Document:

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                                                                    EXHIBIT 10.2

                           [GENERAL MAGIC LETTERHEAD]

May 10, 2001

Personal and Confidential

Dr. Steven Markman
c/o General Magic, Inc.
420 North Mary Avenue
Sunnyvale, California  94085

Dear Steve:

This will confirm your agreement to accept payment in the total amount of
$350,000 in lieu of any and all cash payments otherwise due under your September
12, 1999 Employment Agreement ("Employment Agreement"), which payment shall be
payable in two installments of $175,000 each, less applicable payroll taxes, on
May 18, 2001 and July 13, 2001, respectively.

This also will confirm your agreement to continue to serve as a founding member
of the Company's Industry Advisory Board ("IAB") for a minimum of six months,
but for no more than ten hours per month. For so long as you serve in this
capacity, you will be deemed an employee (but not an officer or executive) of
the Company. We value your agreement to lend your expertise to the cause of
General Magic, and thank you for your continuing commitment to the Company.

As an employee, you will be eligible 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 shall not be eligible
for a bonus for your work in 2001 and thereafter. In addition, from and after
May 4, 2001, you will not be eligible to participate in the Company's life,
accident and long term disability insurance programs, or to accrue paid time off
benefits. Should the reduction in your hours from and after May 4, 2001, trigger
a termination of your medical, dental and vision benefits under applicable law
or the Company's insurance policies, you will be eligible for continuation
coverage pursuant to COBRA.

In consideration of the foregoing, the Board of Directors granted you an option
to purchase an aggregate of 685,000 shares of the Company's common stock at an
exercise price equal to the average of the high and low bid prices of the stock
on April 26, 2001 (the "Grant Date"). The option has been granted to you outside
of the Company's existing stock option plans, and shall be governed by and
subject to the terms and

<PAGE>   2

Dr. Steve Markman
May 10, 2001
Page 2 of 3

conditions of a stock option agreement 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 option has a term of ten years, will become vested
and exercisable on the six-month anniversary of the Grant Date (provided you
continue in service with the Company through that date), and shall remain
exercisable for a period of eighteen (18) months following the date your service
to the Company terminates (provided it they shall not be exercisable beyond the
option term). For purposes of this option, you will be deemed to continue in the
service of the Company for so long as you render services as an employee of the
Company or any parent or subsidiary corporation. Notwithstanding the foregoing,
in the event of a Change in Control (as defined in the Employment Agreement),
this option shall become immediately vested and exercisable. The Company will
undertake, as soon as practicable, to register the shares underlying the option
on Form S-8 under the Securities Act of 1933, and shall keep such Form S-8 in
effect for the entire period the option remains outstanding. Please note that,
because this option was granted outside of the Company's existing stock option
plans, it is a non-qualified stock option, and does not have the tax advantages
associated with incentive stock options.

In further consideration of the foregoing, the Company hereby assigns you all
right, title and interest in and to the Intergraph Windows NT work station and
related software (serial no. H28WBE), together with the Viewsonic flat panel
monitor (serial no. MF90400470) purchased by General Magic for your use.

Finally, all stock options previously granted to you by the Company shall
continue to vest for so long as you continue as an employee of the Company, and
shall remain exercisable for a period of eighteen months following the date your
service terminates, provided that they shall not be exercisable beyond the
option term.

You will be paid your base salary through May 4, 2001. Thereafter, you shall not
be entitled to any other payment from the Company, except as provided herein.
This will also confirm that any paid time off benefits accrued for your account
through May 4, 2001, have been paid to you; that you will continue to have
access to your existing Portico account, at your expense, subject to the user
license attached hereto as Exhibit B; and that the Company will loan to you a
screenphone prototype, together with a DataRover 840 handheld communications
device (serial no. 71200241) pursuant to an Equipment Loan Agreement in the form
attached hereto as Exhibit C.

This letter, together with the Proprietary Rights and Information Agreement
signed by you upon your employment represent the entire agreement between us,
and supersede all prior negotiations, representations or agreements between you
and the Company regarding your employment, whether written or oral, except that,
in the event of any dispute or claim relating to or arising out of your
employment relationship with the Company, this Agreement, or the separation of
your employment with the Company,

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Dr. Steve Markman
May 10, 2001
Page 3 of 3

such claim or dispute shall be resolved as set forth in Paragraph 7 of the
Employment Agreement.

This agreement shall be governed by and construed in accordance with the laws of
the State of California.

If this letter accurately sets forth our agreement, please execute the enclosed
copy and return it to Elena Morera.

Very truly yours,

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

Accepted:  /s/ STEVEN MARKMAN
<PAGE>   4
                                                                       EXHIBIT A

                      NONSTATUTORY STOCK OPTION AGREEMENT

     (Incorporated by reference to Exhibit 4.27 to the Company's Report on
 Form S-8 filed with the Securities and Exchange Commission on August 8, 2001)
<PAGE>   5
                                                                       EXHIBIT B

                              PORTICO USER LICENSE
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General Magic, Inc. Individual Subscriber Agreement

Welcome to the Portico(TM) service ("Service"). The Service is provided to you
(the subscriber) by General Magic, Inc. ("General Magic") exclusively under the
terms and conditions of this agreement. Your use of the Service constitutes your
acceptance of the terms and conditions of this agreement now in effect and as
updated from time to time by General Magic.

1.     Eligible Subscribers. You must be at least 18 years of age to use the
       Service.

2.     Fees and Payment Authorization. General Magic will provide you a monthly
       invoice stating the amount of fees incurred through use of your account.
       The fees for use of your account (which may include, among other charges,
       an initial sign-up fee, a base monthly fee, a connect-time fee, content
       usage fees, early termination fees, and any applicable taxes) will be
       charged to the credit card you have specified. Your account to use the
       Service will not be established until General Magic has verified that
       this credit card information is accurate and that your credit card is in
       good standing. Please note that General Magic does not accept debit/ATM
       cards. The terms of the payment plans currently in effect are disclosed
       in the accompanying document entitled Portico(TM) Prices and Payment
       Plans. Unless otherwise provided in the payment plan you select upon
       completing the subscriber information form, General Magic may, in its
       discretion, change the payment plans or Service fees or add new fees from
       time to time. General Magic will notify you in advance of any such
       changes or new fees that may affect your via email, telephone, or through
       the Service. You may obtain the terms of the payment plans currently in
       effect at any time by contacting an authorized reseller of the Service or
       General Magic's customer service group at 1-800-774-3311.

3.     Access to Account. When your account is established, General Magic will
       provide you with a toll-free telephone number and temporary passcode
       through which you may access your account. You should change this
       temporary passcode immediately after your account is established. This
       passcode is an important means of preventing others from accessing your
       account via the toll-free number; you must keep the passcode
       confidential. You may disclose the passcode to other people whom you want
       to have access to use your account on your behalf (but not for their own
       use), but you will be fully responsible for all charges and liabilities
       incurred by their use. You will also be fully responsible for any charges
       and liabilities incurred through use of your account by anyone who
       obtains this passcode as a result of your negligence, until you notify
       General Magic's customer service group at 1-800-774-3311. General Magic
       may temporarily disable access to your account if you report unauthorized
       use or if usage of the account dramatically exceeds normal usage patterns
       within a short time period. You understand and agree that you will have
       no proprietary rights to the toll-free telephone number provided by
       General Magic for your account.

4.     Use of Account; Privacy. You may not transfer your account, in whole or
       in part, to another person. You and other users of your account must
       comply with all applicable laws and regulations in using the Service and
       may not use the Service to impersonate or harass any other person, to
       intercept any communications not intended for you, or to engage in
       "spamming" or similar conduct. General Magic respects the privacy of your
       personal communications and will not monitor or disclose any
       communications you send or receive via the Service, except as may be
       required by law or legal process. General Magic may, from time to time,
       keep audible records of your spoken commands to the Service in order to
       improve the Service. As with other forms of communication such as
       Internet emails and cellular phone conversations, the privacy of
       communications you send and receive via the Service cannot be guaranteed
       by General Magic.

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5.     Subscriber Information. You (or a representative of General Magic or your
       authorized reseller, in each case with your assistance) must accurately
       complete the subscriber information form. You understand and agree that
       General Magic may compile and maintain lists and databases of the
       information provided on these forms (including yours) and other
       information derived from use of the Service, that General Magic may use
       such information in the operation, administration, management, and
       promotion of the Service, and that General Magic will own the copyright
       in the compilation of such information.

6.     Third Party Content. The Service currently provides you the ability to
       retrieve certain news stories, press releases, stock prices, and similar
       information supplied by news and information services (collectively,
       "Third Party Content"). You understand that General Magic has no
       editorial control over any Third Party Content and that General Magic
       does not guarantee the accuracy or completeness of any Third Party
       Content. You agree that General Magic will have no liability to you, or
       anyone else who uses your account, with regard to any Third Party
       Content. You also understand that the Third Party Content is the
       copyrighted material of the third party that supplies it, is protected by
       copyright and other applicable laws, and may not be reproduced,
       published, broadcast, rewritten, or redistributed without the written
       permission of the third party that supplied it, except to the extent
       allowed under the "fair use" provisions of the U.S. copyright laws or
       comparable provisions of foreign laws. Your use of certain stock price
       information included in the Third Party Content may be subject to, and
       you agree to comply with, the terms of separate agreements provided by
       the suppliers of such information, copies of which will be furnished to
       you by General Magic upon written request.

7.     Software. You may need to use certain software programs to use or have
       full access to certain features of the Service. General Magic will either
       provide such software to you at no additional charge, or provide
       instructions for obtaining such software directly from the company that
       supplies it. Your use of such software typically will be subject to the
       terms of a separate "shrink wrap" or "click screen" license. You agree to
       comply with the terms of all licenses for the software you use in
       connection with the Service.

8.     Changes to the Service or Terms. You understand that General Magic may,
       in its discretion, from time to time change, add, or remove certain
       features of the Service or change the terms of this agreement. General
       Magic will notify you of any changes to the terms of this agreement via
       email, telephone or through the Service; you may obtain the terms in
       effect at any time by contacting an authorized reseller of the Service or
       General Magic's customer service group at 1-800-774-3311. If you are
       unhappy with any change in the Service or agreement, other than a change
       that does not materially alter the existing features of the Service or a
       change that does not materially alter the terms on which the Service is
       offered, you may cancel your account as provided in paragraph 11 without
       penalty within thirty (30) days after General Magic provides you notice
       of the change.

9.     Disclaimer of All Warranties. You understand and agree that the Service
       is provided on an "AS IS" and "AS AVAILABLE" basis. General Magic makes
       no warranty that the Service will meet your requirements or that use of
       the Service will be uninterrupted, timely, secure, or error-free; nor
       does General Magic make any warranty as to the results that may be
       obtained from use of the Service or the accuracy or reliability of any
       information obtained through the Service (including Third Party Content),
       or that any defects in the Service will be corrected. General Magic and
       its suppliers disclaim all warranties of any kind, whether express,
       implied, or statutory, regarding the Service, including any implied
       warranty of title, merchantability, fitness for a particular purpose, or
       non-infringement of third party rights. You understand and agree that any
       material or data obtained through use of the Service is at your own
       discretion and risk and that you will be solely responsible for any
       resulting damage to your computer system or loss of data. General Magic
       makes no warranty regarding any goods or services purchased or

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       obtained through the Service or any transactions entered into through the
       Service. Some states or jurisdictions do not allow the exclusion of
       certain warranties. Therefore, the above exclusions may not apply to you
       to that extent, and nothing in this paragraph should be construed as
       excluding or limiting any warranty beyond what is permissible under
       applicable law.

10.    Limitations of General Magic's Liability. General Magic and its suppliers
       will not be liable for any lost data, business interruption, lost
       profits, or other indirect, consequential, special, or incidental damages
       of any nature arising from or relating to your use of the Service or use
       of the Service through your account by anyone else. General Magic's total
       cumulative liability to you and anyone who uses the Service through your
       account, for any and all claims under any theory of law, will not exceed
       the aggregate amount you paid to General Magic in the preceding twelve
       months. Some states or jurisdictions do not allow the exclusion or
       limitation of certain types of liability. Therefore, the above
       limitations of liability may not apply to you to that extent, and nothing
       in this paragraph should be construed as excluding or limiting General
       Magic's liability beyond what is permissible under applicable law.
       Moreover, this paragraph does not limit General Magic's obligation, if
       General Magic mistakenly or wrongfully overcharges your account, to
       refund the amount of the overcharge.

11.    Termination of Account. You may terminate your account, this agreement,
       and your right to use the Service at any time by contacting General
       Magic's customer service group at 1-800-774-3311 and confirming your
       request in writing to General Magic at 420 North Mary Avenue, Sunnyvale,
       CA 94086. Notifying General Magic in any other way of your desire to
       terminate your account may result in delays in processing your request.
       General Magic may immediately suspend or terminate your account, and
       terminate this agreement, if you have provided false or misleading
       information to General Magic, if you breach any provision in this
       agreement or if the charges to your credit card for the fees described in
       paragraph 2 are refused for any reason. General Magic reserves the right
       to discontinue the Service at any time in its discretion, and to
       terminate your account and this agreement for any other reason if General
       Magic gives you at least five (5) days advance notice. Upon any such
       termination of your account, you will remain obligated to pay all
       outstanding fees and charges relating to your use of the Service before
       termination. Any amounts that remain unpaid more than thirty (30) days
       after General Magic sends you notice that such amounts are due will bear
       interest at the rate of 1.5% per month or the highest rate permitted by
       law, if less than 1.5% per month. Paragraphs 5, 6, 9, 10, 11 and 12 will
       remain in effect notwithstanding the termination of your account or this
       agreement.

12.    Miscellaneous. This agreement will be governed by the laws of the State
       of California as such laws apply to agreements between California
       residents performed entirely within California. If any provision of this
       agreement is invalid or unenforceable under applicable law, such
       provision will be deemed modified to the extent necessary to render such
       provision valid and enforceable and the other provisions of this
       agreement will remain in full force and effect. This document represents
       the entire agreement governing your use of the Service and supersedes any
       prior or contemporaneous written or oral statements by General Magic or
       its representatives or resellers. This agreement may not be amended
       except as provided in paragraph 8. The terms of this agreement will inure
       to the benefit of General Magic, its successors, assigns and licensees.

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

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PORTICO PRICES AND PAYMENT PLANS

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BASIC MONTH-TO-MONTH PLAN

If you choose the Basic Plan, you are electing to receive the Service on a
month-to-month basis for a monthly fee plus a per-minute fee for each minute of
use of the Service. The current monthly fees in effect for the Basic Plan are
shown below. General Magic may increase the fees from time to time effective
beginning with the first month after the increase is announced or published as
described in paragraph 2 of the Subscriber Agreement. If you are not happy with
the increase, you may cancel your account effective at the beginning of the
month in which the increase takes effect, provided that you notify General Magic
of your desire to terminate your account before the beginning of such month. In
addition, you may terminate your account at any time, as provided in the
Subscriber Agreement, effective at the beginning of the next month. If General
Magic discontinues the Service to your account for any reason other than
nonpayment you will receive a pro rata refund of the monthly fee for such month.

BASE MONTHLY FEE: $9.95
CHARGE PER MINUTE FOR ADDITIONAL MINUTES: $.15
INCLUDED MINUTES: 0
ONE TIME SET-UP FEE: $25.00

POWER1000 MONTH-TO-MONTH PLAN

If you choose the Power1000 Plan, you are electing to receive the Service on a
month-to-month basis for a monthly fee that includes 1000 minutes of Service
use, plus a per-minute fee for each minute of use beyond the 1000 bundled
minutes. The current monthly fees in effect for the Power1000 Plan are shown
below. General Magic may increase the fees from time to time effective beginning
with the first month after the increase is announced or published as described
in paragraph 2 of the Subscriber Agreement. If you are not happy with the
increase, you may cancel your account effective at the beginning of the month in
which the increase takes effect, provided that you notify General Magic of your
desire to terminate your account before the beginning of such month. In
addition, you may terminate your account at any time, as provided in the
Subscriber Agreement, effective at the beginning of the next month. If General
Magic discontinues the Service to your account for any reason other than
nonpayment you will receive a pro rata refund of the monthly fee for such month.

BASE MONTHLY FEE: $124.95
CHARGE PER MINUTE FOR ADDITIONAL MINUTES: $.12
INCLUDED MINUTES: 1000
ONE TIME SET-UP FEE: $0.00

INTERNATIONAL CALLING

International incoming and outgoing charges are subject to a surcharge.
Surcharges range from $0.20 per minute (Canada) to $14.00 per minute
(International Marine Satellite INMARSAT, the maritime mobile-satellite
service).

HOW MINUTES OF USE ARE DETERMINED

Please note that account usage includes all of the following: (1) all connect
time used when you call the service, including when you place a call through the
service, (2) all connect time used by a caller who reaches you through the
Service, whether the caller leaves a message or asks the Service to find you,
and (3) all connect time used by the Service in paging you at your direction.
ALSO PLEASE NOTE THAT ALL PLANS INCLUDE ALL DOMESTIC LONG DISTANCE CHARGES. NO
ADDITIONAL CHARGE IS MADE FOR DOMESTIC LONG DISTANCE. Connect time for access to
the Portico service over the telephone is measured and billed as follows. Each
time your Portico account is accessed, you are billed for 18 seconds of connect
time for the initial connection to the service. After 18 seconds, additional
connect time is billed in 6 second increments. You may terminate an outgoing
call initiated through the Portico service immediately by pressing the # key
twice. Otherwise, connect time for a call to or originating from your Portico
account will continue to accumulate until General Magic is signaled by the
external telecommunications network that the call has been terminated, which may
take as long as approximately 25 seconds.

<PAGE>   10
                                                                       EXHIBIT C

                            EQUIPMENT LOAN AGREEMENT
<PAGE>   11

                                 LOAN AGREEMENT

       This Loan Agreement ("Agreement") is made this 10th day of May, 2001, by
and between General Magic, Inc., a Delaware corporation ("General Magic"), and
Steven Markman ("Recipient").

                                   RECITALS:

       WHEREAS, Recipient was employed by General Magic as its Chairman through
April 20, 2001; and

       WHEREAS, Recipient desires to have the use of a screen phone and a
DataRover 840 handheld communications device designed and developed by General
Magic during the term of his employment.

                                    AGREEMENT

       NOW, THEREFORE, in consideration of the mutual promises set forth herein,
it is agreed as follows:

       1. Subject to the terms and conditions set forth hereinafter, General
Magic hereby loans to Recipient the screen phone described as follows: General
Magic screen phone, and the DataRover 840 handheld communications device, Serial
No. 71200241 (collectively the "Equipment").

       2. As between Recipient and General Magic, Recipient acknowledges and
agrees that all right, title and interest in and to the Equipment and its
components, including but not limited to any software or firmware incorporated
therein, remain the property of General Magic.

       3. Recipient agrees to use the Equipment only in the United States for
his own personal use and for no commercial or other purpose. Recipient will not
transfer the Equipment to any third party, nor will Recipient dispose of,
transport or cause to be transported the Equipment outside of the United States,
or encumber the Equipment in any manner. Recipient further agrees that he will
not reverse engineer, disassemble, decompile or otherwise analyze the physical
construction of the Equipment or any of its components, including but not
limited to any firmware or software incorporated therein.

       4. With the exception of the external physical appearance of the
Equipment, Recipient acknowledges and agrees that the Equipment and any of its
components, including but not limited to any software or firmware incorporated
therein are the confidential information of General Magic. Recipient agrees that
he will not disclose, publish or disseminate any such information to any third
party without the express written consent of General Magic.

<PAGE>   12

       5. No ownership or license of the Equipment or any component or
Derivative thereof is either granted or implied by this Agreement or any
disclosure hereunder, including, but not limited to, any license to make, use or
sell any product embodying the confidential information of General Magic
(described in Section 4 above). For purposes of this paragraph, "Derivative"
shall mean: (i) for copyrightable or copyrighted material, any translation,
abridgement, revision or other form in which an existing work may be recast,
transformed or adapted; (ii) for patentable or patented material, any
improvement thereon; and (iii) for material which is protected by trade secret,
any new material derived from such existing trade secret material, including new
material which may be protected by copyright, patent and/or trade secret.

       6. THE EQUIPMENT IS FURNISHED "AS IS," WITHOUT WARRANTY OF ANY KIND,
WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.
RECIPIENT ASSUMES ALL RISK FOR USE OF THE EQUIPMENT.

       7. GENERAL MAGIC WILL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON CONTRACT, TORT, OR ANY
OTHER LEGAL THEORY, ARISING OUT OF THIS AGREEMENT, OR RECIPIENT'S USE OF THE
EQUIPMENT.

       8. The term of this Agreement shall be for a period of one year from the
date first set forth above and shall automatically renew for successive one year
periods unless notice of nonrenewal is given by either party to the other party
at or prior to the end of the then current term. Notwithstanding the foregoing,
General Magic may terminate this Agreement, without notice and effective
immediately, in the event of a material breach of the Agreement by Recipient.
Upon termination of this Agreement, Recipient shall return the Equipment to
General Magic within five (5) days in its original condition, normal wear and
tear excepted.

       9. This Agreement constitutes the entire Agreement of the parties with
respect to the subject matter hereof, and supersedes all prior discussions
between the parties relating thereto. No amendment or modification of this
Agreement shall be valid or binding on the parties unless made in writing and
signed by each of the parties hereto. Recipient may not assign or transfer, in
whole or in part, any of its rights, obligations or duties under this Agreement,
but General Magic may assign or transfer to any third party any or all of its
rights, obligations or duties hereunder. Any assignment or transfer in violation
of the foregoing sentence shall be void. The failure or delay of General Magic
to enforce at any time any provision of this Agreement shall not constitute a
waiver of its right thereafter to enforce each and every provision of this
Agreement. In the event that any of the terms, conditions or provisions of this
Agreement are held to be illegal, unenforceable or invalid by any court of
competent jurisdiction, the remaining terms, conditions or provisions hereof
shall remain in full force and effect.

                                      -2-
<PAGE>   13

       This Agreement shall be effective as of the date first set forth above.

GENERAL MAGIC, INC.
a Delaware corporation

By:
    -------------------------------     -------------------------------------
Its:                                    Steven Markman ("Recipient")
    -------------------------------

                                      -3-<PAGE>   1

                                                                    EXHIBIT 10.3

                           [GENERAL MAGIC LETTERHEAD]

May 25, 2001

CONFIDENTIAL

Mr. David H. Russian
1050 Emerald Street, Unit B
San Diego, CA  92109

Dear David:

We are very pleased to extend an offer to you to join the General Magic team as
Vice President, Finance and Administration and CFO, reporting to Kathie Layton.
This letter sets out the terms of your employment with General Magic.

1.    Base Salary:

      You will be paid a base salary of $9,615.38 every two weeks ($250,000
      annualized), less applicable withholding.

2.    Incentive Cash Compensation:

      As Vice President, Finance and Administration and CFO, you will have the
      opportunity to earn a performance bonus in accordance with General Magic's
      Performance Bonus Plan, as such plan may be modified over time. This Plan
      is based upon your achievement of certain performance-based objectives as
      agreed to by you and your manager, as well as the achievement of certain
      fiscal Company objectives. Bonus payments, if any, shall be made in
      accordance with General Magic's Performance Bonus Plan and its normal
      payroll procedures and will be paid quarterly. Your annual target bonus is
      set at 50% of your base pay.

3.    Stock Options:

      Subject to the approval of the Board, you will be granted options to
      purchase an aggregate of 450,000 shares of the Company's common stock at
      an exercise price per

<PAGE>   2

David H. Russian
May 25, 2001
Page 2 of 4

      share equal to the average of the high and low bid prices of the stock on
      your option grant date. 225,000 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 225,000 will 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 the Company's standard form stock option agreement (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. Board
      meetings typically occur once each quarter, and the fair market value of
      the Company's stock may change based on the Company's financing
      activities, technical and business success, and other factors.

4.    Benefits:

      A booklet describing our benefit plans is included in this package. You
      and your family are eligible for health insurance benefits beginning on
      your start date with General Magic. Please refer to that booklet regarding
      the specifics of the plans.

5.    Sign-on Bonus:

      You will receive a sign-on bonus in the amount of $10,000 (after taxes)
      within the first 30 days of employment. Additionally, you will be
      reimbursed for up to 1 month of temporary living costs while you seek a
      more permanent residence.

6.    Change of Control:

      In addition, in the event you are terminated following a change of control
      you will be entitled to benefits at the executive management level under
      the company's Change of Control Plan, and subject to its terms. A copy of
      the plan is attached for your information.

<PAGE>   3

David H. Russian
May 25, 2001
Page 3 of 4

7.    Severance:

      If General Magic, in its sole discretion, terminates your employment
      within twelve months of your date of employment for any reason (other than
      for just cause or upon your death, disability or voluntary resignation),
      you will receive continuation of your base salary, less any applicable
      state and federal payroll taxes, for a period of six months from the date
      of your termination, in accordance with the company's payroll procedures
      then in effect.

      For the purposes of this Agreement, a termination "for cause" occurs if
      you are terminated for any of the following reasons: (i) material breach
      or neglect of the duties and obligations for which you were employed,
      which breach or neglect continues without remedial action reasonably
      satisfactory to the Company for thirty days following written notice from
      the Company, (ii) your conviction (including a plea of guilty or no
      contest) of a felony or other crime that 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, (iii)
      dishonesty towards, fraud upon, or deliberate injury or attempted injury
      to, the Company or (iv) willful engagement in misconduct which is
      materially and demonstrably injurious to the Company, including the
      improper use or disclosure of the confidential or proprietary information
      of the Company.

8.    "At Will" employment:

      General Magic's employment relationship with all employees is an "at-will"
      arrangement where the employment relationship is voluntary, for no
      specified term, and based on mutual consent. As such, your employment may
      be terminated by you or General Magic at any time, with or without cause
      or advance notice.

As a condition of your employment, you will be required to sign General Magic's
standard Employee Proprietary Information Agreement, without modification, on
your first day of work. In addition, you will also be required to provide
evidence of your identity and eligibility for employment in the United States.
It is imperative that you bring appropriate documentation with you on your first
day of employment; you cannot be put on General Magic's payroll without it. The
required documentation is described within this package.

This offer is valid until end of day Friday, May 25, 2001. The terms and
conditions of this offer letter and the proprietary agreement referenced above
supersede any prior

<PAGE>   4

David H. Russian
May 25, 2001
Page 4 of 4

written or oral communications with you concerning your employment at General
Magic. The provisions of this agreement regarding "at will" employment may only
be modified by a document signed by you and the President of General Magic.
Please indicate your acceptance of these terms and conditions by signing and
dating the enclosed original of this letter and returning it to me. Please
retain the duplicate for your records.

Your acceptance of our offer represents a unique opportunity for us both to grow
and succeed. We want to thank you in advance for your faith in us, and for the
commitment you have made to our common vision. We look forward to working with
you.

Welcome to General Magic!

GENERAL MAGIC, INC.

/s/ KATHIE LAYTON/med
------------------------
Kathie Layton
President and CEO

I agree to and accept employment with General Magic, Inc. on the terms and
conditions set forth in this letter.

/s/ DAVID H. RUSSIAN
------------------------
David H. Russian

Start date:  June 11, 2001
             ----------------

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