POLYCOM INC
10-Q, 1997-05-14
TELEPHONE & TELEGRAPH APPARATUS
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                              UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549
                                           
                                FORM 10-Q
                                           
Quarterly report pursuant to Section 13 or 15(d) of the Securities 
Exchange Act of 1934

              FOR THE QUARTERLY PERIOD ENDED MARCH 30, 1997
                                           
                                    or
                                           
Transition report pursuant to Section 13 or 15(d) of the Securities 
Exchange Act of 1934

            For the transition period from       to        
                                           
                   COMMISSION FILE NUMBER     0-27130
                                           
                              POLYCOM, INC.
                                           
          (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                                           
              DELAWARE                                 94-3128324

    (STATE OR OTHER JURISDICTION OF                  (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)               IDENTIFICATION NUMBER)
                                           
  2584 JUNCTION AVENUE,  SAN JOSE, CA                    95134-1902

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                 (ZIP CODE)

                            (408) 526-9000

           (REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)


Indicate by check mark whether the Registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
Registrant was required to file such reports) and (2) has been subject to 
such filing requirements for the past 90 days.

                            Yes  X      No 
                               -----       -----

There were 19,115,430  shares of the Company's Common Stock, par value 
$.0005, outstanding on March 31, 1997. 

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<PAGE>

TABLE OF CONTENTS

                                                                        PAGE
                                                                        NO.


PART I   FINANCIAL INFORMATION

         Item 1 -- Financial Statements:
         Condensed Consolidated Balance Sheets as of March 31, 1997 
           and December 31, 1996........................................   3
         Condensed Consolidated Statements of Operations for the Three
           Month Periods Ended March 31, 1997 and March 31,1996.........   4
         Condensed Consolidated Statements of Cash Flows for the Three
           Month Periods Ended March 31, 1997 and March 31, 1996........   5
         Notes to Condensed Consolidated Financial Statements...........   6
         Item 2 -- Management's Discussion and Analysis of Financial
           Condition and Results of Operations..........................   9

PART II  OTHER INFORMATION

         Item 6 -- Exhibits and Reports on Form 8-K.....................  15

SIGNATURE...............................................................  16


                                                                             2
<PAGE>

PART 1   FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                 POLYCOM, INC.
                     Condensed Consolidated Balance Sheets
                                 (in thousands)

                                                 March 31,       December 31,
                                                   1997              1996
                                                -----------      ------------
                                                (unaudited)
ASSETS
Current assets:
  Cash and cash equivalents                       $  12,145        $   9,548
  Short-term investments                              8,454           10,101
  Accounts receivable, net                            5,812            6,965
  Inventories                                         7,719            7,458
  Other current assets                                  889              384
                                                  ---------        ---------
     Total current assets                            35,019           34,456
Fixed assets, net                                     3,393            3,164
Other assets                                            361              100
                                                  ---------        ---------
    Total assets                                  $  38,773        $  37,720
                                                  ---------        ---------
                                                  ---------        ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                $   5,598        $   4,307
  Other current liabilities                           2,203            2,192
                                                  ---------        ---------
     Total current liabilities                        7,801            6,499
                                                  ---------        ---------
Stockholders' equity:
  Common stock                                           10               10
  Additional paid-in capital                         42,746           42,521
  Notes receivable from stockholders                    (29)             (29)
  Accumulated deficit                               (11,755)         (11,281)
                                                  ---------        ---------
     Total stockholders' equity                      30,972           31,221
                                                  ---------        ---------
       Total liabilities and stockholders' 
         equity                                   $  38,773        $  37,720
                                                  ---------        ---------
                                                  ---------        ---------

The accompanying notes are an integral part of these financial statements.


                                                                             3
<PAGE>

                                 POLYCOM, INC.
               Condensed Consolidated Statements of Operations
                                  (Unaudited)
                   (in thousands, except per share data)

                                                     Three Months Ended
                                                  March 31,       March 31,
                                                    1997            1996
                                                  ---------       ---------
Net revenues                                      $  10,510       $  8,238 
Cost of net revenues                                  5,653          3,772
                                                  ---------       --------
    Gross profit                                      4,857          4,466
                                                  ---------       --------

Operating expenses:
  Sales and marketing                                 2,682          2,071
  Research and development                            2,221          1,770
  General and administrative                            690            498
                                                  ---------       --------
    Total operating expenses                          5,593          4,339
                                                  ---------       --------

Operating income (loss)                                (736)           127

Interest income, net                                    282             24
Other expense, net                                      (20)           (17)
                                                  ---------       --------

Net income (loss)                                 $    (474)      $    134
                                                  ---------       --------
                                                  ---------       --------

Net income (loss) per share                       $   (0.03)      $   0.01
                                                  ---------       --------
                                                  ---------       --------

Weighted average shares outstanding                  18,958          17,164 
                                                  ---------       ---------
                                                  ---------       ---------

The accompanying notes are an integral part of these financial statements.


                                                                            4
<PAGE>

                                    POLYCOM, INC.
                   Condensed Consolidated Statements of Cash Flows
                                     (Unaudited)
                                    (in thousands)

<TABLE>
<CAPTION>
                                                                       Three Months Ended
                                                                     March 31,      March 31,
                                                                       1997           1996
                                                                     ---------     ----------
<S>                                                                  <C>           <C>
Cash flows from operating activities:
Net income (loss)                                                    $   (474)     $     134 
Adjustments to reconcile net income (loss) to 
  net cash provided by (used in) operating activities:
  Depreciation and amortization                                           424            352 
  Provision for excess and obsolete inventories                           205            119 
  Changes in assets & liabilities:
    Accounts receivable                                                 1,153         (1,030)
    Inventories                                                          (466)          (414)
    Prepaid expenses and other assets                                    (766)          (149)
    Accounts payable                                                    1,291           (451)
    Accrued liabilities                                                    11             30 
                                                                    ---------      ---------
Net cash provided by (used in) operating activities                     1,378         (1,409)

Cash flows from investing activities:
  Acquisition of fixed assets                                            (653)           (34)
  Proceeds from sale and maturity of short term investments             2,649            -
  Purchases of short term investments                                  (1,002)        (1,286)
                                                                    ---------      ---------
Net cash provided by (used in) investing activities                       994         (1,320)

Cash flows from financing activities:
  Proceeds from issuance of notes payable                                  -           1,224 
  Repayment of notes payable and capital leases                            -          (1,632)
  Proceeds from issuance of common stock, net of repurchases              225            (34)
  Proceeds from repayment of notes receivable from stockholders            -              60 
                                                                    ---------      ---------
Net cash provided by (used in) financing activities                       225           (382)
                                                                    ---------      ---------
Net increase (decrease) in cash                                         2,597         (3,111)

Cash and cash equivalents, beginning of year                            9,548          3,539 
                                                                    ---------      ---------
Cash and cash equivalents, end of period                            $  12,145      $     428 
                                                                    ---------      ---------
                                                                    ---------      ---------
Supplemental disclosure of cash flow information:
  Cash paid for interest                                            $      -       $     64 

Supplemental schedule of noncash investing and financing:
  Fixed assets financed by notes payable                            $      -       $    329 
  Common stock issued for notes from shareholders                   $      -       $     17 
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                                                             5
<PAGE>

                                  Polycom, Inc.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1. BASIS OF PRESENTATION

The condensed consolidated balance sheet as of March 31, 1997 and the 
condensed consolidated statements of operations for the three month periods 
ending March 31, 1997 and 1996 and condensed consolidated statements of cash 
flows for the three month periods ending March 31, 1997 and 1996, have been 
prepared by the Company without audit.  In the opinion of management, all 
adjustments (which include only normal recurring adjustments) necessary to 
present fairly the financial position, results of operations and cash flows 
at March 31, 1997 and for all periods presented have been made.  The 
condensed consolidated balance sheet at December 31, 1996 has been derived 
from the audited financial statements at that date.

Certain information and footnote disclosures normally included in financial 
statements prepared in accordance with generally accepted accounting 
principles have been condensed or omitted pursuant to the Securities and 
Exchange Commission rules and regulations.  These condensed financial 
statements should be read in conjunction with the audited financial 
statements and notes thereto included in the Company's Report on Form 10-K 
dated March 26, 1997 and filed with the Securities and Exchange Commission.

The Company uses a 52-53 week fiscal year.  Each reporting period ends on the 
last Sunday of a month.  As a result, a fiscal year may not end as of the 
same day as the calendar period.  For convenience of presentation, the 
accompanying consolidated financial statements have been shown as ending on 
March 31 and December 31 of each applicable period.

This Report on Form 10-Q contains forward looking statements that involve 
risks and uncertainties, including possible fluctuations in quarterly 
results; the market acceptance of ShowStation and the risks associated with 
this emerging market; the acceptance of SoundPoint, SoundStation Premier and 
other new products; the manufacturing transfer of the SoundStation product 
line; the impact of competitive products and pricing; and the other risks 
detailed from time to time in the Company's SEC reports, including the Form 
10-K dated March 26, 1997.

2. INVENTORIES

Inventories are stated at the lower of cost or market.  Cost is determined on 
a standard cost basis which approximates the first-in, first-out ("FIFO") 
method. Inventories consisted of the following (in thousands):

                        March 31,     December 31,
                          1997            1996
                        --------      ------------

     Raw materials      $  2,991        $  3,252 
     Finished goods        4,728           4,206 
                        --------        --------
                        $  7,719        $  7,458 
                        --------        --------
                        --------        --------


                                                                           6
<PAGE>

3. BANK LINE OF CREDIT

On April 15, 1997, the Company's revolving line of credit with a bank 
expired. The Company is currently negotiating with the bank to establish a 
new line of credit; however, there can be no assurance that these 
negotiations will be successful.

4. STOCK OPTION REPRICING

In March 1997, the Company implemented an option cancellation and regrant 
program for employees (other than executive officers) holding stock options 
with exercise prices per share in excess of $4.50. Outstanding options 
covering an aggregate of 223,200 shares with exercise prices in excess of 
$4.50 per share were canceled and new options for the same number of shares 
were granted with an exercise price of $4.375 per share. The new options will 
vest over a five-year period beginning on March 5, 1997.

5. PER SHARE INFORMATION

Net income (loss) per share is computed using the weighted average number of 
common and dilutive common equivalent shares outstanding during the period. 
Common equivalent shares consist of shares issuable upon the exercise of 
stock options, using the treasury stock method. Common stock issued under a 
stock option plan which are subject to repurchase are excluded from shares 
issued in the computation of net loss per share as their effect is 
antidilutive.

6. RECENT ACCOUNTING PRONOUNCEMENT

In February 1997, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 
128). SFAS No. 128 establishes a different method of computing net income 
(loss) per share than is currently required under Accounting Principles Board 
Opinion No. 15.  Under SFAS No. 128, the Company will be required to present 
both basic net income (loss) per share and diluted net income (loss) per 
share.  Basic and diluted net loss per share is expected to approximate the 
currently presented net loss per share.  However, basic net income per share 
is expected to be higher than net income per share as currently computed 
because the effect of dilutive stock options will not be considered in 
computing basic net income per share.  Diluted net income per share is 
expected to be comparable to the currently presented net income per share.

The Company will adopt SFAS No. 128 in its fiscal quarter ending December 31, 
1997 and at that time all historical net income (loss) per share data will be 
restated to conform to the provisions of SFAS No. 128.

7. AGREEMENT WITH 3M

In March 1997, the Company entered into a joint development and marketing 
agreement with Minnesota Mining and Manufacturing Company (3M). Under the 
agreement, 3M provides $3.0 million in funding to Polycom for certain 
deliverables related to the development of dataconferencing products and will 
also provide shared technology resources for the development of future 
products. Polycom will grant 3M exclusive private-label rights in certain 
distribution channels to the products developed under this agreement. In 
addition, 3M received warrants to purchase 2,000,000 shares of the Company's 
common stock at an exercise price of $7.50 per share. The warrants expire in 
March 1999, which may be extended until March 2000 depending on the delivery 
of Polycom's first product developed under the agreement.

                                                                             7
<PAGE>

8. RELATED PARTY TRANSACTION

In March 1997, the Company loaned $250,000 to an officer of the Company under 
the terms of a note receivable which is due in March 2002. The note is 
secured by shares of the Company's stock owned by the officer.


                                                                             8
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW 

Polycom was incorporated in December 1990 to develop, manufacture and market 
audioconferencing and dataconferencing products that facilitate meetings at a 
distance. The Company was engaged principally in research and development 
from inception through September 1992, when it began volume shipments of its 
first audioconferencing product, SoundStation. The Company's 
audioconferencing products include SoundStation, SoundStation EX, 
SoundStation Premier (introduced in November 1996) and SoundPoint, a desktop 
audioconferencing product introduced in September 1996. The Company began 
shipping its first dataconferencing product, ShowStation, in November 1995. 
The Company markets its products domestically and internationally through a 
direct sales force and a network of value-added resellers (VARs) and original 
equipment manufacturers (OEMs). Through March 31, 1997, the Company has 
derived a substantial majority of its net revenues from sales of its 
SoundStation products. The Company anticipates that sales of its SoundStation 
product line will continue to account for a substantial majority of net 
revenues at least through the year ending December 31, 1997. Any factor 
adversely affecting the demand or supply for the SoundStation product line 
could materially adversely affect the Company's business, financial 
condition, cash flows or results of operations. 

From inception through the nine month period ended September 30, 1995, the 
Company incurred losses from operations, primarily as a result of its 
investments in the development of its products and the expansion of its sales 
and marketing, manufacturing and administrative organizations. The Company 
achieved profitability in the fourth quarter of 1995 and generated a small 
operating income in each quarter of fiscal 1996.  The Company incurred an 
operating loss in the first quarter of 1997. The Company intends to continue 
to invest significantly in research and development, and plans to operate 
with an operating loss or break-even results through the third quarter of 
1997.  There can be no assurance that the Company will achieve its operating 
plans or achieve profitable operations in any subsequent period. 

In January 1997, the Company announced plans to divisionalize the Company 
along the two lines of business, audioconferencing and dataconferencing.  The 
Company named a general manager for each division and formally restructured 
the Company's research and development organization into two separate 
divisions, reporting to each business' general manager.  Business unit 
alignments were also made in the Company's sales, marketing and general and 
administrative organizations.

In March 1997, the Company entered into a joint development and marketing 
agreement with Minnesota Mining and Manufacturing Company (3M). Under the 
agreement, 3M provides $3.0 million in funding to Polycom for certain 
deliverables related to the development of the next generation 
dataconferencing product and will also provide shared technology resources 
for the development of future products. Polycom will grant 3M exclusive 
private-label rights in certain distribution channels to the products 
developed under this agreement. In addition, 3M received warrants to purchase 
2,000,000 shares of the Company's common stock at an exercise price of $7.50 
per share. The warrants expire in March 1999, which may be extended until 
March 2000 depending on the delivery of Polycom's first product developed 
under the agreement.

This Report on Form 10-Q contains forward looking statements that involve 
risks and uncertainties, including possible fluctuations in quarterly 
results; the market acceptance of ShowStation and the risks associated with 
this emerging market; the acceptance of SoundPoint, SoundStation Premier and 
other new products; the manufacturing transfer of the SoundStation product 
line; the impact of competitive products and pricing; and the other risks 
detailed from time to time in the Company's SEC reports, including the Form 
10-K dated March 26, 1997.


                                                                             9
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth, as a percentage of net revenues, condensed 
consolidated statements of operations data for the periods indicated. 

                                            Three Months Ended
                                       March 31,           March 31,
                                         1997                1996
                                       ---------           ---------
Net revenues                                100%                100%
Cost of net  revenues                        54%                 46%
                                       ---------           ---------
    Gross profit                             46%                 54%
                                       ---------           ---------
Operating expenses:
  Sales and marketing                        25%                 25%
  Research and development                   21%                 21%
  General and administrative                  7%                  6%
                                       ---------           ---------
    Total operating expenses                 53%                 52%
                                       ---------           ---------

Operating income (loss)                      (7%)                 2%

Interest income, net                          3%                  0%
Other expense, net                            0%                  0%
                                       ---------           ---------
Net income (loss)                            (4%)                 2%
                                       ---------           ---------
                                       ---------           ---------

The following table sets forth net revenues by line of business for the 
periods indicated (amounts in thousands).

                                             Three Months Ended
                                         March 31,          March 31,
                                            1997               1996
                                         ---------          ---------
Audioconferencing:
Net revenues                             $  8,345           $  6,672 
Cost of net revenues                        4,247              2,542 
                                         ---------          ---------
  Gross profit                           $  4,098           $  4,130 
                                         ---------          ---------
                                         ---------          ---------
  Gross margin                                 49%                62%

Dataconferencing:
Net revenues                             $  2,165           $  1,566 
Cost of net revenues                        1,406              1,230 
                                         ---------          ---------
  Gross profit                             $  759             $  336 
                                         ---------          ---------
                                         ---------          ---------
  Gross margin                                 35%                21%


Total net revenues increased 28% from $8.2 million in the first quarter of 
1996 to $10.5 million in the first quarter of 1997. Within the 
audioconferencing product line, net revenues increased $1.7 million or 25% to 
$8.3 million in the 1997 quarter. The increase is due to the impact of new 
products introduced in the third and fourth quarters of 1996 partially offset 
by the effect of the 37% price reduction on SoundStation products sold in 
North America, effective January 1997. However, SoundStation unit sales 
increased significantly in the 1997 quarter compared to the 1996 quarter, 
partially mitigating the impact of the price reduction. Dataconferencing net 
revenues increased $0.6 million or 38% from the first quarter of 1996. 

                                                                            10
<PAGE>

Dataconferencing net revenues in 1997 include $1.0 million associated with 
the joint development and marketing agreement with 3M.  During the first 
quarters of 1997 and 1996, the Company derived a substantial majority of its 
net revenues from sales of its SoundStation product family. No customer or 
reseller accounted for more than 10% of the Company's net revenues during the 
1997 or 1996 periods. 

International net revenues accounted for 21% of total net revenues for the 
first quarters of both 1997 and 1996. The Company anticipates that 
international sales will continue to account for a significant portion of 
total net revenues for the foreseeable future. However, international net 
revenues may fluctuate in the future as the Company introduces new products, 
since the Company expects to initially introduce such products in North 
America and also because of the additional time required for product 
homologation and regulatory approvals of new products in international 
markets. In addition, the implementation of the international price reduction 
for SoundStation products effective April 1997 will affect international 
revenues in future quarters. To the extent the Company is unable to expand 
international sales in a timely and cost-effective manner, the Company's 
business, financial condition or results of operations could be adversely 
affected. There can be no assurance that the Company will be able to maintain 
or increase international market demand for the Company's products. To date, 
a substantial majority of the Company's international sales have been 
denominated in U.S. currency;  however, the Company expects that in the 
future more international sales may be denominated in local currencies.

Cost of net revenues consists primarily of manufacturing costs of the Company 
and the Company's contract manufacturers, warranty expense and allocation of 
overhead expenses. Gross margin represented 46% and 54% of net revenues for 
the first quarters of 1997 and 1996, respectively. By product line, 
audioconferencing gross margin declined from 62% in the 1996 quarter to 49% 
in 1997, while dataconferencing gross margin increased from 21% in 1996 to 
35% in 1997. The decrease in audioconferencing gross margin is primarily 
attributable to the North American price reduction on SoundStation products 
implemented in January 1997 combined with the impact of the lower margin 
SoundPoint product. The dataconferencing gross margin increase is entirely 
due to the revenue received under the 3M agreement, which had very low 
associated costs.

The Company's historical price reductions have been driven by the Company's 
desire to expand the market for its products, and the Company expects that in 
the future it may further reduce prices or introduce new products that carry 
lower margins in order to further expand the market or to respond to 
competitive pricing pressures, although there can be no assurance that such 
actions by the Company will expand the market for its products or be 
sufficient to meet competitive pricing pressures. In the future, gross margin 
may be affected by price competition and changes in unit volume, product cost 
and warranty expenses. Gross margin may also be impacted by the mix of 
distribution channels used by the Company, the mix of products sold and the 
mix of international versus North American revenues. The Company typically 
realizes higher gross margin on direct sales than on sales through indirect 
channels and higher gross margin on international revenues than on North 
American revenues. If sales through resellers, especially OEMs, increase as a 
percentage of total revenues, the Company's gross margin will be adversely 
impacted. 

Sales and marketing expenses consist primarily of salaries and commissions, 
advertising and promotional expenses, allocation of overhead expenses and 
customer service and support costs.  Sales and marketing expenses were $2.7 
million and $2.1 million in the first quarters of 1997 and 1996, 
respectively, an increase in absolute dollars of 30%. As a percent of net 
revenues, sales and marketing expenses remained constant at 25% in each of 
the quarters presented. The increase in absolute dollars was primarily 
related to the expansion of the Company's sales and marketing organization, 
particularly the increase in spending to generate direct  and retail channel 
sales.  The Company expects to continue to increase its sales and marketing 
expenses in absolute dollar amounts in an effort to expand North American and 
international markets, market new products and establish and expand 
distribution channels.  In particular, due to the innovative nature of the 
ShowStation products, the Company has incurred significant expenses to 
develop a sales presence for the ShowStation product and believes it will be 
required to incur significant additional expenses for sales and marketing, 
including advertising, to educate potential customers as to the desirability 
of ShowStation.  In addition, the Company is continuing to invest in the 
market launch of its 


                                                                           11
<PAGE>

new SoundPoint and SoundStation Premier product lines and expects to make a 
significant investment in advertising and product promotion for all product 
lines.

Research and development expenses consist primarily of compensation costs, 
consulting fees, allocation of overhead expense, supplies, depreciation of 
equipment and product marketing expenses.  Research and development expenses 
were $2.2 million and $1.8 million for the first quarters of 1997 and 1996, 
respectively, representing 21% of net revenues in each period. The increase 
in the dollar amount of research and development expenses was primarily 
attributable to increased staffing and associated support to expand and 
enhance the Company's product lines. The Company believes that technological 
leadership is critical to its success and is committed to continuing a high 
level of research and development, especially in the development of the 
planned next generation ShowStation product. Consequently, the Company 
intends to increase its research and development expenses in absolute dollars 
in the future.

General and administrative expenses consist of compensation costs, allocation 
of overhead expense and outside legal and accounting expenses.  General and 
administrative expenses were $0.7 million and $0.5 million for the first 
quarters of 1997 and 1996, respectively, representing 7% and 6% of net 
revenues for each respective period. The increase in dollar amount was 
primarily due to increased staffing, including the hiring of a president, to 
support the Company's growth and increased focus in both the 
audioconferencing and dataconferencing divisions.  The Company believes that 
its general and administrative expenses will increase in absolute dollar 
amounts in the future primarily as a result of expansion of the Company's 
administrative staff and costs related to being a public company.

Interest income consists of interest earned on the Company's cash equivalents 
and short-term investments. In the first quarter of 1996, interest income is 
reported net of interest expense on the Company's bank debt facilities. The 
increase in interest income, net, in the first quarter of 1997 over the same 
period of 1996 is primarily due to the increase in the Company's cash 
equivalents and short-term investments as a result of its initial public 
offering in the second quarter of 1996. In addition, no interest expense was 
incurred in the first quarter of 1997. 

The Company accounts for income taxes in accordance with the Financial 
Accounting Standards Board's Statement of Financial Accounting Standards No. 
109 "Accounting for Income Taxes."  The Company expects to incur operating 
losses or break-even results through the third quarter of 1997 and 
consequently expects to incur minimal federal and state income taxes in 1997. 
As of December 31, 1996, the Company had approximately $6.4 million in 
federal net operating loss carryforwards and $790,000 in tax credit 
carryforwards.  The future utilization of the Company's net operating loss 
carryforwards may be subject to certain limitations upon certain changes in 
ownership.  The Company believes that its initial public offering on April 
29, 1996 triggered a change in ownership pursuant to the Internal Revenue 
Code of 1986, as amended, such that the annual limitation for utilization of 
federal net operating loss carryforwards will be approximately $7.1 million.

The Company has established a valuation allowance against its deferred tax 
assets due to the uncertainty surrounding the realization of such assets. 
Management evaluates the recoverability of the deferred tax assets and the 
level of the valuation allowance on a quarterly basis.  At such time it is 
determined that it is more likely than not that deferred tax assets are 
realizable, the valuation allowance will be appropriately reduced. 


                                                                            12
<PAGE>

OTHER FACTORS AFFECTING FUTURE OPERATIONS

The Company's net revenues have grown primarily through increased market 
acceptance of its established audioconferencing product line, new product 
introductions and, to a lesser extent, through the expansion of the Company's 
North American and international distribution networks. While the Company has 
experienced growth in net revenues in recent quarters, it does not believe 
that the historical growth rates in net revenues will be sustainable or 
indicative of future operating results. For example, the Company believes 
that the 37% price reduction in the North American list price of its 
SoundStation product line, effective December 1996 for resellers and January 
1997 for end user customers, negatively impacted the Company's net revenues 
and gross margins in the first quarter of 1997 and will continue to 
negatively impact net revenues and gross margins throughout 1997. In 
addition, the Company reduced its international list prices for the 
SoundStation products by approximately 30% effective in April 1997. The 
Company expects that gross margins will continue to be negatively affected in 
the future as a result of several factors, including low to negative gross 
margins for the Company's first-generation ShowStation dataconferencing 
products, the reduction in the list prices of the SoundStation product line, 
the introduction of the lower margin SoundPoint desktop product line and 
continuing competitive price pressure in the audioconferencing and 
dataconferencing markets.  Although price reductions have been driven by the 
Company's desire to expand the market for its products, and the Company 
expects that in the future it may further reduce prices or introduce new 
products that carry lower margins in order to further expand the market or to 
respond to competitive pricing pressures, there can be no assurance that such 
actions by the Company will expand the market for its products or be 
sufficient to meet competitive pricing pressures. In addition, the Company's 
limited operating history and limited resources, among other factors, make 
the prediction of future operating results difficult if not impossible.

In the past the Company has experienced delays from time to time in the 
introduction of certain new products and enhancements and expects that such 
delays may occur in the future.  For instance,  the introduction of 
ShowStation was delayed by approximately eighteen months from the originally 
anticipated date of introduction because of unforeseen technical challenges 
and difficulties in building core technologies and, for approximately six 
weeks in the first quarter of 1996, shipments were interrupted in order to 
correct software and other technical problems identified by initial 
customers.  In addition, SoundStation Premier first customer shipments were 
delayed from its original shipment target of September 1996 to November 1996 
due to engineering issues. Any similar delays could have a material adverse 
effect on the Company's results of operations.

The Company's operating results have fluctuated in the past and may fluctuate 
in the future as a result of a number of factors, including market acceptance 
of the ShowStation products and other new product introductions and product 
enhancements by the Company or its competitors, the prices of the Company's 
or its competitors' products, the mix of products sold, the mix of products 
sold directly and through resellers, fluctuations in the level of 
international sales, the cost and availability of components, manufacturing 
costs, the level of warranty claims, changes in the Company's distribution 
network, the level of royalties to third parties and changes in general 
economic conditions. In addition, competitive pressure on pricing in a given 
quarter could adversely affect the Company's operating results for such 
period, and such price pressure over an extended period could materially 
adversely affect the Company's long-term profitability. The Company's ability 
to maintain or increase net revenues will depend upon its ability to increase 
unit sales volumes of its SoundStation, SoundStation Premier and SoundPoint 
families of audioconferencing products and the dataconferencing line of 
products, currently comprised of the ShowStation product, and any new 
products or product enhancements. There can be no assurance that the Company 
will be able to increase unit sales volumes of existing products, introduce 
and sell new products or reduce its costs as a percentage of net revenues. 

The Company typically ships products within a short time after receipt of an 
order, does not usually have a significant backlog and backlog fluctuates 
significantly from period to period. As a result, backlog at any point in 
time is not a good indicator of future net revenues and net revenues for any 
particular quarter cannot be predicted with any degree of accuracy. 
Accordingly, the Company's expectations for both short- 


                                                                           13
<PAGE>

and long-term future net revenues are based in large part on its own estimate 
of future demand and not on firm customer orders. In addition, the Company 
has in the past received orders and shipped a substantial percentage of the 
total products sold during a particular quarter in the last several weeks of 
the quarter. In some cases, these orders have consisted of distributor 
stocking orders and the Company has from time to time provided special 
incentives for distributors to purchase more than the minimum  quantities 
required under their agreements with the Company. Therefore, the Company has 
been uncertain, even during most of the quarter, what level of revenues it 
will achieve in the quarter and the impact that distributor stocking orders 
will have on revenues and gross margins in that quarter and subsequent 
quarters. In addition, because a substantial percentage of product sales 
occur at the end of the quarter, product mix and therefore gross margins are 
difficult to predict. The Company anticipates that this pattern of sales will 
continue in the future. Expense levels are based, in part, on these estimates 
and, since the Company is limited in its ability to reduce expenses quickly 
if orders and net revenues do not meet expectations in a particular period, 
operating results would be adversely affected. In addition, a seasonal demand 
may develop for the Company's products in the future. Due to all of the 
foregoing factors, it is likely that in some future quarter the Company's 
operating results will be below the expectations of public market analysts 
and investors. In such event, the price of the Company's Common Stock would 
likely be materially adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 1997, the Company's principal sources of liquidity included 
cash, cash equivalents and short-term investments of $20.6 million. 
Additionally, as of March 31, 1997, the Company had a $4.0 million revolving 
bank line of credit from Silicon Valley Bank which expired on April 15, 1997. 
The Company is currently negotiating with the bank to establish a new line of 
credit; however, there can be no assurance that these negotiations will be 
successful.

The Company generated $1.4 million in cash from operating activities for the 
three months ending March 31, 1997. Cash was generated primarily from the 
reduction of accounts receivable through increased collection efforts and 
higher accounts payable levels, partially offset by increases in inventories, 
prepaid expenses and deposits.

Investing activities generated $1.0 million of net cash for the first quarter 
of 1997. Net proceeds of $1.6 million from the sale and maturity of 
short-term investments were partially offset by fixed asset acquisitions of 
$653,000. Financing activities in the first quarter of 1997 provided $225,000 
of net cash from the issuance of common stock under employee stock plans.

The Company's material commitments consist of obligations under its revolving 
bank line of credit, operating leases and a $100,000 stand-by letter of 
credit which has been issued to guarantee certain of the Company's 
contractual obligations. The Company estimates that 1997 capital expenditures 
will total approximately $4.5 million. 

The Company believes that its available cash will be sufficient to meet the 
Company's operating expenses and capital requirements though  at least 
December 31, 1997.  Thereafter, the Company may require additional funds to 
support its working capital requirements or for other purposes and may seek 
to raise such additional funds through public or private equity financing or 
from other sources.  There can be no assurance that additional financing will 
be available at all or that, if available, such financing will be obtainable 
on terms favorable to the Company and would not be dilutive.  The Company's 
future liquidity and cash requirements will depend on numerous factors, 
including introduction of new products and potential product family or 
technology acquisitions. 


                                                                           14
<PAGE>

PART II  OTHER INFORMATION

Item 5.  OTHER INFORMATION

         Robert Lien, Vice President, Worldwide Sales and Service,
         resigned his position with the Company effective March 31, 1997.
         The Company has begun a search for a new Vice President,
         Worldwide Sales and Service.

Item 6   EXHIBITS AND REPORTS ON FORM 8-K

    (a)  List of Exhibits

NUMBER                           EXHIBIT
- ------   -------------------------------------------------------------------
10.1 (1) Stock Pledge Agreement and Note Secured by Stock Pledge Agreement, 
         each dated March 17, 1997

10.2 (1) Joint Marketing and Development Agreement dated March 28, 1997, by and
         between Polycom, Inc. and Minnesota Mining and Manufacturing Company

11.1     Computation of Net Income (Loss) per Common and Common Equivalent
         Share

  27     Financial Data Schedule

(1) Confidential treatment requested as to certain portions of these documents.


    (b)  Report on Form 8-K: No reports on Form 8-K were filed during the
         quarter ended March 30, 1997.


                                                                            15
<PAGE>

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1394, the 
Registrant has duly caused this report to be signed on its behalf by the 
undersigned, thereunto duly authorized.

Dated:  May 13, 1997                         POLYCOM, INC.



                                       /s/ Michael R. Kourey
                                       ---------------------
                                       Michael R. Kourey
                                       Chief Financial Officer
                                       (Duly Authorized Officer and Principal
                                       Financial and Accounting Officer)


                                                                            16

<PAGE>
                                                               EXHIBIT 10.1

                                STOCK PLEDGE AGREEMENT


         THIS STOCK PLEDGE AGREEMENT (this "Agreement"), dated as of March 17,
1997, is made between Michael Kourey ("Pledgor"), and Polycom, Inc. ("Secured
Party").

         Pledgor and Secured Party hereby agree as follows:

         SECTION 1  DEFINITIONS; INTERPRETATION.

         (a)  As used in this Agreement, the following terms shall have the
following meanings:

         "ADDITIONAL COLLATERAL" means any and all (i) securities, property,
interest, dividends and other payments and distributions issued as an addition
to, in redemption of, in renewal or exchange for, in substitution or upon
conversion of, or otherwise on account of, the Pledged Shares or such additional
capital stock or other equity securities, and (ii) cash and non-cash proceeds of
the Pledged Shares and any of the foregoing, in each case from time to time
received or receivable by, or otherwise paid or distributed to or acquired by,
Pledgor.

         "EVENT OF DEFAULT" has the meaning set forth in Section 7.

         "LIEN" means any mortgage, deed of trust, pledge, security interest,
assignment, charge or encumbrance, lien, or other type of preferential
arrangement.

         "NOTE" means that certain Promissory Note dated March 17, 1997 made by
Pledgor in favor of Secured Party, as amended, modified, renewed, extended or
replaced from time to time.

         "OBLIGATIONS" means the indebtedness, liabilities and other
obligations of Pledgor to Secured Party under or in connection with this
Agreement and the Note.

         "PERSON" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization or authority, or any other entity of whatever
nature.

         "PLEDGED COLLATERAL" has the meaning set forth in Section 2(a).

         "PLEDGED SHARES" means the issued and outstanding shares of the
capital stock, whether certificated or uncertificated, of the Secured Party now
owned by Pledgor, as more specifically described in SCHEDULE 1.



                                      1.

<PAGE>

         "UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; PROVIDED, HOWEVER, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the security interest in any Pledged Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.

         (b)  Where applicable and except as otherwise defined herein, terms
used in this Agreement shall have the meanings assigned to them in the UCC.

         SECTION 2  SECURITY INTEREST.

         (a)  As security for the payment and performance of the Obligations,
Pledgor hereby pledges, assigns, transfers, hypothecates and sets over to
Secured Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in, to and under (i) the Pledged Shares and
the Additional Collateral and any certificates and instruments now or hereafter
representing the Pledged Shares and the Additional Collateral, (ii) all rights,
interests and claims with respect to the Pledged Shares and Additional
Collateral, including under any and all related agreements, instruments and
other documents, and (iii) all books, records and other documentation of Pledgor
related to the Pledged Shares and Additional Collateral, in each case whether
presently existing or owned or hereafter arising or acquired and wherever
located (collectively, the "Pledged Collateral").

         (b)  Pledgor hereby agrees to deliver to or for the account of Secured
Party, at the address and to the Person or Persons to be designated by Secured
Party, the certificates representing the Pledged Shares, which shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Secured Party.

         (c)  If Pledgor shall become entitled to receive or shall receive any
Additional Collateral, Pledgor shall accept any such Additional Collateral as
Secured Party's agent, shall hold it in trust for Secured Party, shall segregate
it from other property or funds of Pledgor, and shall deliver all Additional
Collateral and all certificates, instruments and other writings representing
such Additional Collateral forthwith to or for the account of Secured Party, at
the address and to the Person to be designated by Secured Party, which shall be
in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to Secured Party, to be held by Secured Party subject to
the terms hereof, as part of the Pledged Collateral.  Upon accepting any such
Additional Collateral hereunder, Secured Party shall promptly send a
notification to Pledgor describing the Additional Collateral accepted and held
as part of the Pledged Collateral hereunder, which notification shall be deemed
to be a Schedule to this Agreement and may be attached hereto.


                                      2.

<PAGE>

         (d)  Pledgor shall execute and deliver to Secured Party concurrently
with the execution of this Agreement, and at any time and from time to time
thereafter, all financing statements, assignments, continuation financing
statements, termination statements, and other documents and instruments, in form
reasonably satisfactory to Secured Party, and take all other action, as Secured
Party may reasonably request, to effect a transfer of a perfected first priority
security interest in and pledge of the Pledged Collateral to Secured Party
pursuant to the UCC and to continue perfected, maintain the priority of or
provide notice of the security interest of Secured Party in the Pledged
Collateral and to accomplish the purposes of this Agreement.

         (e)  Pledgor agrees that this Agreement shall create a continuing
security interest in and pledge of the Pledged Collateral which shall remain in
effect until terminated by Secured Party. 

         (f)  Notwithstanding anything to the contrary herein, so long as no
Event of Default has occurred under this Agreement or the Note, Pledgor may
request that certain of the Pledged Shares be released by Secured Party from the
lien created by this Agreement at such time as (i) the price of the shares of
common stock of Secured Party ("Traded Shares") quoted by nationally recognized
broker-dealers on Nasdaq after the date hereof (the "Future Value") exceeds by
25% or more the price of such Traded Shares quoted by nationally recognized
broker-dealers on Nasdaq as of the date hereof (the "Current Value") for a
period of no less than three months, or (ii) Pledgor prepays outstanding
principal due under the Note in an amount in excess of $50,000.  Upon the
occurrence of the events noted in clauses (i) and (ii) of the preceding
sentence, Secured Party will release Pledged Shares in an amount that would
cause the ratio of the Future Value of all Pledged Shares (the parties agree
that for purposes of determining compliance with this clause (f) the value of
Traded Shares and Pledged Shares is equal) to the then outstanding principal
under the Note to be no less than the ratio of the Current Value of all Pledged
Shares to the amount of principal which may be borrowed under the Note as of the
date hereof.

         SECTION 3  REPRESENTATIONS AND WARRANTIES.  Pledgor represents and
warrants to Secured Party that:

         (a)  This Agreement constitutes the legal, valid and binding
obligation of Pledgor, enforceable against Pledgor in accordance with its terms.

         (b)  No approval or consent of any other Person, is required for the
due execution, delivery or performance by Pledgor of this Agreement.

         (c)  With respect to the Pledged Shares Pledgor is, and with respect
to any Additional Collateral Pledgor will be, the legal record and beneficial
owner thereof, and has and will have good and marketable title thereto, subject
to no Lien except for the pledge created by this Agreement.


                                      3.

<PAGE>

         (d)  Pledgor's residence and all books and records concerning the
Pledged Collateral, are located at his address set forth on the signature pages
hereof.

         (e)  No effective financing statement naming Pledgor as debtor,
assignor, grantor, mortgagor, pledgor or the like and covering all or any part
of the Pledged Collateral is on file in any filing or recording office in any
jurisdiction.

         Pledgor agrees that the foregoing representations and warranties shall
be deemed to have been made by him on the date of each delivery of Pledged
Collateral hereunder.

         SECTION 4  COVENANTS.  So long as any of the Obligations remain
unsatisfied, Pledgor agrees that:

         (a)  Pledgor will, at his own expense, appear in and defend any
action, suit or proceeding which purports to affect his title to, or right or
interest in, the Pledged Collateral or the security interest of Secured Party
therein and the pledge to Secured Party thereof.

         (b)  Pledgor shall give prompt written notice to Secured Party (and in
any event not later than 30 days following any change described below in this
subsection) of:  (i) any change in the location of Pledgor's residence, (ii) any
change in the location of books and records pertaining to Pledged Collateral;
and (iii) any change in his name in any manner which might make any financing
statement filed hereunder incorrect or misleading.

         (c)  Pledgor will not create, incur or permit to exist any Liens upon
or with respect to the Pledged Collateral, other than the pledge to Secured
Party created by this Agreement.

         SECTION 5  ADMINISTRATION OF THE PLEDGED COLLATERAL.

         (a)  Unless an Event of Default shall have occurred:  (i)  Pledgor
shall be entitled to receive and retain for his own account any cash dividend in
amounts consistent with past practices in respect of the Pledged Collateral; and
(ii)  Pledgor shall have the right to vote the Pledged Collateral and to retain
the power to control the direction, management and policies of the Secured Party
to the same extent as Pledgor would if the Pledged Collateral were not pledged
to Secured Party pursuant to this Agreement; PROVIDED, HOWEVER, that Secured
Party shall receive, and Pledgor shall not be entitled to receive, (A) cash
paid, payable or otherwise distributed in redemption of, or in exchange for or
in substitution of, any Pledged Collateral, or (B) dividends and other
distributions paid or payable in cash in respect of any Pledged Collateral in
connection with a partial or total liquidation or dissolution of the Secured
Party or in connection with a reduction of capital, capital surplus or
paid-in-surplus or any other type of recapitalization involving the Secured
Party; and PROVIDED FURTHER, HOWEVER, that no vote shall be cast or consent,
waiver or ratification given or action taken or proxy given which would have the
effect of impairing the position or interest of Secured Party in respect of the
Pledged Collateral or which would 


                                      4.

<PAGE>

alter the voting rights with respect to the stock of the Secured Party or be 
inconsistent with or violate any provision of this Agreement.  Secured Party 
shall execute and deliver (or cause to be executed and delivered) to Pledgor 
all such proxies and other instruments as Pledgor may reasonably request for 
the purpose of enabling Pledgor to exercise the voting and other rights which 
it is entitled to exercise, and to receive distributions which it is 
authorized to receive and retain, pursuant to this subsection (a).

         (b)  Upon and after the occurrence of any Event of Default:(i) Secured
Party shall be entitled to receive all distributions and payments of any nature
with respect to the Pledged Collateral, to be held by Secured Party as part of
the Pledged Collateral;(ii)  Secured Party shall have the right following prior
written notice to Pledgor to vote or consent to take any action with respect to
the Pledged Collateral and exercise all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to the
Pledged Collateral as if Secured Party were the absolute owner thereof; and
(iii)  Secured Party shall have the right, for and in the name, place and stead
of Pledgor, to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Pledged Collateral, to
endorse any checks, drafts, money orders and other instruments relating thereto,
to sue for, collect, receive and give acquittance for all moneys due or to
become due in connection with the Pledged Collateral and otherwise to file any
claims, take any action or institute, defend, settle or adjust any actions,
suits or proceedings with respect to the Pledged Collateral, execute any and all
such other documents and instruments, and do any and all such acts and things,
as Secured Party may deem necessary or desirable to protect, collect, realize
upon and preserve the Pledged Collateral, to enforce Secured Party's rights with
respect to the Pledged Collateral and to accomplish the purposes of this
Agreement.

         (c)  Distributions and other payments which are received by Pledgor
but which it is not entitled to retain as a result of the operation of
subsection (a) or (b) shall be held in trust for the benefit of Secured Party,
be segregated from the other property or funds of Pledgor, and be forthwith paid
over or delivered to Secured Party in the same form as so received.

         (d)  At any time and from time to time, Secured Party may cause any of
the Pledged Collateral to be transferred into its name or into the name of its
nominee or nominees (subject to the revocable rights specified in
subsection (a)).  Secured Party shall at all times have the right to exchange
uncertificated Pledged Collateral for certificated Pledged Collateral, and to
exchange certificated Pledged Collateral for certificates of larger or smaller
denominations, for any purpose consistent with this Agreement.

         (e)  For the purpose of enabling Secured Party to exercise its rights
under this Section 5 or otherwise in connection with this Agreement, Pledgor
hereby (i) constitutes and appoints Secured Party (and any of Secured Party's
officers, employees or agents designated by Secured Party) his true and lawful
attorney-in-fact, with full power and authority to execute any notice,
assignment, endorsement or other instrument or document, and to do any and all
acts and things for and on behalf of Pledgor, which Secured Party may deem
necessary or desirable to protect, collect, realize upon and preserve the
Pledged 


                                      5.

<PAGE>

Collateral, to enforce Secured Party's rights with respect to the Pledged 
Collateral and to accomplish the purposes hereof, and (ii) revokes all 
previous proxies with regard to the Pledged Collateral and appoints Secured 
Party as his proxyholder with respect to the Pledged Collateral to attend and 
vote at any and all meetings of the shareholders of the Secured Party held on 
or after the date of this proxy and prior to the termination hereof, with 
full power of substitution to do so and agrees, if so requested, to execute 
or cause to be executed appropriate proxies therefor.  Each such appointment 
is coupled with an interest and irrevocable so long as the Obligations have 
not been paid and performed in full.  Pledgor hereby ratifies, to the extent 
permitted by law, all that Secured Party shall lawfully and in good faith do 
or cause to be done by virtue of and in compliance with this Section 5.

         SECTION 6  SECURED PARTY'S DUTIES.  Notwithstanding any provision
contained in this Agreement, Secured Party shall have no duty to exercise any of
the rights, privileges or powers afforded to it and shall not be responsible to
Pledgor or any other Person for any failure to do so or delay in doing so. 
Beyond the exercise of reasonable care to assure the safe custody of the Pledged
Collateral while held hereunder and the accounting for moneys actually received
by Secured Party hereunder, Secured Party shall have no duty or liability to
exercise or preserve any rights, privileges or powers pertaining to the Pledged
Collateral.

         SECTION 7  EVENTS OF DEFAULT.  Any of the following events which shall
occur and be continuing shall constitute an "Event of Default":

         (a)  Pledgor shall fail to pay when due any amount payable hereunder
or under the Note or in respect of the Obligations.

         (b)  Any representation or warranty by Pledgor under or in connection
with this Agreement or the Note shall prove to have been incorrect in any
material respect when made or deemed made.

         (c)  Pledgor shall fail to perform or observe in any material respect
any other covenant or agreement contained in this Agreement or the Note on his
part to be performed or observed and any such failure shall remain unremedied
for a period of 15 days from the occurrence thereof, or any "Event of Default"
as defined in the Note shall have occurred.

         (d)  Any impairment in the priority of Secured Party's Lien hereunder.

         SECTION 8  REMEDIES.

         (a)  Upon the occurrence and during the continuance of any Event of
Default, Secured Party may declare any of the Obligations to be immediately due
and payable and shall have, in addition to all other rights and remedies granted
to it in this Agreement or the Note, all rights and remedies of a secured party
under the UCC and other applicable laws.  Without limiting the generality of the
foregoing, Pledgor agrees that any item of the Pledged Collateral may be sold
for cash or on credit or for future delivery 


                                      6.

<PAGE>

without assumption of any credit risk, in any number of lots at the same or 
different times, at any exchange, brokers' board or elsewhere, by public or 
private sale, and at such times and on such terms, as Secured Party shall 
determine; PROVIDED, HOWEVER, that Pledgor shall be credited with the net 
proceeds of sale only when such proceeds are finally collected by Secured 
Party in cash.  Pledgor hereby agrees that the sending of notice by ordinary 
mail, postage prepaid, to the address of Pledgor set forth herein, of the 
place and time of any public sale or of the time after which any private sale 
or other intended disposition is to be made, shall be deemed reasonable 
notice thereof if such notice is sent ten days prior to the date of such sale 
or other disposition or the date on or after which such sale or other 
disposition may occur, PROVIDED that Secured Party may provide Pledgor 
shorter notice or no notice, to the extent permitted by the UCC or other 
applicable law.  Pledgor recognizes that Secured Party may be unable to make 
a public sale of any or all of the Pledged Collateral, by reason of 
prohibitions contained in applicable securities laws or otherwise, and 
expressly agrees that a private sale to a restricted group of purchasers for 
investment and not with a view to any distribution thereof shall be 
considered a commercially reasonable sale.  Secured Party shall have the 
right upon any such public sale, and, to the extent permitted by law, upon 
any such private sale, to purchase the whole or any part of the Pledged 
Collateral so sold, free of any right or equity of redemption, which right or 
equity of redemption Pledgor hereby releases to the extent permitted by law.

         (b)  The cash proceeds actually received from the sale or other
disposition or collection of Pledged Collateral, and any other amounts received
in respect of the Pledged Collateral the application of which is not otherwise
provided for herein, shall be applied FIRST, to the payment of the reasonable
costs and expenses of Secured Party in exercising or enforcing its rights
hereunder and in collecting or attempting to collect any of the Pledged
Collateral, and to the payment of all other amounts payable to Secured Party
pursuant to Section 12; and SECOND, to the payment of the Obligations.  Any
surplus thereof which exists after payment and performance in full of the
Obligations shall be promptly paid over to Pledgor or otherwise disposed of in
accordance with the UCC or other applicable law.  Pledgor shall remain liable to
Secured Party for any deficiency which exists after any sale or other
disposition or collection of Pledged Collateral.

         SECTION 9  CERTAIN WAIVERS.  Pledgor waives, to the fullest extent
permitted by law, (i) any right of redemption with respect to the Pledged
Collateral, whether before or after sale hereunder, and all rights, if any, of
marshalling of the Pledged Collateral or other collateral or security for the
Obligations; (ii) any right to require Secured Party (A) to proceed against any
Person, (B) to exhaust any other collateral or security for any of the
Obligations, (C) to pursue any remedy in Secured Party's power, or (D) to make
or give any presentments, demands for performance, notices of nonperformance,
protests, notices of protests or notices of dishonor in connection with any of
the Pledged Collateral; and (iii) all claims, damages, and demands against
Secured Party arising out of the repossession, retention, sale or application of
the proceeds of any sale of the Pledged Collateral.

         SECTION 10  NOTICES.  All notices or other communications hereunder
shall be in writing (including by facsimile transmission) and mailed, sent or
delivered to the respective parties hereto at or to their respective addresses
or facsimile numbers set forth 


                                      7.

<PAGE>

below their names on the signature pages hereof, or at or to such other 
address or facsimile number as shall be designated by any party in a written 
notice to the other parties hereto.  All such notices and other 
communications shall be effective (i) if delivered by hand, when delivered; 
(ii) if sent by mail, upon the earlier of the date of receipt or five 
business days after deposit in the mail, first class; and (iii) if sent by 
facsimile transmission, when sent.

         SECTION 11  NO WAIVER; CUMULATIVE REMEDIES.  No failure on the part of
Secured Party to exercise, and no delay in exercising, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.  The rights and remedies under this Agreement are cumulative
and not exclusive of any rights, remedies, powers and privileges that may
otherwise be available to Secured Party.

         SECTION 12  COSTS AND EXPENSES.

         (a)  Pledgor agrees to pay on demand all costs and expenses of Secured
Party, including the fees and disbursements of counsel to Secured Party, in
connection with the enforcement or attempted enforcement of, and preservation of
any rights or interests under, this Agreement and the Note, including in any
out-of-court workout or other refinancing or restructuring or in any bankruptcy
case, and the protection, sale or collection of, or other realization upon, any
of the Pledged Collateral.

         (b)  Any amounts payable to the Agent or any Secured Party under this
Section 12 or otherwise under this Agreement if not paid upon demand shall bear
interest from the date of such demand until paid in full, at the default rate of
interest set forth in the Note.

         SECTION 13  BINDING EFFECT.  This Agreement shall be binding upon,
inure to the benefit of and be enforceable by Pledgor, Secured Party and their
respective successors, assigns, personal representatives, heirs and legatees
(including any trust pledgor now or hereafter may create).

         SECTION 14  GOVERNING LAW.  This Agreement shall be governed by, and
construed in accordance with, the law of the State of California, except as
required by mandatory provisions of law and to the extent the validity or
perfection of the security interests hereunder, or the remedies hereunder, in
respect of any Pledged Collateral are governed by the law of a jurisdiction
other than California.

         SECTION 15  ENTIRE AGREEMENT; AMENDMENT.  This Agreement contains the
entire agreement of the parties with respect to the subject matter hereof and
shall not be amended except by the written agreement of the parties.

         SECTION 16  SEVERABILITY.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations.  If, however, any provision of this
Agreement shall be 


                                      8.

<PAGE>

prohibited by or invalid under any such law or regulation in any 
jurisdiction, it shall, as to such jurisdiction, be deemed modified to 
conform to the minimum requirements of such law or regulation, or, if for any 
reason it is not deemed so modified, it shall be ineffective and invalid only 
to the extent of such prohibition or invalidity without affecting the 
remaining provisions of this Agreement, or the validity or effectiveness of 
such provision in any other jurisdiction.

         SECTION 17  COUNTERPARTS.  This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same agreement.

         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.

                                       Michael Kourey


                                       /S/ MICHAEL KOUREY 
                                       -------------------------------------

                                       [*   *     *      *     *]
                                       [*   *     *      *     *]

                                       Fax: 
                                           ---------------------------------


                                       
                                       POLYCOM, INC.

                                       By  /s/ BRIAN L. HINMAN
                                         -----------------------------------
                                          Title:

                                       CHAIRMAN AND CHIEF EXECUTIVE OFFICER
                                       -------------------------------------

                                       2584 JUNCTION AVE.
                                       -------------------------------------

                                       SAN JOSE, CA 95134
                                       -------------------------------------
                                       Attn:                           
                                           ---------------------------------
                                       Fax:                            
                                           ---------------------------------



* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.

                                      9.

<PAGE>



                                      SCHEDULE 1
                            to the Stock Pledge Agreement


                                    PLEDGED SHARES



         Up to 62,500 shares of common stock of Polycom, Inc. (as determined in
accordance with the Stock Pledge Agreement between Pledgor and Secured Party
dated as of March 17, 1997) being represented by stock certificates as follows:



Certificate No.              Certificate Date                    No. of Shares
- ---------------              ----------------                    -------------

  FBU07814                    March 18, 1997                       62,500


                                     S-1

<PAGE>


                                   PROMISSORY NOTE


$250,000                                                   Dated: March 17, 1997



         FOR VALUE RECEIVED, the undersigned, Michael Kourey (the "Borrower"),
HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of Polycom, Inc. (the
"Lender"), the principal sum of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000),
on March 17, 2002.

         The Borrower further promises to pay interest on the outstanding
principal amount of this Promissory Note from the date hereof until maturity, in
arrears, on March 17, 2002, at a rate per annum equal at all times to the
Applicable Federal Rate.  The "Applicable Federal Rate" means the lowest
available interest rate which may be paid by the Borrower such that no
additional interest is imputed to be paid to Lender under the Internal Revenue
Code of 1986, including any rules or regulations promulgated thereunder.  In the
event that any amount of principal or interest, or any other amount payable
hereunder, is not paid in full when due (whether at stated maturity, by
acceleration or otherwise), the Borrower agrees to pay interest on such unpaid
principal or other amount, from the date such amount becomes due until the date
such amount is paid in full, payable on demand, at a rate per annum equal at all
times to 9%.  All computations of interest shall be made on the basis of a year
of 365 days for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest is payable. 
Notwithstanding anything to the contrary herein, so long as no Event of Default
occurs under clauses (i) and (ii) of the paragraph below listing the Events of
Default, it is intended that the Borrower shall not be obligated to pay any
interest described in this Promissory Note to the Lender.  Moreover, the
Borrower may, with the Lender's permission and subject to such further
conditions as the Lender may require, repay this Promissory Note by selling the
Collateral (as defined in the Stock Pledge Agreement referred to below) and
using the proceeds of such sale therefor without such sale being deemed to be an
Event of Default (as defined below) hereunder.

         All payments hereunder shall be made in lawful money of the United
States of America, to the Lender, at such place or to such account as the Lender
from time to time shall designate to the Borrower.

         Whenever any payment hereunder shall be stated to be due, or whenever
any interest payment date or any other date specified hereunder would otherwise
occur, on a day other than a Business Day (as defined below), then such payment
shall be made, and such interest payment date or other date shall occur, on the
next succeeding Business Day, and such extension of time shall in such case be
included in the 


                                      1.


<PAGE>

computation of payment of interest hereunder.  As used herein, "Business Day" 
means a day (i) other than Saturday or Sunday, and (ii) on which commercial 
banks are open for business in San Francisco, California.

         Anything herein to the contrary notwithstanding, if during any period
for which interest is computed hereunder, the amount of interest computed on the
basis provided for in this Promissory Note, together with all fees, charges and
other payments which are treated as interest under applicable law, as provided
for herein or in any other document executed in connection herewith, would
exceed the amount of such interest computed on the basis of the Highest Lawful
Rate, the Borrower shall not be obligated to pay, and the Lender shall not be
entitled to charge, collect, receive, reserve or take, interest in excess of the
Highest Lawful Rate, and during any such period the interest payable hereunder
shall be computed on the basis of the Highest Lawful Rate.  As used herein,
"Highest Lawful Rate" means the maximum non-usurious rate of interest, as in
effect from time to time, which may be charged, contracted for, reserved,
received or collected by the Lender in connection with this Promissory Note
under applicable law.

         The Borrower may prepay the outstanding amount hereof in whole or in
part at any time, without premium or penalty. 

         The Borrower represents and warrants to the Lender that this
Promissory Note is the legal, valid and binding obligation of the Borrower
enforceable against him in accordance with its terms.

         The occurrence of any of the following shall constitute an "Event of
Default" under this Promissory Note:

           i)  the failure to make any payment of principal, interest or
any other amount payable hereunder when due under this Promissory Note or the
breach of any other condition or obligation under this Promissory Note or the
Pledge Agreement (as defined below);

          ii)  the filing of a petition by or against the Borrower under
any provision of United States bankruptcy laws or under any similar law relating
to bankruptcy, insolvency or other relief for debtors; or appointment of a
receiver, trustee, custodian or liquidator of or for all or any part of the
assets or property of the Borrower; or the insolvency of the Borrower; or the
making of a general assignment for the benefit of creditors by the Borrower;

         iii)  the Borrower's death or incapacity; or
         
          iv)  four months following the effective date of the voluntary
resignation of the Borrower from his current position with the Lender.


                                      2.


<PAGE>

         Upon the occurrence of any Event of Default, the Lender, at its
option, may (i) by notice to the Borrower, declare the unpaid principal amount
of this Promissory Note, all interest accrued and unpaid hereon and all other
amounts payable hereunder to be immediately due and payable, whereupon the
unpaid principal amount of this Promissory Note, all such interest and all such
other amounts shall become immediately due and payable, without presentment,
demand, protest or further notice of any kind, provided that if an event
described in paragraph (ii) above shall occur, the result which would otherwise
occur only upon giving of notice by the Lender to the Borrower as specified
above shall occur automatically, without the giving of any such notice; and
(ii) whether or not the actions referred to in clause (i) have been taken,
exercise any or all of the Lender's rights and remedies and proceed to enforce
all other rights and remedies available to the Lender under applicable law.

         The Borrower agrees to pay on demand all the losses, costs, and 
expenses (including, without limitation, attorneys' fees and disbursements) 
which the Lender incurs in connection with enforcement or attempted 
enforcement of this Promissory Note, or the protection or preservation of the 
Lender's rights under this Promissory Note, whether by judicial proceedings 
or otherwise. Such costs and expenses include, without limitation, those 
incurred in connection with any workout or refinancing, or any bankruptcy, 
insolvency, liquidation or similar proceedings.

         The Borrower hereby waives diligence, demand, presentment, protest 
or further notice of any kind.  The Borrower agrees to make all payments 
under this Promissory Note without setoff or deduction and regardless of any 
counterclaim or defense.

         No single or partial exercise of any power under this Promissory 
Note shall preclude any other or further exercise of such power or exercise 
of any other power.  No delay or omission on the part of the Lender in 
exercising any right under this Promissory Note shall operate as a waiver of 
such right or any other right hereunder.

         This Promissory Note shall be binding on the Borrower and his 
successors, assigns, personal representatives, heirs, and legatees, and shall 
be binding upon and inure to the benefit of the Lender, any future holder of 
this Promissory Note and their respective successors and assigns.  The 
Borrower may not assign or transfer this Promissory Note or any of his 
obligations hereunder without the Lender's prior written consent.

                                      3.

<PAGE>

         This Promissory Note is secured by that certain Stock Pledge 
Agreement dated as of the date hereof by the Borrower in favor of the Lender 
(the "Pledge Agreement").

         THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN 
ACCORDANCE WITH CALIFORNIA LAW.

                             /s/ Michael Kourey                   
                             ----------------------------------------
                             Michael Kourey

                             Address:

                             [*   *    *    *    *]
                             [*   *    *    *    *]




* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.



                                      4.



<PAGE>
                                                                   EXHIBIT 10.2

                      JOINT MARKETING AND DEVELOPMENT AGREEMENT



         This JOINT MARKETING AND DEVELOPMENT AGREEMENT (this "Agreement")
dated as of March 28, 1997 (the "Effective Date") is by and between MINNESOTA
MINING AND MANUFACTURING COMPANY, a Delaware corporation, acting through its
Visual Systems Division, with its principal place of business at 3M Austin
Center, 6801 Riverplace Boulevard, Austin, Texas 78726-9000 ("3M") and POLYCOM,
INC., a Delaware corporation, with its principal place of business at 2584
Junction Avenue, San Jose, California 95134-1902 ("Polycom").  As used herein,
the term "Party" shall refer to 3M or Polycom, as the context may require, while
the term "Parties" shall refer to 3M and Polycom collectively.  The term
"Agreement" specifically includes all Exhibits referred to herein.

                                      RECITALS:

    WHEREAS, Polycom has developed a data conferencing device that facilitates
the interactive sharing of data among individuals situated at differing
locations, which Polycom currently markets under its trade name and trademarks;

    WHEREAS, 3M has expertise in electronic projection components, such as
light management films, lenses and power supplies, electronic projection design
for optical and thermal performance, and hardgoods, cost reduction processes and
tools, as well as in global sales and marketing;

    WHEREAS, 3M believes that the application of its expertise to the design
and manufacture of Polycom's dataconferencing device will significantly improve
its marketability and desires to obtain the right to market the improved
product; and

    WHEREAS, Polycom desires 3M's assistance in the development of its
dataconferencing device in those areas of its expertise, including development
of the global market therefor, and is willing to grant certain exclusive
marketing rights therein to 3M, subject to the terms and conditions set forth
herein, in consideration for such assistance.

    NOW, THEREFORE, in consideration of the premises and of the mutual promises
hereinafter set forth, the Parties hereto agree as follows:

                                    ARTICLE 1
                             DEVELOPMENT OF THE [*   *   *]

         1.1  DEVELOPMENT OF [*    *    *]. 3M agrees to assist Polycom in the
final development of an improved version of Polycom's current communicating
overhead projection system (the "[*    *    *]") meeting the Specifications and
in the development of 


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


<PAGE>

subsequent generations of the [*    *    *] during the term hereof (the 
"Project").  The term "Specifications" shall mean the detailed technical 
specifications for the [*    *    *    *] set forth on Exhibit A, including, 
but not limited to, product specifications, accessories specifications, 
performance requirements, packaging specifications, and quality control 
procedures.  For purposes of this Agreement, the term "[*    *    *]" shall 
include the [*    *    *    *], subsequent generations of Polycom's 
communicating overhead projection system and all options, accessories and 
enhancements thereto developed during the term hereof.

         1.2  CONTRIBUTIONS OF THE PARTIES.

         (a)  TECHNICAL SUPPORT.  The Parties shall provide and support 
technical staff for the development of the [*    *    *] in the following 
areas:

            (i)    3M - Manufacturing, product cost reductions, optics, 
brightness enhancement and thermal cooling systems;

            (ii)   Polycom - hardware and software design, product design and 
development, and manufacturing design;

         (b)  FINANCIAL SUPPORT.

            (i)    3M agrees to provide funding to Polycom for certain 
deliverables related to the [*    *    *    *] hereunder ("Polycom 
Deliverables") at the times and in the amounts set forth below, provided that 
the associated Polycom Deliverable is delivered to 3M on or before such date:

    DELIVERY      POLYCOM DELIVERABLES       PAYMENT       AMOUNT
     DATE                                     DATE 
                                                           
    *             *                           *            *
                                                           
    *             *                           *            *
                                                           
    *             *                           *            *

         In the event Polycom should fail to timely deliver any Polycom
Deliverable, Polycom shall have the right to cure such failure for a period of
up to sixty (60) days following such Due Date (each a "Cure Period") by
delivering such Polycom Deliverable to 3M.  Following Polycom's delivery of a
Polycom Deliverable within a Cure Period, 3M shall deliver the funding amount
due Polycom within ten (10) business days following the date 


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        2.
<PAGE>

of delivery.  If Polycom fails to timely cure such default, 3M shall have the 
right to terminate this Agreement by delivering written notice of termination 
to Polycom.  If, prior to such termination, Polycom has delivered the 
Functional Specification for the [*    *    *    *] to 3M and 3M has delivered 
the payment associated therewith to Polycom, 3M shall retain all rights under 
the Stock Warrant Agreement between the Parties of even date herewith, a copy 
of which is attached as Exhibit B, and the Warrant issued thereunder, 
following such termination.

            (ii)    During the time periods stated below, 3M agrees to spend at
least the following sums in sales and marketing promotional costs directly in
support of the 3M-branded [ * * * ]:

              TIME PERIOD                  AMOUNT

              *                              *
                                             
              *                              *    
                                             
              *                              *
                                             
              *                              *

For purposes of this Agreement, "Net Billable Price" shall mean the total 
amount billed to third parties on orders for [*    *    *] that are accepted 
by Polycom or 3M and its Affiliates, less the total amount thereon of 
credits, cash or trade discounts actually given, freight charges paid by such 
Party, fees paid by such Party for installation of the [*    *    *], and 
excluding import duties and Federal, State and Local taxes, based on such 
sales, however designated, paid by such Party. 3M agrees to establish a 
commodity classification for the 3M-branded [*    *    *] on its internal 
records, in accordance with generally accepted accounting principles, that 
will facilitate verification of 3M's required sales and marketing 
expenditures in support of the 3M-branded [*    *    *] by Polycom's 
independent auditor, subject to mutually agreed to confidentiality 
restrictions.

         (c) [*   *   *   *]

              [*   *    *    *    *    *    *    *


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        3.
<PAGE>

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *



* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        4.
<PAGE>

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *


*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *

*   *    *    *    *    *    *    *    *    *



* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.

                                        5.
<PAGE>

*   *    *    *    *    *    *    *    *    *

         1.3  ENGINEERING CHANGE.  The term "Engineering Change" shall mean 
any design, material, or manufacturing process change to the [*     *     *], 
whether originating with 3M or Polycom.  Mutual agreement of the Parties 
shall be required for Engineering Changes that would affect the form, fit 
and/or material function of any [*    *    *] or that would have the effect 
of rendering finished goods inventory or field service inventory obsolete.  
Polycom agrees to give 3M prior written notice of any Engineering Change that 
would affect the safety, performance, serviceability, appearance, dimensions, 
packaging or field support of any [*     *     *].  Either Party may request 
an Engineering Change.  Polycom, upon receiving such request from 3M or 
proposing any such change, shall evaluate it and provide 3M with estimates 
for changes in costs, performance, quality and schedule of the [*     *     *]
 resulting from any such proposed Engineering Change.

         1.4  ENHANCEMENTS; POLYCOM'S R&D COMMITMENT.  Polycom has developed a
potential product migration schedule for the [*     *     *] (the "Migration
Schedule"), which is attached hereto as Exhibit C. 3M shall have the option to
have included in 3M models of [*     *     *] the enhancements that are
developed by Polycom for the [*     *     *], including, but not limited to,
those identified in the Migration Schedule.  In order to enable 3M to sell a
market-acceptable [*     *     *] through the incorporation of the enhancements,
Polycom agrees to provide 3M with a written report, in a mutually agreed format,
by the first day of each calendar quarter summarizing the status of technology
development for the [*     *     *] for the next [*     *     *].  During the
term hereof, Polycom agrees to annually expend funds for research and
development of the [*     *     *] in an amount meeting or exceeding [*  
    *    *    *    *    *    *    *    *    *    *    *    *    *    *    *
    *    *    *    *    *    *    *    *    *    *    *    *    *    *    *
    *    *    *    *    *    *    *    *    *    *    *    *    *    *    *
    *    *    *    *    *    *    *    *].  Insofar as the royalties to be paid
by 3M and the volumes of sales determining the amount of such royalties and
whether 3M will maintain its exclusive marketing rights have been based, in
part, on Polycom's funding commitment, should Polycom fail to meet its funding
commitment for research and development in any given year, the Parties agree to
meet during the first quarter of the following year to review the actual level
of Polycom's funding and to reduce the amount of 3M's future royalty and/or
future sales volume commitment accordingly.  With respect to the royalty
requirement for the then current calendar year, the royalty shall be reduced to
a percentage determined by multiplying [*   *    *    *    *    *    *    *
    *    *    *
*   *    *    *    *    *    *    *    *    *    *    *    *
*   *    *    *    *    *    *    *    *    *    *
*   *    *    *    *    *    *    *    *    *    *
*   *    *    *    *]. With respect to 3M's sales volume commitment to maintain 


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        6.
<PAGE>

its exclusive marketing rights for the then current calendar year under 
Section 2.2(a)(ii), the minimum sales volume requirements for each Sales 
Period of the then current calendar year [*     *     *].

         1.5  PROJECT MANAGEMENT.  The Parties shall form a management team 
to manage the Project (the "Management Team") consisting of one business 
representative and one technical representative designated by Polycom and 3M. 
Each Party shall designate its two representatives to the other Party in 
writing within [*     *     *] following the Effective Date.  The Management 
Team shall oversee the development of the Project, determine the course of 
development of the [*     *     *], including the updates and enhancements to 
be pursued, provide input and/or approval on behalf of their respective 
Parties, and resolve disputes to the extent possible.  In the event the 
Management Team is unable to resolve any dispute between the Parties, they 
shall refer the matter to the senior management of Polycom and 3M's Visual 
System Division, respectively, for resolution.  If senior management is 
unable to informally resolve the dispute, the dispute resolution mechanism 
set forth in Article 19 shall be invoked.

         1.6  CONSIDERATION OF FURTHER BUSINESS ARRANGEMENTS.  The Parties 
recognize that the market for audioconferencing, dataconferencing and 
videoconferencing equipment integrated with communicating overhead projection 
systems (collectively "Conferencing Products") is not fully developed at this 
time, and that their respective areas of technological expertise and 
marketing abilities suggest that collaboration in the further development of 
Conferencing Products, and their manufacture and distribution, could prove to 
be mutually beneficial.  Therefore, the Parties agree to reasonably cooperate 
with each other in exploring the possible advantages of additional business 
arrangements for the development, manufacture, distribution, and sale of 
Conferencing Products, to meet from time to time to discuss same, and to 
negotiate in good faith to develop new business arrangements to meet 
agreed-upon goals.

                                   ARTICLE 2
                 MANUFACTURING AND MARKETING RIGHTS; ROYALTIES

         2.1  MANUFACTURING.

         (a)  CHOICE OF MANUFACTURER.  The Parties acknowledge that a 
predecessor to the [*     *     *] is currently manufactured for Polycom by a 
third party, and Polycom hereby agrees that 3M and its Affiliates shall have 
the right, but not the obligation, to purchase [*     *     *] from the 
current manufacturer as well.  In order to allow the Parties to assess 
whether adequate manufacturing capacity will be available to meet both 
Parties' needs, each Party agrees to provide the other, by the first day of 
each calendar quarter, with a non-binding, written forecast of its 
anticipated requirements for [*     *     *] for the following [*     *     *]
 .  If, after conferring in good faith, the Parties determine that any joint 
manufacturer will be unable to supply a Party with sufficient quantities of 
[*     *     *] to meet demand in its market segment in light of the other 
Party's supply requirements, the Parties agree to engage a secondary or 
substitute manufacturer in order to meet such demand.  Further, if any joint 
manufacturer is unable to meet any cost reduction and/or 


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        7.
<PAGE>

quality improvement target(s) established by the Parties pursuant to the 
provisions of Section 2.9 below, the Parties agree to engage a substitute 
manufacturer capable of meeting such target(s) and the Parties' supply 
requirements for [*     *     *]. The Parties shall mutually agree upon any 
new manufacturer engaged to manufacture [*     *     *] as described herein, 
and the Parties shall promptly commence negotiations with such manufacturer 
and conduct such negotiations in a reasonably diligent manner in an effort to 
insure that the manufacture of the [*     *     *] will continue 
uninterrupted and that market demand will be met.

         (b)  TARGET DATE.  Polycom represents and warrants that the 
[*     *     *] meeting the Specifications shall be made available in 
commercial quantities to 3M by Polycom's manufacturer on or before 
[*     *     *] (the "Target Date").  In the event Polycom's manufacturer 
fails to have commercial quantities of the [*     *     *] meeting the 
Specifications therefor available to 3M by the Target Date, 3M shall notify 
Polycom of such failure and Polycom shall have a period of [*     *     *] 
after such notice to cause such default to be cured.  If Polycom fails to 
effect a cure of such default within such cure period, this Agreement shall 
automatically terminate with 3M retaining all rights under the Stock Warrant 
Agreement and Warrant thereunder.

         (c)  PURCHASE TERMS; PRODUCT ALLOCATION.  The Parties agree to work 
together in negotiating with manufacturers in order to obtain purchase terms 
that are mutually beneficial.  In the event that the combined demand for 
[*     *     *] of Polycom and 3M and its Affiliates from any manufacturer 
should exceed such manufacturer's manufacturing capacity in any given month, 
Polycom and 3M agree to allocate the available capacity between them pro rata 
based upon the forecast for that month set forth in the firm [*     *     *]
forecast filed by each Party with such manufacturer.

         (d)  FAILSAFE PRODUCTION.  In the event that Polycom (i) suspends, 
for more than [*     *     *], or terminates its dataconferencing business, 
(ii) becomes subject to any bankruptcy or insolvency proceeding under federal 
or state statute, which proceeding is not dismissed within [*     *     *] of 
the filing thereof, or (iii) becomes insolvent or subject to direct control 
by a trustee, receiver or similar authority, 3M shall have the right to have 
[*     *     *] manufactured by a party of its choosing having the 
wherewithal to produce the [*     *     *] to the Specifications and in 
accordance with the quality control procedures developed by the Parties.  In 
order to facilitate the manufacturing of [*     *     *] by any subsequent 
manufacturer chosen by 3M, Polycom hereby grants any such manufacturer an 
irrevocable (only during the remaining term of this Agreement), royalty-free, 
nontransferable, non-exclusive, and non-sublicensable license in any of its 
intellectual property incorporated into the Specifications for the 
[*     *     *] for the sole purpose of the manufacture of [*     *     *] 
solely for the account of 3M and its Affiliates during the remaining term of 
this Agreement.  Additionally, Polycom agrees to place the source code for 
any software necessary in the manufacture and/or operation of [*     *     *] 
into escrow, allowing 3M access thereto upon the occurrence of certain 
conditions, all as set forth in Exhibit D. 3M shall ensure that any such 
manufacturer shall not exercise the foregoing license unless and until one of 
the release conditions expressly set forth in Exhibit 


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        8.
<PAGE>

D has been triggered and escrow agent has released the Deposit Materials ( as 
defined in Exhibit D) to 3M pursuant to Exhibit D.

         2.2  MARKETING RIGHTS.

         (a)  ASSIGNED MARKET SEGMENTS.  Polycom and 3M shall each have the 
exclusive, non-transferable right to market the [*     *     *] and all 
enhancements thereto, including but not limited to those listed on Exhibit C, 
world-wide within their assigned market segments as follows:

                 (i)    Polycom shall have the right to market the 
[*     *     *] to its current and future telephony distributors, including, 
but not limited to, teleconferencing specialists, and under its existing, and 
any future, agreement with the General Services Administration ("GSA"); 
provided, however, that Polycom shall not enter into any agreement for the 
distribution and/or sale of [*     *     *] for a term of greater than 
[*     *     *], nor shall it renew or otherwise amend any existing agreement 
to effect the extension of any term thereof for any period or periods greater 
than [*     *     *], unless, after such [*     *     *], such agreement is 
terminable by Polycom upon no more than [*     *     *] written notice 
without further liability to Polycom.  Polycom agrees to promptly add 3M 
and/or any of its distributors to the appropriate GSA Schedule under its 
agreement with the GSA upon 3M's written request, subject to any such party's 
compliance with all federal regulations relating to the addition of parties 
thereunder.

              (ii)      3M and its Affiliates shall have the right to market 
[*     *     *] both through their existing distribution network with 
audio/visual, office supply, and office automation vendors and through 
additional distribution channels they may develop in the future; provided, 
however, that 3M shall not enter into any agreement for the distribution 
and/or sale of [*     *     *] for a term of greater than two years, nor 
shall it renew or otherwise amend any existing agreement to effect the 
extension of any term thereof for any period or periods greater than 
[*     *     *], unless, after such [*     *     *], such agreement is 
terminable by 3M upon no more than [*     *     *] written notice without 
further liability to 3M. 3M's exclusive marketing rights shall convert to 
non-exclusive marketing rights should 3M and its Affiliates fail to meet the 
sales goals set forth on Exhibit E (A) during the initial sales period 
commencing upon the date the first [*     *     *] are shipped by 3M to its 
customers ("Commencement Date") through the last day of the second full 
calendar quarter following Commencement Date (the "Ramp Up Period") or (B) 
during any two consecutive calendar quarters following the Ramp Up Period.  
Prior to any such conversion becoming effective, Polycom shall deliver within 
[ * * * ] of the end of such quarter written notice to 3M of its 
failure to meet the required level of sales to maintain its exclusive 
marketing rights for [*     *     *].  Thereafter, 3M shall have the 
opportunity to cure any such default by tendering a payment in cash or cash 
equivalents to Polycom in an amount equal to the royalties that would have 
been due Polycom on the difference between the sales goal 3M and its 
Affiliates had failed to reach and actual sales of 3M and its Affiliates for 
the period in question by no later than the tenth (10th) business day 
following 3M's receipt of such notice from Polycom.


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.

                                        9.
<PAGE>

              (iii)     In the case of distributors who operate in both 
Polycom's and 3M's distribution channels, the Parties agree to negotiate in 
good faith to assign any such distributor to either Polycom or 3M based upon 
the dominant character of the distributor's distribution business.

              (iv)      [*   *    *    *    *    *    *    *    *
*   *    *    *    *    *    *    *    *    *    *    *    *
*   *    *    *    *    *    *    *    *    *    *
*   *    *    *    *    *    *    ]; provided, however, that such restriction
shall no longer apply to Polycom should 3M's exclusive marketing rights convert
to non-exclusive marketing rights in accordance with the provisions of
Subsection (ii) above.

         (b)  PERIODIC REVIEW OF MARKETING RESULTS.  The Parties agree to 
meet to review the results of their respective marketing efforts at least on 
a semi-annual basis.

         (c)  BRAND NAMES AND PATENT MARKINGS.  [*     *     *] shall be 
marketed by each Party solely under its trade names and trademarks; provided, 
however, that Polycom may continue to supply [*     *     *] to PictureTel to 
the extent of its existing contractual obligation.  Neither Party shall use 
any trademark, trade name or any other proprietary work or symbol belonging 
to the other Party, its subsidiaries or Affiliates, without such Party's 
prior written approval for each such use. 3M agrees that all [*     *     *] 
shall bear all appropriate patent markings.

         (d)  REGULATORY APPROVALS.  Polycom hereby agrees to promptly 
obtain, at its sole cost and expense, all regulatory approvals necessary to 
authorize the sale of [*     *     *] by both Polycom and 3M in those 
countries identified on Exhibit F [*     *     *] Regulatory Approvals 
attached hereto.  Polycom agrees to obtain all required regulatory approvals 
in the countries identified in Column A of Exhibit F immediately upon the 
first customer shipment of each [ *    *    * ] delivered thereto.  With 
respect to countries identified in Columns B and C, Polycom shall obtain all 
required regulatory approvals in a timely fashion in the ordinary course of 
its business.  Additionally, upon 3M's written request, Polycom agrees to 
seek (i) expedited approval for any country identified in Columns B or C and 
(ii) all regulatory approval necessary to authorize 3M's sale of 
[*     *     *] in additional countries designated by 3M. 3M agrees to 
provide reasonable assistance to Polycom as may be required to obtain any 
such expedited or additional approval and to bear all costs associated 
therewith.



* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        10.
<PAGE>

         2.3  ROYALTIES.

         (a)  [*     *     *].

                 (i)    3M.  3M and its Affiliates shall pay Polycom 
royalties from the sale of [*     *     *] equal to [*     *     *] of the 
Net Billable Price they receive for sales up to and including the number of 
units of the [*     *     *] overhead projectors (exclusive of options and 
accessories) (the "Cumulative [*     *     *] Unit Sales Target") for each 
Royalty Period as stated below.  In the event that 3M meets the Cumulative 
[*     *     *] Unit Sales Target in a given Royalty Period, the royalty 
payable by 3M on all subsequent sales of [*     *     *] during such Royalty 
Period shall be equal to [*     *     *] of the Net Billable Price received 
by 3M and all 3M Affiliates from such sales.

    ROYALTY PERIOD                               CUMULATIVE [* * *]
                                                     UNIT SALES
                                                   TARGETS FOR 3M
                                                 AND ITS AFFILIATES(1)
            *                                            *
                                                        
            *                                            *
                                                        
            *                                            *
                                                        
            *(2)                                         *
                                                        
            *(2)                                         *


Royalties on sales of [*     *     *] by 3M Affiliates may be paid directly to
Polycom by any such Affiliate; however, 3M shall remain primarily liable for any
such royalties in the event of default in payment by any of its Affiliates.


- ---------------------
    (1) Cumulative [*   *   *] Unit Sales Targets assume that Commencement 
Date will occur on or before [*   *   *].  The Parties agree to revise the 
Cumulative [*   *   *] Unit Sales Targets in the event that Commencement Date 
occurs after [*   *   *].


    (2) Assumes renewal of the Agreement pursuant to the provisions of 
Section 6.2 below.



* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        11.
<PAGE>

                 (ii)    POLYCOM.  In the event Polycom sales of 
[*     *    *](s) during any Royalty Period comprise [*     *     *] or more 
of total sales of [*     *     *] by the Parties, Polycom shall pay 3M 
royalties on such sales of [*     *     *] based upon the Net Billable Price 
received by Polycom from its sale of [*     *     *] during such Royalty 
Period.  Provided, however, that: (A) in no event shall the amount of 
royalties paid to 3M by Polycom based on its sales of [*     *     *] during 
any Royalty Period exceed the amount of royalties paid to Polycom by 3M based 
on its sales of [*     *     *] for such Royalty Period; (B) if at any time 
during a Royalty Period, 3M's royalty is reduced to [*     *     *] in 
accordance with the provisions of Section 2.3 (a)(i) above, Polycom's royalty 
obligation to 3M shall be contemporaneously reduced to [*     *     *] for 
the remainder of such Royalty Period; and (C) in the event 3M should decide 
to delay its launch of the [*     *     *], Polycom's sales of the 
[*     *     *] during any such delay shall not be included in the 
calculation to determine whether royalties are owed to 3M during the 
applicable Royalty Period(s).

          (b)  PAYMENT.  Royalties shall be due and payable on a quarterly 
basis, with payment to be delivered on or before the [*     *     *] of the 
month following the end of each calendar quarter.  If an audit discloses that 
the audited Party had failed to pay any royalties due during an audited 
period, such Party shall tender payment of such unpaid royalties within 
[*     *     *]of its receipt of notice of such discrepancy.

          2.4  AUDIT RIGHTS.  Polycom and 3M shall each be entitled to 
examine all records of the other Party to the distribution, sale, and, in the 
case of Polycom, research and development expenditures made in support of the 
development, of [*     *     *] at any time upon reasonable notice in order 
to verify the performance of the Parties pursuant to Sections 1.2(b)(ii), 1.4 
and 2.3 hereof.  All such audits shall be conducted by an independent auditor 
of the auditing Party's choosing in the offices of the audited Party during 
business hours.  The auditor shall report only whether any discrepancy in the 
required level of performance or payment was discovered and, if so, the 
amount thereof. The costs of any such audit shall be borne by the auditing 
Party unless such audit discloses that the audited Party has failed to 
perform within [*     *    *] of the required level of performance or payment 
required in any audited period, in which case the audited Party shall bear 
all such costs.

          2.5  INDEMNIFICATION.

          (a)  3M agrees to indemnify and hold harmless Polycom from any 
damage or out-of-pocket expenses incurred due to a claim that any 
[*     *     *]infringes any patent, copyright, trade secret or other 
intellectual property of a third party due to Polycom's use of 3M's 
intellectual property, if any, licensed to Polycom hereunder except to the 
extent such claim is based on 3M's or 3M's manufacturer's use of Polycom's 
intellectual property licensed to 3M or 3M's manufacturer pursuant to the 
provisions of 1.2(c)(ii)(C) or 2.1(d), respectively, above; provided, 
however, that 3M will only indemnify Polycom if (i) 3M specifies that its 
intellectual property in question be incorporated into the [*     *     *] or 
(ii) it is a commercially available product that would have infringed upon 
such third party's interest notwithstanding the use of it in the 
[*     *     *]. 3M agrees that it will not 


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        12.
<PAGE>

knowingly provide Polycom with an infringing product or knowingly specify any 
infringing technology for use in [*     *     *].  Polycom shall give 3M 
prompt notice of the assertion of such a claim, and permit 3M full control, 
including, but not limited to, choice of counsel, in the negotiation, 
litigation, and/or settlement of such claim.

          (b)  Polycom agrees to indemnify and hold harmless 3M from any 
damage or out-of-pocket expenses incurred due to a claim that any 
[*     *     *]infringes any patent, copyright, trade secret or other 
intellectual property of a third party based upon 3M's sale of [*     *     *]
 hereunder except to the extent such claim is based on Polycom's use of 3M's 
intellectual property licensed to Polycom pursuant to the provisions of 
Section 1.2 (c)(i), 1.2(c)(ii)(B) and/or 1.2(c)(ii)(C) above; provided, 
however, that Polycom will only indemnify 3M if (i) Polycom specifies that 
its intellectual property in question be incorporated into the [*     *     *]
 or (ii) it is a commercially available product that would have infringed 
upon such third party's interest notwithstanding the use of it in the 
[*     *     *].  Polycom further agrees that it will not knowingly provide 
3M with an infringing product or knowingly specify any infringing technology 
for use in [*     *     *]. 3M shall give Polycom prompt notice of the 
assertion of such a claim, and permit Polycom full control, including, but 
not limited to, choice of counsel, in the negotiation, litigation, and/or 
settlement of any such claim.

          2.6  PUBLIC ANNOUNCEMENTS.  Each Party agrees that it shall obtain 
the prior written approval of the other Party, which approval shall not be 
unreasonably withheld or delayed, in advance of any publicity involving the 
other Party.  The Parties intend to make a mutual press release announcing 
their new business relationship on or before April 15, 1997.

          2.7  TRAINING AND SERVICE SUPPORT.  Each Party agrees to reasonably 
assist the other Party in setting up service facilities and in training its 
designated sales, marketing and service personnel with respect to the factors 
for which such Party is responsible in the development of [*     *     *]
hereunder as the other Party may deem reasonably necessary to effectively 
market, and provide adequate service support to, the [*     *     *] that it 
will distribute hereunder.  Any training to be provided hereunder shall be 
provided to a Party at its facility located at the address for notice set 
forth in Article 17 below.  Additionally, Polycom agrees to accept redirected 
service inquiries received, and initially handled, by 3M regarding 
[*     *     *] during the Initial Royalty Period.

          2.8  QUALITY ASSURANCE; ENGINEERING DOCUMENTATION.  The Parties 
shall develop and implement a mutually acceptable quality assurance plan in 
the manufacture of [*     *     *] and require adherence to such plan by all 
manufacturers engaged to manufacture [*     *     *] for their account.  The 
Parties shall develop engineering documentation sufficient to allow each 
Party to inspect and qualify [*     *     *] as meeting their specifications, 
publish mutually acceptable end-user and service support documentation and 
provide adequate service support to distributors and/or purchasers of the 
[*     *     *].


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        13.
<PAGE>

          2.9  PRICE REDUCTION, QUALITY IMPROVEMENT AND PERFORMANCE 
ENHANCEMENT. The Parties agree to meet at least on a semi-annual basis to 
establish cost reduction, quality improvement and performance enhancement 
targets for [*     *    *] and to develop effective and on-going cost 
reduction, quality improvement and performance enhancement programs, to meet 
or exceed the cost, quality, and performance enhancement targets.  Each and 
every detail of the manufacturing process, including without limitation, bill 
of materials, inventory control, material handling, material substitution, 
supplier substitution and cycle time, yield and process improvement, will be 
subject to these cost reductions and quality improvement programs.


                                   ARTICLE 3
                            GRANT OF WARRANTS TO 3M

          3.1  DESCRIPTION OF WARRANTS.  As further consideration to 3M for 
its contributions to the Project, Polycom shall grant 3M warrants to acquire 
up to two million (2,000,000) shares of Polycom's outstanding common stock at 
a price of $7.50 per share for each share of Polycom's common stock so 
purchased, with such warrants to be exercisable for a period of two (2) years 
commencing with the Effective Date; provided, however, should 3M be required 
to postpone the Commencement Date for a period of six months or more beyond 
[*     *     *] (the "Target Date") due to the failure of the [*     *     *] 
to meet the Specifications, the expiration of the exercise period shall be 
extended for a period of time equal to the period of time commencing with the 
Target Date and concluding with the actual Commencement Date, but in no event 
beyond the third anniversary of the Effective Date.  The grant of such 
warrants, and the specific terms and conditions related thereto, are set 
forth in the Stock Warrant Agreement.

          3.2  LIMITATION ON ACQUISITION OF ADDITIONAL POLYCOM STOCK.  During 
the term hereof, 3M represents and warrants that it will not acquire 
additional capital stock in Polycom to the extent that, when added to the 
number of shares acquired, or to be acquired, by 3M pursuant to the Stock 
Warrant Agreement, 3M's stock will equal or exceed [*     *     *] of 
Polycom's issued and outstanding capital stock (assuming, in the latter case, 
the issuance of all of the stock available to 3M under the Stock Warrant 
Agreement) without the approval of Polycom's Board of Directors.


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.



                                        14.
<PAGE>

                                      ARTICLE 4
                            REPRESENTATIONS AND WARRANTIES

          4.1  REPRESENTATIONS AND WARRANTIES OF 3M.  3M hereby represents 
and warrants to Polycom as follows:

          (a)  ORGANIZATION AND GOOD STANDING.  3M is a corporation duly 
organized, validly existing and in good standing under the laws of Delaware, 
with all requisite power and authority to carry on the business in which it 
is engaged and to own the property it owns.  3M is duly qualified and 
licensed to do business and is in good standing in all jurisdictions where 
the nature of its business makes such qualification necessary.

          (b)  AUTHORIZATION AND VALIDITY.  The execution, delivery and 
performance of this Agreement and the other agreements contemplated hereby, 
by 3M, and the consummation of the transaction contemplated hereby and 
thereby, have been duly authorized by 3M . This Agreement and each other 
agreement contemplated hereby have been duly executed and delivered by 3M and 
constitute legal, valid and binding obligations of 3M, enforceable against it 
and in accordance with their respective terms, except as may be limited by 
applicable bankruptcy, insolvency or similar laws affecting creditor's rights 
generally or the availability of equitable remedies.

          (c)  NO VIOLATION.  Neither the execution and performance of this 
Agreement or the agreements contemplated hereby nor the consummation of the 
transactions contemplated hereby or thereby will (i) result in a violation or 
breach of the Articles of Incorporation or Bylaws of 3M or any agreement or 
other instrument under which 3M is bound or to which any of the assets of 3M 
is subject, or result in the creation or imposition of any lien, charge or 
encumbrance upon any of such assets, or (ii) violate any applicable law, 
regulation or any judgment or order of any court or governmental agency.

          (d)  NO VIRUSES.  The software supplied by 3M, its employees and/or 
agents incorporated into [*     *     *] as delivered to the manufacturer 
shall be free of any wilfully introduced computer virus or any other similar 
or harmful, malicious or hidden programs or data, and 3M shall indemnify and 
hold harmless Polycom from (i) any cost or damages awarded against Polycom in 
connection with any such virus, programs or data and (ii) the cost of 
debugging any virus and the cost of alternative processing while debugging is 
underway.

          4.2  REPRESENTATIONS AND WARRANTIES OF POLYCOM.  Polycom hereby 
represents and warrants to 3M as follows:

          (a)  ORGANIZATION AND GOOD STANDING.  Polycom. is a corporation 
duly organized, validly existing and in good standing under the laws of 
Delaware, with all requisite power and authority to carry on the business in 
which it is engaged and to own the property it owns.  Polycom is duly 
qualified and licensed to do business and is in good standing in all 
jurisdictions where the nature of its business makes such qualification 
necessary.


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        15.
<PAGE>

          (b)  AUTHORIZATION AND VALIDITY.  The execution, delivery and 
performance of this Agreement, and the other agreements contemplated hereby, 
by Polycom, and the consummation of the transaction contemplated hereby and 
thereby, have been duly authorized by Polycom.  This Agreement and each other 
agreement contemplated hereby have been duly executed and delivered by 
Polycom and constitute legal, valid and binding obligations of Polycom, 
enforceable against it and in accordance with their respective terms, except 
as may be limited by applicable bankruptcy, insolvency or similar laws 
affecting creditor's rights generally or the availability of equitable 
remedies.

          (c)  NO VIOLATION.  Neither the execution and performance of this 
Agreement or the agreements contemplated hereby nor the consummation of the 
transactions contemplated hereby or thereby will (a) result in a violation or 
breach of the Articles of Incorporation or Bylaws of Polycom or any agreement 
or other instrument under which Polycom is bound or to which any of the 
assets of Polycom is subject, or result in the creation or imposition of any 
lien, charge or encumbrance upon any of such assets, or (b) violate any 
applicable law, regulation or any judgment or order of any court or 
governmental agency.

          (d)  PATENTS AND TRADE SECRETS.

                  (i)    To the best of Polycom's knowledge, Polycom owns all 
trade secrets, patents and copyrights necessary to manufacture, distribute, 
and sell [*     *     *], or possesses adequate licenses or other rights, if 
any, therefor (collectively, the "Polycom Proprietary Rights").

                  (ii)   To the best of Polycom's knowledge at the time of
incorporation into a [*     *     *], Polycom has the right to use the Polycom
Proprietary Rights without infringing or violating the rights of any third
parties.  To the best of Polycom's knowledge at the time of incorporation into a
[*     *     *], no claim has been asserted by any person to the ownership of,
or right to use, any Polycom Proprietary Right or challenging or questioning the
validity or effectiveness of any such license or agreement and Polycom knows of
no valid basis for any such claim.  To the best of Polycom's knowledge at the
time of incorporation into a [*     *     *], each of the Polycom Proprietary
Rights is valid and subsisting, has not been terminated and, if applicable, has
been duly issued or filed.  Polycom will maintain its interest in the Polycom
Proprietary Rights throughout the term of this Agreement.

          (e)  [*     *     *] DESIGN.  The design of [*     *     *], as 
delivered to any manufacturer for the manufacture of [*     *     *] for 3M's 
account, will meet the Specifications therefor as mutually agreed to by 
Polycom and 3M hereunder.

          (f)  NO VIRUSES.  The software incorporated into [*     *     *], 
other than software supplied by 3M, its employees or agents or by a third 
party other than an independent contractor of Polycom, as delivered to the 
manufacturer, shall be free of any wilfully introduced computer virus or any 
other similar or harmful, malicious or hidden programs or data, and Polycom 
shall indemnify and hold harmless 3M from (i) any cost or 


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.



                                        16.
<PAGE>

damages awarded against 3M in connection with any such virus, programs or 
data and (ii) the cost of debugging any virus and the cost of alternative 
processing while debugging is underway.

          (g)  MAXIMUM FAILURE RATE.  In the event that [*     *     *]
purchased by 3M hereunder experience a field failure rate, based on a 
material Polycom design defect (excluding cosmetic defects), of 
[*     *     *] or more based upon returns of defective [*     *     *] 
during any [*     *     *], Polycom shall reimburse 3M for any and all costs 
incurred by it in the repair or replacement of such [*     *     *]; 
provided, however, that Polycom shall have no obligation with respect to such 
repair or replacement if it is determined that the defect is directly 
attributable to a 3M design.


                                   ARTICLE 5
                            CONFIDENTIAL INFORMATION

          5.1  Either Party who receives Confidential Information of the 
other Party shall protect the confidentiality of such Confidential 
Information for a period of [*     *     *] from the termination of this 
Agreement.  Confidential Information includes: (a) written materials 
delivered to the recipient marked as confidential or with a similar legend of 
confidentiality, (b) visual information indicated as confidential by means of 
written notices or signs, (c) oral information that is indicated orally to be 
confidential and subsequently summarized and designated as confidential in a 
written memo sent to the recipient within [*     *     *] and (d) disclosed 
in the form of tangible products or materials transmitted to the recipient 
with an accompanying written memorandum.  It is the responsibility of each 
Party to identify its own information which it deems to be "Confidential 
Information."

          5.2  Use of the disclosing Party's Confidential Information by the 
receiving Party shall be limited to the express purposes of this Agreement in 
the following areas: 

          (a)  3M information in the areas of [*  *    *    *    *    *    *
     *    *    *    *    *    *    *    *    *    *    *    *    *    *    *
     *    *    *    *    *    *    *    *    *    *    *    *    *    *    *
     *    *    *    *    *    *    *    *    *    *    *].

          (b)  Polycom information in the areas of [*  *    *    *    *    *
     *    *    *    *    *    *    *    *    *    *    *    *    *    *    *
     *    *    *    *    *    *    *    *    *    *    *    *    *    *    *
     *    *    *    *    *    *    *    *    *    *    *    *    *].



* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        17.
<PAGE>

          5.3  A recipient shall return or properly dispose of all 
information (including tangible products or materials) received from the 
disclosing Party upon request of the disclosing Party except that the 
recipient may retain in the office of its legal counsel one copy of written 
information for record purposes only.

          5.4  A recipient shall protect the disclosed Confidential 
Information by using the same degree of care, but no less than a reasonable 
degree of care, to prevent the unauthorized use or disclosure of the 
Confidential Information of the disclosing Party, as the recipient uses to 
protect is own Confidential Information of like nature.  A recipient of the 
other Party's Confidential Information shall not disclose any such 
Confidential Information to any third party.  Confidential Information of the 
disclosing Party will be restricted to those employees, agents, or 
contractors of each receiving Party having a need-to-know.  In the event that 
the recipient is required by judicial or administrative process to divulge 
Confidential Information of the disclosing Party, the recipient shall 
promptly notify the disclosing Party and allow the disclosing Party a 
reasonable time to oppose such process prior to divulging such Confidential 
Information.

          5.5  This Agreement imposes no obligation upon a recipient with 
respect to information that (a) was in the recipient's possession before 
receipt from the disclosing Party, (b) is or becomes available to the public 
through no fault of the recipient, (c) is received in good faith by the 
recipient from a third party and is not subject to an obligation of 
confidentiality owed to the third party, (d) is independently developed by 
the recipient without reference to information received hereunder, or (e) is 
disclosed by disclosing Party to a third party without a duty of 
confidentiality on the third party.


                                   ARTICLE 6
                                      TERM

          This Agreement shall be effective as of the Effective Date and 
shall continue in effect until [*     *     *]; provided, however, that the 
term shall be extended:

          (a)  [*     *     *], if, during the Initial Royalty Period, 3M has 
(i) met or exceeded the level of sales required to maintain the exclusive 
nature of its marketing rights and (ii) spent the required sums in marketing 
[*     *    *] pursuant to the provisions of Section 2.2(a)(ii) and Section 
1.2(b)(ii) above, respectively.

          (b)  [*     *     *], if, (i) the conditions for the first 
extension under subsection (a) above were timely met and (ii) during the 
second Royalty Period, 3M has (A) met or exceeded the level of sales required 
to maintain the exclusive nature of its marketing rights and (B) spent the 
required sums in marketing [*     *     *] pursuant to the provisions of 
Section 2.2 (a)(ii) and Section 1.2(b)(ii) above, respectively;


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        18.
<PAGE>


                                   ARTICLE 7
                                  TERMINATION

          Either Party may terminate this Agreement during the term hereof 
upon written notice, given pursuant to the requirements of Article 17 below, 
in the event the other Party fails to perform a material obligation under 
this Agreement or otherwise is in breach of any of its material obligations 
hereunder.  The Party receiving such notice shall have [*     *     *] from 
the date of receipt thereof to cure the failure or breach.  If the Party 
receiving such notice does not cure the failure or breach within such cure 
period, the Party claiming breach may terminate this Agreement by sending 
written notice of termination, given pursuant to the requirements of Article 
17 below.


                                   ARTICLE 8
                           LIMITATION OF LIABILITIES

          IN THE EVENT EITHER PARTY SHOULD BECOME LIABLE TO THE OTHER FOR ANY 
MATTER RELATING TO THIS AGREEMENT, WHETHER ARISING IN CONTRACT, EQUITY OR 
TORT (INCLUDING, WITHOUT LIMITATION, NEGLIGENCE), AND IN ADDITION TO ANY 
OTHER LIMITATION OF LIABILITY OR REMEDY SET FORTH IN THIS AGREEMENT, THE 
AMOUNT OF DAMAGES RECOVERABLE BY THE INJURED PARTY SHALL NOT INCLUDE ANY 
AMOUNTS FOR INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS, LOST 
INCOME OR LOST SAVINGS, OR FOR ANY AMOUNTS WITH RESPECT TO CLAIMS BY ANY 
OTHER PARTY.  These exclusions do not apply to claims for personal injury by 
a third party.


                                   ARTICLE 9
                                INDEMNIFICATION

          9.1  INDEMNIFICATION BY POLYCOM.  Polycom will indemnify, defend, 
and hold harmless 3M, its affiliates and their respective directors, 
officers, shareholders, agents, and employees from any loss, claim, liability 
and/or expense (including reasonable attorneys' fees, court costs, and other 
expenses of litigation) with respect to claims for sickness, bodily injury, 
personal injury, death, tangible property damage or loss as asserted by third 
parties where the claim is based in whole or in part on, or is in any way 
related to, any act or omission attributable to Polycom, its agents, 
employees, or subcontractors, or in any way related to Polycom's design of 
the [*     *    *], except to the extent that such claims are due solely and 
directly to the negligence or intentional misconduct of 3M.

          9.2  INDEMNIFICATION BY 3M. 3M will indemnify, defend, and hold 
harmless Polycom, its affiliates and their respective directors, officers, 
shareholders, agents, and employees from any loss, claim, liability and/or 
expense (including reasonable attorneys' fees, court costs, and other 
expenses of litigation) with respect to claims for sickness, bodily injury, 
personal injury, death, tangible property damage or loss as asserted by third 
parties 


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        19.
<PAGE>

where the claim is based in whole or in part on, or is in any way related to, 
any act or omission attributable to 3M, its agents, employees, or 
subcontractors, or in any way related to 3M's design of the [*     *     *], 
except to the extent that such claims are due solely and directly to the 
negligence or intentional misconduct of Polycom.


                                   ARTICLE 10
                               PUBLIC DISCLOSURE

          3M and Polycom agree not to disclose the terms and conditions of 
this Agreement, except as may be required by law or government regulations or 
in connection with any due diligence relating to any financing, merger or 
acquisition involving such Party, without written authorization of the other 
Party, for the term of this Agreement.  In the event such disclosure is 
required, the disclosing Party agrees to provide the other Party with prompt 
notice of such disclosure and, where possible, with prior notice thereof.


                                   ARTICLE 11
                                 FORCE MAJEURE

         11.1  If the performance of this Agreement or of any obligation 
hereunder is prevented, restricted or interfered with by reason of fire or 
earthquake or other casualty or accident; inability to procure raw materials, 
power or supplies (for reasons other than a Party's negligence or fault or 
failure to timely order); war or other violence; or any law, order, 
proclamation, regulation, ordinance, demand or requirement of any government 
agency, court or intergovernmental body, the Party whose performance is 
prevented, restricted or interfered with shall be excused from such 
performance to the extent of such prevention, restriction or interference; 
provided that the Party so affected shall use its reasonable efforts so as to 
avoid or remove such causes of nonperformance and shall resume performance 
hereunder with the utmost dispatch whenever such causes are removed.

         11.2  If performance of this Agreement or of any obligation 
hereunder is prevented, restricted or interfered with for any reason set 
forth in this Article 11, and such prevention, restriction or interference 
lasts for, or is expected to last for more than, one hundred and twenty (120) 
days, the Party whose performance is not affected by the force majeure 
condition shall have the option of being excused, without further obligation, 
from performance of the Agreement or of any obligation.


                                   ARTICLE 12
                            RELATIONSHIP OF PARTIES

         12.1  NATURE OF RELATIONSHIP.  Neither Polycom nor 3M is an agent of 
the other Party and has no authority to bind the other Party, transact any 
business in the other Party's name or on its behalf, or make any promises or 
representations on behalf of the other Party.  Each Party makes this 
Agreement and will perform all of its respective 


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        20.
<PAGE>

obligations under this Agreement as an independent contractor, and no joint 
venture, partnership or other relationship shall be created or implied by 
this Agreement.  The employees and agents of each Party are NOT for any 
purpose the employees or agents of the other Party.

         12.2  NON-SOLICITATION.  During the term of this Agreement and for a 
period of one year thereafter, both 3M and Polycom agree that they will not, 
directly or indirectly, for their own account or otherwise, solicit for 
employment or employ or engage as an independent contractor, consultant or 
otherwise, any employee, or former employee employed during the term hereof, 
of the other Party without such Party's prior written approval.


                                   ARTICLE 13
                                   ASSIGNMENT

         This Agreement may not be transferred or assigned, in whole or in 
part, by either Party hereto without the written consent of the other Party, 
except as a part of the transfer of substantially all of such Party's capital 
stock, assets or that portion of the transferring Party's business to which 
this Agreement pertains.


                                   ARTICLE 14
                                    SURVIVAL

         The rights and obligations of the Parties hereto under Sections 
1.2(c), 2.3(c), 2.4, 2.5, 4, 5, 8, 9, 12.2, 14, 16-19 and all rights to 
payment of either Party hereunder shall survive any termination, cancellation 
or expiration of this Agreement.


                                   ARTICLE 15
                               PARAGRAPH HEADINGS

         The title and headings of the various articles of this Agreement are 
inserted for convenience of reference only and shall not be constructed to 
affect the construction or interpretation of any of its provisions.


                                   ARTICLE 16
                                     WAIVER

         Any failure or delay by either Party in exercising any right or 
remedy in one or many instances will not prohibit a Party from exercising it 
at a later time or from exercising any other right or remedy.


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        21.
<PAGE>

                                   ARTICLE 17
                                    NOTICES

         Any notices required or permitted hereunder shall be given in 
writing either (a) through personal delivery by courier with tracking 
capabilities or otherwise, (b) by telecopy or other electronic medium to be 
promptly followed by confirmation pursuant to subsections (a) or (c), or (c) 
by deposit in United States mail, postage paid, certified or registered mail, 
return receipt requested to the address stated below or to such other address 
notice of which is given in accordance with this Article 17:

If to 3M:      Division Vice President
               3M Visual Systems Division
               Minnesota Mining and Manufacturing Company
               3M Austin Center
               6801 River Place Boulevard
               Austin, Texas 78726-9000

               Telecopier No.: 512/984-5191

If to Polycom: Chief Executive Officer
               Polycom, Inc.
               2584 Junction Avenue
               San Jose, California 95134-1902

               Telecopier No.: 415/474-2955

All notices shall be deemed given or made (x) on the date delivered if 
delivered personally, by courier or otherwise, (y) on the date initially 
received, if delivered by telecopy or other electronic medium followed by 
confirmation by personal delivery or registered or certified mail, or (z) on 
the third business day after it is mailed, if mailed in accordance with 
subsection (c) above.


                                   ARTICLE 18
                         GOVERNING LAW; CHOICE OF FORUM

         18.1  THIS AGREEMENT IS ENTERED INTO AND PERFORMABLE IN SANTA CLARA 
COUNTY, CALIFORNIA AND ANY QUESTIONS, CLAIMS, DISPUTES OR LITIGATION 
CONCERNING OR ARISING FROM THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF 
CALIFORNIA, USA WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS DOCTRINES OF 
ANY FEDERAL STATE OF THE UNITED STATES OR ANY NATION STATE.

         18.2  The Parties agree that both California and Texas have a 
substantial relationship to this transaction, and each Party consents to 
personal jurisdiction in the courts thereof.  Any action or suit arising from 
or related to this Agreement shall only be brought by the Parties in any 
federal or state court with appropriate jurisdiction over the subject 


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.

                                        22.
<PAGE>

matter established or sitting in (a) in the case of Polycom, state of Texas, 
located in Austin, Texas, and (b) in the case of 3M, the state of California, 
located in San Jose, California.


                                   ARTICLE 19
                               DISPUTE RESOLUTION

         19.1  UNAIDED NEGOTIATIONS.  To resolve any disputes among the 
Parties, 3M or Polycom must first provide written notice to the other, 
specifying in as much detail as possible the source or reason for the dispute 
and the resolution proposed by the notifying Party.  The receiving Party 
shall respond in writing to any such notice within [*     *     *] after 
receipt.  The receiving Party may include in its reply a detailed description 
of any disputes it would like to resolve and the proposed resolutions.  The 
first notifying Party shall respond within [*     *     *].  If the dispute 
is not then resolved, there shall follow within [*     *     *] of the last 
written response a meeting between at least one representative of each Party. 
 Each Party agrees to have present such person or persons who are authorized 
to fully and finally resolve the dispute.  The purpose of this meeting shall 
be to discuss and negotiate in good faith the complete resolution of any 
outstanding dispute(s). The date and time shall be mutually agreed (within 
the stated period), and the location of the meeting shall be chosen by the 
Party responding to the first notice.  Each Party shall bear its own costs 
(including travel expenses) incident to this negotiation and meeting.

         19.2  MEDIATION.  Should the procedure outlined above not bring 
about a resolution of the dispute, then within [*     *     *] following the 
meeting of principals, the Party first sending the notice shall initiate a 
voluntary, nonbinding mediation conducted at a mutually-agreed location (or, 
if no location can be agreed upon in Chicago, Illinois), by a mutually-agreed 
mediator selected from the membership of the local chapter of the Association 
of Attorney-Mediators.  Should the Parties for any reason be unable or 
unwilling to agree upon a mediator, they shall request the local chapter of 
the Association of Attorney-Mediators to appoint one of its members for them. 
 The Parties shall bear equally all costs and expenses (including any 
mediator's fees) of this mediation and endeavor in good faith to resolve 
their differences.  While this mediation shall be nonbinding in all respects 
(except agreements in settlement of the dispute negotiated by the Parties), 
each Party agrees that:

         (a)   It shall appear when directed by the mediator, be fully 
prepared to work towards a resolution of the dispute, and participate in good 
faith in the mediation towards a resolution of all disputed issues or 
concerns;

         (b)   The duty to mediate in good faith shall be specifically 
enforceable by the courts of California and Texas; and

         (c)   Should a court in any litigation stemming from the same 
general dispute or disagreement among the Parties determine that either did 
not participate in good faith in the mediation process hereunder, the court 
shall impose against such Party a 


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        23.
<PAGE>

sanction equal to the other Party's attorneys' fees in the resulting 
litigation, up to [*     *     *].

         19.3  LITIGATION.  In the event that the Parties are unable to 
resolve any outstanding disagreement or dispute as provided above, then, as a 
last resort, either Party may commence litigation; provided, however, that, 
in the case of Polycom, it must do so in the courts (state or federal, 
provided the court selected has subject matter jurisdiction) of the state of 
Texas located in Austin, Texas, and, in the case of 3M, it must do so in the 
Courts (state or federal, provided the court selected has subject matter 
jurisdiction) of the state of California located in San Jose, California.


                                   ARTICLE 20
                                ENTIRE AGREEMENT

         20.1  This Agreement and the exhibits referred to in this Agreement 
supersede and terminate all prior agreements, if any, whether written or 
oral, between the Parties with respect to the subject matter contained herein.

         20.2  Each Party agrees that it has not relied on any 
representation, warranty, or provisions not explicitly stated in this 
Agreement, and that no oral statement has been made to either Party that in 
any way trends to waive any of the terms or conditions of this Agreement.  
This Agreement constitutes the final written expression of all terms of the 
Agreement, and it is a complete and exclusive statement of those terms.

         20.3  No part of this Agreement may be waived, modified, or 
supplemented in any manner whatsoever (including a course of dealing or of 
performance or usage of trade) except by a written instrument signed by duly 
authorized officers of the Parties.


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        24.
<PAGE>

         The Parties, intending to be bound, have signed this Agreement as of 
the day and year first written above.

                             3M:

                             MINNESOTA MINING AND MANUFACTURING COMPANY



                             By: /s/ C. AGNEW MEEK
                                ---------------------------------------

                             Title:
                                   ------------------------------------

                             Date:   MARCH 28, 1997                      
                                  -------------------------------------

                             POLYCOM:

                             POLYCOM, INC.



                             By:/S/ MICHAEL R. KOUREY                          
                                ---------------------------------------

                             Title: CHIEF FINANCIAL OFFICER                    
                                   ------------------------------------

                             Date:  MARCH 28, 1997                             
                                  -------------------------------------



* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        25.
<PAGE>

Exhibit A  Specifications of [*     *     *]
Exhibit B  Stock Warrant Agreement
Exhibit C  Migration Schedule
Exhibit D  Source Code Escrow Provisions
Exhibit E  Minimum Sales Requirements to Maintain 3M Exclusivity
Exhibit F  [*     *     *] Regulatory Approvals


* Confidential treatment requested. Confidential portion has been filed 
separately with the Securities and Exchange Commission.


                                        26.

<PAGE>

                                      EXHIBIT A

                                          [*   *   *]
                         Engineering Functional Specification

                                Confidential Treatment
                             Requested for Entire Exhibit







* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.

<PAGE>

                                      EXHIBIT B

                               STOCK WARRANT AGREEMENT



         This STOCK WARRANT AGREEMENT (this "Agreement") is entered into and
made effective as of March 28, 1997 by and between POLYCOM, INC., a Delaware
corporation (the "Company"), and the MINNESOTA MINING AND MANUFACTURING COMPANY,
a Delaware corporation, acting through its Visual Systems Division ("3M").


                                      ARTICLE 1
                          AUTHORIZATION AND SALE OF WARRANTS

         1.1   AUTHORIZATION.  The Company has authorized the issuance of a
warrant exercisable for two million (2,000,000) (subject to adjustment as set
forth herein) fully paid and non-assessable shares of the Company's Common
Stock, $.0005 par value per share (the "Stock") at an exercise price of $7.50
per share (the "Exercise Price", which is subject to adjustment as set forth
herein) in the form attached hereto as Exhibit A (the "Warrant").

         1.2   SALE OF WARRANTS.  Subject to the terms and conditions hereof,
in consideration of the representations, warranties and covenants of 3M given
pursuant to that certain Joint Marketing and Development Agreement of even date
herewith by and between the Company and 3M (the "Development Agreement"), the
Company will issue and sell to 3M, and 3M will buy from the Company, a warrant
exercisable at a price and for a number of shares of Stock set forth herein. 
For purposes of this Agreement, "Warrant Shares" means all shares of Stock
issuable upon exercise of the Warrant.

         1.3   ADJUSTMENTS AND RELATED ISSUES.

         (a)   NUMBER OF SHARES; EXERCISE PRICE.  The number of shares of Stock
which the Holder of the Warrant shall be entitled to receive upon exercise
hereof shall be determined by multiplying the number of shares of Stock which
would otherwise be issuable upon such exercise, as designated by the Holder (as
defined herein) thereof, by a fraction of which (1) the numerator is $15,000,000
and (2) the denominator is the Exercise Price in effect on the date of such
exercise.  The Exercise Price shall be adjusted and readjusted from time to time
as provided in this Section 1.3 and, as so adjusted or readjusted, shall remain
in effect until a further adjustment or readjustment thereof is required by this
Section 1.3.

         (b)   ADJUSTMENT FOR CHANGE IN CAPITALIZATION.  Upon exercise of the
Warrant, the Holder thereof shall be entitled to receive an amount of Stock
which shall be based upon the two million (2,000,000) shares of Stock set forth
in Section 1. I above and adjusted as set forth herein.  If the outstanding
shares of Stock shall be subdivided (split), combined (reverse split), by
reclassification or otherwise, or if there is declared any dividend 

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


<PAGE>

payable on the Stock in shares of Stock, or upon the issuance of options, 
warrants, or securities exercisable or convertible into Stock, the Exercise 
Price in effect immediately prior to such event shall be adjusted to the 
price determined by dividing (1) the number of shares of Stock outstanding 
(determined on a fully diluted basis) immediately prior to such event 
multiplied by the Exercise Price in effect immediately prior to such event by 
(2) the total number of shares of Stock outstanding immediately after such 
event (determined on a fully diluted basis).  If at any time there shall be a 
capital reorganization of the Company's Stock, then, as part of such capital 
reorganization, the Company shall cause lawful provisions to be made so that 
the Holder of the Warrant shall thereafter be entitled to receive on the 
exercise of the Warrant the number of shares of stock, securities, or other 
property of the Company, to which a holder of the Stock into which the 
Warrant is exercisable would have been entitled on such capital 
reorganization, if the Warrant had been exercised immediately before that 
capital reorganization.  In any such event, appropriate adjustment (as 
determined in good faith by the Board of Directors of the Company) shall be 
made to the Exercise Price with respect to the rights and interests of the 
Holder after such capital reorganization, to the end that this Section 1.3 
and the rights of the Holder hereunder (including adjustment to the Exercise 
Price then in effect and the number of shares of Stock received upon exercise 
hereof) shall be applicable after that event, as near as reasonably may be, 
to any shares, securities or property deliverable after that event on 
exercise of the Warrant. The Company shall give the Holder no less than 
fifteen (15) days prior written notice of the proposed effective date of any 
transaction or event resulting in an adjustment to the number of Warrant 
Shares or the Exercise Price under the Warrant.

         (c)   MERGER OR CONSOLIDATION OF THE COMPANY.  In the event that, at
any time prior to the expiration of the Warrant, the Company is merged into or
consolidated with another corporation or other entity under circumstances where
the Company is not the surviving entity, or more than fifty percent (50%) of the
outstanding voting securities of the Company are owned by another entity as a
result of such merger or consolidation, then, at the election of the Board of
Directors of the Company, the Warrant may be canceled by the Board of Directors
of the Company as of the effective date of such merger or consolidation,
provided that (a) notice of such cancellation shall be given to Holder at least
thirty (30) days prior to the effective date of any such merger or consolidation
and (b) Holder shall have the right to exercise the Warrant, in whole or in
part, throughout the period preceding the effective date of such merger or
consolidation.

         (d)   OTHER DILUTIVE EVENTS.  In case any event shall occur as to
which the provisions of this Section 1.3 are not strictly applicable but the
failure to make any adjustment relating thereto would not fairly protect the
purchase rights represented by the Warrant in accordance with the essential
intent and principles of this Section 1.3, then, in each such case, the Company
shall immediately make all adjustments necessary to preserve, without dilution,
the purchase rights represented by the Warrant on a basis consistent with the
intent and principles established 

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        2.



<PAGE>

in this Section 1.3 and shall also immediately appoint a firm of independent 
certified public accountants of recognized national standing (which may be 
the regular auditors of the Company if they satisfy such standard), which 
shall give their opinion that such adjustment, if any, preserves, without 
dilution, the purchase rights represented by the Warrant on a basis 
consistent with the intent and principles established in this Section 1.3. 
Upon receipt of such opinion, the Company will immediately deliver a copy 
thereof to the Holder of the Warrant.  The Company shall not, by amendment of 
its certificate of incorporation or through any consolidation, merger, 
reorganization, transfer of assets, dissolution, issue or sale of securities 
or any other voluntary action, avoid or seek to avoid the observance or 
performance of any of the terms of this Warrant, and will at all times in 
good faith assist in carrying out all of such terms and in the taking of all 
such actions as may be necessary or appropriate in order to protect the 
rights of the Holder of this Warrant against dilution or other impairment.  
Without limiting the generality of the foregoing, the Company (i) will not 
permit the par value of any shares of Stock receivable upon the exercise of 
the Warrant to exceed the amount payable therefor upon such exercise of the 
Warrant from time to time outstanding, and (iii) will not take any action 
that results in any adjustment of the Exercise Price if the total number of 
shares of Stock issuable after such action upon the exercise of the Warrant 
would exceed the total number of shares of Stock then authorized by the 
Company's certificate of incorporation and available for the purpose of 
issuance upon such exercise.

         (e)   NOTICE.  Whenever there shall be an adjustment as provided in
this Section 1.3 the Company shall within three (3) days cause written notice
thereof to be given to the Holder, which notice shall be accompanied by an
officer's certificate setting forth the Exercise Price and number of Warrant
Shares available after such adjustment and setting forth a brief statement of
the facts requiring such adjustment and the computation thereof.  However, the
failure by the Company to satisfy its obligations under this Section 1.3 shall
not in any manner affect or alter the rights of the Holder under this Warrant.

         (f)   FRACTIONAL SHARES.  The Company shall not be required to issue
fractions of shares of Stock or other capital stock of the Company upon the
exercise of Warrant.  If any fraction of a share would be issuable upon the
exercise of any Warrant, the Company shall purchase such fraction for an amount
in cash equal to the same fraction of the fair value of such share of Stock (as
determined in good faith by the Board of Directors of the Company but not less
than the fair market value) on the date of exercise of the Warrant.

         (g)   TREASURY STOCK.  For the purposes of this Section 1.3, the sale
or other disposition of any Stock theretofore held in the Company's treasury
shall be deemed to be an issue thereof.

         (h)   VALID ISSUANCE.  All shares of Stock that may be issued upon the
exercise of the Warrant will upon issuance by the Company be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof, and the Company shall take no action that
will cause a contrary result (including, without limitation, any action which
would cause the Exercise Price to be less than the par value, if any, of the
Stock).

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        3.

<PAGE>

                                      ARTICLE 2
                                CLOSING DATE; DELIVERY

         2.1   CLOSING DATE.  The closing of the purchase and sale of the
Warrants hereunder shall be held concurrently with the execution hereof, such
execution and closing to be held at the offices of 3M located at 3M Austin
Center, 6801 River Place Boulevard, Austin, Texas at 10:00 a.m. C.S.T. on March
28, 1997 (the "Closing") or at such other time and place upon which the Company
and 3M shall agree (the date of the Closing is hereinafter referred to as the
"Closing Date").

         (a)   DELIVERY.  At the Closing, the Company will deliver to 3M the
Warrant, registered in 3M's name, upon the terms and conditions set forth
herein.


                                      ARTICLE 3
                    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         Except as set forth on Exhibit B attached hereto, the Company
represents and warrants to 3M as follows:

         3.1   ORGANIZATION AND STANDING.  The Company is a corporation duly
organized and existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws.  The Company has all requisite
corporate power and authority to own and operate its properties and assets, and
to carry on its business as presently conducted and as proposed to be conducted.
The Company is qualified to do business as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on its business as now conducted or as now proposed to be
conducted.

         3.2   CORPORATE POWER.  The Company will have at the Closing Date as
applicable, all requisite legal and corporate power and authority to execute and
deliver this Agreement to sell and issue the Warrant hereunder, to issue the
Warrant Shares and to carry out and perform its obligations under the terms of
this Agreement.

         3.3   SUBSIDIARIES.  The Company has a single subsidiary, Polyspan
Teleconferencing, N.V.. a Netherlands corporation, and does not otherwise own or
control, directly or indirectly, any equity interest in any corporation,
association or other business entity.

         3.4   CAPITALIZATION. As of December 31, 1996, the authorized capital
stock of the Company consists of fifty million (50,000,000) shares of Common
Stock, $.0005 par value per share, of which ninety million one hundred forty
four thousand and fifty eight (19,144,058) shares are issued and outstanding. 
Except as set forth above or on the Exhibit B hereto, there is no outstanding
option, warrant or other right to purchase any of the Company's authorized and
unissued capital stock.  All of the outstanding shares of Common Stock of the
Company have been duly authorized and validly issued, and are fully paid and

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        4.

<PAGE>

nonassessable and were issued in compliance with the registration provisions of
applicable state and federal securities laws.

         3.5   AUTHORIZATION.  All corporate action on the part of the 
Company, its directors and shareholders necessary for the authorization, 
execution, delivery and performance of this Agreement by the Company, the 
authorization, sale, issuance and delivery of the Warrant and the Warrant 
Shares and the performance of all of the Company's obligations hereunder has 
been taken prior to the Closing.  This Agreement, when executed and delivered 
by the Company, shall constitute a valid and binding obligation of the 
Company, enforceable in accordance with its terms. The Warrant, when issued 
in compliance with the provisions of this Agreement, will be validly issued, 
fully paid and nonassessable, the Stock issuable upon exercise of the Warrant 
has been duly and validly reserved and, when issued in compliance with the 
provisions of the Company's Amended and Restated Certificate of Incorporation 
(the "Certificate"), the Warrant will be validly issued, and will be fully 
paid and nonassessable; and the Warrant, and such Stock will be free of any 
liens or encumbrances other than any liens or encumbrances created by or 
imposed upon by the Holders; provided, however, that the Warrant and such 
Stock may be subject to restrictions on transfer under state and/or federal 
securities laws as set forth herein.

         3.6   FINANCIAL STATEMENTS.  The Company has delivered to 3M its
audited financial statements (balance sheet, statement of operations,
shareholders' equity and cash flows) for the year ended December 31, 1996 (the
"Financial Statements").  The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated.  The balance sheet included in the Financial Statements
fairly presents the financial condition of the Company as of December 31, 1996
and reflects all material liabilities, contingent or otherwise, of the Company
as of such date, and the statement of operations included in the Financial
Statements accurately present the operating results of the Company during the
period indicated therein.  Since December 31, 1996, there has not been any
change in the assets, liabilities, financial condition or operations of the
Company from that reflected in the Financial Statements, except changes in the
ordinary course of business which have not been, either in any case or in the
aggregate, materially adverse.  The Company has no material liabilities required
by generally accepted accounting principles to be disclosed in a balance sheet
which are not disclosed in the Financial Statements.

         3.7   TITLE TO PROPERTIES AND ASSETS; LIENS, ETC.  The Company has
good and marketable title to its properties and assets, and good title to all
its leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) the lien of current taxes not yet
due and payable, and (ii) possible minor liens and encumbrances which do not in
any case materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and which have not arisen
otherwise than in the ordinary course of business.

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.

                                        5.

<PAGE>

         3.8   COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC.  The
Company is not in violation of any term of its Certificate or By-Laws, or in any
material respect of any term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
and to the best of its knowledge is not in violation of any order, statute, rule
or regulation applicable to the Company where such violation would materially
and adversely affect the Company.  The execution, delivery and performance of
and compliance with this Agreement and the issuance of the Stock issuable upon
the Holder's exercise of the Warrant have not resulted and will not result in
any material violation of, or conflict with, or constitute a material default
under, the Company's Certificate or By-laws or any of its agreements, nor result
in the creation of, any mortgage, pledge, lien, encumbrance or charge upon any
of the properties or assets of the Company.

         3.9   LITIGATION, ETC.  There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency that, if adversely decided, could be materially adverse to
the Company or its business or financial condition or that question the validity
of this Agreement (nor, to the best of the Company's knowledge, is there any
threat thereof or reasonable basis therefor).

         3.10  EMPLOYEES.  To the Company's knowledge and after reasonable
investigation, no employee of the Company is a party to an agreement with any
previous employer that in any way adversely affects his or her performance or
his or her duties as an employee of the Company or is a party to, or threatened
by, any litigation concerning any patents, trademarks, trade secrets and the
like.  The Company does not have any collective bargaining agreements covering
any of its employees.  Each of the employees of the Company has executed an
Proprietary Information and Invention Agreement in the form previously submitted
to 3M.  The Company has no employee benefit plans or agreements with respect to
profit-sharing or pension benefits.

         3.11  PATENTS, COPYRIGHTS, ETC.  The Company owns or has the right to
use, free and clear of all liens, charges, claims and restrictions, all patents,
copyrights, licenses and rights necessary to its business as now conducted or
proposed to be conducted, and is not infringing upon or otherwise acting
adversely to, nor will the conduct of its business as proposed to be conducted
cause it to infringe upon or act adversely to, the right or claimed right of any
person under, or with respect to, any of the foregoing.

         3.12  REGISTRATION RIGHTS.  Except as set forth in that certain
Amended and Restated Investors' Rights Agreement dated May 17, 1995 among the
Company and the parties who have executed the counterpart signature pages
thereto or are otherwise bound thereby (the "Investors' Rights Agreement"), the
Company is not under any contractual obligation to register any of its presently
outstanding securities or any of its securities which may hereafter be issued.

         3.13  GOVERNMENTAL CONSENT, ETC.  Subject to the accuracy of 3M's
representations in Section 4 hereof, no consent, approval or authorization of or
designation, declaration or filing with, any governmental authority on the part
of the Company is 

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        6.
<PAGE>

required in connection with the valid execution and delivery of this 
Agreement, or the offer, sale or issuance of the Warrant Shares or the 
consummation of any other transaction contemplated hereby, except (a) 
qualification (or taking such action as may be necessary to secure an 
exemption from qualification, if available) of the offer and sale of the 
stock under applicable Blue Sky laws, which filings and qualifications, if 
required, will be accomplished in a timely manner and (b) filing of a notice 
of transaction on Form D with the Securities and Exchange Commission pursuant 
to Regulation D promulgated under the Securities Act, if required, which 
filing will be made in a timely manner.

         3.14  TAX RETURNS.  The Company has filed all federal, state and other
tax returns which are required to be filed, or has timely filed for extensions
thereof, and has paid all taxes which have become due and payable.  The Company
has not been advised that any of its returns, federal, state or other, have been
or are being audited as of the date hereof.

         3.15  OFFERING.  Subject to the accuracy of 3M's representations in
Section 4 hereof, the offer, sale and issuance of the Warrant to be issued in
conformity with the terms of this Agreement, and the issuance of the Warrant
Shares constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended (the "Securities Act").

         3.16  BROKERS OR FINDERS: OTHER OFFERS.  The Company has not incurred,
and will not incur, directly or indirectly, as a result of any action taken by
or on behalf of the Company, any liability for brokerage OR finders' fees or
agents' commissions or any similar charges in connection with this Agreement.

         3.17  INSURANCE.  The Company has fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its material properties that might be
damaged or destroyed.

         3.18  DISCLOSURE.  To the best of the Company's knowledge, this
Agreement with the Exhibits hereto, when taken as a whole, does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained herein not misleading in light of the
circumstances under which they were made.

         3.19  RESERVED STOCK.  The Company shall reserve and keep available at
all times solely for the purpose of providing for the exercise of the Warrant
the maximum number of shares of Stock as to which the Warrant may then be
exercised.  All such shares shall be duly authorized and free of preemptive
rights and, when issued upon such exercise, shall be validly issued and fully
paid and non-assessable with no liability on the part of the holder thereof.

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        7.
<PAGE>

                                      ARTICLE 4
                         REPRESENTATIONS AND WARRANTIES OF 3M

         3M represents and warrants to the Company with respect to the purchase
of the Warrant Shares as follows:

         4.1   EXPERIENCE.  It has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.

         4.2   INVESTMENT.  It is acquiring the Warrant Shares for investment
for its own account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any distribution thereof.  It understands that the
Warrant Shares to be purchased have not been, and will not be, registered under
the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
3M's representations herein.

         4.3   RULE 144.  It acknowledges that the Warrant Shares must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from such registration is available.  It is aware of the provisions
of Rule 144 promulgated under the Securities Act, which permit limited resale of
shares purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, in certain instances, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being
affected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of shares being sold during any three-month period
not exceeding specified limitations.  It is also aware that pursuant to the
provisions of subparagraph (k) of Rule 144, a holder of "Restricted Securities"
who has held such securities for over two years may dispose of such securities
without regard to certain of the general conditions relating to sales under Rule
144, provided that such holder has not been an "affiliate" of the issuer within
90 days prior to such disposition.

         4.4   ACCESS TO DATA.  It has had an opportunity to discuss the
Company's business, management and financial affairs with its management and the
opportunity to review the Company's facilities and operating plan.  It has also
had an opportunity to ask questions of officers of the Company, which questions
were answered to its satisfaction.  It understands that such discussions, as
well as any written information issued by the Company, were intended to describe
certain aspects of the Company's business and prospects but were not a thorough
or exhaustive description.

         4.5   AUTHORIZATION.  This Agreement when executed and delivered by 3M
will constitute a valid and legally binding obligation of 3M enforceable in
accordance with its terms.

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        8.
<PAGE>

         4.6   BROKERS OR FINDERS.  The Company has not, and will not, incur,
directly or indirectly, as a result of any action taken by or on behalf of 3M,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.

         4.7   TAX CONSEQUENCES.  It has reviewed with its own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement (including any tax consequences that
may result under the various tax legislation proposals currently before
Congress).  It is relying solely on such advisors and not on any statements or
representations of the Company or any of its agents with respect to such taxes. 
It understands that it (and not the Company) shall be responsible for its own
tax liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.


                                      ARTICLE 5
                             CONDITIONS TO CLOSING OF 3M

         3M's obligation to purchase the Warrant at the Closing is, at the
option of 3M, subject to the fulfillment of the following conditions:

         5.1   REPRESENTATIONS AND WARRANTIES CORRECT.  The representations 
and warranties made by the Company in Section 3 hereof shall be true and 
correct in all material respects as of the Closing Date.

         5.2   COVENANTS.  All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.

         5.3   COMPLIANCE CERTIFICATE.  The Company shall have delivered to 3M
a certificate of the Company executed by a Vice President of the Company, dated
the Closing Date, and certifying, among other things, to the fulfillment of the
conditions specified in Sections 5.1 and 5.2 of this Agreement.

         5.4   BLUE SKY.  The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Warrant Shares,
subject to timely filings after the Closing where appropriate.

         5.5   DEVELOPMENT AGREEMENT.  The Company shall have executed and
delivered the Development Agreement.

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        9.
<PAGE>

                                      ARTICLE 6
                           CONDITIONS TO CLOSING OF COMPANY

         The Company's obligation to sell and issue the Warrant at the Closing
is, at the option of the Company, subject to the fulfillment of the following
conditions: VI

         6.1   REPRESENTATIONS. The representations made by 3M in Section 4 
hereof shall be true and correct when made, and shall be true and correct on 
the Closing Date.

         6.2   BLUE SKY.  The Company shall have obtained all necessary Blue 
Sky law permits and qualifications, or have the availability of exemptions 
therefrom, required by any state for the offer and sale of the Warrant 
Shares, subject to timely filings after the Closing where appropriate.

         6.3   LEGAL MATTERS.  All material matters of a legal nature which
pertain to this Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.

         6.4   DEVELOPMENT AGREEMENT.  3M shall have executed and delivered the
Development Agreement.


                                      ARTICLE 7
                               COVENANTS OF THE COMPANY

         The Company hereby covenants and agrees as follows:

         7.1   FINANCIAL INFORMATION. The Company will provide the Holder the
following reports for so long as such Holder is a holder of a minimum of 100,000
shares of Stock or one or more warrants to acquire at least 100,000 shares of
Stock:

         (a)   As soon as practicable after the end of each fiscal year, and in
any event within 90 days thereafter, consolidated balance sheets of the Company
and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in comparative form the figures for the previous fiscal year
(or, at the election of the Company, setting forth in comparative form the
budgeted figures for the fiscal year then reported), all in reasonable detail
and audited by independent public accountants of national standing selected by
the Company.

         (b)   As soon as practicable after the end of each quarterly
accounting period in each fiscal year of the Company and in any event within 45
days thereafter, a consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of each such quarterly period, and
consolidated statements of income and consolidated statements 

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        10.
<PAGE>

of changes in financial condition of the Company and its subsidiaries, if 
any, for such period and for the current fiscal year to date, prepared in 
accordance with generally accepted accounting principles (other than for 
accompanying notes), subject to changes resulting from year-end audit 
adjustments, all in reasonable detail and signed by the principal financial 
or accounting officer of the Company.  Company will send copies of the 
quarterly reports to:

               Division Vice President
               3M Visual Systems Division
               Minnesota Mining & Manufacturing Company
               3M Austin Center 6801 River Place Blvd.
               Austin, Texas 78726-9000
    and
               Director, Acquisitions and Business Development
               3M Center, Building 224-5S-28
               P.O. Box 33428
               St. Paul, Minnesota 55133

         (c)   An annual budget for the Company as soon as it is available.

         7.2   ADDITIONAL INFORMATION.  The Company will deliver or provide
with reasonable promptness to the Holder of at least 100,000 shares of Stock or
one or more warrants to acquire at least I 00,000 shares of Stock, such other
information and data, including access to books, records, officers and
accountants, with respect to the Company and its subsidiaries, if any, as may
from time to time reasonably request; provided, however, that the Company shall
not be obligated to provide any information that it considers in good faith to
be a trade secret or to contain confidential or classified information unless
such Holder agrees to execute a reasonable covenant on maintaining the
confidentiality of such information.

         7.3   ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION.  The rights
granted pursuant to Sections 7.1 and 7.2 may not be assigned or otherwise
conveyed to a competitor of the Company, as reasonably determined by the Board
of Directors of the Company excluding any director with an interest in the
transaction.

         7.4   EMPLOYEE SHARES.  The Company shall not grant any options to
purchase Stock or issue any Stock to directors, employees and other agents of
the Company other than options granted by the Company or Stock purchases under
incentive stock plans approved by the Board of Directors.  If a stock option
shall expire or terminate, or if shares are repurchased by the Company under a
stock purchase agreement, the shares subject to, but not delivered under, such
option, or the shares repurchased, shall be available for other options or stock
purchases.

         7.5   RIGHT OF FIRST OFFER.  The Company hereby grants to the Holder a
right of first offer with respect to future sales by the Company of its New
Securities (as hereinafter defined).  Each time the Company proposes to offer
any shares of, or securities convertible into or exercisable for any shares of,
any class of its capital stock other than as 

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        11.
<PAGE>

set forth injection 7.4 or 7.6 hereof ("New Securities "), the Company shall 
simultaneously make an offering of such New Securities to the Holder in 
accordance with the following provisions:

         (a)   The Company shall deliver a notice ("Notice") to the Holder
stating (A) its bona fide intention to offer New Securities, (B) the number of
such New Securities to be offered, (C) the price, if any, for which it proposes
to offer such New Securities, and (D) whether such offering will be registered
under the Securities Act of 1933, as amended (the "Securities Act") or be exempt
from registration pursuant to Rule 144A of the Securities Exchange Commission
(the "Commission").

         (b)   

         (a)   PRIVATE OFFERINGS.  With respect to any offering of New
Securities that will not be registered under the Securities Act, other than any
offering exempt from such registration pursuant to Rule 144A of the Commission,
within fortyfive (45) calendar days after receipt of the Notice, the Holder may
elect to purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such New Securities which equals the proportion
that the number of shares of Stock issued and held, or issuable upon the
Holder's exercise of its wan-ant rights hereunder by such Holder, bears to the
total number of shares of Stock issued and outstanding, assuming, in the latter
case, the Holder's exercise of its warrant rights hereunder with respect to all
shares of Stock then subject to such warrants.

         (b)   PUBLIC OFFERINGS.  

                 (i)    With respect to any offering of New Securities that
will be registered under the Securities Act, the Company shall,
contemporaneously with its filing of the Registration Statement for any such
offering with the Commission, deliver a copy of such Registration Statement to
Holder and thereafter deliver copies of any subsequent amendments thereto filed
with the Commission contemporaneously therewith.  At least ten (I0) days prior
to the date the price of the offering is determined, the Company shall notify
Holder of the range of prices in which it is anticipated that the New Securities
will be priced, along with a range of the anticipated number of New Securities
that will be offered consistent with the current range discussed with the
Company's underwriters.  Thereafter, the Company shall provide Holder with daily
reports updating Holder as to the anticipated range of offering prices and
number of shares of Stock to be offered contemplated by the underwriters.  The
Company shall immediately notify Holder of the determination of the offering
price for the New Securities and the date the registration is declared
effective.  Holder shall have twelve (12) hours following its receipt of notice
of the pricing of the New Securities in which to elect to purchase or obtain, at
the price and on the terms specified in the Registration Statement and notice of
offer price, if any, up to that portion of such New Securities which equals the
proportion that the number of shares of stock issued and held, or issuable upon
the Holder's exercise of its warrant rights hereunder by such Holder, bears to
the number of shares of Stock issued and outstanding, assuming, in the latter
case, 

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        12.
<PAGE>

the Holder's exercise of it warrant rights hereunder with respect to all 
shares of Stock then subject to such warrants.

                (ii)    With respect to any offering of New Securities that
will be exempt from registration in reliance on Rule 144A, the Company shall
deliver a copy of the Offering Statement for the New Securities to Holder prior
to its delivery to any prospective purchaser and shall thereafter promptly
provide Holder with copies of any amendment to the Offering Statement.  At least
ten (10) days prior to the date the price of the offering is determined, the
Company shall notify Holder of the range of prices in which it is anticipated
that the New Securities will be priced, along with a range of the anticipated
number of New Securities that will be offered consistent with the current range
discussed with the Company's underwriters.  Thereafter, the Company shall
provide Holder with daily reports updating Holder as to the anticipated range of
offering prices and number of shares of Stock to be offered contemplated by the
underwriters.  The Company shall immediately notify Holder of the determination
of the offering price for the New Securities.  Holder shall have twelve (I 2)
hours following its receipt of notice of the pricing of the New Securities in
which to elect to purchase or obtain, at the price and on the terms specified in
the Offering Statement and notice of offer price, if any, up to that portion of
such New Securities which equals the proportion that the number of shares of
stock issued and held, or issuable upon the Holder's exercise of its warrant
rights hereunder by such Holder, bears to the number of shares of Stock issued
and outstanding, assuming, in the latter case, the Holder's exercise of it
warrant rights hereunder with respect to all shares of Stock then subject to
such warrants.

         (c)   ACQUISITIONS.  Notwithstanding anything to the contrary herein,
in the event the New Securities are to be issued in exchange for equity
interests in, or the assets of, another corporation, partnership, limited
liability company or other entity, the purchase price for New Securities to be
utilized with respect to any Holder's exercise of its rights of first offer
hereunder shall be the Exercise Price then in effect after giving effect to the
adjustments provided in Section 1.3 above.

         (c)   If all such New Securities referred to in the Notice are not
elected to be obtained as provided in Section 7.5.2 hereof, the Company may,
during the 90-day period following the expiration of the applicable period
provided in Section 7.5.2 hereof, offer the remaining unsubscribed New
Securities to any person or persons at a price not less than, and upon terms no
more favorable to the offeree than, those specified in the Notice.  If the
Company does not enter into an agreement for the sale of the New Securities
within such period, or if such agreement is not consummated within 90 days of
the execution thereof, the Holder's right of first offer with respect to such
New Securities provided hereunder shall be deemed to be revived and such New
Securities shall not be offered unless first reoffered to the Holder in
accordance herewith.

         7.6   EXCLUSIONS.  The right of first offer in Section 7.5 above shall
not be applicable to the issuance or sale of Stock (or options therefor) to
employees, officers, directors and consultants of the Company for the primary
purpose of soliciting or retaining 

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        13.
<PAGE>

their employment or obtaining their services or as part of an incentive 
program with the approval of the Board of Directors.

         7.7   BOARD OBSERVER; BOARD MEMBER.  The Vice President of 3M's Visual
Systems Division, or any other representative, serving 3M in at least an
equivalent position, designated by 3M from time to time and reasonably
acceptable to the Company, (collectively, the "Observer") shall be entitled to
attend any and all meetings of the Board of Directors in an observer capacity;
provided, however, that the Observer shall not have a vote with respect to any
matter which shall come before the Board, and provided further that the Observer
may be excluded from a portion of such meetings on advice of counsel and if
necessary to protect the attorney-client privilege or in the event of a direct
conflict of interests between the Company and 3M with respect to the matters to
be discussed.  The Company agrees to provide the Observer with any and all
information (including notice of meetings) which is or may be from time to time
provided to the Board of Directors of the Company in such capacity provided the
Observer agrees to hold all such information in confidence and not disclose it
to any person or entity, other than 3M personnel with the need-to-know such
information and who have entered into an agreement not to disclose such
information to the same extent as the Observer.  The Observer may, with five (5)
days prior written notice, schedule a meeting with the President and Chief
Executive Officer of the Company, which meeting is to take place immediately
prior to a meeting of the Board, to discuss the operations of the Company.  Upon
the Holder's exercise of at least fifty percent (50%) of the Warrant Shares, the
Company agrees, upon notice of Holder's desire to have the Vice President of
3M's Visual Systems Division, or any other representative, serving 3M in at
least an equivalent position, designated by 3M and reasonably acceptable to the
Company sit on the Company's Board of Directors, to cause such designee to be
appointed to the Company's Board of Directors and to nominate and use its best
efforts to cause the Company's shareholders to elect and thereafter maintain a
designee of the Holder as a Company Board Member.

         7.8   KEY PERSON LIFE INSURANCE.  Effective on Closing and continuing
for at least three (3) years following the Closing, the Company shall keep in
effect term life insurance policy in the amount of [*   *    *    *    *
*     *] with proceeds payable to the Company.

         7.9   DISCLOSURE OF MATERIAL NON-PUBLIC INFORMATION.  Notwithstanding
anything herein to the contrary, Polycom shall not be required to disclose any
material, non-public information respecting the Company until such information
is released by the Company to the public market.


                                      ARTICLE 8
                  RESTRICTIONS ON TRANSFERABILITY OF WARRANT SHARES;
                 COMPLIANCE WITH SECURITIES ACT; REGISTRATION RIGHTS

         8.1   RESTRICTIONS ON TRANSFERABILITY.  The Warrant Shares shall not
be sold, assigned, transferred or pledged except upon the conditions specified
in this Section 8, which 

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        14.
<PAGE>

conditions are intended to ensure compliance with the provisions of the 
Securities Act.  Each Holder will cause any proposed purchaser, assignee, 
transferee, or pledgee of any interest of such Holder to agree to take and 
hold such Warrant Shares subject to the provisions and upon the conditions 
specified in this Section 8.

         8.2   RESTRICTIVE LEGEND.  Each certificate representing (i) the Stock
and (ii) any other Warrant Shares issued in respect of the Stock upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of Section 8.3 below) be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required under applicable state securities law):

         THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
         INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933.  SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
         SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
         REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
         EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
         SAID ACT.  COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE
         SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
         WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
         THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF
         THE CORPORATION.

         Each Holder consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Stock in order to implement
the restrictions on transfer established in this Section 8.

         8.3   NOTICE OF PROPOSED TRANSFERS.  The Holder of each certificate
required to bear the legend set forth in Section 8.2 above by acceptance thereof
agrees to comply in all respects with the provisions of this Section 8.3. Prior
to any proposed sale, assignment, transfer or pledge of any Restricted Warrant
Shares, unless there is in effect a registration statement under the Securities
Act covering the proposed transfer, the Holder thereof shall give written notice
to the Company of such Holder's intention to effect such transfer, sale,
assignment or pledge (except that if such Holder or any successor thereto is a
partnership, no such notice described below shall be necessary for a transfer by
such Holder to a partner of such Holder).  Each such notice shall describe the
manner and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accompanied, at such Holder's expense by either
(i) an unqualified written opinion of legal counsel who shall, and whose legal
opinion shall be, reasonably satisfactory to the Company addressed to the
Company, to the effect that the proposed transfer of the Restricted Warrant
Shares may be effected without registration under the Securities Act, or (ii) a
"no action" letter from the Commission to the effect that the transfer of such
Warrant Shares without registration will not result in a recommendation by the
staff of the Commission that action 

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        15.
<PAGE>

be taken with respect thereto, whereupon the Holder of such Restricted 
Warrant Shares shall be entitled to transfer such Restricted Warrant Shares 
in accordance with the terms of the notice delivered by the Holder to the 
Company.  Each certificate evidencing the Restricted Warrant Shares 
transferred as above provided shall bear, except if such transfer is made 
pursuant to Rule 144, the appropriate restrictive legend set forth in Section 
8.2 above, except that such certificate shall not bear such restrictive 
legend if in the opinion of counsel for such Holder and in the reasonable 
opinion of the Company such legend is not required in order to establish 
compliance with any provision of the Securities Act.

         8.4   REMOVAL OF RESTRICTIONS ON TRANSFER OF WARRANT SHARES.  Any
legend referred to in Section 8.2 hereof stamped on a certificate evidencing (i)
the Stock or (ii) any other Warrant Shares issued in respect of the Stock upon
any stock split, stock dividend, recapitalization, merger, consolidation or
similar event and the stock transfer instructions and record notations with
respect to such security shall be removed and the Company shall issue a
certificate without such legend to the holder of such security if (a) such
security is registered under the Securities Act, or if such holder provides the
Company with an opinion of counsel (which may be counsel for the Company)
reasonably acceptable to the Company to the effect that a public sale or
transfer of such security may be made without registration under the Securities
Act or (b) such holder provides the Company with reasonable assurances, which
may, at the option of the Company, include an opinion of counsel satisfactory to
the Company, that such security can be sold pursuant to paragraph (k) of Rule
144 under the Securities Act.

         8.5   REGISTRATION RIGHTS.  Upon exercise of this Warrant, the Holder
shall have and be entitled to exercise, together with all other holders of
Registrable Securities possessing registration rights under the Investors'
Rights Agreement, the rights of registration granted thereunder to Registerable
Securities (with respect to the shares issued on exercise of the Warrant).  By
its execution of this Agreement, Holder agrees to be bound by the provisions of
Article 2 of the Investors' Rights Agreement upon exercise of the Warrant.  The
Company agrees (a) to use its best efforts to, as soon as practicable, cause the
parties to the Investors' Rights Agreement to amend its terms to include 3M as a
party with respect to the rights and obligations under Article 2 REGISTRATION
RIGHTS, (b) to include all of the Warrant Shares issuable under the Warrant as
Registerable Securities under the Investors' Rights Agreement, and (c) to amend
the Investors' Rights Agreement as follows:

                 (i)    any request by 3M that the Company file a registration
statement in accordance with the provisions of Section 2.2 (a) shall not be
subject to the requirement that Holders of Registerable Securities then
outstanding sufficient to comprise the majority thereof join in such request;
and

                (ii)    the restriction on the number of registrations that the
Company is obligated to effect pursuant to the provisions of Sections 2.2(c) and
2.3(b) shall not apply to 3M.

In the event Polycom is unsuccessful in obtaining the above-described amendment
to the Investors' Rights Agreement, 3M and Polycom agree that they will promptly
amend this 

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        16.
<PAGE>

Agreement to provide registration rights to 3M in the same form as provided 
therein, modified, however, to include the revised terms set forth in 
subsections (c)(i) and (ii) above, which rights will expire if not exercised 
prior to April 1, 2003.  In this regard, 3M acknowledges the rights of the 
holders of Registrable Securities under Section 2.14 of the Investors' Rights 
Agreement and agrees that its registration rights will be structured in such 
a way as to avoid any violation thereof.

                                      ARTICLE 9
                                    MISCELLANEOUS

         9.1   DISPUTE RESOLUTION.

         (a)   UNAIDED NEGOTIATIONS. Without prejudice to the right of the
parties to terminate this Agreement in accordance with the terms hereof, all
disputes, controversies or differences which may arise between the parties out
of, in relation to or in connection with this Agreement, or for the breach
hereof (a "Dispute"), shall, if possible, be decided amicably between the
parties hereto.  In the event of a Dispute, the complaining party shall notify
the other party of the nature thereof (a "Dispute Notice") and the party
receiving such Dispute Notice shall have ten (10) days from the date thereof to
respond in writing to the allegations set forth therein.  The parties agree to
attempt in good faith to resolve any Dispute promptly by negotiations.

         (b)   MEDIATION.  If such Dispute cannot be settled within thirty (30)
days after the date of the Dispute Notice, the parties agree to initiate
voluntary, nonbinding mediation to be conducted by a mediator agreed upon in
writing by the parties to the Dispute.  If the parties have not mutually agreed
to a mediator within forty (40) days following the date of the Dispute Notice,
then any party may request the American Arbitration Association to appoint a
mediator in accordance with the Arbitration Rules.  The initial expenses of
mediation shall be borne by each party and paid in accordance with the terms of
any settlement reached between the parties.

         (c)   EXHAUSTION OF PROCEDURE; LITIGATION. The procedures stated in
this Section 9.1 must be exhausted prior to the initiation of any litigation.  A
party, however, may seek a preliminary injunction or other provisional judicial
relief if in its judgment such action is necessary to avoid irreparable damage
or to preserve the status quo.  In the event that the parties are unable to
resolve any outstanding disagreement or dispute as provided above, then, as a
last resort, either Party may commence litigation; provided, however, that, in
the case of the Company, it must do so in the courts (state or federal, provided
the court selected has subject matter jurisdiction) of the state of Texas
located in Austin, Texas, and, in the case of 3M, it must do so in the Courts
(state or federal, provided the court selected has subject matter jurisdiction)
of the state of California located in San Jose, California.

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        17.
<PAGE>

         9.2   GOVERNING LAW; JURISDICTION.

         (a)   This Agreement shall be governed in all respects by the internal
laws of the State of California.

         (b)   The Parties agree that both California and Texas have a
substantial relationship to this transaction, and each Party consents to
personal jurisdiction in the courts thereof.  Any action or suit arising from or
related to this Agreement shall only be brought by the Parties in any federal or
state court with appropriate jurisdiction over the subject matter established or
sitting in (a) in the case of Polycom, state of Texas, located in Austin, Texas,
and (b) in the case of 3M, the state of California, located in San Jose,
California.

         9.3   SURVIVAL.  The representations, warranties, covenants and
agreements made herein shall survive any investigation made by 3M, and closing
of the transactions contemplated hereby, including the exercise of the Warrant
and the issuance of the Stock thereunder, for a period of one year; provided,
however, that Holder's right of first offer set forth in Section 7.5 above shall
expire or terminate, as the case may be, contemporaneously with the Warrant.

         9.4   SUCCESSORS AND ASSIGNS.  Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

         9.5   ENTIRE AGREEMENT; AMENDMENT.  This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein.  Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that Holders of 50% of the Warrant Shares may, with the
Company's prior written consent, waive, modify or amend on behalf of all
Holders, any provisions hereof.

         9.6   NOTICES, ETC.  All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to 3M, at the first address set forth in Section 7.1(b) above,
or at such other address as 3M shall have furnished to the Company in writing,
or (b) if to any other Holder of any shares of Stock, at such address as such
Holder shall have furnished the Company in writing, or, until any such Holder so
furnishes an address to the Company, then to and at the address of the last
Holder of such Shares of Stock who has so furnished an address to the Company,
or (c) if to the Company, one copy should be sent to its address set forth on
the cover page of this Agreement and addressed to the attention of the Corporate
Secretary, or at such other address as the Company shall have furnished to the
Holder.

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        18.
<PAGE>

         Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.

         9.7   DELAYS OR OMISSIONS.  Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any Holder
of any Warrant Shares, upon any breach or default of the Company under this
Agreement, shall impair any such right, power or remedy of such Holder nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring.  Any waiver, permit,
consent or approval of any kind or character on the part of any Holder of any
breach or default under this Agreement, or any waiver on the part of any Holder
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing.  All
remedies, either under this Agreement or by law or otherwise afforded to any
Holder, shall be cumulative and not alternative.

         9.8   CORPORATE SECURITIES LAW.  THE SALE OF THE WARRANT SHARES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS THE ISSUANCE OF SUCH WARRANT SHARES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL
UNLESS AN EXEMPTION FROM SUCH QUALIFICATION IS AVAILABLE.  THE RIGHTS OF ALL
PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, OR SUCH EXEMPTION BEING AVAILABLE.

         9.9   EXPENSES.  Each party shall bear its own expenses incurred on
its behalf with respect to the negotiation and execution of this Agreement.

         9.10  COUNTERPART.  This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

         9.11  SEVERABILITY.  In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        19.
<PAGE>

         9.12  TITLES AND SUBTITLES.  The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.

         The foregoing agreement is hereby executed as of the date first above
written.

                                  "COMPANY"

                                  POLYCOM, INC.,
                                  a Delaware corporation



                                  By:                                          
                                     -------------------------------------------

                                  Title:                                       
                                        ----------------------------------------

                                  "3M"

                                  MINNESOTA MINING AND MANUFACTURING COMPANY,

                                  a Delaware corporation



                                  By:                                          
                                     -------------------------------------------

                                  Title:                                       
                                        ----------------------------------------



Exhibit A: Form of Warrant
Exhibit B: Exceptions

* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        20.
<PAGE>


                                      EXHIBIT A



    THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR
    INVESTMENT AND NOT WITH VIEW TO, OR IN CONNECTION WITH, THE SALE OR
    DISTRIBUTION THEREOF.  NO SUCH SALE OR DISPOSITION MAY BE AFFECTED
    WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
    OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
    REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.


                                       WARRANT
                        TO PURCHASE SHARES OF COMMON STOCK OF
                                    POLYCOM, INC.

    THIS CERTIFIED that, for value received, the Minnesota Mining and
Manufacturing Company ("3M") whose address is 3M Austin Center, 6801 River Place
Boulevard, Austin, Texas 78726-9000 is entitled, upon the terms and subject to
the conditions hereinafter set forth, to subscribe for and purchase, from
Polycom, Inc., a Delaware corporation (the "Company"), up to 2,000,000 fully
paid and non-assessable shares of the Company's Common Stock ("Common Stock") at
a purchase price (the "Purchase Price") of $7.50 per share at any time on or
after the date hereof and on or prior to that date which is twenty-four (24)
months after the date hereof ("Expiration Date"); provided, however, should 3M
elect to postpone the Commencement Date under the terms of that certain Joint
Marketing and Development Agreement of even date herewith between 3M and the
Company (the "Development Agreement") for a period of six (6) months or more
beyond October 24, 1997 due to the failure of the [ * * * ] to meet the
Specifications, the Expiration Date shall automatically and without any further
action be extended (a) by the period of time equal to that period of time
between October 24, 1997 and the actual Commencement Date, or (b) until the
third anniversary of the Effective Date, whichever should first occur. 
Notwithstanding the foregoing, the number of shares for which this Warrant is
exercisable and the Purchase Price shall be subject to adjustment as provided in
that certain Stock Warrant Agreement of even date herewith between the Company
and 3M (the "Stock Warrant Agreement"). All of the foregoing terms used but not
defined herein shall have the meaning given such term in the Development
Agreement.

                                      ARTICLE 1

TITLE OF WARRANT.  Prior to the Expiration Date and subject to compliance with
applicable laws, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company, referred to in Section
2 hereof, by the holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.



* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.



                                       

<PAGE>

                                      ARTICLE 2

EXERCISE OF WARRANT.  The purchase rights represented by this Warrant are
exercisable by the registered holder hereof, in whole or in part, at any time
before the close of business on the Expiration Date, subject to adjustment as
hereinafter provided, by the surrender of this Warrant and the Notice of
Exercise Form annexed hereto, duly completed and executed on behalf of the
Holder, at the office of the Company in San Jose, California (or such other
office or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company), and upon payment of the Purchase Price for the shares thereby
purchased (by cash or by check or bank draft payable to the order of the Company
or by cancellation of indebtedness of the Company to the holder hereof, if any,
at the time of exercise in an amount equal to the purchase price of the shares
thereby purchased); whereupon the holder of this Warrant shall be entitled to
receive a certificate for the number of shares of Common Stock so purchased. 
The Company agrees that if the time of the surrender of this Warrant and
purchase the holder hereof shall be entitled to exercise this Warrant, the
shares so purchased shall be and be deemed to be issued to such holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been exercised as aforesaid.

         Certificates for shares purchased hereunder shall be delivered to the
holder hereof within a reasonable time, but not later than 10 days, after the
date on which this Warrant shall have been exercised as aforesaid.

         If this Warrant is exercised with respect to less than all of the
shares of Common Stock covered hereby, the holder hereof shall be entitled to
receive a new Warrant, in this form, covering the number of shares of Common
Stock with respect to which this Warrant shall not have been exercised.

         The Company covenants that all shares of Common Stock which may be
issued upon the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant, be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges in respect of
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

                                      ARTICLE 3

NO FRACTIONAL SHARES OR SCRIP.  No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant.


* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        2.

<PAGE>

                                      ARTICLE 4

CHARGES, TAXES AND EXPENSES.  Issuance of certificates for shares of Common
Stock upon the exercise of this Warrant shall be made without charge to the
holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder;
and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

                                      ARTICLE 5

NO RIGHTS AS SHAREHOLDERS.  This Warrant does not entitle the holder hereof to
any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof.

                                      ARTICLE 6

EXCHANGE AND REGISTRY OF WARRANT.  This Warrant is exchangeable, upon the
surrender hereof by the registered holder at the above-mentioned office or
agency of the Company, for a new Warrant of like tenor and dated as of such
exchange.  The Company shall maintain at the above-mentioned office or agency a
registry showing the name and address of the registered holder of this Warrant. 
This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its terms, at such office or agency of the Company, and the
Company shall be entitled to rely in all respects, prior to written notice to
the contrary, upon such registry.

                                      ARTICLE 7

LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT.  Upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and upon reimbursement to
the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation of this Warrant, if mutilated, the Company will make and
deliver a new Warrant of like tenor and dated as of such cancellation, in lieu
of this Warrant.


* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        3.

<PAGE>

                                      ARTICLE 8

SATURDAYS, SUNDAYS, HOLIDAYS, ETC.  If the last or appointed day for the taking
of any action or expiration of any right required or granted herein shall be a
Saturday or a Sunday or shall be a legal holiday, then such action may be taken
or such right may be exercised on the next succeeding day not a legal holiday.

                                      ARTICLE 9

REPRESENTATIONS AND WARRANTIES.  In order to induce the acquisition of this
Warrant, the Company hereby represents and warrants to the holder that the
representations and warranties of the Company contained in the Stock Warrant
Agreement are true and correct in all respects as of the date hereof (with all
references in such representations and warranties to the "Warrant" meaning this
Warrant).

REGISTRATION AND OTHER RIGHTS.  The Company hereby agrees and acknowledges 
that this Warrant shall be subject to and shall have all benefits, rights and 
remedies set forth in the Stock Warrant Agreement.

                                      ARTICLE 10

REMEDIES.  The Company stipulates that the remedies at law of the holder of this
Warrant in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that, to the extend permitted by applicable law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.

                                      ARTICLE 11

MISCELLANEOUS.

    11.1   ISSUE DATE.  The provisions of this Warrant shall be construed and
shall be given effect in all respect as if it has been issued and delivered by
the Company on the date hereof.  This Warrant shall be binding upon any
successors or assigns of the Company.  This Warrant shall constitute a contract
under the laws of the State of California and for all purposes shall be
construed in accordance with and governed by the laws of said state.

    11.2   RESTRICTIONS.  The holder hereof acknowledges that the Common Stock
acquired upon the exercise of this Warrant shall have restrictions upon its
resale imposed by state and federal securities laws.

    11.3   AUTHORIZED SHARES. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Common Stock
upon the exercise of any purchase rights under this Warrant.  The Company
further covenants that its issuance 


* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        4.

<PAGE>

of this Warrant shall constitute full authority to its officers who are 
charged with the duty of executing stock certificates to execute and issue 
the necessary certificates for shares of the Company's Common Stock upon the 
exercise of the purchase rights under this Warrant.

    11.4   NO IMPAIRMENT.   The Company will not, by amendment of its 
Articles of Incorporation or any other voluntary action, avoid or seek to 
avoid the observance or performance of any of the terms of this Warrant, but 
will at all times in good faith assist in the carrying out of all such terms 
and in the taking of all such action as may be necessary or appropriate in 
order to protect the rights of the holder hereof against impairment.

    11.5   NOTICES OF RECORD DATE.  In the event 

           (a)  the Company shall take a record of the holders of its Common
Stock for the purposes of entitling them to receive any dividend (other than a
cash dividend) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares or Stock of any class or any other securities or
property, or to receive any other right; or

           (b)  of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation; or

           (c)  of the voluntary or involuntary dissolution, liquidation, or
winding-up of the Company;

then, and in each such case, the Company will mail or cause to be mailed to the
holder of this Warrant a notice specifying, as the case may be, (i) the date on
which a record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, or (ii) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up.  Such notice shall be mailed at least 10 days prior to the date
therein specified.

    11.6   AMENDMENTS, MODIFICATIONS, ETC.  This Warrant and any term hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.  Any provision of this Warrant that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.  To the extent permitted
by applicable law, the Company waives any provision of law that shall render any
provision hereof prohibited or unenforceable in any respect.  The section and
paragraph headings 


* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        5.

<PAGE>

used in this Warrant are inserted for convenience only and shall not be used 
for any interpretive purpose.

    11.7   EXPENSES.  The Company shall pay all costs, fees, taxes (other than
stock transfer taxes) and expenses payable in connection with the preparation,
issuance and delivery from time to time of the Warrant and of shares of Common
Stock issued upon the exercise of the Warrant.

    IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officers thereinto duly authorized.

Dated:
      -------------------------

                                  POLYCOM, INC.


                                  By:
                                     ---------------------------------------
                                  Printed Name:
                                               -----------------------------
                                  Title:
                                        ------------------------------------




* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        6.


<PAGE>
                                   ASSIGNMENT FORM

                      (To assign the foregoing warrant, execute
                      this form and supply required information.
                      Do not use this form to purchase shares.)

    FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to __________________________ whose address is ___________
_____________________________.


Dated:________________________.

                   Holder's Signature:
                                      --------------------------------------

                   Holder's Address:  
                                    ----------------------------------------

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


Signature Guaranteed:                                                 
                     -------------------------------------------------------

NOTE:  The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company.  Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.


* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


<PAGE>

                               NOTICE OF EXERCISE FORM



    The undersigned hereby exercises his or its rights to subscribe for
______________________ shares of Common Stock covered by the within Warrant and
tenders payment herewith in the amount of $__________________ in accordance
with the terms thereof, and requests that certificates for such shares in the
following denominations be issued in the name of, and delivered to, the
person[s] at the following address[es]:

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

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

                ---------------------------------------------------
                (Print Address(es] and Social Security Number[s] or
                Employer Identification Number[s] as applicable)

and, if said number of shares shall not be all the shares covered by the within
Warrant, that a new Warrant for the balance remaining of the shares covered by
the within Warrant be registered in the name of, and delivered to, the
undersigned at the address stated below.

Date:_______________________________.

                                  Name:
                                       ---------------------------------------
                                                 (Print)

                                       ---------------------------------------
                                                 (Signature)

                        Address:                                               
                                 ---------------------------------------------

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

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


* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


<PAGE>

                                      EXHIBIT B

1996 Executive Compensation Plan

    The Company adopted a compensation plan for 1996 pursuant to which each
executive officer of the Company is eligible to be paid a cash bonus as a
percentage of base salary and eligible to be granted a stock option.  Such bonus
and stock option awards are based upon the Company achieving specified
objectives and the individual performance of such executive officer.  Mr.
McDowell, as Vice President of Sales and Marketing, has goals which differ
slightly from the other executive officers of the Company.

1996 Stock Incentive Plan

    The Company's 1996 Stock Incentive Plan (the "1996 Plan") is intended to
serve as the successor equity incentive program to the Company's 1991 Stock
Option Plan (the "Predecessor Plan").  The 1996 Plan was adopted by the Board of
Directors on March 5, 1996, and has been approved by the Company's stockholders.
3,125,000 shares of Common Stock have been authorized for issuance under the
1996 Plan.  This share reserve is comprised of (i) the 763,928 shares which
currently remain available for issuance under the Predecessor Plan, including
the shares subject to outstanding options thereunder, plus (ii) an additional
increase of 2,361,072 shares.  Outstanding options under the Predecessor Plan
will be incorporated into the 1996 Plan at the time the Underwriting Agreement
for this Offering is executed, and no further option grants will be made under
the Predecessor Plan.  The incorporated options will continue to be governed by
their existing terms, unless the Plan Administrator elects to extend one or more
of the features of the 1996 Plan to those options.  However, except as otherwise
noted below, the outstanding options under the Predecessor Plan contain
substantially the same terms and conditions summarized below for the
Discretionary Option Grant Program in effect under the 1996 Plan.

    The 1996 Plan is divided into three separate components: (i) the
Discretionary Option Grant Program under which individuals in the Company's
service may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock at an exercise price per share not less than the
fair market value of the Common Stock on the grant date, (ii) the Stock Issuance
Program under which such individuals may, in the Plan Administrator's
discretion, be issued shares of Common Stock directly, through the purchase of
such shares at a price per share not less than fair market value at the time of
issuance or as a fully-paid bonus for services rendered the Company, and (iii)
the Automatic Option Grant Program under which option grants will automatically
be made at periodic intervals to eligible non-employee Board members to purchase
shares of Common Stock at an exercise price equal to the fair market value of
the option shares on the grant date.

    The Discretionary Option Grant Program and the Stock Issuance Program will
be administered by the Compensation Committee of the Board.  The Compensation
Committee as Plan Administrator will have complete discretion to determine which
eligible individuals are to receive option grants or stock issuances, the time
or times when such option grants 


* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


<PAGE>

or stock issuances are to be made, the number of shares subject to each such 
grant or issuance, the status of any granted option as either an incentive 
stock option or a non-statutory stock option under the Federal tax laws, the 
vesting schedule to be in effect for the option grant or stock issuance and 
the maximum term for which any granted option is to remain outstanding.  In 
no event, however, may any one participant in the 1996 Plan receive option 
grants or direct stock issuances for more than 300,000 shares per calendar 
year.

    In the event the Company is acquired by merger or the sale of substantially
all of its assets, each outstanding option under the Discretionary Option Grant
Program which is not to be assumed by the successor corporation will accelerate
in full, and all unvested shares under the Stock Issuance Program will
immediately vest, except to the extent the Company's repurchase rights with
respect to those shares are to be assigned to the successor corporation.  The
Plan Administrator will also have the authority under the Discretionary Option
Grant and Stock Issuance Programs to grant options and to structure repurchase
rights so that the shares subject to those options or repurchase rights will
immediately vest in the event the individual's service is terminated, whether
involuntarily or, under certain circumstances, through a resignation, within
twelve (12) months following (i) a merger or the sale of substantially of the
Company's assets in which those options are assumed or those repurchase rights
are assigned or (ii) a hostile change in control of the Company effected by a
successful tender offer for more than 50% of the outstanding voting stock or by
proxy contest for the election of Board members.  Outstanding stock options
under the Predecessor Plan will accelerate upon an acquisition of the Company by
merger or the sale of substantially all of its assets, unless those options are
assumed by the acquiring entity, but such options are not subject to
acceleration upon the termination of the optionee's service following an
acquisition of the Company in which those options are assumed or a hostile
change in control of the Company.

    Stock appreciation rights are authorized for issuance under the
Discretionary Option Grant Program.  Such rights will provide the holders with
the election to surrender their outstanding options for an appreciation
distribution from the Company equal to the excess of (i) the fair market value
of the vested shares of Common Stock subject to each surrendered option over
(ii) the aggregate exercise price payable for those shares.  Such appreciation
distribution may be made in cash or in shares of Common Stock.  No stock
appreciation rights exist with respect to options currently outstanding under
the Predecessor Plan.

    The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program (including
options incorporated from the Predecessor Plan) in return for the grant of new
options for the same or different number of option shares with an exercise price
per share based upon the fair market value of the Common Stock on the new grant
date.

    Under the Automatic Grant Option Program, each individual who is serving as
a nonemployee Board member on the date on which the Underwriting Agreement for
this Offering is executed will receive on such date an option to purchase 16,000
shares of Common Stock provided such individual has not otherwise been in the
prior employ of the 


* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        2.

<PAGE>

Company and such individual has not previously received an option grant from 
the Company.  Each individual who first becomes a non-employee Board member 
after the date the Underwriting Agreement for this Offering is executed will 
receive an option grant for 16,000 shares of Common Stock on the date he or 
she joins the Board.  In addition, at each Annual Stockholders Meeting, 
beginning with the first Annual Meeting held after the completion of this 
Offering, each individual who is to continue to serve as a non-employee Board 
member will receive an option grant to purchase an additional 4,000 shares of 
Common Stock, provided such individual has served on the Board for at least 
six (6) months.

    Each automatic option will have a term of 10 years, subject to earlier
termination following the optionee's cessation of Board service.  Each automatic
option will be immediately exercisable for all the option shares; however, any
shares purchased upon exercise of the option will be subject to repurchase by
the Company, at the option exercise price paid per share, should the optionee
cease service on the Board prior to vesting in those shares.  The initial 16,000
share grant will vest in a series of four (4) successive equal annual
installments over the optionee's period of Board service measured from the grant
date.  Each additional 4,000 share grant will vest in two successive equal
annual installments over the optionee's period of Board service measured from
the grant date.  However, each outstanding option will immediately vest upon (i)
certain changes in the ownership or control of the Company or (ii) the death or
disability of the optionee while serving as a Board member.  In addition, upon
the successful completion of a hostile takeover, each automatic option grant
that has been outstanding for at least six (6) months may be surrendered to the
Company for a cash distribution per surrendered option share in an amount equal
to the excess of (a) the higher price per share paid in connection with the
takeover, over (b) the option price payable per share.

    The Board may amend or modify the 1996 Plan at any time, however material
amendments to the 1996 Plan are subject to stockholder approval.  The 1996 Plan
will terminate on December 31, 2005 unless sooner terminated by the Board.

Employee Stock Purchase Plan

    The Company's Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors on March 5, 1996 and has been approved by the
Company's stockholders.  The Purchase Plan is designed to allow eligible
employees of the Company and participating subsidiaries to purchase shares of
Common stock, at semi-annual intervals, through their period payroll deductions
under the Purchase Plan, and a reserve of 500,000 shares of Common Stock has
been established for this purpose.

    The Purchase Plan will be implemented in a series of successive offering
periods, each with a maximum duration of 24 months.  However, the initial
offering period will begin at the time the Underwriting Agreement is executed
and priced in connection with this Offering and will end on the last business
day in January, 1998.



* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        3.

<PAGE>

    Individuals who are eligible employees on the start date of any offering
period may enter the Purchase Plan on that start date or any subsequent
quarterly entry date (February 1, May 1, August 1 or November 1).  Individuals
who become eligible employees after the start date of the offering period may
join the Purchase Plan on any subsequent quarterly entry date within that
period.

    Payroll deductions may not exceed 10% of the participant's total 
compensation for each semi-annual period of participation, and the 
accumulated payroll deductions will be applied to the purchase of shares on 
the participant's behalf on each semi-annual purchase date (January 31 and 
July 31 each year) at a purchase price per share equal to 85% of the LOWER of 
(i) the fair market value of the Common Stock on the participant's entry date 
into the offering period or (ii) the fair market value on the semi-annual 
purchase date. In no event, however, may any participant purchase more than 
750 shares on any one semi-annual purchase date.

    The Board may amend or modify the Purchase Plan at any time.  The 
Purchase Plan will terminate on the last business day in February 2006, 
unless sooner terminated by the Board.


* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        4.

<PAGE>

                                      EXHIBIT C

                             PROPOSED MIGRATION SCHEDULE

                 PROGRAM                     PROJECTED DURATION

                    *                                *
                    *                                *
                    *                                *
                    *                                *
                    *                                *
                    *                                *
                    *                                *
                    *                                *
                    *                                *



* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


<PAGE>

                                      EXHIBIT D

                            SOURCE CODE ESCROW PROVISIONS


           1.   INITIAL DEPOSIT.  Within thirty (30) days after the Effective 
Date of this Agreement, Polycom shall deposit with its attorneys, Brobeck 
Phleger & Harrison LLP ("Brobeck"), a copy of the source code for software 
owned by Polycom and incorporated into the [*     *     *] ("[*     *     *]"),
including related documentation necessary for the manufacture and/or operation 
of the [*     *     *] ("Initial Deposit").

           2.   SUPPLEMENTAL DEPOSIT.  A "Supplemental Deposit" will include
any materials added to the Initial Deposit by Polycom pursuant to this Exhibit
D. During the term of this Agreement, Polycom will deposit source code for any
upgrades, bug fixes or new releases of the [*     *     *] Software within
thirty (30) days of Polycom's incorporation thereof into a [*     *     *].  The
Initial Deposit together with any Supplemental Deposits shall be collectively
referred to herein as "Deposit Materials."

           3.   CONTENT AND ACCURACY.  Brobeck shall not be responsible for
verifying the contents or validating the accuracy of the Deposit Materials or
Polycom's labeling of the Deposit Materials.

           4.   RELEASE CONDITIONS.  During the term of this Agreement, Brobeck
shall release the Deposit Materials to 3M only in accordance with all the terms
and conditions of this Exhibit D and only in the event Polycom:

                 (i)    suspends, for more than six (6) consecutive months, or
terminates its dataconferencing business; or

                (ii)    becomes subject to any bankruptcy or insolvency
proceeding under federal or state statute, which proceeding is not dismissed
within ninety (90) days of the filing thereof, or

               (iii)    becomes insolvent or subject to direct control by a
trustee, receiver or similar authority.

The parties expressly acknowledge and agree that there are no other conditions
or circumstances under which Brobeck may release the Deposit Materials to 3M,
unless otherwise instructed in a writing signed by both Polycom and 3M or
pursuant to a court order.

           5.   CONDITIONS FOR USE AND LICENSE.  As set forth in Section 2.1(d)
of this Agreement and subject to all the terms and conditions of this Agreement
and this Exhibit D, Polycom grants to any manufacturer chosen by 3M pursuant to
Section 2.1(d) an irrevocable (only during the remaining term of this
Agreement), royalty-free, non-transferable, non-exclusive and non-sublicensable
license to use the Deposit Materials for 


* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


<PAGE>

the sole purpose of manufacturing the [*     *     *] solely for the account 
of 3M and its Affiliates during the term of this Agreement. 3M shall ensure 
that any such manufacturer shall not exercise the foregoing license unless 
and until one of the release conditions expressly set forth in Paragraph 4 
above has been triggered and Brobeck has released the Deposit Materials to 3M 
pursuant to Paragraph 6 below.

           6.   RELEASE OF DEPOSIT TO 3M.  Upon notice to Brobeck by 3M (in the
form of an affidavit or declaration by an officer of 3M) of the occurrence of a
release condition as specified in Paragraph 4 above, Brobeck shall so notify
Polycom with a copy of the notice from 3M.  If Polycom provides "Contrary
Instructions" (as defined below) to Brobeck within five (5) business days after
the date of Brobeck's notice to Polycom, Brobeck shall not deliver the Deposit
Materials to 3M.  "Contrary Instructions" shall mean the filing of an affidavit
or declaration with Brobeck by an officer of Polycom stating that a Release
Condition has not occurred or has been cured.

           Brobeck will send a copy of any Contrary Instructions to 3M.  Upon
receipt of Contrary Instructions, Brobeck shall not release any Deposit
Materials and shall continue to store the Deposit Materials until otherwise
directed by Polycom and 3M jointly in writing or by court order.

           If Brobeck does not receive Contrary Instructions from Polycom,
Brobeck is authorized to release the Deposit Materials to 3M pursuant to this
Exhibit D.

           7.   INDEMNIFICATION.  Polycom and 3M each agree to indemnify,
defend and hold Brobeck and its partners, officers, employees, contractors and
agents harmless from and against all claims, actions, proceedings, suits,
liabilities, losses, damages, settlements, costs, charges, penalties, attorneys'
fees, and other expenses of any nature as a result of its obligations or
performance of its obligations under this Exhibit D.

           8.   GENERAL.  Subject to all the terms and conditions of this
Exhibit D, Brobeck may act in reliance upon any written instructions, instrument
or signature reasonably believed to be genuine and may assume that any person
giving any written notice, request, advice or instruction in connection with or
relating to this Exhibit D has been duly authorized to do so.  Brobeck is not
responsible for failure to fulfill its obligations under this Exhibit D due to
causes beyond its reasonable control.  Polycom and 3M expressly acknowledge and
agree that Brobeck's only obligations shall be as expressly and unambiguously
set forth in Exhibit D.


* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        2.

<PAGE>

           All notices to Brobeck pursuant to this Exhibit D shall be sent
pursuant to the notice, provisions set forth in Article 17 of this Agreement to
the following:

           Brobeck Phleger & Harrison LLP
           Two Embarcadero Place
           2200 Geng Road
           Palo Alto, CA 94303
           Attention:  Gari L. Cheever




* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        3.

<PAGE>

                                      EXHIBIT E
                                    Minimum Sales
                               requirements to maintain
                           3M's Exclusive Marketing Rights

               SALES PERIOD            MINIMUM [*     *     *] TO BE SOLD
                                            BY 3M AND ITS AFFILIATES

                    *                                 *
                    *                                 
                    *                                 *
                    *                                 *
                    *                                 *
                    *                                 *
                    *                                 *
                    *                                 *
                    *                                 *
                    *                                 *
                    *                                 *
                    *                                 *
                   *(4)                               *
                   *(4)                               *
                   *(4)                               *
                   *(4)                               *
                   *(4)                               *
                   *(4)                               *
                   *(4)                               *
                   *(4)                               *



________________

(3) The Sales Periods stated above assume that the Commencement Date occurs on
    or before [*     *     *].  The Parties agree to revise the Sales Periods
    correspondingly in the event Commencement Date occurs after [*     *    
    *].

(4) Assumes renewal of the Agreement pursuant to the provisions of Section 6.2.



* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        4.

<PAGE>
                                      EXHIBIT F

                                   [*     *     *]


- ----------------------------------------------------------------------------
        PRIORITY               A                B                  C
- ----------------------------------------------------------------------------

           *                   *                *                  *

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

           *                   *                *                  *

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

           *                   *                *                  *

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

           *                   *                *                  *

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

           *                   *                *                  *

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

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


[*  *      *    *  *    *    *    *    *    *    *    *    *    *
*   *      *    *  *    *    *    *    *    *    *    *    *    *
*   *      *    *  *    *] 


                         3/26/97 Polycom Company Confidential



* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        5.


<PAGE>
                                      EXHIBIT F
                                           
                                        [***] 


                                         ---------------------------------
                                                Safety            EMI
- --------------------------------------------------------------------------
                               *                   *               *
                   -------------------------------------------------------
         *                     *                   *               *
                   -------------------------------------------------------
                               *                   *               *
- --------------------------------------------------------------------------
                               *                   *               *
                   -------------------------------------------------------
         *                     *                   *               *
                   -------------------------------------------------------
                               *                   *               *
                   -------------------------------------------------------
                               *                   *               *
                   -------------------------------------------------------

                               *                   *               *

                   -------------------------------------------------------
                               *                   *               *
- --------------------------------------------------------------------------


                               *                   *               *

                   -------------------------------------------------------
                               *                   *               *
                   -------------------------------------------------------

         *                     *                   *               *

                   -------------------------------------------------------
                               *                   *               *
- --------------------------------------------------------------------------

         *                     *                   *               *

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

                         3/26/97 Polycom Company Confidential



* Confidential treatment requested. Confidential portion has been filed 
seperately with the Securities and Exchange Commission.


                                        6.



<PAGE>

                                                                EXHIBIT 11.1

                                    POLYCOM, INC.

                           COMPUTATION OF NET INCOME (LOSS)
                        PER COMMON AND COMMON EQUIVALENT SHARE
                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                      March 31,     March 31,
                                                        1997           1996
                                                      ---------     ---------
PRIMARY & FULLY DILUTED
  Weighted average common shares outstanding            18,958         2,748
  Common equivalent shares from options and warrants         0           115
  Common equivalent shares from common stock
    subject to repurchase (2)                                0           629
  Common equivalent shares from convertible 
    redeemable preferred stock and warrants                  0        11,990
  Common equivalent shares from options and 
    convertable redeemable preferred stock (1)               0         1,682
                                                        ------        ------
      Total shares                                      18,958        17,164
                                                        ------        ------
                                                        ------        ------

Net income (loss):
  Amount                                               $  (474)      $   134

  Per share                                            $ (0.03)      $  0.01

- ----------------
(1) Pursuant to the requirements of the Securities and Exchange Commission, 
common equivalent shares relating to stock options, using the treasury stock 
method and the initial public offering price of $9.00 per share, and common 
equivalent shares from convertible redeemable preferred stock using the 
if-converted method issued during the twelve months period prior to the 
initial public offering are included in the computation for the three month 
period ended March 31, 1996.

(2) Commons stock issued under stock option plan which are subject to 
repurchase are excluded from shares issued in the computation of net loss per 
share as their effect is antidilutive.


                                                                            17

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the condensed financial statements included in the Company's Form 10-Q
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-28-1997
<PERIOD-END>                               MAR-30-1997
<CASH>                                          12,145
<SECURITIES>                                     8,454
<RECEIVABLES>                                    6,254
<ALLOWANCES>                                       442
<INVENTORY>                                      7,719
<CURRENT-ASSETS>                                35,019
<PP&E>                                           7,576
<DEPRECIATION>                                   4,183
<TOTAL-ASSETS>                                  38,773
<CURRENT-LIABILITIES>                            7,801
<BONDS>                                              0
                                0
                                          0
<COMMON>                                            10
<OTHER-SE>                                      30,962
<TOTAL-LIABILITY-AND-EQUITY>                    38,773
<SALES>                                         10,510
<TOTAL-REVENUES>                                10,510
<CGS>                                            5,653
<TOTAL-COSTS>                                    5,653
<OTHER-EXPENSES>                                 5,593
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                                  (474)
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                              (474)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     (474)
<EPS-PRIMARY>                                    (.03)
<EPS-DILUTED>                                    (.03)
        

</TABLE>


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