POLYCOM INC
DEF 14A, 1997-05-13
TELEPHONE & TELEGRAPH APPARATUS
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                                  SCHEDULE 14A
 
                                 (Rule 14a-101)
                    INFORMATION REQUIRED IN PROXY STATEMENT
                            SCHEDULE 14A INFORMATION
 
          Proxy Statement Pursuant to Section 14(a) of the Securities
                              Exchange Act of 1934
 
<TABLE>
    <S>  <C>
    Filed by the registrant /X/
 
    Filed by a party other than the registrant / /
 
    Check the appropriate box:
    / /  Preliminary proxy statement
    /X/  Definitive proxy statement
    / /  Definitive additional materials
    / /  Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
 
                                 POLYCOM, INC.
- - --------------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)
 
                                 POLYCOM, INC.
- - --------------------------------------------------------------------------------
                   (Name of Person(s) Filing Proxy Statement)
 
Payment of filing fee (Check the appropriate box): Not applicable.
 
/ /  $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ /  $500 per each party to the controversy pursuant to Exchange Act Rule
     14a-6(i)(3).
/ /  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
     (1) Title of each class of securities to which transaction applies:
        ------------------------------------------------------------------------
     (2) Aggregate number of securities to which transaction applies:
        ------------------------------------------------------------------------
     (3) Per unit price or other underlying value of transaction computed
        pursuant to Exchange Act Rule 0-11:(1)
        ------------------------------------------------------------------------
     (4) Proposed maximum aggregate value of transaction:
        ------------------------------------------------------------------------
 
/ /  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2) and identify the filing for which the offsetting fee was paid
     previously.Identify the previous filing by registration statement number,
     or the form or schedule and the date of its filing.
 
     (1) Amount previously paid:
        ------------------------------------------------------------------------
     (2) Form, schedule or registration statement no.:
        ------------------------------------------------------------------------
     (3) Filing party:
        ------------------------------------------------------------------------
     (4) Date filed:
        ------------------------------------------------------------------------
 
(1) Set forth the amount on which the filing fee is calculated and state how it
    was determined.
<PAGE>
                                     [LOGO]
 
                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                                 JUNE 11, 1997
 
TO THE STOCKHOLDERS OF POLYCOM, INC:
 
    NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Polycom,
Inc. (the "Company"), a Delaware corporation, will be held on Wednesday, June
11, 1997 at 10:00 a.m. local time, at The Beverly Heritage Hotel, 1820 Barber
Lane, Milpitas, California 95035, for the following purposes, as more fully
described in the Proxy Statement accompanying this Notice:
 
    1.  To elect directors to serve for one year terms or until their successors
       are elected;
 
    2.  To approve a series of amendments to the Company's 1996 Stock Incentive
       Plan (the "1996 Plan"), including a 1,000,000-share increase in the
       maximum number of shares of Common Stock authorized for issuance over the
       term of the 1996 Plan;
 
    3.  To ratify the appointment of Coopers & Lybrand, L.L.P. as independent
       auditors of the Company for the fiscal year ending December 28, 1997; and
 
    4.  To transact such other business as may properly come before the meeting
       or any adjournment or adjournments thereof.
 
    Only stockholders of record at the close of business on May 9, 1997 are
entitled to notice of and to vote at the Annual Meeting. The stock transfer
books will not be closed between the record date and the date of the meeting.
 
    All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed Proxy as
promptly as possible in the envelope enclosed for your convenience. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that all
your shares will be voted. You may revoke your proxy at any time prior to the
Annual Meeting. If you attend the Annual Meeting and vote by ballot, your proxy
will be revoked automatically and only your vote at the Annual Meeting will be
counted.
 
                                          Sincerely,
 
                                          /s/ Brian L. Hinman
                                          Brian L. Hinman
                                          CHAIRMAN OF THE BOARD AND
                                            CHIEF EXECUTIVE OFFICER
 
May 13, 1997
 
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, AND COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
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                                PROXY STATEMENT
                               TABLE OF CONTENTS
 
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                                                                                                               PAGE
                                                                                                             ---------
<S>                                                                                                          <C>
MATTERS TO BE CONSIDERED AT ANNUAL MEETING.................................................................          3
 
    PROPOSAL ONE--ELECTION OF DIRECTORS....................................................................          3
 
    PROPOSAL TWO--AMENDMENTS TO THE 1996 STOCK INCENTIVE PLAN..............................................          6
 
    PROPOSAL THREE--RATIFICATION OF INDEPENDENT AUDITORS...................................................         14
 
    OTHER MATTERS..........................................................................................         14
 
MANAGEMENT.................................................................................................         15
 
EXECUTIVE COMPENSATION AND RELATED INFORMATION.............................................................         18
 
OWNERSHIP OF SECURITIES....................................................................................         22
 
EXECUTIVE COMPENSATION REPORT..............................................................................         25
 
GENERAL COMPENSATION POLICY................................................................................         25
 
COMPARISON OF STOCKHOLDER RETURN...........................................................................         28
 
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.......................................         29
 
ANNUAL REPORT..............................................................................................         29
 
FORM 10-K..................................................................................................         29
</TABLE>
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                                     [LOGO]
 
                                 POLYCOM, INC.
                              2584 JUNCTION AVENUE
                           SAN JOSE, CALIFORNIA 95134
 
                                PROXY STATEMENT
                     FOR THE ANNUAL MEETING OF STOCKHOLDERS
                          TO BE HELD ON JUNE 11, 1997
 
    The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of Polycom, Inc., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held on June 11, 1997 (the "Annual
Meeting"). The Annual Meeting will be held at 10:00 a.m. local time, at The
Beverly Heritage Hotel, 1820 Barber Lane, Milpitas, California 95035. These
proxy solicitation materials were mailed on or about May 13, 1997, to all
stockholders entitled to vote at the Annual Meeting.
 
VOTING
 
    The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice and are described in more detail in
this Proxy Statement. On May 9, 1997, the record date for determination of
stockholders entitled to notice of and to vote at the Annual Meeting, 19,118,679
shares of the Company's common stock, $0.0005 par value ("Common Stock"), were
issued and outstanding. No shares of the Company's preferred stock were
outstanding. Abstentions and broker non-votes are counted as present for the
purpose of determining the presence or absence of a quorum for the transaction
of business. Each stockholder is entitled to one vote for each share of Common
Stock held by such stockholder on May 9, 1997. Directors are elected by a
plurality vote. Since votes are cast in favor of or withheld from each nominee,
abstentions will therefore have no effect on the outcome. Each of the other
proposals requires an affirmative vote of a majority of shares present in person
or represented by proxy at the 1997 Annual Meeting and entitled to vote on each
matter. Abstentions will have the same effect as negative votes, while broker
non-votes are not included in the total number of votes cast on a proposal and
therefore will not be counted for purposes of determining whether a proposal has
been approved. All votes will be tabulated by the inspector of election
appointed for the meeting, who will separately tabulate affirmative and negative
votes, abstentions and broker non-votes.
 
REVOCABILITY OF PROXIES
 
    You may revoke or change your Proxy at any time before the Annual Meeting by
filing with the Secretary of the Company at the Company's principal executive
offices, a notice of revocation or another signed Proxy with a later date. You
may also revoke your Proxy by attending the Annual Meeting and voting in person.
 
SOLICITATION
 
    The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional solicitation materials furnished to
<PAGE>
stockholders. Copies of solicitation materials will be furnished to brokerage
houses, fiduciaries, and custodians holding shares in their names that are
beneficially owned by others so that they may forward this solicitation material
to such beneficial owners. In addition, the Company may reimburse such persons
for their costs in forwarding the solicitation materials to such beneficial
owners. The original solicitation of proxies by mail may be supplemented by a
solicitation by telephone, telegram, or other means by directors, officers or
employees. No additional compensation will be paid to these individuals for any
such services. Except as described above, the Company does not presently intend
to solicit proxies other than by mail.
 
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
 
    Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1998 Annual Meeting must be received no
later than January 11, 1998, in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
 
                                       2
<PAGE>
                   MATTERS TO BE CONSIDERED AT ANNUAL MEETING
                      PROPOSAL ONE--ELECTION OF DIRECTORS
 
GENERAL
 
    The Board of Directors has selected six nominees, all of whom are currently
serving as directors of the Company. The names of the persons who are nominees
for director and their positions with the Company as of May 1, 1997, are set
forth in the table below. Each person nominated for election has agreed to serve
if elected, and management has no reason to believe that any nominee will be
unavailable to serve. In the event any nominee is unable or declines to serve as
a director at the time of the Annual Meeting, the proxies will be voted for any
nominee who may be designated by the present Board of Directors to fill the
vacancy. Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR the nominees named below. The six candidates receiving the
highest number of affirmative votes of the shares represented and voting on this
particular matter at the Annual Meeting will be elected directors of the Company
to serve until the next Annual Meeting or until their successors have been
elected and qualified.
 
<TABLE>
<CAPTION>
                                                                                                                  DIRECTOR
NOMINEE                                             AGE         POSITIONS AND OFFICES HELD WITH THE COMPANY         SINCE
- - ----------------------------------------------      ---      --------------------------------------------------  -----------
<S>                                             <C>          <C>                                                 <C>
Brian L. Hinman...............................          35   Chief Executive Officer and Chairman of the Board         1991
                                                               of Directors
Robert C. Hagerty.............................          45   President, Chief Operating Officer and Director           1997
Bandel Carano(2)..............................          35   Director                                                  1991
Stanley J. Meresman(1)........................          50   Director                                                  1995
John P. Morgridge(1)(2).......................          63   Director                                                  1992
James R. Swartz...............................          54   Director                                                  1991
</TABLE>
 
- - ------------------------
 
(1) Member of Audit Committee
 
(2) Member of Compensation Committee
 
BUSINESS EXPERIENCE OF DIRECTORS
 
    BRIAN L. HINMAN is a founder of the Company and serves as the Chief
Executive Officer and Chairman of the Board of Directors. Mr. Hinman co-founded
PictureTel, a leading manufacturer of videoconferencing equipment, in August
1984. At PictureTel, he served as the Vice President of Engineering from August
1984 until January 1991 and as a member of the Board of Directors from August
1984 to December 1989. He is a co-founder and director of the International
Multimedia Teleconferencing Consortium, Inc. which is dedicated to the
International Telecommunications Union standards of H.320 and T.120 for video
and dataconferencing. Mr. Hinman holds eight U.S. patents in the
teleconferencing field. Mr. Hinman also holds a B.S.E.E. degree from the
University of Maryland and an S.M.E.E. degree from Massachusetts Institute of
Technology.
 
    ROBERT C. HAGERTY joined the Company in January 1997 and serves as the
President, Chief Operating Officer and a member of the Board of Directors. Prior
to joining the Company, Mr. Hagerty served as President, Chief Executive Officer
and Director of Stylus Assets, Ltd., a document management company, from
November 1995 through December 1996. From July 1993 to October 1995, Mr. Hagerty
served in various executive management positions of Logitech, Inc. Prior to that
time, Mr. Hagerty served in various executive management positions at Conner
Peripherals, Inc. Mr. Hagerty holds a B.S. degree in Operations Research and
Industrial Engineering from the University of Massachusetts, Amherst and an M.A.
degree in Management from St. Mary's College of California.
 
                                       3
<PAGE>
    BANDEL CARANO has been a director of the Company since July 1991. Since
1987, Mr. Carano has been a General Partner of Oak Investment Partners ("Oak"),
a venture capital investment firm. Mr. Carano is also a director of Digital
Sound Corp., a unified messaging systems company. Mr. Carano received both his
B.S. and M.S. degrees in Electronic Engineering from Stanford University.
 
    STANLEY J. MERESMAN has been a director of the Company since January 1995.
Mr. Meresman served as the Senior Vice President, Finance and Chief Financial
Officer of Silicon Graphics, Inc. ("Silicon Graphics") from May 1989 to May
1997. Prior to joining Silicon Graphics, Mr. Meresman was Vice President,
Finance and Administration, and Chief Financial Officer of Cypress Semiconductor
Corporation. Mr. Meresman has a B.S. degree in Industrial Engineering and
Operations Research from the University of California, Berkeley and an M.B.A.
degree from Stanford University.
 
    JOHN P. MORGRIDGE has been a director of the Company since April 1992. In
January 1995, Mr. Morgridge became the Chairman of the Board of Cisco Systems,
Inc. ("Cisco"). Prior to this appointment, Mr. Morgridge had served as President
and Chief Executive Officer of Cisco since October 1988. Prior to Cisco, Mr.
Morgridge served two years as President and Chief Operating Officer of GRiD
Systems Corporation. From 1982 to 1986, Mr. Morgridge was Vice President of
Sales, Marketing and Service for Stratus Computers, Inc. Mr. Morgridge holds a
B.B.A. degree in Marketing and Finance from the University of Wisconsin and an
M.B.A. degree in Marketing and Transportation from Stanford University.
 
    JAMES R. SWARTZ has been a director of the Company since July 1991. Mr.
Swartz co-founded Accel Partners, a venture capital investment firm, and has
been managing partner of Accel Partners, since September 1983. Mr. Swartz is
also a director of Farallon Computing, Inc., an Internet collaboration tools
company, PictureTel Corporation, a developer and manufacturer of video
conferencing systems, and Remedy Corporation, a developer of client/server
application software, and a number of private companies. Mr. Swartz holds an
A.B. degree in Engineering Sciences and Applied Physics from Harvard University
and an M.S.I.A. degree from Carnegie Mellon University.
 
    The Company's bylaws authorize the Board of Directors to fix the number of
directors by resolution. The Company currently has authorized six directors.
Each director holds office until the next annual meeting of stockholders or
until his successor is duly elected and qualified. The officers serve at the
discretion of the Board of Directors.
 
BOARD COMMITTEES AND MEETINGS
 
    During the fiscal year ended December 29, 1996, the Board of Directors held
six meetings and acted by unanimous written consent on three occasions. Each of
the directors attended or participated in 75% or more of the aggregate of (i)
the total number of meetings of the Board of Directors (held during the period
he served) and (ii) the total number of meetings held by all committees of the
Board on which he served (held during the period he served) during the past
fiscal year.
 
    The Board of Directors has two standing committees: the Audit Committee and
the Compensation Committee.
 
    The Audit Committee currently consists of two directors, Stanley J. Meresman
and John P. Morgridge. The Audit Committee reviews internal auditing procedures,
the adequacy of internal controls and the results and scope of the audit and
other services provided by the Company's independent auditors. The Audit
Committee held four meetings during the last fiscal year.
 
    The Compensation Committee currently consists of two directors, Bandel
Carano and John P. Morgridge, and is primarily responsible for reviewing and
approving the Company's general compensation policies and establishing salaries,
incentives and other forms of compensation for the Company's executive officers
and other employees of the Company. The Compensation Committee also has the
exclusive authority to administer the Company's 1996 Stock Incentive Plan and
make option grants thereunder, and
 
                                       4
<PAGE>
administers the other benefit plans of the Company. The Compensation Committee
held five meetings during the last fiscal year.
 
DIRECTOR COMPENSATION
 
    Except as otherwise described, the Company has not paid cash or other
compensation to its directors. Non-employee members of the Board of Directors
are eligible to receive periodic option grants under the Automatic Option Grant
program in effect under the Company's 1996 Stock Incentive Plan. During 1996
Messrs. Carano and Swartz each received an option grant under the Automatic
Option Grant Program for 16,000 shares with an exercise price of $9.00 per
share. Each option is immediately exercisable for all the option shares.
However, any shares purchased under the option will be subject to repurchase by
the Company, at the option exercise price paid per share, upon the optionee's
cessation of Board service prior to vesting in those shares. The shares subject
to each 16,000-share grant will vest in four (4) successive equal annual
installments over the optionee's period of continued service as a Board member,
with the first such installment to vest upon the optionee's completion of one
(1) year of Board service measured from the grant date. The option shares will
immediately vest upon an acquisition of the Company by merger or asset sale or
upon certain other changes in control or ownership of the Company. Upon the
successful completion of a hostile tender offer for more than 50% of the
Company's outstanding Common Stock, each of these options may be surrendered to
the Company in return for a cash distribution from the Company in an amount per
surrendered option share equal to the excess of (i) the highest reported price
per share of Common Stock paid in the tender offer over (ii) the option exercise
price payable per share.
 
RECOMMENDATION OF THE BOARD OF DIRECTORS
 
    THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE ABOVE NOMINEES.
 
                                       5
<PAGE>
           PROPOSAL TWO--AMENDMENTS TO THE 1996 STOCK INCENTIVE PLAN
 
    The Company's stockholders are being asked to approve a series of amendments
to the Company's 1996 Stock Incentive Plan (the "1996 Plan") which will effect
the following changes: (i) increase the maximum number of shares of Common Stock
authorized for issuance over the term of the 1996 Plan from 3,125,000 to
4,125,000 shares, (ii) render the non-employee Board members who are serving as
Plan Administrator eligible to receive option grants and direct stock issuances
under the Discretionary Option Grant and Stock Issuance Programs in effect under
the 1996 Plan, (iii) allow unvested shares issued under the 1996 Plan and
subsequently repurchased by the Company at the option exercise or direct issue
price paid per share to be reissued under the 1996 Plan, (iv) remove certain
restrictions on the eligibility of non-employee Board members to serve as Plan
Administrator, and (v) effect a series of additional changes to the provisions
of the 1996 Plan (including the stockholder approval requirements, the
transferability of non-statutory stock options and the elimination of the six
(6)-month holding period requirement as a condition to the exercise of stock
appreciation rights) in order to take advantage of the recent amendments to Rule
16b-3 of the Securities and Exchange Commission which exempts certain officer
and director transactions under the 1996 Plan from the short-swing liability
provisions of the federal securities laws.
 
    The proposed share increase will assure that a sufficient reserve of Common
Stock is available under the 1996 Plan to attract and retain the services of key
individuals essential to the Company's long-term growth and success. The
remaining amendments will provide the Company with more opportunities to make
equity incentives available to the non-employee Board members as an inducement
for their continued service and to facilitate plan administration by eliminating
a number of limitations and restrictions previously incorporated into the 1996
Plan to comply with the applicable requirements of SEC Rule 16b-3 prior to its
recent amendment.
 
    The 1996 Plan is successor to the Company's 1991 Stock Option Plan (the
"Predecessor Plan"). The 1996 Plan became effective upon adoption by the Board
on March 5, 1996 (the "Effective Date"), and was approved by the stockholders on
March 7, 1996. The Discretionary Option Grant and Stock Issuance Programs became
effective on the Effective Date. The Automatic Option Grant Program became
effective on April 29, 1996 in connection with the initial public offering of
the Company's Common Stock. On March 5, 1997, the Board adopted the amendments
to the 1996 Plan that are the subject of this Proposal Two.
 
    The following is a summary of the principal features of the 1996 Plan, as
most recently amended. However, the summary does not purport to be a complete
description of all the provisions of the 1996 Plan. Any stockholder of the
Company who wishes to obtain a copy of the actual plan document may do so upon
written request to the Corporate Secretary at the Company's principal executive
offices in San Jose, California.
 
EQUITY INCENTIVE PROGRAMS
 
    The 1996 Plan contains three (3) separate equity incentive programs: (i) a
Discretionary Option Grant Program, (ii) an Automatic Option Grant Program, and
(iii) a Stock Issuance Program. The principal features of these programs are
described below. The 1996 Plan (other than the Automatic Option Grant Program)
is administered by the Compensation Committee of the Board. The Compensation
Committee acting in such administrative capacity (the "Plan Administrator") has
complete discretion (subject to the provisions of the 1996 Plan) to authorize
option grants and direct stock issuances under the 1996 Plan. Pursuant to
provisions in the 1996 Plan, the Board may appoint a Secondary Committee of one
or more Board members, including employee directors, to authorize option grants
and direct stock issuances to eligible persons other than executive officers and
Board members subject to the short-swing liability provisions of the federal
securities laws. All grants under the Automatic Option Grant Program are to be
made in strict compliance with the provisions of that program, and no
administrative discretion will be exercised by the Plan Administrator with
respect to the grants made under such program. Stockholder
 
                                       6
<PAGE>
approval of this Proposal will also constitute pre-approval of each option which
is granted on or after the date of the Annual Meeting pursuant to the provisions
of the Automatic Option Grant Program and the subsequent exercise of each such
option in accordance with those provisions.
 
SHARE RESERVE
 
    A total of 4,125,000 shares of Common Stock has been reserved for issuance
over the term of the 1996 Plan, assuming stockholder approval of the
1,000,000-share increase which forms part of this Proposal. In no event may any
one participant in the 1996 Plan be granted stock options and direct stock
issuances for more than 300,000 shares in the aggregate per calendar year under
the 1996 Plan.
 
    In the event any change is made to the outstanding shares of Common Stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and class of securities issuable under the 1996
Plan, (ii) the maximum number and class of securities for which any one
participant may be granted stock options and direct stock issuances under the
1996 Plan, (iii) the number and class of securities for which option grants will
subsequently be made under the Automatic Option Grant Program to each
newly-elected or continuing non-employee Board member, and (iv) the number and
class of securities and the exercise price per share in effect under each
outstanding option.
 
    Should an option expire or terminate for any reason prior to exercise in
full or be cancelled in accordance with the provisions of the 1996 Plan, the
shares subject to the portion of the option not so exercised or cancelled will
be available for subsequent issuance under the 1996 Plan. Unvested shares issued
under the 1996 Plan and subsequently repurchased by the Company at the original
option exercise or direct issue price paid per share will also be added back to
the share reserve and will accordingly be available for subsequent issuance
under the 1996 Plan. Shares subject to any option surrendered in accordance with
the stock appreciation right provisions of the 1996 Plan will not be available
for subsequent issuance.
 
ELIGIBILITY
 
    Employees of the Company or any parent or subsidiary, non-employee members
of the Board or the board of directors of any parent or subsidiary corporation,
and consultants and other independent advisors in the service of the Company or
its parent or subsidiary corporations will be eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs. Non-employee members of
the Board will also be eligible to participate in the Automatic Option Grant
Program.
 
    As of April 1, 1997, seven (7) executive officers, four (4) non-employee
Board members and approximately 147 other employees were eligible to participate
in the Discretionary Option Grant and Stock Issuance Programs, and the four (4)
non-employee Board members were also eligible to participate in the Automatic
Option Grant Program.
 
VALUATION
 
    The fair market value per share of Common Stock on any relevant date under
the 1996 Plan will be the closing selling price per share on that date on the
Nasdaq National Market. On May 1, 1997, the closing selling price per share was
$3.00.
 
                                       7
<PAGE>
                       DISCRETIONARY OPTION GRANT PROGRAM
 
    Options granted under the Discretionary Option Grant Program will have an
exercise price per share not less than the fair market value per share of Common
Stock on the option grant date. No granted option will have a term in excess of
ten (10) years. The options will generally become exercisable in a series of
installments over the optionee's period of service with the Company.
 
    Upon cessation of service, the optionee will have a limited period of time
in which to exercise his or her outstanding options for any shares in which the
optionee is vested at that time. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
 
    The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
 
        TANDEM STOCK APPRECIATION rights provide the holders with the right to
    surrender their options for an appreciation distribution from the Company
    equal in amount to the excess of (a) the fair market value of the vested
    shares of Common Stock subject to the surrendered option over (b) the
    aggregate exercise price payable for those shares. Such appreciation
    distribution may, at the discretion of the Plan Administrator, be made in
    cash or in shares of Common Stock.
 
        LIMITED STOCK APPRECIATION rights may be provided to one or more
    non-employee Board members or officers of the Company as part of their
    option grants. Any option with such a limited stock appreciation right may
    be surrendered to the Company upon the successful completion of a hostile
    tender offer for more than fifty percent (50%) of the Company's outstanding
    voting stock. In return for the surrendered option, the officer will be
    entitled to a cash distribution from the Company in an amount per
    surrendered option share equal to the excess of (a) the highest price paid
    per share of Common Stock in connection with the tender offer over (b) the
    exercise price payable for such share.
 
    The shares of Common Stock acquired upon the exercise of one or more options
may be unvested and subject to repurchase by the Company, at the original
exercise price paid per share, if the optionee ceases service with the Company
prior to vesting in those shares. The Plan Administrator will have complete
discretion to establish the vesting schedule to be in effect for any such
unvested shares and, in certain circumstances, may cancel the Company's
outstanding repurchase rights with respect to those shares and thereby
accelerate the vesting of those shares.
 
    The Plan Administrator will also have the authority to effect the
cancellation of outstanding options under the Discretionary Option Grant Program
(including outstanding options under the Predecessor Plan) and to issue
replacement options with an exercise price based on the fair market price of
Common Stock at the time of the new grant. Pursuant to such authority, the Plan
Administrator effected an option cancellation/regrant program in March 1997
which allowed all employees (other than the Company's executive officers)
holding options with an exercise price per share in excess of $4.50 to surrender
those options for a new option grant for the same number of shares but with an
exercise price of $4.375 per share, the fair market value per share of the
Common Stock on the grant date of the new option, and with a new five (5)-year
vesting schedule measured from March 5, 1997. Options covering 223,200 shares
with an average weighted exercise price of $6.41 were surrendered for new
options for the same number of shares under this cancellation/regrant program.
 
                                       8
<PAGE>
                         AUTOMATIC OPTION GRANT PROGRAM
 
    Under the Automatic Option Grant Program, each individual who was serving as
a non-employee Board member at the time of the initial public offering on April
29, 1996 was granted at that time a non-statutory option to purchase 16,000
shares of Common Stock, provided such individual had not previously been in the
Company's employ and had not otherwise received a stock option grant in
connection with his Board service. Each individual who first becomes a
non-employee Board member after April 29, 1996, whether through election by the
stockholders or appointment by the Board, will automatically be granted, at the
time of such initial election or appointment, a non-statutory option to purchase
16,000 shares of Common Stock, provided such individual has not previously been
in the Company's employ. In addition, on the date of each Annual Meeting, each
individual who is to continue to serve as a non-employee Board member will
automatically be granted a non-statutory option to purchase 4,000 shares of the
Company's Common Stock, provided such individual has served as a non-employee
Board member for at least six (6) months. There will be no limit on the number
of such 4,000-share option grants that any one non-employee Board member may
receive over his or her period of Board service.
 
    Each 16,000-share or 4,000-share option granted under the Automatic Option
Grant Program will have an exercise price per share equal to one hundred percent
(100%) of the fair market value per share of Common Stock on the option grant
date and a maximum term of ten (10) years measured from the grant date, subject
to earlier termination at the end of the twelve (12)-month period measured from
the date of the optionee's cessation of Board service. Each 16,000-share or
4,000-share option will be immediately exercisable for all the option shares.
However, any shares purchased under the option will be subject to repurchase by
the Company, at the option exercise price paid per share, upon the optionee's
cessation of Board service prior to vesting in those shares. The shares subject
to each initial 16,000-share automatic option grant will vest in a series of
four (4) successive equal annual installments upon the optionee's completion of
each year of Board service over the four (4)-year period measured from the grant
date. The shares subject to each annual 4,000-share grant will vest in two (2)
successive equal annual installments over the optionee's period of continued
service as a Board member, with the first such installment to vest upon
optionee's completion of one (1) year of Board service measured from the grant
date. Should the optionee cease to serve as a Board member, the optionee will
generally have until the earlier of (i) the twelve (12) month period following
such cessation of service or (ii) the expiration date of the option term in
which to exercise the option for the number of shares that are vested at the
time of such individual's cessation of Board service.
 
    The shares subject to each automatic option grant will immediately vest in
full upon (i) the optionee's death or permanent disability while a Board member,
(ii) an acquisition of the Company by merger or asset sale, (iii) the successful
completion of a tender offer for more than fifty percent (50%) of the Company's
outstanding voting stock or (iv) a change in the majority of the Board effected
through one or more proxy contests for Board membership. In addition, upon the
successful completion of a hostile tender offer for more than fifty percent
(50%) of the Company's outstanding voting stock, each automatic option grant may
be surrendered to the Company for a cash distribution per surrendered option
share in an amount equal to the excess of (a) the highest price per share of
Common Stock paid in connection with such tender offer over (b) the exercise
price payable for such share. Stockholder approval of this Proposal will also
constitute pre-approval of each option granted on or after the date of the
Annual Meeting with such a surrender right and the subsequent surrender of that
option in accordance with foregoing provisions.
 
                             STOCK ISSUANCE PROGRAM
 
    Shares may be sold under the Stock Issuance Program at a price per share not
less than the fair market value on the issuance date, payable in cash or through
a promissory note payable to the Company. Shares may also be issued solely as a
bonus for past services.
 
    The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the performance of service or the attainment of
performance goals. The Plan Administrator will,
 
                                       9
<PAGE>
however, have the discretionary authority at any time to accelerate the vesting
of any and all unvested shares outstanding under the 1996 Plan.
 
                               GENERAL PROVISIONS
 
ACCELERATION
 
    In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation will automatically accelerate in full,
and all unvested shares under the Discretionary Option Grant and Stock Issuance
Programs 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. Any options assumed in connection with such acquisition may, in the
Plan Administrator's discretion, be subject to immediate acceleration, and any
unvested shares which do not vest at the time of such acquisition may be subject
to full and immediate vesting, in the event the individual's service with the
successor entity is subsequently terminated within a specified period following
the acquisition. In connection with a change in control of the Company (whether
by successful tender offer for more than fifty percent (50%) of the outstanding
voting stock or a change in the majority of the Board by one or more contested
elections for Board membership), the Plan Administrator will have the
discretionary authority to provide for automatic acceleration of outstanding
options under the Discretionary Option Grant Program and the automatic vesting
of all unvested shares outstanding under the Discretionary Option Grant and
Stock Issuance Programs, with such acceleration or vesting to occur either at
the time of such change in control or upon the subsequent termination of the
individual's service.
 
    The acceleration of vesting upon a change in the ownership or control of the
Company may be seen as an anti-takeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of the Company.
 
FINANCIAL ASSISTANCE
 
    The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options or the purchase of
shares under the Discretionary Option Grant and Stock Issuance Programs. The
Plan Administrator will have complete discretion to determine the terms of any
such financial assistance. However, the maximum amount of financing provided any
individual may not exceed the cash consideration payable for the issued shares
plus all applicable taxes. Any such financing may be subject to forgiveness in
whole or in part, at the discretion of the Plan Administrator, over the
participant's period of service.
 
SPECIAL TAX ELECTION
 
    The Plan Administrator may provide one or more holders of options or
unvested shares (other than the options granted or the shares issued under the
Automatic Option Grant Program) with the right to have the Company withhold a
portion of the shares otherwise issuable to such individuals in satisfaction of
the tax liability incurred by such individuals in connection with the exercise
of those options or the vesting of those shares. Alternatively, the Plan
Administrator may allow such individuals to deliver previously acquired shares
of Common Stock in payment of such tax liability.
 
STOCK AWARDS
 
    The table below shows, as to each of the Company's executive officers named
in the Summary Compensation Table and the various indicated individuals and
groups, the number of shares of Common Stock subject to options granted under
the 1996 Plan between the Effective Date, and April 1, 1997, together with the
weighted average exercise price payable per share. The table does not include
option grants that were originally granted with exercise prices in excess of
$4.50 and cancelled on March 5, 1997 in exchange for new options for the same
number of shares with an exercise price of $4.375.
 
                                       10
<PAGE>
                              OPTION TRANSACTIONS
 
<TABLE>
<CAPTION>
                                                                                             OPTIONS GRANTED     WEIGHTED AVERAGE
NAME                                                                                        (NUMBER OF SHARES)    EXERCISE PRICE
- - ------------------------------------------------------------------------------------------  ------------------   ----------------
<S>                                                                                         <C>                  <C>
Brian L. Hinman...........................................................................              0            --
Michael R. Kourey.........................................................................        100,000             $6.375
Evan J. McDowell..........................................................................              0            --
Ardeshir Falaki...........................................................................        175,000             $7.675
Joseph H. Donnelly........................................................................              0            --
Patrick P. Day............................................................................              0            --
All executive officers as a group.........................................................        705,000             $5.614
All employees, including current officers who are not executive officers, as a group......      1,443,050             $5.878
</TABLE>
 
    As of April 1, 1997, options covering 1,371,550 shares of Common Stock were
outstanding under the 1996 Plan, 2,000,961 shares remained available for future
option grant assuming stockholder approval of the 1,000,000-share increase which
forms part of this Proposal, and 742,489 shares have been issued under the 1996
Plan in connection with option exercises.
 
AMENDMENT AND TERMINATION
 
    The Board may amend or modify the 1996 Plan in any or all respects
whatsoever, subject to any stockholder approval required under applicable law or
regulation. The Board may terminate the 1996 Plan at any time, and the 1996 Plan
will in all events terminate on December 31, 2005.
 
                        FEDERAL INCOME TAX CONSEQUENCES
 
OPTION GRANTS
 
    Options granted under the 1996 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
 
    INCENTIVE OPTIONS.  No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For Federal tax purposes, dispositions are
divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has held the shares for more than two (2) years after the option grant date and
more than one (1) year after the exercise date. If either of these two (2)
holding periods is not satisfied, then a disqualifying disposition will result.
 
    Upon a qualifying disposition, the optionee will recognize long-term capital
gain in an amount equal to the excess of (i) the amount realized upon the sale
or other disposition of the purchased shares over (ii) the exercise price paid
for the shares. If there is a disqualifying disposition of the shares, then the
excess of (i) the fair market value of those shares on the exercise date over
(ii) the exercise price paid for the shares will be taxable as ordinary income
to the optionee. Any additional gain or loss recognized upon the disposition
will be recognized as a capital gain or loss by the optionee.
 
    If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
 
                                       11
<PAGE>
    NON-STATUTORY OPTIONS.  No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
 
    If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
 
    The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
 
STOCK APPRECIATION RIGHTS
 
    An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
such distribution for the taxable year in which the ordinary income is
recognized by the optionee.
 
DIRECT STOCK ISSUANCE
 
    The tax principles applicable to direct stock issuances under the 1996 Plan
will be substantially the same as those summarized above for the exercise of
non-statutory option grants.
 
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
 
    The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options will qualify as performance-based
compensation for purposes of Internal Revenue Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those options will remain deductible by the Company without
limitation under Internal Revenue Code Section 162(m).
 
                              ACCOUNTING TREATMENT
 
    Option grants or stock issuances with exercise or issue prices equal to the
fair market value of the shares at the time of issuance or grant will not result
in any charge to the Company's earnings, but the Company must disclose in the
notes to the Company's financial statements the fair value of options granted
under the 1996 Plan and the pro forma impact on the Company's annual net income
and earnings per share as though the computed fair value of such options had
been treated as compensation expense. In addition, the number of outstanding
options may be a factor in determining the Company's earnings per share on a
fully-diluted basis.
 
                                       12
<PAGE>
    Should one or more optionees be granted stock appreciation rights which have
no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to the
Company's earnings.
 
                               NEW PLAN BENEFITS
 
    As of April 1, 1997, no options have been granted to date on the basis of
the 1,000,000-share increase to the 1996 Plan which forms part of this Proposal.
 
                              STOCKHOLDER APPROVAL
 
    The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the Annual Meeting is
required for approval of the amendments to the 1996 Plan. Should such
stockholder approval not be obtained, then any options granted on the basis of
the 1,000,000-share increase which forms part of this Proposal will terminate
without becoming exercisable for any of the shares of Common Stock subject to
those options, and no further options will be granted on the basis of such share
increase. In addition, the non-employee Board members will not become eligible
to participate in the Discretionary Option Grant or Stock Issuance Programs, and
any unvested shares repurchased by the Company at the option exercise or direct
issue price paid per share will not be added back to the share reserve for
reissuance. The 1996 Plan will, however, continue to remain in effect, and
option grants and direct stock issuances may continue to be made pursuant to the
provisions of the 1996 Plan in effect prior to the amendments summarized in this
Proposal Two, until the available reserve of Common Stock as last approved by
the stockholders has been issued pursuant to option grants made under the 1996
Plan.
 
    THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENTS TO THE 1996 PLAN.
 
                                       13
<PAGE>
              PROPOSAL THREE--RATIFICATION OF INDEPENDENT AUDITORS
 
    The Board of Directors has appointed the firm of Coopers & Lybrand L.L.P.,
independent public auditors for the Company during fiscal year ending December
29, 1996, to serve in the same capacity for the fiscal year ending December 28,
1997, and is asking the stockholders to ratify this appointment. The affirmative
vote of a majority of the shares represented and voting at the Annual Meeting is
required to ratify the selection of Coopers & Lybrand L.L.P.
 
    In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors in its discretion may direct the appointment of a different
independent auditing firm at any time during the year if the Board of Directors
believes that such a change would be in the best interests of the Company and
its stockholders.
 
    A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
 
RECOMMENDATION OF THE BOARD OF DIRECTORS
 
    THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND L.L.P. TO SERVE AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 28, 1997.
 
                                 OTHER MATTERS
 
    The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is granted
by the execution of the enclosed Proxy.
 
                                       14
<PAGE>
                                   MANAGEMENT
 
EXECUTIVE OFFICERS AND DIRECTORS
 
    The officers and directors of the Company, and their ages as of April 1,
1997, are as follows:
 
<TABLE>
<CAPTION>
NAME                                              AGE                               POSITION
- - ---------------------------------------------     ---     ------------------------------------------------------------
<S>                                            <C>        <C>
Brian L. Hinman..............................     35      Chairman of the Board and Chief Executive Officer
Robert C. Hagerty............................     45      President, Chief Operating Officer and Director
                                                          Vice President, Finance and Administration, Chief Financial
Michael R. Kourey............................     37      Officer and Secretary
Ardeshir Falaki..............................     38      Vice President, Engineering--Dataconferencing
Gilbert J. Pearson...........................     48      Vice President, Engineering--Audioconferencing
Alan D. Hagedorn.............................     49      Vice President, Manufacturing
Bandel Carano(2).............................     35      Director
Stanley J. Meresman(1).......................     50      Director
John P. Morgridge(1)(2)......................     63      Director
James R. Swartz..............................     54      Director
</TABLE>
 
- - ------------------------
 
(1) Member of Audit Committee
 
(2) Member of Compensation Committee
 
    BRIAN L. HINMAN is a founder of the Company and serves as Chief Executive
Officer and Chairman of the Board of Directors. Mr. Hinman co-founded
PictureTel, a leading manufacturer of videoconferencing equipment, in August
1984. At PictureTel, he served as the Vice President of Engineering from August
1984 until January 1991 and as a member of the Board of Directors from August
1984 to December 1989. He is a co-founder and director of the International
Multimedia Teleconferencing Consortium, Inc. which is dedicated to the
International Telecommunications Union standards of H.320 and T.120 for video
and dataconferencing. Mr. Hinman holds eight U.S. patents in the
teleconferencing field. Mr. Hinman also holds a B.S.E.E. degree from the
University of Maryland and an S.M.E.E. degree from Massachusetts Institute of
Technology.
 
    ROBERT C. HAGERTY joined the Company in January 1997 and serves as the
President, Chief Operating Officer and a member of the Board of Directors. Prior
to joining Polycom, Mr. Hagerty served as President, Chief Executive Officer and
Director of Stylus Assets, Ltd., a document management company, from November
1995 through December 1996. From July 1993 to October 1995, Mr. Hagerty served
in various executive management positions of Logitech, Inc. Prior to that time,
Mr. Hagerty served in various executive management positions at Conner
Peripherals, Inc. Mr. Hagerty holds a B.S. degree in Operations Research and
Industrial Engineering from the University of Massachusetts, Amherst and an M.A.
degree in Management from St. Mary's College of California.
 
    MICHAEL R. KOUREY joined the Company in July 1991 and has served as the
Company's Vice President, Finance and Operations until January 1995. Mr. Kourey
assumed the offices of Secretary and Treasurer in June 1993. Since January 1995,
he has served as Vice President, Finance and Administration and Chief Financial
Officer of the Company. Prior to joining Polycom, Mr. Kourey was employed by
Verilink Corporation, a supplier of T1 nodal connecting telecommunications
equipment, where he served as the Vice President of Operations from July 1990 to
May 1991 and the Director of Materials from April 1989 to June 1990. From
January 1984 to April 1989, he served in various manufacturing management
positions at David Systems, Inc., a voice and data communications equipment
company. Mr. Kourey holds a B.S. in Managerial Economics from the University of
California, Davis and an M.B.A. from the University of Santa Clara.
 
                                       15
<PAGE>
    ARDESHIR FALAKI joined the Company in April 1996 as Vice President,
Dataconferencing Engineering. Prior to joining the Company, Mr. Falaki served in
various engineering management roles at PictureTel Corporation, including the
position of Director, Performance Products, Group Systems Division, from March
1988 through April 1996. Prior to joining PictureTel, Mr. Falaki held
engineering management positions at Siemens AG. Mr. Falaki holds a B.S.E.E. in
Electrical Engineering from Northeastern University and an M.S.E.E. from the
University of Massachusetts, Dartmouth.
 
    GILBERT J. PEARSON joined the Company in February 1994, and served as the
Company's Manager of Audio Systems until December 1994. In December 1994, Mr.
Pearson was named Director Hardware Development until January 1997. In January
1997, Mr. Pearson was named Vice President, Audioconferencing Engineering. From
September 1987 to June 1990, Mr. Pearson served as the Director of Engineering
and Vice President/General Manager of Harris Corporation, Video Systems
Operation. From October 1981 to July 1986, Mr. Pearson was employed by
Compression Labs, Inc., a leading videoconferencing equipment supplier, where he
served as Vice President of Engineering. Mr. Pearson holds a B.S.E.E. from the
University of Adelaide, Australia.
 
    ALAN D. HAGEDORN joined the Company in September 1996 as Vice President,
Manufacturing. Prior to joining the Company, Mr. Hagedorn served as Vice
President of Manufacturing at Amati Communications, Inc. from February 1994
through September 1995. From September 1988 through February 1994, Mr. Hagedorn
served as Vice President of Manufacturing at Network Computing Devices, Inc. Mr.
Hagedorn holds a B.A. in Management from California State University, Fullerton.
 
    BANDEL CARANO has been a director of the Company since July 1991. Since
1987, Mr. Carano has been a General Partner of Oak Investment Partners ("Oak"),
a venture capital investment firm. Mr. Carano is also a director of Digital
Sound Corp., a unified messaging systems company. Mr. Carano received both his
B.S. and M.S. degrees in Electronic Engineering from Stanford University.
 
    STANLEY J. MERESMAN has been a director of the Company since January 1995.
Mr. Meresman served as the Senior Vice President, Finance and Chief Financial
Officer of Silicon Graphics, Inc. ("Silicon Graphics") from May 1989 to May
1997. Prior to joining Silicon Graphics, Mr. Meresman was Vice President,
Finance and Administration, and Chief Financial Officer of Cypress Semiconductor
Corporation. Mr. Meresman has a B.S. degree in Industrial Engineering and
Operations Research from the University of California, Berkeley and an M.B.A.
degree from Stanford University.
 
    JOHN P. MORGRIDGE has been a director of the Company since April 1992. In
January 1995, Mr. Morgridge became the Chairman of the Board of Cisco Systems,
Inc. ("Cisco"). Prior to this appointment, Mr. Morgridge had served as President
and Chief Executive Officer of Cisco since October 1988. Prior to Cisco, Mr.
Morgridge served two years as President and Chief Operating Officer of GRiD
Systems Corporation. From 1982 to 1986, Mr. Morgridge was Vice President of
Sales, Marketing and Service for Stratus Computers, Inc. Mr. Morgridge holds a
B.B.A. degree in Marketing and Finance from the University of Wisconsin and an
M.B.A. degree in Marketing and Transportation from Stanford University.
 
    JAMES R. SWARTZ has been a director of the Company since July 1991. Mr.
Swartz co-founded Accel Partners, a venture capital investment firm, and has
been managing partner of Accel Partners, since September 1983. Mr. Swartz is
also a director of Farallon Computing, Inc., an Internet collaboration tools
company, PictureTel Corporation, a developer and manufacturer of video
conferencing systems, and Remedy Corporation, a developer of client/server
application software, and a number of private companies. Mr. Swartz holds an
A.B. degree in Engineering Sciences and Applied Physics from Harvard University
and an M.S.I.A. degree from Carnegie Mellon University.
 
    The Company currently has authorized six directors. Each director holds
office until the next annual meeting of stockholders or until his successor is
duly elected and qualified. The officers serve at the discretion of the Board of
Directors.
 
                                       16
<PAGE>
    The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee reviews internal auditing procedures, the
adequacy of internal controls and the results and scope of the audit and other
services provided by the Company's independent auditors. The Audit Committee
meets periodically with management and the independent auditors. The
Compensation Committee establishes salaries, incentives and other forms of
compensation for officers and other employees of the Company, and administers
the incentive compensation and benefit plans of the Company.
 
    Except as otherwise described in this proxy statement, the Company has not
paid cash or other compensation to its directors. Non-employee members of the
Board of Directors are eligible to receive periodic option grants under the
Automatic Option Grant program in effect under the Company's 1996 Stock
Incentive Plan.
 
                                       17
<PAGE>
                 EXECUTIVE COMPENSATION AND RELATED INFORMATION
 
SUMMARY COMPENSATION TABLE
 
    The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the four other most highly compensated executive
officers of the Company serving as such as of the end of the last fiscal year
for services rendered in all capacities to the Company for the 1995 and 1996
fiscal years. Mr. Donnelly and Mr. Day, two officers who would have otherwise
been included in such table on the basis of salary and bonus earned for the 1996
fiscal year had they not resigned or terminated employment during fiscal year
1996, are also included in this table. The individuals included in the table
will be collectively referred to as the "Named Officers."
 
<TABLE>
<CAPTION>
                                                                                                      LONG-TERM
                                                                                                    COMPENSATION
                                                                                                 -------------------
                                                                                                       AWARDS
                                                                                                 -------------------
                                                                          ANNUAL COMPENSATION         NUMBER OF
                                                                         ----------------------      SECURITIES
NAME AND PRINCIPAL POSITION                                     YEAR     SALARY($)  BONUS($)(6)  UNDERLYING OPTIONS
- - ------------------------------------------------------------  ---------  ---------  -----------  -------------------
<S>                                                           <C>        <C>        <C>          <C>
Brian L. Hinman(1), ........................................       1996    150,000      --                6,667
 President and Chief Executive Officer                             1995    115,802      --               --
 
Michael R. Kourey, .........................................       1996    135,000      --              106,667
 Vice President, Finance and Administration, Chief Financial       1995    130,033      --               --
 Officer and Secretary
 
Evan J. McDowell(2), .......................................       1996    100,022     109,000            7,111
 Vice President, Sales and Marketing                               1995    100,000     137,474           --
 
Ardeshir Falaki(3), ........................................       1996     81,731      24,997          165,000
 Vice President, Dataconferencing Engineering
 
Joseph H. Donnelly(4), .....................................       1996    103,698      --                6,667
 Vice President, Manufacturing                                     1995    125,000      --               --
 
Patrick P. Day(5), .........................................       1996    136,122      --                6,667
 Vice President, Engineering                                       1995     86,538      --              200,000
</TABLE>
 
- - ------------------------
 
(1) As of January 13, 1997, Mr. Hinman's position at the Company is Chairman of
    the Board of Directors and Chief Executive Officer. The current President
    and Chief Operating Officer is Robert C. Hagerty, who joined the Company in
    January 1997.
 
(2) Mr. McDowell resigned in January 1997.
 
(3) Mr. Falaki joined the Company in April 1996.
 
(4) Mr. Donnelly resigned in September 1996. The current Vice President of
    Manufacturing is Alan D. Hagedorn, who joined the Company in September 1996.
 
(5) Mr. Day resigned in November 1996. Effective November 11, 1996, the Company
    divided engineering management between dataconferencing and
    audioconferencing products. The current Vice President of Dataconferencing
    Engineering is Ardeshir Falaki who joined the Company in April 1996. Gilbert
    J. Pearson was promoted to Vice President of Audioconferencing Engineering
    in January 1997.
 
(6) Mr. McDowell's bonus consists of commissions. Mr. Falaki's bonus is a
    relocation bonus.
 
                                       18
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
 
    The following table provides information with respect to the stock option
grants made during the 1996 fiscal year under the Company's 1996 Stock Incentive
Plan to each of the Named Officers in fiscal year 1996. No stock appreciation
rights were granted to the Named Officers during the fiscal year.
 
<TABLE>
<CAPTION>
                                                         INDIVIDUAL GRANT                        POTENTIAL REALIZABLE
                                     --------------------------------------------------------      VALUE AT ASSUMED
                                      NUMBER OF                                                 ANNUAL RATES OF STOCK
                                     SECURITIES      % OF TOTAL                                   PRICE APPRECIATION
                                     UNDERLYING    OPTIONS GRANTED    EXERCISE                    FOR OPTION TERM(3)
                                       OPTIONS     TO EMPLOYEES IN      PRICE     EXPIRATION   ------------------------
NAME                                 GRANTED(1)      FISCAL YEAR     ($/SHARE)(2)    DATE          5%          10%
- - -----------------------------------  -----------  -----------------  -----------  -----------  ----------  ------------
<S>                                  <C>          <C>                <C>          <C>          <C>         <C>
Brian L. Hinman....................       6,667(4)           0.6%     $    4.75     01/28/06   $   19,914  $     50,469
 
Michael R. Kourey..................       6,667(4)           0.6%     $    4.75     01/28/06   $   19,914  $     50,469
                                        100,000(5)           9.6%     $   6.375     07/29/06   $  400,900  $  1,016,000
 
Evan J. McDowell...................       7,111(4)           0.7%     $    4.75     01/28/06   $   21,241  $     53,830
 
Ardeshir Falaki....................     100,000(6)           9.6%     $   9.000     04/28/06   $  566,000  $  1,434,400
                                         65,000(7)           6.3%     $   6.125     11/05/06   $  250,380  $    634,530
 
Joseph H. Donnelly.................       6,667(4)           0.6%     $    4.75     01/28/06   $   19,914  $     50,469
 
Patrick P. Day.....................       6,667(4)           0.6%     $    4.75     01/28/06   $   19,914  $     50,469
</TABLE>
 
- - ------------------------
 
(1) Each option granted on January 29, 1996 is immediately exercisable for all
    the option shares. However, any shares purchased under the option will be
    subject to repurchase by the Company, at the option exercise price paid per
    share, upon the optionee's cessation of service prior to vesting in those
    shares. The option shares will vest in a series of twenty-four (24)
    successive equal monthly installments upon the optionee's completion of each
    month of service over the twenty-four (24)-month period measured from the
    grant date. The options granted on April 29, 1996, July 30, 1996 and
    November 6, 1996 will each become exercisable for the option shares in a
    series of installments over the optionee's period of service with the
    Company, with 20% of the option shares to become exercisable upon the
    optionee's completion of one year of service measured from the grant date
    and the balance to become exercisable in forty-eight (48) successive equal
    monthly installments upon the optionee's completion of each additional month
    of service. Each option has a maximum term of 10 years, subject to earlier
    termination upon the optionee's cessation of service. The shares subject to
    each option will immediately vest in full in the event the Company is
    acquired by a merger or asset sale (unless the Company's repurchase right
    with respect to the unvested shares is to be assigned to the acquiring
    entity or the option is to be assumed by such entity).
 
(2) The exercise price may be paid in cash, in shares of the Company's Common
    Stock valued at fair market value on the exercise date or through a cashless
    exercise procedure involving a same-day sale of the purchased shares. The
    Company may also finance the option exercise by loaning the optionee
    sufficient funds to pay the exercise price for the purchased shares,
    together with any federal and state income tax liability incurred by the
    optionee in connection with such exercise.
 
(3) There can be no assurance provided to the option holder or any other holder
    of the Company's securities that the actual stock price appreciation over
    the ten (10)-year option term will be at the assumed 5% and 10% annual rates
    of compounded stock price appreciation or at any other defined level.
 
(4) The grant date of the option was January 29, 1996.
 
(5) The grant date of the option was July 30, 1996.
 
(6) The grant date of the option was April 29, 1996.
 
(7) The grant date of the option was November 6, 1996.
 
                                       19
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
 
    The following table sets forth information concerning option exercises and
option holdings for 1996 with respect to each of the Named Officers. No stock
appreciation rights were exercised during such year or were outstanding at the
end of that year.
 
<TABLE>
<CAPTION>
                                                                          NUMBER OF SECURITIES           VALUE OF UNEXERCISED
                                                                         UNDERLYING UNEXERCISED              IN-THE-MONEY
                                                                        OPTIONS AT FY-END(#)(1)          OPTIONS AT FY-END(1)
                                   SHARES ACQUIRED        VALUE       ----------------------------  ------------------------------
NAME                               ON EXERCISE(#)      REALIZED(1)     EXERCISABLE   UNEXERCISABLE  EXERCISABLE    UNEXERCISABLE
- - --------------------------------  -----------------  ---------------  -------------  -------------  -----------  -----------------
<S>                               <C>                <C>              <C>            <C>            <C>          <C>
Brian L. Hinman.................              0            --               6,667               0    $  32,502          --
Michael R. Kourey...............              0            --               6,667         100,000    $  32,502          --
Evan J. McDowell................              0            --                   0               0       --              --
Ardeshir Falaki.................              0            --                   0         165,000       --              --
Joseph H. Donnelly..............              0            --                   0               0       --              --
Patrick P. Day..................              0            --                   0               0       --              --
</TABLE>
 
- - ------------------------
 
(1) As of December 29, 1996, Brian L. Hinman and Michael R. Kourey each held
    options to purchase 6,667 shares of Common Stock at an exercise price of
    $4.75 per share, and Mr. Kourey held an option to purchase 100,000 shares of
    Common Stock at a purchase price of $6.375 per share. Mr. Falaki was granted
    an option for 100,000 shares of Common Stock at an exercise price of $9.00
    per share and 65,000 shares at an exercise price of $6.125 per share. Each
    6,667 share option is immediately exercisable for all the option shares, but
    as of December 29, 1996, 3,611 of the option shares subject to each of those
    options were subject to repurchase by the Company. Mr. Kourey's 100,000
    share option and both of Mr. Falaki's options become exercisable in a series
    of installments over their respective periods of service, with 20% of the
    option shares to become exercisable one year from the grant date and the
    balance to become exercisable in forty-eight (48) successive equal monthly
    installments. As of December 29, 1996, the option exercise price for each of
    the above options was greater than the fair market value of the Common
    Stock. Therefore, none of the unexercised options held by the executive
    officers were in-the-money options as of December 29, 1996.
 
OPTION REPRICING
 
    During the 1997 fiscal year, 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 the market price of the
Company's Common Stock at the time the cancellation and regrant occurred. The
cancellation and regrant was effected on March 14, 1997, and 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. None of the Named Officers
participated in the 1997 option cancellation and regrant program.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
    The Compensation Committee of the Company's Board was formed in January
1995, and the members of the Compensation Committee are Messrs. Carano and
Morgridge. Neither of these individuals was at any time during the year ended
December 29, 1996, or at any other time, an officer or employee of the Company.
No member of the Compensation Committee of the Company serves as a member of the
board of directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
 
                                       20
<PAGE>
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
 
    The Company does not presently have any employment contracts in effect with
the Chief Executive Officer or any of the other executive officers named in the
Summary Compensation Table.
 
    In connection with an acquisition of the Company by merger or asset sale,
each outstanding option held by the Chief Executive Officer and the other
executive officers under the 1996 Plan (and the Company's predecessor stock
plan) will automatically accelerate in full and all unvested shares of Common
Stock purchased or purchasable by such individuals under such plans will
immediately vest in full, except to the extent such options are to be assumed
by, and the Company's repurchase rights with respect to those shares are to be
assigned to, the successor corporation. In addition, the Compensation Committee
as Plan Administrator of the 1996 Plan will have the authority to provide for
the immediate vesting of the shares of Common Stock subject to outstanding
options held by the Chief Executive Officer or any other executive officer or
any unvested shares of Common Stock held by such individual, in connection with
the termination of the officer's employment following: (i) a merger or asset
sale in which those options are assumed or the Company's repurchase rights with
respect to those shares are assigned or (ii) certain changes in control of the
Company.
 
                                       21
<PAGE>
                            OWNERSHIP OF SECURITIES
 
    The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Stock as of April 1,
1997 by (i) all persons who are beneficial owners of five percent (5%) or more
of the Company's Common Stock, (ii) each director and each nominee for election
to the Board at the Annual Meeting, (iii) the Named Officers, and (iv) all
directors and executive officers as a group. Unless otherwise indicated, each of
the stockholders has sole voting and investment power with respect to the shares
beneficially owned, subject to community property laws, where applicable.
 
<TABLE>
<CAPTION>
                                                                                      SHARES
NAME AND ADDRESS                                                                    BENEFICIALLY PERCENTAGE OF SHARES
(IF APPLICABLE) BENEFICIAL OWNER                                                       OWNED      BENEFICIALLY OWNED
- - ----------------------------------------------------------------------------------  -----------  ---------------------
<S>                                                                                 <C>          <C>
Accel III, L.P. and its related entities(2) ......................................   2,633,398              13.8%
  One Palmer Square
  Princeton, NJ 08542
 
Oak Investment Partners IV, L.P. and its related entities(3) .....................   2,721,398              14.2%
  525 University Avenue, Suite 1300
  Palo Alto, CA 94301
 
Institutional Venture Partners V and its related entities(4) .....................   2,126,976              11.1%
  Building Two, Suite 290
  3000 Sand Hill Road
  Menlo Park, CA 94025
 
Brian L. Hinman(5) ...............................................................   2,003,817              10.4%
  2584 Junction Avenue
  San Jose, CA 95134
 
Norwest Capital LLC ..............................................................   1,159,341               6.1%
  Sixth and Marquette
  Minneapolis, MN 55479
 
Brentwood Associates V, L.P. .....................................................   1,012,846               5.3%
  2730 Sand Hill Road, Suite 250
  Menlo Park, CA 94025
 
Robert C. Hagerty.................................................................       1,000             *
 
Michael R. Kourey(6)..............................................................     211,667               1.1%
 
Ardeshir Falaki(7)................................................................      35,000             *
 
Gilbert J. Pearson(8).............................................................      50,000             *
 
Alan D. Hagedorn..................................................................      10,000             *
 
Bandel Carano(3)..................................................................   2,737,398              14.3%
 
Stanley J. Meresman...............................................................      30,000             *
 
John P. Morgridge.................................................................      36,338             *
 
James R. Swartz(2)................................................................   2,649,398              13.9%
 
Evan J. McDowell..................................................................     202,723               1.1%
 
Joseph H. Donnelly................................................................      45,000             *
 
Patrick P. Day....................................................................      56,667             *
</TABLE>
 
                                       22
<PAGE>
<TABLE>
<CAPTION>
                                                                                      SHARES
NAME AND ADDRESS                                                                    BENEFICIALLY PERCENTAGE OF SHARES
(IF APPLICABLE) BENEFICIAL OWNER                                                       OWNED      BENEFICIALLY OWNED
- - ----------------------------------------------------------------------------------  -----------  ---------------------
<S>                                                                                 <C>          <C>
All directors and officers as a group
  (10 persons)(9).................................................................   7,764,618              48.0%
</TABLE>
 
- - ------------------------
 
 *  Less than 1%
 
    Beneficial ownership is determined in accordance with the rules of the
    Securities and Exchange Commission (the "Commission") and generally includes
    voting or investment power with respect to securities. Shares of Common
    Stock subject to options which are currently exercisable or convertible or
    which will become exercisable or convertible within sixty (60) days after
    April 1, 1997 are deemed outstanding for computing the beneficial ownership
    of the person holding such options but are not deemed oustanding for
    computing the beneficial ownership of any other person. Except as indicated
    by footnote, and subject to community property laws where applicable, the
    persons named in the table above have sole voting and investment power with
    respect to all shares of Common Stock shown as beneficially owned by them.
 
(1) Except as indicated in the footnotes to this table and pursuant to
    applicable community property laws, the persons named in the table have sole
    voting and investment power with respect to all shares of Common Stock.
 
(2) Includes 2,317,391 shares held by Accel III, L.P. ("Accel III"), 210,671
    shares held by Accel Japan, L.P. ("Accel Japan") and 105,336 shares held by
    Accel Investors' 91, L.P. ("Accel Investors"). Mr. Swartz, a director of the
    Company, is a General Partner of Accel III, Accel Japan and Accel Investors.
    Mr. Swartz disclaims beneficial ownership of the shares held by these
    entities except to the extent of his pecuniary interest therein arising from
    his general partnership interests in Accel III, Accel Japan and Accel
    Investors. The shares beneficially owned by Mr. Swartz consist of 16,000
    shares granted in April 1996 in the form of immediately exercisable options,
    some of which, if exercised and issued, would be unvested and subject to a
    repurchase right of the Company that lapses over time.
 
(3) Includes 2,611,022 shares held by Oak Investment Partners IV, L.P. ("Oak
    IV") and 110,376 shares held by Oak IV Affiliates Fund, L.P. ("Oak IV
    Affiliates"). Mr. Carano, a director of the Company, is a General Partner of
    Oak IV and Oak IV Affiliates. Mr. Carano disclaims beneficial ownership of
    the shares held by these entities except to the extent of his pecuniary
    interest therein arising from his general partnership interests in Oak IV
    and Oak IV Affiliates. The shares beneficially owned by Mr. Carano consist
    of options to purchase 16,000 shares of Common Stock granted in April 1996
    in the form of immediately exercisable options, some of which, if exercised
    and issued, would be unvested and subject to a repurchase right of the
    Company that lapses over time.
 
(4) Includes 2,093,186 shares held by Institutional Venture Partners V and
    33,790 shares held by Institutional Venture Management V. Institutional
    Venture Management V is the General Partner of Institutional Venture
    Partners V.
 
(5) Includes 6,667 shares owned by Mr. Hinman in the form of immediately
    exercisable options, some of which, if exercised and issued, would be
    unvested and subject to a repurchase right of the Company that lapses over
    time.
 
(6) Includes 6,667 shares owned by Mr. Kourey in the form of immediately
    exercisable options, some of which, if exercised and issued, would be
    unvested and subject to a repurchase right of the Company that lapses over
    time.
 
(7) Includes options to purchase 20,000 shares of Common Stock.
 
                                       23
<PAGE>
(8) Includes 28,542 shares owned by Mr. Pearson in the form of immediately
    exercisable options, some of which, if exercised and issued, would be
    unvested and subject to a repurchase right of the Company that lapses over
    time.
 
(9) Includes options to purchase 93,876 shares of Common Stock, 71,376 shares of
    which are in the form of immediately exercisable options, some of which, if
    exercised and issued, would be unvested and subject to a repurchase right of
    the Company that lapses over time.
 
                                       24
<PAGE>
                                 POLYCOM, INC.
                             COMPENSATION COMMITTEE
                                     OF THE
                               BOARD OF DIRECTORS
                         EXECUTIVE COMPENSATION REPORT
 
    The Compensation Committee of the Board of Directors sets the compensation
of the Chief Executive Officer and the other executive officers and key
employees subject to ratification by the Board. The Compensation Committee also
administers the Company's 1996 Stock Incentive Plan, and approves stock option
grants for all executive officers and other key employees.
 
                          GENERAL COMPENSATION POLICY
 
    The Company operates in the extremely competitive and rapidly changing high
technology industry. The Committee believes that the compensation programs for
executive officers of the Company should be designed to attract, motivate, and
retain talented executives responsible for the success of the Company and should
be determined within a competitive framework and based on the achievement of
overall financial results, individual contributions, and a measure of customer
satisfaction. Within this overall philosophy, the Committee's objectives are to:
 
    - Offer a total compensation program that takes into consideration the
      compensation practices of a specifically identified peer group of
      companies and other selected companies with which the Company competes for
      executive talent.
 
    - Provide annual variable incentive awards that take into account the
      Company's overall financial performance relative to corporate objectives
      and the performance of the peer group companies and that are also based on
      individual contributions and a measure of customer satisfaction.
 
    - Align the financial interests of executive officers with those of
      stockholders by providing significant equity-based, long-term incentives.
 
COMPENSATION COMPONENTS AND PROCESS
 
    The three major components of the Company's executive officer compensation
are: (i) base salary, (ii) variable incentive awards, and (iii) long-term
equity-based incentive awards.
 
    The Committee determines the compensation levels for the executive officers
with the assistance of the Company's Human Resources Department, which works
with an independent consulting firm that furnishes the Committee with executive
compensation data drawn from a nationally recognized survey of similarly sized
technology companies (the "Peer Companies"). A significant number of the Peer
Companies are listed in the Hambrecht & Quist Technology Index which is included
in the Performance Graph for this Proxy Statement. Certain companies not
included in this Index were taken into account as Peer Companies because the
Company competes for executive talent with those firms. However, some
organizations in the Hambrecht & Quist Technology Index were excluded from the
Peer Companies list because they were not considered competitors for executive
talent or because compensation information was not available.
 
    The positions of the Company's CEO and executive officers were compared with
those of their counterparts at the Peer Companies, and the market compensation
levels for comparable positions were examined to determine base salary, target
incentives, and total cash compensation. In addition, the Peer Companies'
practices concerning stock option grants were reviewed and compared.
 
    BASE SALARY.  The base salary for each executive officer is determined at
levels considered appropriate for comparable positions at the Peer Companies.
 
                                       25
<PAGE>
    VARIABLE INCENTIVE AWARDS.  To reinforce the attainment of Company goals,
the Committee believes that a substantial portion of the annual compensation of
each executive officer should be in the form of variable incentive pay. The
annual incentive pool set aside for executive officers is determined on the
basis of the Company's achievement of the financial performance targets
established at the beginning of the fiscal year, a range for the executive's
contribution, and a measure of customer satisfaction. The incentive plan
requires a threshold level of Company performance based on both revenue and
profit before interest and taxes that must be attained before any incentives are
awarded. Once the new fiscal year's threshold is reached, specific formulas are
in place to calculate the actual incentive payment for each officer. A target is
set for each executive officer based on targets for comparable positions at the
Peer Companies. In fiscal 1996, the Company did not meet its performance
targets. No awards were therefore paid in fiscal 1996.
 
    LONG-TERM, EQUITY-BASED INCENTIVE AWARDS.  The goal of the Company's
long-term equity-based incentive awards is to align the interests of executive
officers with stockholders and to provide each executive officer with a
significant incentive to manage the Company from the perspective of an owner
with an equity stake in the business. The Committee determines the size of
long-term, equity-based incentives according to each executive's position within
the Company and sets a level it considers appropriate to create a meaningful
opportunity for stock ownership. In addition, the Committee takes into account
an individual's recent performance, his or her potential for future
responsibility and promotion, comparable awards made to individuals in similar
positions with the Peer Companies, and the number of unvested options held by
each individual at the time of the new grant. The relative weight given to each
of these factors varies among individuals at the Committee's discretion.
 
    During fiscal 1996, the Committee made option grants to Messrs. Hinman,
Kourey, McDowell, Donnelly and Day under the 1991 Stock Incentive Plan and to
Messrs. Kourey and Falaki under 1996 Stock Incentive Plan. Each grant allows the
officer to acquire shares of the Company's common stock at a fixed price per
share (the market price on the grant date) over a specified period of time. Each
option granted under the 1991 Stock Incentive Plan vests in periodic
installments in a series of twenty-four (24) successive equal monthly
installments upon the optionee's completion of each month of service over the
twenty-four (24)-month period measured from the grant date. Each option granted
under the 1996 Stock Incentive Plan vests in periodic installments over a five
(5) year period, contingent upon the executive officer's continued employment
with the Company. Accordingly, the option will provide a return only if the
officer remains with the Company and only if the market price appreciates over
the option term.
 
    CEO COMPENSATION.  The annual base salary for Mr. Hinman for the 1996 fiscal
year was based on an evaluation of his personal performance and the salary
levels paid to chief executive officers of the Peer Companies.
 
    Mr. Hinman's 1996 fiscal year incentive compensation was based on the actual
financial performance of the Company relative to corporate objectives and a
measure of customer satisfaction. Mr. Hinman's incentive compensation provided
no dollar guarantees. The option grant made to Mr. Hinman was in recognition of
his performance and leadership with the Company.
 
    COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M).  As a result of
Section 162(m) of the Internal Revenue Code, which was enacted into law in 1993,
the Company will not be allowed a Federal income tax deduction for compensation
paid to certain officers, to the extent that compensation exceeds one (1)
million dollars per officer in any one year. This limitation will apply to all
compensation which is not considered to be performance based. Compensation which
does qualify as performance-based compensation will not have to be taken into
account for purposes of this limitation.
 
    The cash compensation paid to the Company's executive officers during fiscal
1996 did not exceed the one (1) million dollar limit per officer, nor is the
cash compensation to be paid to the Company's executive officers for the 1997
fiscal year expected to reach that level. Because it is very unlikely that the
cash compensation payable to any of the Company's executive officers in the
foreseeable future will approach
 
                                       26
<PAGE>
the one (1) million dollar limitation, the Committee has decided not to take any
action at this time to limit or restructure the elements of cash compensation
payable to the Company's executive officers. The Committee will reconsider this
decision should the individual compensation of any executive officer ever
approach the one (1) million dollar level.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
    The members of the Compensation Committee of the Company's Board of
Directors are as named above in the Compensation Committee Report. The Committee
is composed entirely of outside directors, none of whom were at any time during
the 1996 fiscal year or at any other time an officer or employee of the Company.
 
                                          Compensation Committee
 
                                          Bandel Carano
                                          Member of Compensation Committee
 
                                          John P. Morgridge,
                                          Member of Compensation Committee
 
                                       27
<PAGE>
                      COMPARISON OF STOCKHOLDER RETURN(1)
 
    The graph depicted below reflects a comparison of the cumulative total
return (change in stock price plus reinvestment dividends) of the Company's
Common Stock with the cumulative total returns of the Nasdaq National Stock
Market Index and the Hambrecht & Quist Technology Index. The graph covers the
period from April 29, 1996, the date the Company's initial public offering
commenced, through the fiscal year ended December 29, 1996.
 
    The graph assumes that $100 was invested on April 29, 1996 in the Company's
Common Stock and in each index and that all dividends were reinvested. No cash
dividends have been declared on the Company's Common Stock.
 
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
 
<TABLE>
<CAPTION>
                                                  HAMBRECHT & QUIST
<S>        <C>            <C>                    <C>
           Polycom, Inc.    Nasdaq Stock Market     Technology Index
04/30/96            $100                   $100                 $100
06/30/96              78                    100                   94
09/30/96              68                    103                  100
12/29/96              54                    109                  106
</TABLE>
 
- - ------------------------
 
(1) Notwithstanding anything to the contrary set forth in any of the Company's
    previous filings under the Securities Act of 1933 or the Securities Exchange
    Act of 1934 that might incorporate future filings made by the Company under
    those statutes, the preceding Compensation Committee Report on Executive
    Compensation and the Company Stock Performance Graph will not be
    incorporated by reference into any of those prior filings, nor will such
    report or graph be incorporated by reference into any future filings made by
    the Company under those statutes.
 
    Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
 
                                       28
<PAGE>
      COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
 
COMPLIANCE WITH SEC REPORTING REQUIREMENTS
 
    Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than ten percent (10%) of the
Company's Common Stock are required to report initial ownership of the Company's
Common Stock and any subsequent changes in ownership to the Securities and
Exchange Commission ("SEC"). Specific due dates have been established by the
SEC, and the Company is required to disclose in this Proxy Statement any failure
to file by these dates. Based solely upon (i) the copies of Section 16(a)
reports that the Company received from such persons for their 1996 fiscal year
transactions and (ii) the written representations received from one or more of
such persons that no reports were required to be filed for them for the 1996
fiscal year, the Company believes that there has been compliance with all
Section 16(a) filing requirements applicable to such officers, directors, and
ten-percent beneficial owners for such fiscal year.
 
                                 ANNUAL REPORT
 
    A copy of the Annual Report of the Company for the fiscal year ended
December 29, 1996 has been mailed concurrently with this Proxy Statement to all
stockholders entitled to notice of and to vote at the Annual Meeting. The Annual
Report is not incorporated into this Proxy Statement and is not considered proxy
soliciting material.
 
                                   FORM 10-K
 
    The Company filed an Annual Report on Form 10-K with the SEC on March 26,
1997. Stockholders may obtain a copy of these reports, without charge, by
writing to Michael R. Kourey, Vice President of Finance and Administration and
Chief Financial Officer, at the Company's executive offices at 2584 Junction
Avenue, San Jose, California 95134.
 
Dated: May 13, 1997
 
                                            THE BOARD OF DIRECTORS OF
                                            POLYCOM, INC.
 
                                       29
<PAGE>


                                                                       POLYCOM
                                           Advanced Teleconferencing Solutions

May 13, 1997

Dear Stockholder:


You are cordially invited to attend the Annual Meeting of Stockholders to be 
held at 10:00 a.m., local time, on Wednesday, June 11, 1997 at The Beverly 
Heritage Hotel, 1820 Barber Lane, Milpitas, California 95035.  Detailed 
information as to the business to be transacted at the meeting is contained 
in the accompanying Notice of Annual Meeting and Proxy Statement.

Regardless of whether you plan to attend the meeting, it is important that 
your shares be voted.  Accordingly, we ask that you mark, sign and return 
your proxy as soon as possible in the envelope provided.  If you do plan to 
attend the meeting, please mark the appropriate box on the proxy.

                                       Sincerely,
                                       Brian L. Hinman



                                       Chairman of the Board and
                                       Chief Executive Officer


/X/ Please mark
    votes as in
    this example

IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE COMPANY'S
NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2 AND 3.

1.     ELECTION OF DIRECTORS
Nominees:  Brian L. Hinman, Robert C. Hagerty, Bandel Carano, Stanley J. 
Meresman, John P. Morgridge, James R. Swartz

     FOR         WITHHELD     MARK HERE
     ALL         FROM ALL     IF YOU PLAN 
     NOMINEES    NOMINEES     TO ATTEND
                              THE MEETING
     /   /        /   /         /   /

                              MARK HERE
                              FOR ADDRESS   
                              CHANGE AND 
                              NOTE BELOW
                                /   /

    /   /
     FOR
          --------------------------------------------------
          all nominees except those listed on the line above

2.   PROPOSAL TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND, 
     L.L.P. AS INDEPENDENT AUDITORS FOR 1997.

          FOR     AGAINST     ABSTAIN
          /  /     /  /         /  /

3.   PROPOSAL TO APPROVE A SERIES OF AMENDMENTS TO THE COMPANY'S 1996 STOCK 
     INCENTIVE PLAN INCLUDING A 1,000,000-SHARE INCREASE IN THE NUMBER OF 
     SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE OVER THE TERM OF THE 
     1996 PLAN.
          FOR     AGAINST     ABSTAIN
          /  /     /  /        /  /

4.   IN THEIR DISCRETION, THE PROXIES AND ATTORNEYS IN FACT ARE AUTHORIZED TO 
VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, AND 
ANY ADJOURNMENT OR ADJOURNMENTS THEREOF.

(This Proxy should be dated, signed by the stockholder(s) exactly as his or 
her name(s) appears hereon, and returned promptly in the enclosed envelope.  
Persons signing in a fiduciary capacity should so indicate.)

Signature:_______________________ Date:_____________ 
Signature:_______________________ Date:_____________ 

<PAGE>

P
R
O
X
Y            THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
                                    POLYCOM, INC.
                    PROXY FOR 1997 ANNUAL MEETING OF STOCKHOLDERS

    The undersigned stockholder of Polycom, Inc., a Delaware corporation, 
hereby acknowledges receipt of the 1996 Annual Report to Stockholders and the 
Notice of Annual Meeting of Stockholders and Proxy Statement for the Annual 
Meeting of Stockholders of Polycom, Inc. to be held on June 11, 1997 at 10:00 
a.m., local time, at The Beverly Heritage Hotel, 1820 Barber Lane, Milpitas, 
California 95035, and hereby appoints Brian L. Hinman and Michael R. Kourey, 
and each of them, proxies and attorneys-in-fact, with full power to each of 
substitution, on behalf and in the name of the undersigned, to represent the 
undersigned at such meeting, and at any adjournment or adjournments thereof, 
and to vote all shares of Common Stock that the undersigned would be entitled 
to vote if then and there personally present on the matters set forth on the 
reverse side.

    Either of such proxies and attorneys-in-fact, or their substitutes, as 
shall be present and shall act at said meeting or any adjournment or 
adjournments thereof shall have and may exercise all the powers of said 
proxies and attorneys-in-fact hereunder.

    THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED 
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S).

                      CONTINUED AND TO BE SIGNED ON REVERSE SIDE     SEE REVERSE
                                                                         SIDE

<PAGE>

                                    POLYCOM, INC.
                              1996 STOCK INCENTIVE PLAN

                        AS AMENDED AND RESTATED MARCH 5, 1997

                                     ARTICLE ONE

                                  GENERAL PROVISIONS


    I.   PURPOSE OF THE PLAN

         This 1996 Stock Incentive Plan is intended to promote the interests of
Polycom, Inc., a Delaware corporation, by providing eligible persons with the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation.

         Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.

  II.    STRUCTURE OF THE PLAN

         A.   The Plan shall be divided into three (3) separate equity
programs:

                (i)     the Discretionary Option Grant Program under which
    eligible persons may, at the discretion of the Plan Administrator, be
    granted options to purchase shares of Common Stock,

               (ii)     the Stock Issuance Program under which eligible
    persons may, at the discretion of the Plan Administrator, be issued
    shares of Common Stock directly, either through the immediate purchase
    of such shares or as a bonus for services rendered the Corporation (or
    any Parent or Subsidiary), and

              (iii)     the Automatic Option Grant Program under which
    Eligible Directors shall automatically receive option grants at
    periodic intervals to purchase shares of Common Stock.

         B.   The Discretionary Option Grant and Stock Issuance Programs became
effective immediately upon the Plan Effective Date, and the Automatic Option
Grant Program became effective upon the Underwriting Date. 

<PAGE>

         C.   The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.

 III.    ADMINISTRATION OF THE PLAN

         A.   Prior to the Section 12(g) Registration Date, the Discretionary
Option Grant and Stock Issuance Programs were administered by the Board. 
Beginning with the Section 12(g) Registration Date, the Primary Committee shall
have sole and exclusive authority to administer the Discretionary Option Grant
and Stock Issuance Programs with respect to Section 16 Insiders.  

         B.   Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons.  The members of the
Secondary Committee may be Board members who are also Employees.

         C.   Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time.  The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.

         D.   Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant and Stock Issuance Programs and
to make such determinations under, and issue such interpretations of, the
provisions of such programs and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable.  Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any stock option or stock issuance thereunder.

         E.   Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee.  No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

                                       2.
<PAGE>

         F.   Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to option
grants made thereunder.

 IV.     ELIGIBILITY

         A.   The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:

                 (i)    Employees,

                (ii)    non-employee members of the Board or the board of
    directors of any Parent or Subsidiary, and

               (iii)    consultants and other independent advisors who
    provide services to the Corporation (or any Parent or Subsidiary).

         B.   Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine, (i) with respect to the option grants
under the Discretionary Option Grant Program, which eligible persons are to
receive option grants, the time or times when such option grants are to be made,
the number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times at which each option is to become exercisable, the vesting schedule (if
any) applicable to the option shares and the maximum term for which the option
is to remain outstanding and (ii) with respect to stock issuances under the
Stock Issuance Program, which eligible persons are to receive stock issuances,
the time or times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration to be paid for such shares.

         C.   The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.

         D.   The individuals eligible to participate in the Automatic Option
Grant Program shall be limited to (i) those individuals serving as non-employee
Board members on the Underwriting Date, (ii) those individuals who first become
non-employee Board members after the Underwriting Date, whether through
appointment by the Board or election by the Corporation's stockholders, and
(iii) those individuals who continue to serve as non-employee Board members
through one or more Annual Stockholders Meetings held after the Underwriting
Date.  A non-employee Board member shall not be eligible to receive an initial
option grant under the Automatic Option Grant Program on the Underwriting Date
if such individual has previously been in the employ of the Corporation (or any
Parent or Subsidiary) or has otherwise received a prior stock option grant from
the

                                       3.
<PAGE>

Corporation.  A non-employee Board member who first joins the Board after
the Underwriting Date shall not be eligible to receive an initial option grant
under the Automatic Option Grant Program if such individual has previously been
in the employ of the Corporation (or any Parent or Subsidiary).  Non-employee
Board members who have previously been in the employ of the Corporation (or any
Parent or Subsidiary) or who have previously received a stock option grant from
the Corporation shall, however, be eligible to receive one or more annual option
grants under the Automatic Option Grant Program over their period of continued
Board service. 

  V.     STOCK SUBJECT TO THE PLAN

         A.   The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market.  The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed approximately
4,125,000 shares.  Such authorized share reserve is comprised of (i) the number
of shares estimated to remain available for issuance, as of the Plan Effective
Date, under the Predecessor Plan as last approved by the Corporation's
stockholders, including the shares subject to the outstanding options hereby
incorporated into the Plan, (ii) an additional increase of 2,300,000 shares
authorized by the Board and approved by the stockholders on March 7, 1996, plus
(iii) an additional increase of 1,000,000 shares authorized by the Board on
March 5, 1997, subject to stockholder approval at the 1997 Annual Meeting.

         B.   No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 300,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1996 calendar year.

         C.   Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
(including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
In addition, any unvested shares issued under the Plan and subsequently
repurchased by the Corporation, at the option exercise or direct issue price
paid per share, pursuant to the Corporation's repurchase rights under the Plan
shall be added back to the number of shares of Common Stock reserved for
issuance under the Plan and shall accordingly be available for reissuance
through one or more subsequent option grants or direct stock issuances under the
Plan. However, should the exercise price of an option under the Plan (including
any option incorporated from the Predecessor Plan) be paid with shares of Common
Stock or should shares of Common Stock otherwise issuable under the Plan be
withheld by the Corporation in satisfaction of the withholding taxes incurred in
connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised

                                       4.
<PAGE>

or which vest under the stock issuance, and not by the net number of shares 
of Common Stock issued to the holder of such option or stock issuance.

         D.   Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the maximum number and/or class of securities for which any
one person may be granted options, separately exercisable stock appreciation
rights and direct stock issuances per calendar year, (iii) the number and/or
class of securities for which automatic option grants are to be made
subsequently per Eligible Director under the Automatic Option Grant Program and
(iv) the number and/or class of securities and the exercise price per share in
effect under each outstanding option (including any option incorporated from the
Predecessor Plan) in order to prevent the dilution or enlargement of benefits
thereunder.  The adjustments determined by the Plan Administrator shall be
final, binding and conclusive.

                                       5.

<PAGE>

                                     ARTICLE TWO

                          DISCRETIONARY OPTION GRANT PROGRAM


    I.   OPTION TERMS

         Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below.  Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

         A.   EXERCISE PRICE.

              1.   The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date.

              2.   The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option, be payable in one or more
of the forms specified below:

                 (i)    cash or check made payable to the Corporation,

                (ii)    shares of Common Stock held for the requisite
    period necessary to avoid a charge to the Corporation's earnings for
    financial reporting purposes and valued at Fair Market Value on the
    Exercise Date, or

               (iii)    to the extent the option is exercised for vested
    shares, through a special sale and remittance procedure pursuant to
    which the Optionee shall concurrently provide irrevocable written
    instructions to (a) a Corporation-designated brokerage firm to effect
    the immediate sale of the purchased shares and remit to the
    Corporation, out of the sale proceeds available on the settlement
    date, sufficient funds to cover the aggregate exercise price payable
    for the purchased shares plus all applicable Federal, state and local
    income and employment taxes required to be withheld by the Corporation
    by reason of such exercise and (b) the Corporation to deliver the
    certificates for the purchased shares directly to such brokerage firm
    in order to complete the sale transaction.

         Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

                                       6.
<PAGE>

         B.   EXERCISE AND TERM OF OPTIONS.  Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option.  However, no option shall have a term in excess of ten
(10) years measured from the option grant date.

         C.   EFFECT OF TERMINATION OF SERVICE.

              1.   The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

                 (i)    Any option outstanding at the time of the
    Optionee's cessation of Service for any reason shall remain
    exercisable for such period of time thereafter as shall be determined
    by the Plan Administrator and set forth in the documents evidencing
    the option, but no such option shall be exercisable after the
    expiration of the option term.

                (ii)    Any option exercisable in whole or in part by the
    Optionee at the time of death may be exercised subsequently by the
    personal representative of the Optionee's estate or by the person or
    persons to whom the option is transferred pursuant to the Optionee's
    will or in accordance with the laws of descent and distribution.

               (iii)    During the applicable post-Service exercise
    period, the option may not be exercised in the aggregate for more than
    the number of vested shares for which the option is exercisable on the
    date of the Optionee's cessation of Service.  Upon the expiration of
    the applicable exercise period or (if earlier) upon the expiration of
    the option term, the option shall terminate and cease to be
    outstanding for any vested shares for which the option has not been
    exercised.  However, the option shall, immediately upon the Optionee's
    cessation of Service, terminate and cease to be outstanding to the
    extent the option is not otherwise at that time exercisable for vested
    shares.

                (iv)    Should the Optionee's Service be terminated for
    Misconduct, then all outstanding options held by the Optionee shall
    terminate immediately and cease to be outstanding.

              2.   The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

                 (i)    extend the period of time for which the option is
    to remain exercisable following the Optionee's cessation of Service
    from the period otherwise in effect for that option to such greater
    period of time as the

                                       7.
<PAGE>

    Plan Administrator shall deem appropriate, but in no event beyond the
    expiration date of the option term, and/or

                (ii)    permit the option to be exercised, during the
    applicable post-Service exercise period, not only with respect to the
    number of vested shares of Common Stock for which such option is
    exercisable at the time of the Optionee's cessation of Service but
    also with respect to one or more additional installments in which the
    Optionee would have vested under the option had the Optionee continued
    in Service.

         D.   STOCKHOLDER RIGHTS.  The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

         E.   REPURCHASE RIGHTS.  The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock.  Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares.  The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the document evidencing
such repurchase right.

         F.   LIMITED TRANSFERABILITY OF OPTIONS.  During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death.  However, Non-Statutory Options
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members.  The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment.  The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.

   II.   INCENTIVE OPTIONS

         The terms specified below shall be applicable to all Incentive
Options.  Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options.  Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall NOT be subject to the terms of this Section II.

                                       8.
<PAGE>

         A.   ELIGIBILITY.  Incentive Options may only be granted to Employees.

         B.   DOLLAR LIMITATION.  The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000).  To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

         C.   10% STOCKHOLDER.  If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

  III.   CORPORATE TRANSACTION/CHANGE IN CONTROL

         A.   In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock.  However, an outstanding option
shall not so accelerate if and to the extent:  (i) such option is, in connection
with the Corporate Transaction, to be assumed by the successor corporation (or
parent thereof) or (ii) such option is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing on the
unvested option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
such option.

         B.   All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction.

         C.   The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a 

                                       9.
<PAGE>

Corporate Transaction, whether or not those options are to be assumed (or 
those repurchase rights are to be assigned) in the Corporate Transaction.

         D.   Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

         E.   Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction. 
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same and (iii) the maximum number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year.

         F.   The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in whole or in part should the Optionee's Service
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed twelve (12) months) following the effective
date of any Corporate Transaction in which those options are assumed or replaced
and do not otherwise accelerate.  Any options so accelerated shall remain
exercisable for fully-vested shares until the EARLIER of (i) the expiration of
the option term or (ii) the expiration of the one (1)-year period measured from
the effective date of the Involuntary Termination.  In addition, the Plan
Administrator may provide that one or more of the Corporation's outstanding
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate in whole or in part,
and the shares subject to those terminated rights shall accordingly vest.

         G.   The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in whole or in part should the Optionee's Service
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed twelve (12) months) following the effective
date of any Change in Control.  Each option so accelerated shall remain
exercisable for fully-vested shares until the EARLIER of (i) the expiration of
the option term or (ii) the expiration of the one (1)-year period measured from
the effective date of the Involuntary Termination.  In addition, the Plan
Administrator may provide that one or more of the Corporation's outstanding
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate in whole or in part,
and the shares subject to those terminated rights shall accordingly vest.

                                       10.
<PAGE>

         H.   The portion of any Incentive Option accelerated in connection 
with a Corporate Transaction or Change in Control shall remain exercisable as 
an Incentive Option only to the extent the applicable One Hundred Thousand 
Dollar ($100,000) limitation is not exceeded.  To the extent such dollar 
limitation is exceeded, the accelerated portion of such option shall be 
exercisable as a Non-Statutory Option under the Federal tax laws.

         I.   The grant of options under the Discretionary Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

   IV.   CANCELLATION AND REGRANT OF OPTIONS

         The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.

    V.   STOCK APPRECIATION RIGHTS

         A.   The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.

         B.   The following terms shall govern the grant and exercise of tandem
stock appreciation rights:

                 (i)    One or more Optionees may be granted the right,
    exercisable upon such terms as the Plan Administrator may establish,
    to elect between the exercise of the underlying option for shares of
    Common Stock and the surrender of that option in exchange for a
    distribution from the Corporation in an amount equal to the excess of
    (a) the Fair Market Value (on the option surrender date) of the number
    of shares in which the Optionee is at the time vested under the
    surrendered option (or surrendered portion thereof) over (b) the
    aggregate exercise price payable for such shares.

                (ii)    No such option surrender shall be effective unless
    it is approved by the Plan Administrator.  If the surrender is so
    approved, then the distribution to which the Optionee shall be
    entitled may be made in shares of Common Stock valued at Fair Market
    Value on the option

                                       11.
<PAGE>

    surrender date, in cash, or partly in shares and partly in cash, as the
    Plan Administrator shall in its sole discretion deem appropriate.

               (iii)    If the surrender of an option is rejected by the
    Plan Administrator, then the Optionee shall retain whatever rights the
    Optionee had under the surrendered option (or surrendered portion
    thereof) on the option surrender date and may exercise such rights at
    any time prior to the LATER of (a) five (5) business days after the
    receipt of the rejection notice or (b) the last day on which the
    option is otherwise exercisable in accordance with the terms of the
    documents evidencing such option, but in no event may such rights be
    exercised more than ten (10) years after the option grant date.

         C.   The following terms shall govern the grant and exercise of
limited stock appreciation rights:

                 (i)    One or more Section 16 Insiders may be granted
    limited stock appreciation rights with respect to their outstanding
    options.

                (ii)    Upon the occurrence of a Hostile Take-Over, each
    individual holding one or more options with such a limited stock
    appreciation right shall have the unconditional right (exercisable for
    a thirty (30)-day period following such Hostile Take-Over) to
    surrender each such option to the Corporation, to the extent the
    option is at the time exercisable for vested shares of Common Stock. 
    In return for the surrendered option, the Optionee shall receive a
    cash distribution from the Corporation in an amount equal to the
    excess of (A) the Take-Over Price of the shares of Common Stock which
    are at the time vested under each surrendered option (or surrendered
    portion thereof) over (B) the aggregate exercise price payable for
    such shares.  Such cash distribution shall be paid within five (5)
    days following the option surrender date.

               (iii)    The Plan Administrator shall pre-approve, at the
    time the limited stock appreciation right is granted, the subsequent
    exercise of that right in accordance with the terms of the grant and
    the provisions of this Section V.C.  No additional approval of the
    Plan Administrator or the Board shall be required at the time of the
    actual option surrender and cash distribution.  

                (iv)    The balance of the option (if any) shall continue
    in full force and effect in accordance with the documents evidencing
    such option.

                                       12.


<PAGE>

                                    ARTICLE THREE

                                STOCK ISSUANCE PROGRAM


    I.   STOCK ISSUANCE TERMS

         Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants. 
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

         A.   PURCHASE PRICE.

              1.   The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.

              2.   Subject to the provisions of Section I of Article Five,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

                 (i)    cash or check made payable to the Corporation, or

                (ii)    past services rendered to the Corporation (or any
    Parent or Subsidiary).

         B.   VESTING PROVISIONS.

              1.   Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives.  The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:

                 (i)    the Service period to be completed by the
    Participant or the performance objectives to be attained,

                (ii)    the number of installments in which the shares are
    to vest,

                                       13.
<PAGE>

               (iii)    the interval or intervals (if any) which are to
    lapse between installments, and

                (iv)    the effect which death, Permanent Disability or
    other event designated by the Plan Administrator is to have upon the
    vesting schedule,

shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.

              2.   Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

              3.   The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested.  Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.

              4.   Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares.  To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.

              5.   The Plan Administrator may in its discretion waive the 
surrender and cancellation of one or more unvested shares of Common Stock (or 
other assets attributable thereto) which would otherwise occur upon the 
cessation of the Participant's Service or the non-attainment of the 
performance objectives applicable to those shares.  Such waiver shall result 
in the immediate vesting of the Participant's interest in the shares of 
Common Stock as to which the waiver applies.  Such waiver may be effected at 
any time,

                                       14.
<PAGE>

whether before or after the Participant's cessation of Service or the 
attainment or non-attainment of the applicable performance objectives.

 II.     CORPORATE TRANSACTION/CHANGE IN CONTROL

         A.   All of the Corporation's outstanding repurchase/cancellation
rights under the Stock Issuance Program shall terminate automatically, and all
the shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction, except to the extent
those repurchase/cancellation rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction.

         B.   The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed twelve (12) months) following the effective
date of any Corporate Transaction in which those repurchase/cancellation rights
are assigned to the successor corporation (or parent thereof).

         C.   The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed twelve (12) months) following the effective
date of any Change in Control.

  III.     SHARE ESCROW/LEGENDS

         Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.

                                       15.


<PAGE>

                                     ARTICLE FOUR

                            AUTOMATIC OPTION GRANT PROGRAM


  I.     OPTION TERMS

         A.   GRANT DATES. Option grants shall be made on the dates specified
below:

              1.   Each individual serving as a non-employee Board member on
the Underwriting Date was automatically granted, on that date, a Non-Statutory
Option to purchase 16,000 shares of Common Stock, provided such individual (i)
had not previously been in the employ of the Corporation (or any Parent or
Subsidiary) and (ii) had not otherwise received a prior stock option grant from
the Corporation.

              2.   Each individual who is first elected or appointed as a 
non-employee Board member after the Underwriting Date shall automatically be 
granted, on the date of such initial election or appointment, a Non-Statutory 
Option to purchase 16,000 shares of Common Stock, provided such individual 
has not previously been in the employ of the Corporation (or any Parent or 
Subsidiary).

              3.   On the date of each Annual Stockholders Meeting held after
the Underwriting Date, each individual who is to continue to serve as an
Eligible Director, whether or not that individual is standing for re-election to
the Board at that particular Annual Meeting, shall automatically be granted a
Non-Statutory Option to purchase 4,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months.  There shall be no limit on the number of such 4,000-share option grants
any one Eligible Director may receive over his or her period of Board service,
and non-employee Board members who have previously been in the employ of the
Corporation (or any Parent or Subsidiary) or who have otherwise received a stock
option grant from the Corporation prior to the Underwriting Date shall be
eligible to receive one or more such annual option grants over their period of
continued Board service.

                   Stockholder approval of this 1997 Restatement at the 1997
Annual Stockholders Meeting shall constitute pre-approval of each option granted
under this Article Four on or after the date of that Annual Meeting and the
subsequent exercise of that option in accordance with the provisions of this
Article Four.

         B.   EXERCISE PRICE.

              1.   The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.

                                       16.
<PAGE>

              2.   The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program. 
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

         C.   OPTION TERM.  Each option shall have a term of ten (10) years
measured from the option grant date.

         D.   EXERCISE AND VESTING OF OPTIONS.  Each option shall be
immediately exercisable for any or all of the option shares.  However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's cessation
of Board service prior to vesting in those shares.  Each initial 16,000-share
grant shall vest, and the Corporation's repurchase right shall lapse, in a
series of four (4) successive equal annual installments over the Optionee's
period of continued service as a Board member, with the first such installment
to vest upon the Optionee's completion of one (1) year of Board service measured
from the option grant date.  Each annual 4,000-share grant shall vest, and the
Corporation's repurchase right shall lapse, in two (2) successive equal annual
installments over the Optionee's period of continued service as a Board member,
with the first such installment to vest upon the Optionee's completion of one
(1) year of Board service measured from the option grant date.

         E.   EFFECT OF TERMINATION OF BOARD SERVICE.  The following provisions
shall govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:

                 (i)    The Optionee (or, in the event of Optionee's
    death, the personal representative of the Optionee's estate or the
    person or persons to whom the option is transferred pursuant to the
    Optionee's will or in accordance with the laws of descent and
    distribution) shall have a twelve (12)-month period following the date
    of such cessation of Board service in which to exercise each such
    option.

                (ii)    During the twelve (12)-month exercise period, the
    option may not be exercised in the aggregate for more than the number
    of vested shares of Common Stock for which the option is exercisable
    at the time of the Optionee's cessation of Board service.

               (iii)    Should the Optionee cease to serve as a Board
    member by reason of death or Permanent Disability, then all shares at
    the time subject to the option shall immediately vest so that such
    option may, during the twelve (12)-month exercise period following
    such cessation of Board service, be exercised for all or any portion
    of those shares as fully-vested shares of Common Stock.

                                       17.
<PAGE>

                (iv)    In no event shall the option remain exercisable
    after the expiration of the option term.  Upon the expiration of the
    twelve (12)-month exercise period or (if earlier) upon the expiration
    of the option term, the option shall terminate and cease to be
    outstanding for any vested shares for which the option has not been
    exercised.  However, the option shall, immediately upon the Optionee's
    cessation of Board service for any reason other than death or
    Permanent Disability, terminate and cease to be outstanding to the
    extent the option is not otherwise at that time exercisable for vested
    shares.

 II.     CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

         A.   In the event of any Corporate Transaction, the shares of Common 
Stock at the time subject to each outstanding option but not otherwise vested 
shall automatically vest in full so that each such option shall, immediately 
prior to the effective date of the Corporate Transaction, become fully 
exercisable for all of the shares of Common Stock at the time subject to such 
option and may be exercised for all or any portion of those shares as 
fully-vested shares of Common Stock.  Immediately following the consummation 
of the Corporate Transaction, each automatic option grant shall terminate and 
cease to be outstanding, except to the extent assumed by the successor 
corporation (or parent thereof).

         B.   In connection with any Change in Control, the shares of Common 
Stock at the time subject to each outstanding option but not otherwise vested 
shall automatically vest in full so that each such option shall, immediately 
prior to the effective date of the Change in Control, become fully 
exercisable for all of the shares of Common Stock at the time subject to such 
option and may be exercised for all or any portion of those shares as 
fully-vested shares of Common Stock.  Each such option shall remain 
exercisable for such fully-vested option shares until the expiration or 
sooner termination of the option term or the surrender of the option in 
connection with a Hostile Take-Over.

         C.   Upon the occurrence of a Hostile Take-Over, the Optionee shall 
have a thirty (30)-day period in which to surrender to the Corporation each 
automatic option held by him or her.  The Optionee shall in return be 
entitled to a cash distribution from the Corporation in an amount equal to 
the excess of (i) the Take-Over Price of the shares of Common Stock at the 
time subject to the surrendered option (whether or not the Optionee is 
otherwise at the time vested in those shares) over (ii) the aggregate 
exercise price payable for such shares. Such cash distribution shall be paid 
within five (5) days following the surrender of the option to the 
Corporation.  Stockholder approval of this 1997 Restatement at the 1997 
Annual Stockholders Meeting shall constitute pre-approval of each option 
granted with such a surrender provision on or after the date of that Annual 
Meeting and the subsequent surrender of that option in accordance with the 
provisions of this Section II.C.  No additional approval of the Plan 
Administrator or the Board shall be required at the time of the actual option 
surrender and cash distribution. 

                                       18.
<PAGE>

         D.   Each option which is assumed in connection with a Corporate 
Transaction shall be appropriately adjusted, immediately after such Corporate 
Transaction, to apply to the number and class of securities which would have 
been issuable to the Optionee in consummation of such Corporate Transaction 
had the option been exercised immediately prior to such Corporate 
Transaction. Appropriate adjustments shall also be made to the exercise price 
payable per share under each outstanding option, PROVIDED the aggregate 
exercise price payable for such securities shall remain the same.

         E.   The grant of options under the Automatic Option Grant Program 
shall in no way affect the right of the Corporation to adjust, reclassify, 
reorganize or otherwise change its capital or business structure or to merge, 
consolidate, dissolve, liquidate or sell or transfer all or any part of its 
business or assets.

  III.     REMAINING TERMS

         The remaining terms of each option granted under the Automatic 
Option Grant Program shall be the same as the terms in effect for option 
grants made under the Discretionary Option Grant Program.

                                       19.


<PAGE>

                                     ARTICLE FIVE

                                    MISCELLANEOUS


  I.     FINANCING

         A.   The Plan Administrator may permit any Optionee or Participant 
to pay the option exercise price under the Discretionary Option Grant Program 
or the purchase price of shares issued under the Stock Issuance Program by 
delivering a promissory note payable in one or more installments.  The terms 
of any such promissory note (including the interest rate and the terms of 
repayment) shall be established by the Plan Administrator in its sole 
discretion.  Promissory notes may be authorized with or without security or 
collateral.  In all events, the maximum credit available to the Optionee or 
Participant may not exceed the sum of (i) the aggregate option exercise price 
or purchase price payable for the purchased shares plus (ii) any Federal, 
state and local income and employment tax liability incurred by the Optionee 
or the Participant in connection with the option exercise or share purchase.

         B.   The Plan Administrator may, in its discretion, determine that 
one or more such promissory notes shall be subject to forgiveness by the 
Corporation in whole or in part upon such terms as the Plan Administrator may 
deem appropriate.

 II.     TAX WITHHOLDING

         A.   The Corporation's obligation to deliver shares of Common Stock 
upon the exercise of stock options or stock appreciation rights or upon the 
issuance or vesting of such shares under the Plan shall be subject to the 
satisfaction of all applicable Federal, state and local income and employment 
tax withholding requirements.

         B.   The Plan Administrator may, in its discretion, provide any or 
all holders of Non-Statutory Options or unvested shares of Common Stock under 
the Plan (other than the options granted or the shares issued under the 
Automatic Option Grant Program) with the right to use shares of Common Stock 
in satisfaction of all or part of the Taxes incurred by such holders in 
connection with the exercise of their options or the vesting of their shares. 
 Such right may be provided to any such holder in either or both of the 
following formats:

                 (i)    STOCK WITHHOLDING:  The election to have the
    Corporation withhold, from the shares of Common Stock otherwise
    issuable upon the exercise of such Non-Statutory Option or the vesting
    of such shares, a portion of those shares with an aggregate Fair
    Market Value equal to the percentage of the Taxes (not to exceed one
    hundred percent (100%)) designated by the holder.

                                       20.
<PAGE>

                (ii)    STOCK DELIVERY:  The election to deliver to the
    Corporation, at the time the Non-Statutory Option is exercised or the
    shares vest, one or more shares of Common Stock previously acquired by
    such holder (other than in connection with the option exercise or
    share vesting triggering the Taxes) with an aggregate Fair Market
    Value equal to the percentage of the Taxes (not to exceed one hundred
    percent (100%)) designated by the holder.

III.     EFFECTIVE DATE AND TERM OF THE PLAN

         A.   The Plan became effective with respect to the Discretionary 
Option Grant and the Stock Issuance Programs immediately upon the Plan 
Effective Date.  The Automatic Option Grant Program under the Plan became 
effective on the Underwriting Date.  Options may be granted under the 
Discretionary Option Grant Program at any time on or after the Plan Effective 
Date.  In addition, the initial option grants under the Automatic Option 
Grant Program were made on the Underwriting Date to each Eligible Director at 
that time.

         B.   The Plan was amended and restated by the Board on March 5, 1997 
(the "1997 Restatement") to effect the following changes:  (i) increase the 
maximum number of shares of Common Stock authorized for issuance over the 
term of the Plan from 3,125,000 shares to 4,125,000 shares, (ii) render the 
non-employee Board members who are serving as Plan Administrator eligible to 
receive option grants and direct stock issuances under the Discretionary 
Option Grant and Stock Issuance Programs in effect under the Plan, (iii) 
allow unvested shares issued under the Plan and subsequently repurchased by 
the Corporation at the option exercise price or direct issue price paid per 
share to be reissued under the Plan, (iv) remove certain restrictions on the 
eligibility of non-employee Board members to serve as Plan Administrator, and 
(v) effect a series of additional changes to the provisions of the Plan 
(including the stockholder approval requirements, the transferability of 
Non-Statutory Options and the elimination of the six (6)-month holding 
requirement as a condition to the exercise of stock appreciation rights) in 
order to take advantage of the recent amendments to Rule 16b-3 of the 
Securities and Exchange Commission which exempts certain officer and director 
transactions under the Plan from the short-swing liability provisions of the 
federal securities laws.  The 1997 Restatement is subject to stockholder 
approval at the 1997 Annual Meeting, and no option grants made on the basis 
of the 1,000,000-share increase shall become exercisable in whole or in part 
unless and until the 1997 Restatement is approved by the stockholders.  
Should such stockholder approval not be obtained, then any options granted on 
the basis of the 1,000,000-share increase shall terminate without ever 
becoming exercisable for those shares, and no further option grants or direct 
stock issuances shall be made on the basis of such share increase. However, 
option grants and direct stock issuances may continue to be made pursuant to 
the provisions of the Plan as in effect immediately prior to the 1997 
Restatement.  All option grants and direct stock issuances made prior to the 
1997 Restatement shall remain outstanding in accordance with the terms and 
conditions of the respective instruments evidencing those options or 

                                       21.
<PAGE>

issuances, and nothing in the 1997 Restatement shall be deemed to modify or 
in any way affect those outstanding options or issuances.  Subject to the 
foregoing limitations, the Plan Administrator may make option grants and 
direct stock issuances under the Plan at any time before the date fixed 
herein for the termination of the Plan.

         C.   The Plan shall serve as the successor to the Predecessor Plan, 
and no further option grants or direct stock issuances shall be made under 
the Predecessor Plan after the Plan Effective Date.  All options outstanding 
under the Predecessor Plan as of such date shall be incorporated into the 
Plan at that time and shall be treated as outstanding options under the Plan. 
 However, each outstanding option so incorporated shall continue to be 
governed solely by the terms of the documents evidencing such option, and no 
provision of the Plan shall be deemed to affect or otherwise modify the 
rights or obligations of the holders of such incorporated options with 
respect to their acquisition of shares of Common Stock.

         D.   One or more provisions of the Plan, including (without 
limitation) the option/vesting acceleration provisions of Article Two 
relating to Corporate Transactions and Changes in Control, may, in the Plan 
Administrator's discretion, be extended to one or more options incorporated 
from the Predecessor Plan which do not otherwise contain such provisions.

         E.   The Plan shall terminate upon the EARLIEST of (i) December 31, 
2005, (ii) the date on which all shares available for issuance under the Plan 
shall have been issued pursuant to the exercise of the options or the 
issuance of shares (whether vested or unvested) under the Plan or (iii) the 
termination of all outstanding options in connection with a Corporate 
Transaction.  Upon such Plan termination, all outstanding stock options and 
unvested stock issuances shall continue to have force and effect in 
accordance with the provisions of the documents evidencing such options or 
issuances.

 IV.     AMENDMENT OF THE PLAN

         A.   The Board shall have complete and exclusive power and authority 
to amend or modify the Plan in any or all respects.  However, no such 
amendment or modification shall adversely affect any rights and obligations 
with respect to options, stock appreciation rights or unvested stock 
issuances at the time outstanding under the Plan unless the Optionee or the 
Participant consents to such amendment or modification.  In addition, certain 
amendments may require stockholder approval pursuant to applicable laws or 
regulations.

         B.   Options to purchase shares of Common Stock may be granted under 
the Discretionary Option Grant Program and shares of Common Stock may be 
issued under the Stock Issuance Program that are in each instance in excess 
of the number of shares then available for issuance under the Plan, provided 
any excess shares actually issued under those programs are held in escrow 
until there is obtained stockholder approval of an amendment

                                       22.
<PAGE>

sufficiently increasing the number of shares of Common Stock available for 
issuance under the Plan.  If such stockholder approval is not obtained within 
twelve (12) months after the date the first such excess grants or issuances 
are made, then (i) any unexercised options granted on the basis of such 
excess shares shall terminate and cease to be outstanding and (ii) the 
Corporation shall promptly refund to the Optionees and the Participants the 
exercise or purchase price paid for any excess shares issued under the Plan 
and held in escrow, together with interest (at the applicable Short-Term 
Federal Rate) for the period the shares were held in escrow, and such shares 
shall thereupon be automatically cancelled and cease to be outstanding.

  V.     USE OF PROCEEDS

         Any cash proceeds received by the Corporation from the sale of 
shares of Common Stock under the Plan shall be used for general corporate 
purposes.

 VI.     REGULATORY APPROVALS

         A.   The implementation of the Plan, the granting of any option or 
stock appreciation right under the Plan and the issuance of any shares of 
Common Stock (i) upon the exercise of any option or stock appreciation right 
or (ii) under the Stock Issuance Program shall be subject to the 
Corporation's procurement of all approvals and permits required by regulatory 
authorities having jurisdiction over the Plan, the options and stock 
appreciation rights granted under it and the shares of Common Stock issued 
pursuant to it.

         B.   No shares of Common Stock or other assets shall be issued or 
delivered under the Plan unless and until there shall have been compliance 
with all applicable requirements of Federal and state securities laws, 
including the filing and effectiveness of the Form S-8 registration statement 
for the shares of Common Stock issuable under the Plan, and all applicable 
listing requirements of any stock exchange (or the Nasdaq National Market, if 
applicable) on which Common Stock is then listed for trading.

 VII.     NO EMPLOYMENT/SERVICE RIGHTS

         Nothing in the Plan shall confer upon the Optionee or the 
Participant any right to continue in Service for any period of specific 
duration or interfere with or otherwise restrict in any way the rights of the 
Corporation (or any Parent or Subsidiary employing or retaining such person) 
or of the Optionee or the Participant, which rights are hereby expressly 
reserved by each, to terminate such person's Service at any time for any 
reason, with or without cause.

                                       23.


<PAGE>

                                       APPENDIX


         The following definitions shall be in effect under the Plan:

    A.   AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.

    B.   BOARD shall mean the Corporation's Board of Directors.

    C.   CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:

            (i)    the acquisition, directly or indirectly, by any person
    or related group of persons (other than the Corporation or a person
    that directly or indirectly controls, is controlled by, or is under
    common control with, the Corporation), of beneficial ownership (within
    the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
    more than fifty percent (50%) of the total combined voting power of
    the Corporation's outstanding securities pursuant to a tender or
    exchange offer made directly to the Corporation's stockholders, or

           (ii)    a change in the composition of the Board over a period
    of thirty-six (36) consecutive months or less such that a majority of
    the Board members ceases, by reason of one or more contested elections
    for Board membership, to be comprised of individuals who either (A)
    have been Board members continuously since the beginning of such
    period or (B) have been elected or nominated for election as Board
    members during such period by at least a majority of the Board members
    described in clause (A) who were still in office at the time the Board
    approved such election or nomination.

    D.   CODE shall mean the Internal Revenue Code of 1986, as amended.

    E.   COMMON STOCK shall mean the Corporation's common stock.

    F.   CORPORATE TRANSACTION shall mean either of the following 
stockholder-approved transactions to which the Corporation is a party:

            (i)    a merger or consolidation in which securities
    possessing more than fifty percent (50%) of the total combined voting
    power of the Corporation's outstanding securities are transferred to a
    person or persons different from the persons holding those securities
    immediately prior to such transaction; or

                                       A-1.
<PAGE>

           (ii)    the sale, transfer or other disposition of all or
    substantially all of the Corporation's assets in complete liquidation
    or dissolution of the Corporation.

    G.   CORPORATION shall mean Polycom, Inc., a Delaware corporation, and any
corporate successor to all or substantially all of the assets or voting stock of
Polycom, Inc. which shall by appropriate action adopt the Plan.

    H.   DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.

    I.   ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.

    J.   EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

    K.   EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.

    L.   FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:

            (i)    If the Common Stock is at the time traded on the Nasdaq
    National Market, then the Fair Market Value shall be the closing
    selling price per share of Common Stock on the date in question, as
    such price is reported by the National Association of Securities
    Dealers on the Nasdaq National Market or any successor system.  If
    there is no closing selling price for the Common Stock on the date in
    question, then the Fair Market Value shall be the closing selling
    price on the last preceding date for which such quotation exists.

           (ii)    If the Common Stock is at the time listed on any Stock
    Exchange, then the Fair Market Value shall be the closing selling
    price per share of Common Stock on the date in question on the Stock
    Exchange determined by the Plan Administrator to be the primary market
    for the Common Stock, as such price is officially quoted in the
    composite tape of transactions on such exchange.  If there is no
    closing selling price for the Common Stock on the date in question,
    then the Fair Market Value shall be the closing selling price on the
    last preceding date for which such quotation exists.

                                       A-2.
<PAGE>

          (iii)    For purposes of any option grants made on the
    Underwriting Date, the Fair Market Value shall be deemed to be equal
    to the price per share at which the Common Stock is to be sold in the
    initial public offering pursuant to the Underwriting Agreement.

           (iv)    For purposes of any option grants made prior to the
    Underwriting Date, the Fair Market Value shall be determined by the
    Plan Administrator, taking into account such factors as it deems
    appropriate.

    M.   HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
effected through the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities  pursuant to a
tender or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept.

    N.   INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.

    O.   INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:

            (i)    such individual's involuntary dismissal or discharge by
    the Corporation for reasons other than Misconduct, or

           (ii)    such individual's voluntary resignation following (A) a
    change in his or her position with the Corporation which materially
    reduces his or her level of responsibility, (B) a reduction in his or
    her level of compensation (including base salary, fringe benefits and
    participation in corporate-performance based bonus or incentive
    programs) by more than fifteen percent (15%) or (C) a relocation of
    such individual's place of employment by more than fifty (50) miles,
    provided and only if such change, reduction or relocation is effected
    by the Corporation without the individual's consent.

    P.   MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner.  The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the 

                                       A-3.
<PAGE>

dismissal or discharge of any Optionee, Participant or other person in the 
Service of the Corporation (or any Parent or Subsidiary).

    Q.   1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

    R.   NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.

    S.   OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.

    T.   PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

    U.   PARTICIPANT shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.

    V.   PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.  However, solely for the purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.

    W.   PLAN shall mean the Corporation's 1996 Stock Incentive Plan, as set
forth in this document.

    X.   PLAN ADMINISTRATOR shall mean the particular entity, whether the
Board, the Primary Committee or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

    Y.   PLAN EFFECTIVE DATE shall mean March 5, 1996, the date on which the
Plan was adopted by the Board.

    Z.   PREDECESSOR PLAN shall mean the Corporation's existing 1991 Stock
Option Plan.

                                       A-4.
<PAGE>

    AA.  PRIMARY COMMITTEE shall mean the committee of two (2) or more 
non-employee Board members appointed by the Board to administer the 
Discretionary Option Grant and Stock Issuance Programs with respect to 
Section 16 Insiders.

    AB.  SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders. 

    AC.  SECTION 12 REGISTRATION DATE shall mean the date on which the Common
Stock was first registered under Section 12(g) of the 1934 Act.

    AD.  SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.

    AE.  SERVICE shall mean the provision of services to the Corporation (or 
any Parent or Subsidiary) by a person in the capacity of an Employee, a 
non-employee member of the board of directors or a consultant or independent 
advisor, except to the extent otherwise specifically provided in the 
documents evidencing the option grant or stock issuance.

    AF.  STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.

    AG.  STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

    AH.  STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
under the Plan.

    AI.  SUBSIDIARY shall mean any corporation (other than the Corporation) 
in an unbroken chain of corporations beginning with the Corporation, provided 
each corporation (other than the last corporation) in the unbroken chain 
owns, at the time of the determination, stock possessing fifty percent (50%) 
or more of the total combined voting power of all classes of stock in one of 
the other corporations in such chain.

    AJ.  TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value 
per share of Common Stock on the date the option is surrendered to the 
Corporation in connection with a Hostile Take-Over or (ii) the highest 
reported price per share of Common Stock paid by the tender offeror in 
effecting such Hostile Take-Over.  However, if the surrendered option is an 
Incentive Option, the Take-Over Price shall not exceed the clause (i) price 
per share.

                                       A-5.
<PAGE>

    AK.  TAXES shall mean the Federal, state and local income and employment 
tax liabilities incurred by the holder of Non-Statutory Options or unvested 
shares of Common Stock in connection with the exercise of those options or 
the vesting of those shares.

    AL.  10% STOCKHOLDER shall mean the owner of stock (as determined under 
Code Section 424(d)) possessing more than ten percent (10%) of the total 
combined voting power of all classes of stock of the Corporation (or any 
Parent or Subsidiary).

    AM.  UNDERWRITING AGREEMENT shall mean the agreement between the 
Corporation and the underwriter or underwriters managing the initial public 
offering of the Common Stock.

    AN.  UNDERWRITING DATE shall mean April 29, 1996, the date on which the 
Underwriting Agreement was executed and priced in connection with an initial 
public offering of the Common Stock.

                                       A-6.


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