contendere)
of a felony or other crime that, in the Company's judgment, materially impairs
your ability to perform your duties for the Company, or materially and adversely
affects the Company's reputation or standing in the community; (v) your failure
or inability to perform any assigned duties reasonably expected of a chief
executive officer after receipt by you of written notice from the Board of such
failure or inability, and a reasonable (but not

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Ms. Kathleen Layton
Employment Agreement
Page 5

less than thirty (30) day) opportunity to cure; or (vi) any material breach of
this Agreement by you, which breach is not cured within ten (10) days after
receipt by you of written notice from the Board of such breach.

                  (b) Termination Without Cause. The Company may terminate your
employment without cause, and you may resign for Good Reason. Subject to
Subparagraph 5(c), if your employment is terminated by the Company without cause
(and not as a result of your death or disability), or you resign for Good Reason
(as defined in Subparagraph 5(d)), then,

                        (i) for two years from the date of termination:

                              (A) you shall continue to be considered an
employee (but not an officer or an executive and you shall have no authority to
act on behalf of the Company);

                              (B) you shall continue to be paid at your final
salary rate (but in no event less than $350,000 per year), less applicable
withholding;

                              (C) all stock options previously granted to you by
the Company shall continue to vest, and such stock options shall remain
exercisable for a period of eighteen (18) months following the later of (i) the
date of your termination of service as Chief Executive Officer of the Company or
(ii) the date of such option vesting; provided, however, that such stock options
shall not be exercisable following the expiration of the option term; and

                              (D) you shall be entitled to participate in the
Company's benefit programs, in accordance with the terms thereof.

                        (ii) In addition, you shall be entitled to the bonus you
would have earned (had your employment not been terminated) for each quarter
remaining in the year such termination occurs, such bonus to be paid in
accordance with Subparagraph 3(b), but you shall not be entitled to earn any
additional bonus payment thereafter.

                  (c) Termination Without Cause Following Change in Control: If
your employment is terminated by the Company without cause or you resign for
Good Reason (as defined in Subparagraph 5(d)) during the period commencing
thirty (30) days prior to the date of the Company's first public announcement
that the Company has entered into an agreement that would result in a Change in
Control (as defined below) and ending one year following such Change in Control,
you shall receive the compensation and benefits described in Subparagraph 5(b),
except that all of your unvested outstanding stock options shall vest
immediately. Such stock options shall remain exercisable for a period of
eighteen (18) months

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following the later of (i) the date of your termination of service as Chief
Executive Officer of the Company, or (ii) the date of such option vesting;
provided, however, that such stock options shall not be exercisable following
the expiration of the option term.

      If, due to the benefits provided under this Agreement, you are subject to
any excise tax due to characterization of any amounts payable hereunder as
excess parachute payments pursuant to Section 4999 of the Internal Revenue Code,
the Company agrees to gross up the amount payable to you such that the net
amount realizable by you is the same as if there were no such excise tax;
provided, however, that the foregoing shall be conditioned upon your cooperating
with the Company in such manner as may be reasonably requested (other than
reducing amounts payable hereunder) so as to minimize the amount of such excise
tax and provided, further, that the maximum amount that the Company shall be
obligated to pay pursuant to this provision shall be $100,000. Notwithstanding
the foregoing, however, upon a Change in Control, you may elect in your sole
discretion, not to have any portion of such options vest in order to avoid any
"excess parachute payment" under Section 280G(b)(1) of the Internal Revenue Code
of 1986, as amended.

      For purposes of this Agreement, a "Change in Control" shall mean the
occurrence of any of the following events:

                        (i) a dissolution or liquidation of the Company;

                        (ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company so long as the Company's
stockholders immediately prior to such transaction will, immediately after such
transaction, fail to possess direct or indirect beneficial ownership of more
than fifty percent (50%) of the voting power of the acquiring entity (for
purposes of this clause, any person who acquired securities of the Company prior
to the occurrence of such asset transaction in contemplation of such transaction
and who after such transaction possesses direct or indirect ownership of at
least ten percent (10%) of the securities of the acquiring entity immediately
following such transaction shall not be included in the group of stockholders of
the Company immediately prior to such transaction);

                        (iii) either a merger or consolidation in which the
Company is not the surviving corporation and the stockholders of the Company
immediately prior to the merger or consolidation fail to possess direct or
indirect beneficial ownership of more than fifty percent (50%) of the voting
power of the securities of the surviving corporation (or if the surviving
corporation is a controlled affiliate of another entity, then the required
beneficial ownership shall be determined with respect to the securities of that
entity which controls the surviving corporation and

<PAGE>   7

Ms. Kathleen Layton
Employment Agreement
Page 7

is not itself a controlled affiliate of any other entity) immediately following
such transaction, or a reverse merger in which the Company is the surviving
corporation and the stockholders of the Company immediately prior to the reverse
merger fail to possess direct or indirect beneficial ownership of more than
fifty percent (50%) of the securities of the Company (or if the Company is a
controlled affiliate of another entity, then the required beneficial ownership
shall be determined with respect to the securities of that entity which controls
the Company and is not itself a controlled affiliate of any other entity)
immediately following the reverse merger (for purposes of this clause, any
person who acquired securities of the Company prior to the occurrence of a
merger, reverse merger, or consolidation in contemplation of such transaction
and who after such transaction possesses direct or indirect beneficial ownership
of at least ten percent (10%) of the securities of the Company or the surviving
corporation (or if the Company or the surviving corporation is a controlled
affiliate, then of the appropriate entity as determined above) immediately
following such transaction shall not be included in the group of stockholders of
the Company immediately prior to such transaction);

                        (iv) an acquisition by any person, entity or group
within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored or maintained
by the Company or a subsidiary or other controlled affiliate of the Company) of
the direct or indirect beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors; or

                        (v) the individuals who, as of the date of this
Agreement, are members of the Board (the "Incumbent Board"), cease for any
reason to constitute at least fifty percent (50%) of the Board. For the purposes
of this clause, if the election, or nomination for election by the Company's
stockholders, of any new director was approved by a vote of at least fifty
percent (50%) of the Incumbent Board, such new director shall be considered as a
member of the Incumbent Board.

            (d) Good Reason. For purposes of this Agreement, "Good Reason" means
the occurrence of any of the following conditions, without your written consent,
which condition(s) remain(s) in effect 10 days after written notice to the Board
from you of such condition(s):

                  (i) a material decrease in your base salary and/or a material
decrease in your bonus plan or employee benefits following a Change in Control;
or

<PAGE>   8

Ms. Kathleen Layton
Employment Agreement
Page 8

                  (ii) a material decrease in your base salary and/or a material
decrease in your bonus plan or employee benefits prior to a Change in Control,
unless such decreases of similar materiality apply to the Company's executives
generally; or

                  (iii) a material, adverse change in your responsibilities or
duties, as measured against your responsibilities or duties immediately prior to
such change causing it to be of materially less stature or responsibility, and
such a materially adverse change shall in all events be deemed to occur if you
no longer serve as Chief Executive Officer of a publicly traded company
reporting to the Board of Directors; or

                  (iv) in the event of the relocation of your work place for the
Company to a location more than 25 miles from the Company's current headquarters
following a Change in Control.

      6. CONFIDENTIAL AND PROPRIETARY INFORMATION: As a condition of your
employment, you agree to sign the Company's Proprietary Rights and Information
Agreement, attached hereto as Exhibit B.

      7. DISPUTE RESOLUTION: In the event of any dispute or claim under this
Agreement or relating to or arising out of your employment relationship with the
Company or the termination of your employment with the Company for any reason
(including, but not limited to, any claims of breach of contract, wrongful
termination or employment discrimination), you and the Company agree that all
such disputes shall be fully, finally and exclusively resolved by binding
arbitration conducted pursuant to the American Arbitration Association's
National Rules for the Resolution of Employment Disputes in Santa Clara County,
California. You and the Company hereby knowingly and willingly waive your
respective rights to have any such disputes or claims tried to a judge or jury.
Nothing in this paragraph shall prevent the Company from seeking injunctive
relief for any violation or threatened violation of the Proprietary Rights and
Information Agreement referred to in Paragraph 6 of this Agreement.

      8. INTERPRETATION: This Agreement shall be interpreted in accordance with
and governed by the laws of the State of California.

      9. ASSIGNMENT: In view of the personal nature of the services to be
performed under this Agreement by you, you cannot assign or transfer any of your
rights or obligations under this Agreement. The rights and obligation of the
Company under this Agreement shall inure to the benefit and shall be binding
upon the successors and assigns of the Company.

<PAGE>   9

Ms. Kathleen Layton
Employment Agreement
Page 8

      10. ENTIRE AGREEMENT: This Agreement and the agreements referred to above
constitute the entire agreement between you and the Company regarding the terms
and conditions of your employment, and they supersede all prior negotiations,
representations or agreements between you and the Company regarding your
employment, whether written or oral.

      11. MODIFICATION: This Agreement may only be modified or amended by a
supplemental written agreement signed by you and another authorized member of
the Board.

      12. INDEMNIFICATION. During the period you remain an officer or member of
the Board of Directors, you shall be entitled to such indemnification as the
Company generally provides its officers and directors including, but not limited
to, that provided pursuant to the terms of the Company's Indemnification
Agreement, a copy of which is attached hereto as Exhibit C.

      13. ATTORNEYS' FEES. In any proceeding brought to interpret or enforce
this Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and costs.

      Please sign and date this letter in the space provided below to
acknowledge your acceptance of the terms of this Agreement.

                                   Sincerely,

                                   General Magic, Inc.

                                   By: /s/ Susan G. Swenson
                                       ---------------------------
                                       Chairman

      I agree to and accept employment with General Magic, Inc. on the terms and
conditions set forth in this Agreement, effective as of January 1, 2001.

                                       /s/ K. M. LAYTON
                                       ---------------------------
                                       Kathleen M. Layton
<PAGE>   10
                                                                       EXHIBIT A

                       NONQUALIFIED STOCK OPTION AGREEMENT

(Incorporated by reference to Exhibits 4.19 and 4.20 to the Company's Report on
Form S-8 filed with the Securities and Exchange Commission on August 8, 2001)

<PAGE>   11

                                   EXHIBIT B

                  PROPRIETARY RIGHTS AND INFORMATION AGREEMENT

<PAGE>   12

                               General Magic, Inc.
                  Proprietary Rights and Information Agreement

This Agreement sets forth the understanding between you and General Magic, Inc.
("General Magic") concerning any discoveries and inventions you may make in
connection with your employment by General Magic and your treatment of General
Magic's confidential and proprietary information. General Magic has agreed to
employ you or continue to employ you with the understanding and expectation that
you agree to and will abide by the following terms and conditions:

1.0    INVENTIONS

       As used in this Agreement, the term "Inventions" means any and all
       inventions and discoveries, including improvements, original works of
       authorship, designs, formulas, processes, computer programs, databases,
       trade secrets, and related proprietary information and materials.

       a.     Your Rights in Inventions

              I.     Previous Employee Inventions
                     Previous employee Inventions belong to you.

              II.    Future Employee Inventions

                     General Magic acknowledges and agrees as provided in
                     Section 2870 of the California Labor Code(1) that any
                     Inventions that: (a) you develop entirely on your own time,
                     (b) you develop without using General Magic equipment,
                     supplies, facilities, or trade secret information, (c) do
                     not result from any work performed by you for General
                     Magic, and (d) do not relate to General Magic's business,
                     or its actual or demonstrably anticipated research or
                     development, will be owned entirely by you, even if
                     developed by you during the time period in which you are
                     employed by General Magic.

       b.     General Magic's Right in Inventions

              I.     Disclosure

                     You agree to make full written disclosure in confidence to
                     General Magic of any and all Inventions that you develop
                     during or as the result of your employment with General
                     Magic.

              II.    Assignment of Inventions to General Magic

                     You agree that all Inventions that: (a) are developed using
                     the equipment, supplies, facilities, or trade secrets of
                     General Magic, (b) result from work performed by you for
                     General Magic, and (c) relate to the business, or actual or
                     demonstrably anticipated research or development of General
                     Magic ("General Magic Inventions"), will be the sole and
                     exclusive property of General Magic, and you will and
                     hereby transfer and assign any "moral" rights that you may
                     have in any General Magic Inventions under any copyright or
                     other similar law, whether U.S. or foreign. You agree to
                     waive and never to assert any such "moral" rights in
                     General Magic Inventions during or after the termination of
                     your employment with

--------------------------------------------------------------------------------
General Magic Proprietary Rights and Information Agreement           Page 1 of 4

<PAGE>   13

              General Magic. This Agreement applies only to those Inventions
              that are related, indirectly or directly, to your assignment and
              responsibility at General Magic.

       c.     Protection of General Magic Inventions

              You agree (at General Magic's expense) to assist General Magic in
              every proper way to obtain and to help General Magic enforce
              patents, copyrights, and other legal protections for General Magic
              Inventions in any and all countries. You agree to execute any
              documents that General Magic may reasonably request for use in
              obtaining or enforcing such patents, copyrights, and other legal
              protections. You acknowledge that all original works for
              authorship that are made by you (solely or jointly with others)
              within the scope of your employment at General Magic, and that are
              protectable by copyright, are "works made for hire," as that term
              is defined in the Untied States Copyright Act (17 U.S.C. section
              101).

2.0    PROPRIETARY INFORMATION

       You understand that your employment with General Magic creates a
       relationship of confidence and trust with respect to any information of a
       confidential or secret nature that may be disclosed to you by General
       Magic or learned by you in the course of your duties at General Magic,
       and that relates to: (a) the business of General Magic or that of any of
       its subsidiaries, affiliates, customers, suppliers, or (b) any
       confidential information of third parties disclosed to General Magic.
       Such confidential and secret information includes information concerning
       Inventions, marketing plans, product plans, business strategies,
       financial information and forecasts, personnel information, and customer
       lists and is referred to collectively in this Agreement as any
       "Proprietary Information."

       a.     Confidentiality of Proprietary Information

              At all times, both during your employment by General Magic and
              after your termination of employment, you agree to keep all
              Proprietary Information in confidence and trust, and you will not
              use or disclose Proprietary Information without the written
              consent of General Magic, except as may be necessary to perform
              your duties as an employee of General Magic. Upon termination of
              your employment with General Magic, you will promptly deliver to
              General Magic all documents and materials of any kind pertaining
              to your work with General Magic, and you will not take with you
              any documents, materials, or copies thereof, whether on paper,
              magnetic, or optical media or any other medium, containing any
              Proprietary Information.

       b.     Information of Former Employer

              You agree that during your employment at General Magic you will
              not improperly use or disclose any confidential or proprietary
              information or trade secrets of your former employers.

--------------------------------------------------------------------------------
General Magic Proprietary Rights and Information Agreement           Page 2 of 4

<PAGE>   14

3.0    NO CONFLICTING OBLIGATIONS

       a.     No Conflicting Employment

              You agree that during the term of your employment at General Magic
              you will not plan or engage in any other employment, occupation,
              consulting, or other business activity directly related to the
              business in which General Magic is involved or becomes involved
              during the term of your employment, nor will you engage in any
              other activities that conflict with your employment obligation to
              General Magic. This restriction may only be modified by written
              permission of a member of the Management Team.

       b.     No Conflicting Agreements

              You represent to General Magic that you have no other agreements
              or commitments that would hinder or prevent the full performance
              of your duties as a General Magic employee or obligations under
              this Agreement, and you agree not to enter into any such
              conflicting agreement during the term of your employment at
              General Magic.

       c.     Disclosure of Agreement

              You hereby authorize General Magic to notify others, including
              customers of General Magic, and any future employers you may have,
              of the terms of this Agreement and your responsibilities under
              this Agreement.

4.0    NO IMPLIED EMPLOYMENT RIGHTS

       You understand and agree that this Agreement does not confer upon you any
       rights to continued employment by General Magic that you would to
       otherwise have, nor does this Agreement obligate General Magic to employ
       you for any specific period of time.

5.0    GENERAL PROVISIONS

       a.     Severablity

              If one or more of the provisions of this Agreement are deemed void
              by law, then the remaining provisions will continue in full force
              and effect.

       b.     Governing Law

              This Agreement will be governed by the laws of the State of
              California, excluding that body of law concerning conflicts of
              law. Any litigation or dispute resolution between the parties
              relating to this Agreement will take place in Santa Clara County,
              California, and you and General Magic each contest to the personal
              jurisdiction of and venue in the state and federal courts within
              that county.

       c.     Entire Agreement

              This Agreement sets forth the entire Agreement an understanding
              between you and General Magic relating to the subject matter of
              this Agreement. No modification to or amendment of this Agreement,
              nor any waiver of any rights under this Agreement, will be
              effective unless in writing signed by both you and any authorized
              representative of

--------------------------------------------------------------------------------
General Magic Proprietary Rights and Information Agreement           Page 3 of 4

<PAGE>   15

              General Magic. Any subsequent changes in your duties, salary, or
              compensation will not affect the validity or scope of this
              Agreement.

       d.     Successors and Assigns

              This Agreement will be binding upon your heirs, executors,
              administrators, and other legal representatives and will be for
              the benefit of General Magic, its successors and assigns.

Please make and retain a copy of this Agreement for your records.

/s/ K. M. LAYTON                        1/02/01
----------------------------------      ----------------------------------------
Employee Signature                      Date Signed

KATHLEEN M. LAYTON
----------------------------------
Print Name

----------

(1)    California Labor Code, Section 2870, Employment Agreements, Assignment of
       Rights

       a.     Any provision in an employment agreement which provides that an
              employee shall assign, or offer to assign, any of his or her
              rights in an invention to his or her employer shall not apply to
              an invention that the employee developed entirely on his or her
              own time without using the employer's equipment, supplies,
              facilities, or trade secret information except for those
              inventions that either:

              1)     Relate at the time of conception or reduction to practice
                     of the invention to the employer's business, or actual or
                     demonstrably anticipated research or development of the
                     employer.

              2)     Result from any work performed by the employee for the
                     employer. To the extent a provision in an employment
                     agreement purports to require an employee to assign an
                     invention otherwise excluded from being required to be
                     assigned under subdivision (a.), the provision is against
                     the public policy of this state and is unenforceable.

--------------------------------------------------------------------------------
General Magic Proprietary Rights and Information Agreement           Page 4 of 4
<PAGE>   16
                                                                       EXHIBIT C

                           INDEMNIFICATION AGREEMENT

     (Incorporated by reference to Exhibit 10.1 to the Company's Report on
  Form 10-Q filed with the Securities and Exchange Commission on May 15, 2000

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