The enclosed proxy is solicited on behalf of the board of directors of 8x8, Inc., or the Company, for use at the 2002 annual meeting of stockholders to be held July 23, 2002 at 1:30 p.m., local time, or at any adjournment thereof, for the purposes set forth in this proxy statement. The annual meeting of stockholders will be held at the offices of the Company at 2445 Mission College Boulevard, Santa Clara, California 95054. The telephone number of the Company's offices is (408) 727-1885.

These proxy solicitation materials and the Company's Annual Report on Form 10-K for the year ended March 31, 2002 (the Company's fiscal 2002), including financial statements, were mailed on or about June 13, 2002, to all stockholders entitled to vote at the annual meeting.

Stockholders of record at the close of business on May 31, 2002 (the "Record Date") are entitled to notice of and to vote at the annual meeting. At the Record Date, 28,237,122 shares of the Company's common stock were issued and outstanding having an equivalent number of votes.

Any proxy given in connection with this solicitation may be revoked by the person giving it at any time before its use by delivering to the Secretary of the Company at or before the taking of the vote at the annual meeting a written notice of revocation or a duly executed proxy bearing a later date or by attending the annual meeting and voting in person.

Each stockholder holding common stock is entitled to one vote for each share of the Company's common stock they hold on all matters presented at the annual meeting. Stockholders do not have the right to cumulate their votes in the election of directors.

Shares of the Company's common stock represented by properly executed proxies will, unless such proxies have been previously revoked, be voted in accordance with the instructions indicated thereon. In the absence of specific instructions to the contrary, properly executed proxies will be voted: (i) FOR the election of each of the Company's nominees for director; (ii) FOR ratification of the appointment of PricewaterhouseCoopers LLP as independent accountants for the Company for the period ending March 31, 2003; and (iii) FOR the amendment of the Director Plan to increase the aggregate number of shares of Common Stock authorized for issuance under such plan by 500,000 shares, from 500,000 shares to 1,000,000 shares and provide for an increase in the number of shares granted as non-discretionary option grants under the plan. No business other than that set forth in the accompanying Notice of Annual Meeting of Stockholders is expected to come before the annual meeting. Should any other matter requiring a vote of stockholders properly arise, the persons named in the enclosed form of proxy will vote such proxy in accordance with the recommendation of the board of directors.

The Company will bear the cost of soliciting proxies. In addition, the Company may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to such beneficial owners. Solicitation of proxies by mail may be supplemented by telephone, telegram, facsimile or personal solicitation by directors, officers or regular employees of the Company. No additional compensation will be paid to such persons for such services.

The required quorum for the transaction of business at the annual meeting is a majority of the votes eligible to be cast by holders of shares of the Company's common stock issued and outstanding on the Record Date. Shares that are voted "FOR," "AGAINST," "WITHHELD" or "ABSTAIN" are treated as being present at the meeting for purposes of establishing a quorum and are also treated as shares entitled to vote at the annual meeting with respect to such matter.

Abstentions shall be counted for purposes of determining both (i) the presence or absence of a quorum for the transaction of business and (ii) the total number of shares entitled to vote with respect to a proposal (other than the election of directors). Accordingly, abstentions will have the same effect as a vote against the proposal.

In instances where brokers are prohibited from exercising discretionary authority for beneficial holders who have not returned a proxy (so-called "broker non-votes"), those shares will be counted for purposes of determining the presence or absence of a quorum for the transaction of business, but will not be counted for purposes of determining the number of shares entitled to vote. Thus, a broker non-vote will not affect the outcome of the voting on a proposal.

The Company's board of directors consists of six directors who are to be elected at this annual meeting. Proxies cannot be voted for a greater number of persons than the number of nominees named. Each of the directors elected at the annual meeting will hold office until the annual meeting of stockholders in 2003 or until his successor has been duly elected and qualified. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Company's six nominees named below, all of whom are currently directors of the Company. In the event that any nominee of the Company becomes unable or declines to serve as a director at the time of the annual meeting, the proxy holders will vote the proxies for any substitute nominee who is designated by the current board of directors to fill the vacancy. It is not expected that any nominee listed below will be unable or will decline to serve as a director.

In January 2000, the Company entered into a strategic relationship with STMicroelectronics NV, or STM, which included STM acquiring shares of the Company's common stock and obtaining the right to nominate a qualified representative to serve on the Company's board of directors so long as STM holds at least 10% of the Company's outstanding common stock. STM currently holds 13.1% of the Company's common stock. Therefore, the Company has selected STM's nominee, Christos Lagomichos, for re-election to the Company's board of directors. For further discussion of the Company's relationship with STM, please see the section of this proxy statement entitled "Certain Relationships and Related Party Transactions."

The names of the nominees and certain information about each of them are set forth below.

Except as indicated below, each nominee or incumbent director has been engaged in the principal occupation set forth above during the past five years. There are no family relationships between any directors or executive officers of the Company.

Dr. Bernd Girod has served as a director of the Company since November 1996 and has served as a director of Netergy Microelectronics, Inc. since January 2001. Dr. Girod is Professor of Electrical Engineering and (by courtesy) Computer Science in the Information Systems Laboratory of Stanford University, a position he has held since 1999. He was Chaired Professor of Telecommunications in the Electrical Engineering Department of the University of Erlangen-Nuremberg from 1993 to 1999. His research interests are in the areas of networked multimedia systems, video signal compression, and 3-D image analysis and synthesis. Prior visiting or regular faculty positions include MIT and Georgia Tech. He has been involved with several startup ventures as founder, director, investor, or advisor, among them Polycom, Vivo Software and RealNetworks. Dr. Girod received a M.S. in Electrical Engineering from the Georgia Institute of Technology and a Doctoral degree from the University of Hanover, Germany. Dr. Girod is a Fellow of the Institute of Electrical and Electronics Engineers.

Major General Guy L. Hecker, Jr. has served as a director of the Company since August 1997 and has served as a director of Netergy since December 2000. He has served as the President of Stafford, Burke and Hecker, Inc., a consulting firm based in Alexandria, Virginia, since 1982. Prior to his retirement from the Air Force in 1982, Major General Hecker's most recent positions included Director of the Air Force Office of Legislative Liaison and an appointment in the Office of the Deputy Chief of Staff, Research, Development and Acquisition for the Air Force. Earlier, he served as a pilot and commander in both fighter and bomber aircraft units, including command of a bomber wing and an air division. During his Air Force career, Major General Hecker was awarded a number of military decorations, including the Air Force Distinguished Service Medal, the Silver Star, the Legion of Merit (awarded twice) and the Distinguished Flying Cross. Major General Hecker received a B.A. from The Citadel, an M.A. in International Relations from George Washington University, an honorary Ph.D. in military science from The Citadel and completed the management development program at Harvard Business School.

Christos Lagomichos has served as a director of the Company since June 2000. Mr. Lagomichos has been Vice President and General Manager of the Set-Top Box Division of STMicroelectronics, Inc., a subsidiary of STM, since July 1997. In December 1996, Mr. Lagomichos was promoted to Director of STM's PPG/Semicustom Products Division for the Americas, and was subsequently promoted to Worldwide General Manager of the Division in May 1997. From October 1989 through December 1996, Mr. Lagomichos served as Product Marketing Manager of STM's Semicustom Business Unit. From 1985 through 1988, he served in various technical roles in STM's Munich design center. Mr. Lagomichos holds an engineering degree from the Technical University of Munich.

Bryan R. Martin has served as President and Chief Executive Officer and as a director of the Company since February 2002. From February 2001 to February 2002 he served as President and Chief Operating Officer and a director of the Company. He has served as a director of Netergy Microelectronics, Inc., a subsidiary of the Company, since January 2001 and of Centile, Inc., a subsidiary of the Company, since March 2001. He served as Senior Vice President, Engineering Operations from July 2000 to February 2001 and as the Company's Chief Technical Officer from August 1995 to August 2000. He also served as a director of the Company from January 1998 through July 1999. In addition, Mr. Martin served in various technical roles for the Company from April 1990 to August 1995. He received a B.S. and an M.S. in Electrical Engineering from Stanford University.

Joe Parkinson has been Chairman of the Board of the Company since November 2000, and served as its Chief Executive Officer from January 2001 to February 2002. He was Chairman and Chief Executive Officer of Netergy Microelectronics, Inc., a subsidiary of the Company, from November 2000 to January 2001. From October 1999 through August 2000, he served on the board of directors of a private company, Photobit Corporation, and from June 2000 through August 2000 served as Photobit's President and Chief Executive Officer. From October 1998 through September 1999, Mr. Parkinson served as Chairman of the Board of Diamonex, Incorporated, also a private company. He also served as Chairman of the Board and Chief Executive Officer of the Company from June 1995 to January 1998. He previously served as Chairman of the Board and Chief Executive Officer of Micron Technology, Inc. He currently serves on the board of directors of Tulane University and of several private companies. Mr. Parkinson received a B.A. from Columbia College, a J.D. from Tulane University, and a L.L.M. in Taxation from New York University.

William P. Tai has served as a director of the Company since April 1994. In June 2002, Mr. Tai joined Charles River Ventures as a general partner. Mr. Tai also serves as a general partner and managing director of funds managed by Institutional Venture Partners. Mr. Tai currently serves on the boards of directors of imGO Limited, a Hong Kong listed company that focuses on investments in the wireless sector, Microtune, Inc., a provider of broadband wireless components, Transmeta Corporation, a provider of hardware and software technologies for mobile computers, as well as several privately held companies. Mr. Tai received a B.S. in Electrical Engineering from the University of Illinois and an M.B.A. from Harvard Business School.

The six nominees receiving the highest number of affirmative votes of the shares entitled to vote on this matter shall be elected as directors. Votes withheld from any director will be counted for purposes of determining the presence or absence of a quorum but are not counted as affirmative votes. A broker non-vote will be counted for purposes of determining the presence or absence of a quorum, but, under Delaware law, it will have no other legal effect upon the election of directors.

The board of directors of the Company held a total of eleven meetings during the fiscal year ended March 31, 2002. No incumbent director attended fewer than 75% of the total number of meetings of the board of directors and committees of the board of directors upon which such director served during fiscal 2002. The board of directors has an audit committee and a compensation committee. The board of directors does not have a nominating committee or any committee performing similar functions.

The audit committee currently consists of Dr. Girod, Mr. Hecker and Mr.Tai. The audit committee reviews the Company's financial controls, evaluates the scope of the annual audit, reviews audit results, consults with management and the Company's independent auditors prior to the presentation of financial statements to stockholders and, as appropriate, initiates inquiries into aspects of the Company's financial affairs. This committee held four meetings during fiscal 2002.

The compensation committee currently consists of Dr. Girod and Mr. Tai. The compensation committee makes recommendations to the board of directors concerning the compensation for the Company's officers and directors and the administration of the Company's stock option and employee stock purchase plans. This committee held no meetings during fiscal 2002.

Cash remuneration for non-employee directors consists of a $1,000 fee for attendance of meetings of the Company's Board of Directors. In addition, directors are reimbursed for reasonable expenses incurred in attending board and committee meetings upon approval of such reimbursement by the board of directors. Non-employee directors are also eligible for discretionary and non-discretionary grants of stock options under the 1996 Director Plan (the "Director Plan") and the 1996 Stock Option Plan (the "1996 Plan"). Under an amendment to the Director Plan approved by the Company's stockholders in August 2000, non-employee directors receive a non-discretionary option grant of 40,000 shares upon their initial election to the board of directors and receive annual grants of 15,000 shares upon their re-election to the board. The initial non-discretionary grant vests annually over a period of four years and subsequent non-discretionary grants vest monthly over a period of forty-eight months. Grants are not made upon re-election in cases where the initial term is shorter than six months. In April 2002 the board reassessed its compensation policy and determined that another increase in non-discretionary grants to non-employee directors was warranted. As a result of this reevaluation, the board increased the amount of the non-discretionary option grant upon re-election of a non-employee director to the board to 25,000 shares. As detailed in Proposal Three, the board is asking Company stockholders to approve changes to the compensation of its non-employee directors under the Director Plan.

In addition, upon termination of service as a director of the Company or upon a Change in Control (as defined below) of the Company, each of the non-employee directors and their immediate families will be eligible for medical insurance coverage for life, subject to the director reimbursing the cost of such coverage to the Company. However, if an individual commences coverage under another plan, coverage under the Company's medical insurance will be discontinued. In addition, upon a Change in Control of the Company any unvested non-employee director options shall become fully vested. For these purposes, a Change in Control is defined as a transaction or series of transactions, including by merger or consolidation of the Company into or with any other entity or corporation or the merger or consolidation of any other corporation into or with the Company, in which any person, entity or group of persons and/or entities acting in concert acquire(s) shares of the Company's stock representing 50% or more of the outstanding voting power of the Company, including voting shares issued or issuable upon conversion of any convertible security outstanding on the date of such transaction including, without limitation, stock options.

Under the foregoing policies, each of Dr. Girod, Mr. Hecker and Mr. Tai received an option to purchase 15,000 shares of the Company's common stock upon their re-election to the Company's board of directors on July 17, 2001 at an exercise price of $1.28. On November 20, 2001, each of Messrs. Girod, Hecker, and Tai also received a discretionary option grant to purchase 1,000 shares of the Company's common stock under the 1996 Plan at an exercise price of $0.96. On January 30, 2002, each of Messrs. Girod, Hecker, and Tai received an additional discretionary option grant to purchase 25,000 shares of the Company's common stock under the Director Plan at an exercise price of $1.18. The above noted exercise prices represented the fair market value of the Company's stock on the date of grant. These grants will vest monthly for forty-eight months subject to their continued service as a director of the Company.

Under a policy of STM, Mr. Lagomichos does not receive option grants in connection with his service on the board, nor does he receive the $1,000 per meeting payment for attending meetings of the Company's board of directors.

Directors who are also employees do not receive any additional compensation for their services as members of the board of directors.

The following table sets forth certain information regarding the executive officers of the Company not shown in the table of the nominees for director above:

Dr. Barry Andrews was appointed Vice President, Engineering and Chief Technical Officer of the Company in February 2001. From December 2000 to February 2001, he served as Director of Customer Premise Equipment & Gateway Development of the Company. From January 1996 to December 2000, Dr. Andrews served as Video R&D Manager and Senior Software Engineer of the Company. He received a B.A.Sc. in Engineering Science from Simon Fraser University, a M.S. in Electrical Engineering, a M.S. in Statistics, and a Ph.D. in Electrical Engineering from Stanford University.

Dr. Theodore Beck has been Vice President, Manufacturing of the Company since May 1999. He has also served as Vice President, Operations of Netergy Microelectronics, Inc. since December 2000. From July 1997 to May 1999, he served as Manufacturing Manager and as Director of Manufacturing of the Company. Dr. Beck joined the Company in December 1996 as Manufacturing Engineer for Systems Products. Dr. Beck received a B.S. in Electrical Engineering from the University of Texas at Austin, as well as a M.S. in Manufacturing Systems Engineering and a Ph.D. in Electrical Engineering, both from Stanford University.

Dr. Philip Bednarz has been Chairman and Chief Executive Officer of Netergy Microelectronics, Inc. since January 2001. He served as President and Chief Operating Officer of Netergy Microelectronics from November 2000 to January 2001. He served as Vice President, Engineering of the Company from February 2000 to November 2000. From October 1995 to February 2000 he served in various technical roles including Director of Advanced Technology and Director of System Software. Dr. Bednarz holds five U.S. patents. He earned his undergraduate degree from the University of Michigan, and a M.S. and a Ph.D. from Stanford University, all in Electrical Engineering.

Christopher Peters has served as the Company's Corporate Development Officer and as a member of the board of directors of Centile, Inc. since October 2001. From September 2000 to October 2001, Mr. Peters was Vice President of Business Development for Kinetic Tide, Inc. Prior to Kinetic Tide, Mr. Peters was Vice President of Sales for 8x8 from July 1997, and Vice President of Business Development from July 1999 to June 2000. Between January 1995 and July 1997, he served as 8x8's East Coast Sales Manager and then as Director of North American OEM Sales. He worked for Media Vision Technology, Inc., a manufacturer of PC multimedia products, from December 1993 through January 1995, where he was an OEM sales manager and director of OEM Sales. He also worked for NCR Microelectronics from 1985 to 1993 in various technical and marketing roles. He received a B.S.E.E. from Colorado State University.

Huw Rees has served as the Chairman and Chief Executive Officer of Centile, Inc. since July 2001 and has been a member of Centile, Inc.'s board of directors since March 2001. From February 2001 to July 2001, he served as Vice President, Sales of the Company. Additionally, he served as Vice President, Sales and Business Development of Centile from March 2001 to July 2001. He served as Vice President, Sales of the Solutions Group of the Company from August 2000 until February 2001 and as Director, North American Sales of the Company from April 1999 to August 2000. He previously worked at Mitel Corporation as Sales Manager of the Western Region. He received a B.Sc. (Hons) from the University of Manchester, Institute of Science and Technology in Electrical and Electronic Engineering and a M.B.A. from the University of LaVerne.

David M. Stoll has been Chief Financial Officer of the Company since January 2000. He was named Acting Chief Financial Officer, Vice President, Finance and Secretary of the Company in August 1999. Mr. Stoll served as the Company's Corporate Controller from November 1996 to August 1999. Prior to joining the Company, Mr. Stoll served as a Finance Manager for Maxtor Corporation and held various positions at PricewaterhouseCoopers LLP. He received a B.A. from Santa Clara University.

The following table sets forth all compensation received for services rendered to the Company in all capacities during the fiscal years ended March 31, 2002, 2001 and 2000 by the Company's Chief Executive Officers and the Company's other four most highly compensated executive officers whose salary and bonus for such fiscal year exceeded $100,000 and who served as executive officers of the Company on March 31, 2002 (collectively, the "Named Executive Officers").

________

1. Consists of Company contributions to the 8x8, Inc. 401(k) plan and premiums paid with respect to term life insurance on behalf of the Named Executive Officer.
2. Mr. Martin was named Chief Executive Officer of the Company in February 2002.
3. Mr. Parkinson was named Chairman of the board and an officer of the Company in November 2000. He served as Chief Executive Officer of the Company from February 2001 to February 2002.
4. Mr. Rees became an officer of the Company in February 2001. Mr. Rees' fiscal 2001 salary consisted of a base salary of $157,864 and sales commissions of $80,000. Mr. Rees' fiscal 2002 compensation package did not include a commission plan. Therefore, his fiscal 2002 salary included base salary only.
5. Dr. Bednarz became an officer of the Company in December 2000.
6. Dr. Beck became an officer of the Company in May 1999.
7. Dr. Andrews became an officer of the Company in February 2001.
8. In fiscal 2001, Mr. Rees was also granted an option to purchase 300,000 shares of Centile, Inc. common stock at an exercise price of $0.43 per share.
9. In fiscal 2001, Dr. Bednarz and Dr. Beck were each also granted an option to purchase 200,000 shares of Netergy Microelectronics, Inc. common stock at an exercise price of $0.50 per share.

The following table provides information with respect to stock option grants to each of the Named Executive Officers during the fiscal year ended March 31, 2002:

________

* less than 0.1%.

1. The Company granted options representing 4,901,073 shares to employees during fiscal 2002.
2. Potential gains are net of the exercise price, but before taxes associated with the exercise. The 5% and 10% assumed annual rates of compounded stock appreciation are mandated by the rules of the Securities and Exchange Commission and do not represent the Company's estimate or projection of the future Company common stock price. Actual gains, if any, on stock option exercises are dependent on the future financial performance of the Company, overall market conditions and the option holders' continued employment through the vesting period. There can be no assurance that the potential realizable values shown in this table will be achieved.
3. The options were granted under the Company's 1996 Stock Plan and vest at a rate of 1/48^th of the shares at the end of each month, subject to continued service as an employee, consultant or director. The term of each option is ten years. The exercise price of each option granted equaled the fair market value of the common stock of the Company on the date of grant. See information provided under the heading "Employment Contracts and Termination of Employment and Change-In-Control Arrangements" for circumstances that would give rise to an acceleration of vesting for outstanding options held by the Named Executive Officers.
4. The exercise price for each option may be paid in cash, in shares of 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.

None of the Named Executive Officers in the Summary Compensation Table exercised any stock options during the fiscal year ended March 31, 2002. The following table provides information with respect to the value of stock options held as of March 31, 2002 by each of the Named Executive Officers:

________

1. The value of unexercised options is based upon the difference between the exercise price and the closing price on the Nasdaq National Market on March 28, 2002 (the last trading day prior to our fiscal year end) of $0.86, multiplied by the number of shares underlying the option.
2. At March 31, 2002, Mr. Rees had an unexercised option to purchase 300,000 shares of Centile, Inc.'s common stock at $0.43 per share, of which 75,000 were exercisable and 225,000 were not exercisable.
3. At March 31, 2002, Dr. Bednarz and Dr. Beck each had an unexercised option to purchase 200,000 shares of Netergy Microelectronics, Inc.'s common stock at $0.50 per share, of which 62,499 were exercisable and 137,501 were not exercisable.

In March 2002 the board of directors authorized the Company to open securities trading accounts and make investments in other classes of securities that may generate higher returns than the currently low yields on governmental and corporate debt securities and money market funds. The amount allocated for such investments was $1.0 million to be invested on behalf of 8x8, Inc. as directed by the Company's Chairman, Joe Parkinson; Chief Executive Officer, Bryan Martin; or Chief Financial Officer, David Stoll. Mr. Parkinson has agreed to personally reimburse 8x8, Inc. on a quarterly basis for any losses resulting from his trading activities in order to maintain a minimum investment account balance of $1.0 million. The board has been assured of Mr. Parkinson's ability to cover any such losses. As part of the arrangement, the Company's board of directors has expressed its intent, but not obligation, to pay Mr. Parkinson a quarterly bonus in an amount equal to 25% of the profits attributable to investments made on the Company's behalf by Mr. Parkinson to the extent such a bonus exceeds his salary for the corresponding period. The Company or Mr. Parkinson can terminate this arrangement at any time, subject to the terms of an agreement between Mr. Parkinson and the Company.

In February 2001, the board of directors authorized a severance arrangement for Joe Parkinson which provides for a one-year severance and one-year option vesting (hereinafter referred to as the "Severance Provisions") in the event of termination of either employment or service as a director (whichever is later) or a Change in Control. The Severance Provisions are subject to a forty-eight month vesting period, which commenced on November 17, 2000, the initial date of Mr. Parkinson's employment. If Mr. Parkinson's immediate family moves to California with the intent that the children will attend school in California, Mr. Parkinson will be considered fully vested in the Severance Provisions. The severance is payable, and options shall vest, month by month, commencing upon the voluntary or involuntary termination of employment or service as a director (whichever is later), conditioned on Mr. Parkinson not competing with the Company and being available for consulting (to the extent it does not interfere with his job responsibilities at a new company, in the discretion of the Chairman of the board of directors of the Company). Notwithstanding the above, in the event of a change in control before the expiration of the applicable severance period, all remaining severance would be paid, and all unvested options would vest.

In January and February 2001, the Company's board of directors authorized severance arrangements with Dr. Beck, Dr. Bednarz, Mr. Martin, Mr. Stoll and two other executives of Netergy Microelectronics, Inc. which provide for one year of severance benefits and option vesting. The severance is payable month by month, commencing upon the voluntary or involuntary termination of the executive, conditioned on the individual not competing with the Company and being available for consulting to the extent it does not interfere with his job responsibilities at a new company, in the discretion of the Chairman of the board of directors of the Company. If the Company is sold before the expiration of the twelve month severance period, all remaining severance would be paid, and all remaining unvested options would vest, as of the closing of the sale of the Company. The executives will also be entitled to continued coverage under the Company's medical plan for the severance period.

Pursuant to the terms of the Netergy Microelectronics, Inc. 2000 Stock Option Plan, the initial options grants to Dr. Bednarz, Dr. Beck, Dr. Girod and Mr. Hecker for the purchase Netergy Microelectronics, Inc. common stock will vest immediately upon a Change in Control of Netergy Microelectronics, Inc.

Notwithstanding the arrangements discussed above, in the event an individual or corporate entity and any related parties cumulatively acquire at least 35% of the Company's fully diluted stock, all stock options held by officers under any 8x8, Inc. stock option plan shall vest immediately without regard to the term of the option. In addition, in such an event, each officer shall be entitled to one year of severance pay and continuing medical benefits for life after leaving the Company, provided that such medical benefits shall cease should such officer accept employment with a competing company.

In the quarter ended March 31, 2000, the Company entered into a strategic relationship with STM. Under various agreements, STM purchased shares of the Company's common stock and was granted certain related rights, licensed certain of the Company's intellectual property and engaged the Company to jointly develop products that enable voice and other multimedia services over internet protocol networks. In addition, STM and the Company entered into a cross license agreement in March 2002 that is more fully described below.

Stock Purchase and Related Rights. As part of the arrangement, STM purchased 3.7 million shares of 8x8's common stock for $27.75 million. STM's share ownership currently represents 13.1% of our outstanding common stock making them the Company's largest shareholder. STM has been granted certain registration rights that expire upon the earlier of the date that STM can sell the remaining shares it holds in any three-month period under Rule 144, or February 2007. The registration rights allow STM to:

• require us to file a registration statement with the U.S. Securities and Exchange Commission covering the resale of some or all of the 3.7 million shares still held by STM, subject to certain conditions; and
• participate in future registration statements, including a registered public offering involving an underwriting, subject to certain conditions and limitations.

In addition, STM has preemptive rights that allow STM to purchase additional shares of common stock from the Company or receive rights to acquire shares of 8x8 common stock, in proportion to their ownership percentage, to the extent that shares of 8x8 common stock or rights to acquire 8x8 common stock are issued in connection with financing activities. STM's preemptive rights terminate on the later of the date that it owns less than 10% of 8x8's outstanding common stock or February 2003. Further, so long as STM holds at least 10% of 8x8's outstanding common stock, the Company is obligated to nominate one qualified nominee selected by STM for election to 8x8's board of directors. Christos Lagomichos, vice president and general manager of the Set-Top Box Division of STM's subsidiary, STMicroelectronics, Inc., was selected as a nominee by STM and currently serves on 8x8's board of directors.

License and Development Agreements. Under a non-exclusive, royalty-bearing license agreement entered into in the quarter ended March 31, 2000 in conjunction with the stock purchase and rights agreements discussed above, the Company provided a subsidiary of STM, STMicroelectronics, Inc., or STM Inc., with rights to use certain of its voice-over-internet-protocol semiconductor and embedded software technology. STM Inc. is required to pay royalties based on a percentage of the net sales price of products sold by STM Inc. that incorporate the licensed technology.

Under a separate development agreement that was also executed in the quarter ended March 31, 2000, the Company and STM Inc. established a framework for the joint development of semiconductor products and defined two initial projects. One project provides for the joint development of a voice-enabled chipset for cable modems and cable television set-top boxes. STM Inc. is not required to pay the Company any engineering fees associated with the development efforts necessary to support this project, which is still ongoing. STM Inc. is required to pay certain per-unit royalties based upon shipments of products that may eventually result from this development effort. The other project involves the integration of certain of our voice-over-internet protocol technology into products intended to be used in various internet telephony applications including digital subscriber line, or DSL, modems and internet protocol telephones. In May 2000 STM Inc. paid us $1.0 million associated with this project; $500,000 for engineering fees associated with the development effort and $500,000 of prepaid royalties. We have substantially completed our obligations under this project and STM Inc. is currently marketing and selling a product resulting from this joint development effort. STM Inc. is required to pay us additional per-unit royalties based upon shipments of this product only if cumulative royalties owed eventually exceed the balance of prepaid royalties. Should STM Inc. elect to have us provide extended product maintenance and support, they are required to pay us additional fees of which a portion will be considered prepaid royalties.

In March 2002, the Company licensed certain Very Long Instruction Word, or VLIW, microprocessor cores, related tools and MPEG4 video compression firmware from STM for use in the Company's Internet protocol, or IP, video communication processor development initiatives. Additionally, the Company agreed to license STM certain of its existing and future H.263 and H.26L video compression/decompression firmware implementations for use with STM's semiconductor products. The licenses are non-exclusive, non-transferable and non-assignable and provide for the sharing of updates and enhancements to the licensed technology, subject to certain limitations. The agreement includes provisions that allow the Company to manufacturing semiconductor devices that contain the VLIW microprocessor cores at STM or at other third-party fabrication facilities. The Company is required to pay STM per-unit royalties based upon shipments of products that incorporate the VLIW technology. In addition, STM is required to pay the Company certain per-unit royalties based upon shipments of STM semiconductor products that contain the Company's video technology.

The compensation committee of the board of directors currently consists of Dr. Girod and Mr. Tai. Neither individual was, at any time since the formation of the Company, an officer or employee of the Company. No executive officer 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. The employee directors of the Company, Messrs. Martin and Parkinson, participated in deliberations of the Company's board of directors concerning executive officer compensation during fiscal 2002.

The audit committee of the Company's board of directors (the "Audit Committee") is comprised of three directors, and operates under a written charter adopted by the board of directors. Each member of the Audit Committee is "independent," as such term is defined under the Nasdaq National Market listing standards.

The Audit Committee oversees the Company's financial reporting process on behalf of the board of directors. Management is responsible for the Company's internal controls, financial reporting process and compliance with laws, regulations and ethical business standards. The Company's independent accountants, PricewaterhouseCoopers LLP ("PWC"), are responsible for performing an independent audit of the Company's consolidated financial statements in accordance with generally accepted auditing standards and to issue a report thereon. The Audit Committee's responsibility is to monitor and oversee these processes. In this capacity, the Audit Committee provides advice, counsel, and direction to management and PWC on the basis of the information it receives, discussions with management and PWC, and the experience of the Audit Committee's members in business, financial and accounting matters.

The Audit Committee has reviewed and discussed the Company's audited consolidated financial statements with the Company's management. The Audit Committee also discussed and reviewed with PWC all matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees). The Audit Committee has met with PWC, with and without management present, to discuss the overall scope of their audit, the results of their examinations, their evaluation of the Company's internal controls and the overall quality of the Company's financial reporting. Furthermore, the Audit Committee has discussed the Company's critical accounting policies with management and PWC.

The Audit Committee has received from PWC a formal written statement describing all relationships between PWC and the Company that might bear on the independence of PWC consistent with Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), discussed with them any relationships that may impact their objectivity and independence, considered the compatibility of non-audit services with the independence of PWC, and in so doing has satisfied itself as to the independence of PWC. Fees for audit and non-audit services provided by PWC in fiscal 2002 are summarized as follows:

Audit Fees. During the fiscal year ended March 31, 2002, the aggregate fees billed, or to be billed, by PWC for the audit of the Company's consolidated financial statements for such fiscal year and for the reviews of the Company's interim financial statements included in the Company's Forms 10-Q for the fiscal year ended March 31, 2002 were $103,000.

Financial Information Systems Design and Implementation Fees. During the fiscal year ended March 31, 2002, PWC billed no fees for information technology consulting services.

All Other Fees. During the fiscal year ended March 31, 2002, the aggregate fees billed by PWC for professional services other than audit fees were $89,000, $55,000 of which were billed in connection with tax related services and $34,000 of which were billed for services such as performance of statutory audits for international subsidiaries, consulting on accounting standards and the review of registration statements.

Based on these reviews and discussions, the Audit Committee recommended to the board of directors, and the board of directors has approved, that the Company's audited consolidated financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2002.

The Audit Committee relies without independent verification on the information provided to them and on the representations made by management and PWC. Accordingly, the Audit Committee's oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee's considerations and discussions referred to above do not assure that the audit of the Company's financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principles or that PWC is in fact "independent" as required by the Nasdaq National Market.

Submitted by the following members of the Audit Committee:

This report of the compensation committee of the Company's board of directors (the "Compensation Committee") on executive compensation is required by the Securities and Exchange Commission. It shall not be deemed to be incorporated by reference by any general statement incorporating this proxy statement by reference into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by reference. Also, it shall not otherwise be deemed soliciting material or filed under these Acts.

The following report describes the Company's compensation policies and rationales applicable to the Company's executive officers with respect to compensation paid to such executive officers for fiscal 2002. The Compensation Committee makes recommendations to the board concerning the compensation for the Company's executive officers. The board of directors is responsible for reviewing and approving the Company's compensation policies and the compensation paid to executive officers, based in part on recommendations of the Compensation Committee. The Compensation Committee did not meet formally during fiscal 2002 and compensation decisions during the fiscal year were made by the full board of directors.

The general philosophy of the Company's compensation program is to offer executive officers competitive compensation based both on the Company's performance and on the individual's contribution and performance. The Company's compensation policies are intended to motivate, reward and retain highly qualified executives for long-term strategic management and the enhancement of stockholder value, to support a performance-oriented environment that rewards achievement of specific internal Company goals and to attract and retain executives whose abilities are critical to the long-term success and competitiveness of the Company. There are three main components in the Company's executive compensation program: i) base salary, ii) incentive bonus and iii) stock incentives.

The salaries of the executive officers, including the Chief Executive Officer, are generally reviewed annually by the Compensation Committee and the board of directors with reference to surveys of salaries paid to executives with similar responsibilities at comparable companies, generally in the high technology industry and often within the Company's geographic area. The peer group for each executive officer is composed of executives whose responsibilities are similar in scope and content. The Company seeks to set executive compensation levels that are competitive with the average levels of peer group compensation. Salaries for executive officers are generally determined on an individual basis by evaluating each executive's scope of responsibility, performance, prior experience and salary history as well as the salaries for similar positions at comparable companies. In light of the Company's efforts to contain expenditures, there were no increases in the salaries of the Named Executive Officers during fiscal 2002.

Annual incentive bonuses for executive officers are intended to reflect the Compensation Committee's belief that a significant portion of the annual compensation of each executive officer should be contingent upon the performance of the Company, as well as the individual contribution of each officer. The Company and its subsidiaries, Netergy Microelectronics, Inc. and Centile, Inc., have implemented profit sharing plans that provide the potential for additional compensation to employees of the respective entities equal to up to 15% of the applicable entity's quarterly net income, if approved by the Company's board of directors. Of these amounts, one third is shared by all employees of the respective entity, one third is shared by key employees identified by the board of directors, and one third is shared by officers. During fiscal 2002, Dr. Bednarz and Dr. Beck received profit sharing bonus payments awarded based upon the net income reported by Netergy Microelectronics, Inc. for the quarter ended December 31, 2001. Additionally, officers are eligible for certain discretionary bonuses based on criteria established by the Company's board of directors and management. No discretionary bonuses were paid to officers during fiscal 2002.

The Company utilizes stock options as long term incentives to reward and retain executive officers. The Compensation Committee believes that this practice links management interests with stockholder interests and motivates executive officers to make long-term decisions that are in the best interests of the Company. The Compensation Committee also believes that executive officers and other key employees should own a significant percentage of the Company's stock. Generally, stock options vest over four years after the grant date and optionees must be employed by the Company at the time of vesting in order to exercise the options.

The Compensation Committee believes that stock option grants provide an incentive that focuses the executives' attention on the Company from the perspective of an owner with an equity stake in the business. Because options are typically granted with an exercise price equal to the fair market value of the Company's common stock on the date of grant, the Company's stock options are tied to the future performance of the Company's common stock and will provide value to the recipient only when the price of the Company's stock increases above the exercise price, that is, only to the extent that stockholders as a whole have benefited. In fiscal 2002, the Compensation Committee and the Board of Directors considered all of these factors and authorized the granting of options to executive officers in November 2001 and January 2002 as part of a company-wide option grant program focusing on employee retention.

Bryan R. Martin's annual base salary had been increased from $190,000 to $225,000 in February 2001 when he was promoted to President and Chief Operating Officer of the Company. Mr. Martin was promoted to Chief Executive Officer of the Company in February 2002; however, no corresponding adjustment was made to his base salary.

Joe Parkinson served as the Company's Chief Executive Officer from January 2001 to February 2002. He has served as the Company's Chairman of the Board since November 2000. Mr. Parkinson's annual base salary during fiscal 2002 was $200,000.

In November 2001, Mr. Martin and Mr. Parkinson were each granted an option to purchase 1,000 shares of the Company's common stock at a price of $0.96 per share, which represented the fair market value of the Company's stock on the date of said grants. Mr. Martin and Mr. Parkinson were also each granted an option to purchase 100,000 shares of the Company's common stock at a price of $1.18 per share in February 2002, which represented the fair market value of the Company's stock on the date of said grants. These grants will vest monthly for up to forty-eight months subject to their continued service as an officer or director of the Company.

Submitted by the following members of the Compensation Committee:

The stock performance graph below is required by the Securities and Exchange Commission. It shall not be deemed to be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by reference. Also, it shall not otherwise be deemed soliciting material or filed under these Acts.

The graph compares the cumulative total stockholder return for the Company's common stock with the Nasdaq Stock Market (US) Composite Index and the Nasdaq Computer Index for the period commencing July 2, 1997 and ending March 31, 2002. The graph assumes that $100 was invested on the date of the Company's initial public offering, July 2, 1997, and that all dividends for the respective Nasdaq indexes have been reinvested. The Company has never paid dividends on its common stock and has no present plans to do so. Historic stock price performance should not be considered indicative of future stock price performance.

Proposals of stockholders of the Company which are intended to be presented by such stockholders at the Company's 2003 annual meeting (the "2003 Meeting") of stockholders must be received by the Company no later than February 13, 2003 in order that they may be considered for inclusion in the proxy statement and form of proxy relating to that meeting.