---

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UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION 
  Washington, D.C. 20549

FORM 10-K/A

ANNUAL REPORT PURSUANT TO SECTION 13 OR
  15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31,
  2002

Commission file number: 000-26689

__________

FOUNDRY NETWORKS, INC.

(Exact name of registrant as specified
  in its charter)

|Delaware                                  | 77-0431154                   
|----------------------------------------- | -----------------------------
|(State
          or other jurisdiction of | (I.R.S. Employer             
|incorporation or organization)            | Identification
          No.)

2100
  Gold Street
  P.O. Box 649100
  San Jose, California 95164-9100
  Website: www.foundrynetworks.com(Address of principal executive offices,
  including zip code)

Registrants telephone number,
  including area code: (408) 586-1700
  Securities registered pursuant to Section 12(b) of the Act: None
  Securities registered pursuant to Section 12(g) of the Act:
  Common Stock, $0.0001 par value

__________

Indicate by check mark
  whether the registrant (1) has filed all reports required to be filed by Section
  13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
  (or for such shorter period than the registrant was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days. YES
  |X|   NO |_|

Indicate by check mark
  if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
  not contained herein, and will not be contained, to the best of registrants
  knowledge, in definitive proxy or information statements incorporated by reference
  in Part III of this Form 10-K or any amendment to this Form 10-K. |_|

Indicate by check mark
  whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
  the Act). YES |X|   NO |_|

The aggregate market
  value of the voting stock held by non-affiliates of the registrant was approximately
  $666,689,642 as of June 28, 2002 based upon the closing sale price on the Nasdaq
  National Market reported for such date. Shares of Common Stock held by each
  officer and director and by each person who owns 5% or more of the outstanding
  Common Stock have been excluded in that such persons may be deemed to be affiliates.
  This determination of affiliate status is not necessarily a conclusive determination
  for other purposes.

There were 122,033,038
  shares of the registrants Common Stock issued and outstanding as of March 24,
  2003.

---

---

---

The Registrant hereby corrects two typographical
  errors which appeared in Item 8, Consolidated Financial Statements and
  Supplementary Data, of its Form 10-K for the fiscal year ended December
  31, 2002 filed with the Securities and Exchange Commission on March 31, 2003,
  which errors were as follows:

(A) The second to final sentence of the second paragraph
  under the heading 1999 Directors Stock Option Plan under
  Note 5, Stockholders Equity, of the Consolidated Financial
  Statements originally read: In June 2002, the directors received their
  annual grants totaling 300,000 stock options at an exercise price of $18.88
  per share. This sentence is being amended and restated in its entirety
  to read, In June 2002, the directors received their annual grants totaling
  240,000 stock options at an exercise price of $6.86 per share.

(B) The Registrants Statement of Operations
  Data (unaudited) which appears under the heading, Supplementary Financial
  Data (Unaudited) originally stated that the Basic net income per share
  for the quarter ended December 31, 2002 was $0.19 and that the Diluted net income
  per share for the quarter ended December 31, 2002 was $0.18. This table is being
  corrected to state that the Basic net income per share for the quarter ended
  December 31, 2002 was $0.09 and that the Diluted net income per share for the
  quarter ended December 31, 2002 was $0.08.

Item 8 is hereby amended and restated solely to reflect the two changes noted above, as follows:

2

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Item 8. Consolidated Financial Statements And Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



| |  |  | Page
| |  |  | ----

|Report of Ernst & Young LLP, Independent Auditors                                                | 4 
|------------------------------------------------------------------------------------------------ | --
|                                                                                                 |   
|Report of Arthur Andersen LLP, Independent Public
      Accountants                              | 5 
|                                                                                                 |   
|Consolidated Balance Sheets as of December 31, 2002 and
      2001                               | 6 
|                                                                                                 |   
|Consolidated Statements of Income for the Years Ended December 31,
      2002, 2001 and 2000     | 7 
|                                                                                                 |   
|Consolidated Statements of Stockholders Equity as of December 31,
      2002, 2001 and 2000     | 8 
|                                                                                                 |   
|Consolidated Statements of Cash Flows for the Years Ended December
      31, 2002, 2001 and 2000 | 9 
|                                                                                                 |   
|Notes to Consolidated Financial Statements                                                       | 10

3

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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Board of
Directors and Stockholders ofFoundry Networks, Inc.:

We have audited the accompanying consolidated balance sheet of Foundry
  Networks, Inc. and subsidiaries as of December 31, 2002, and the related consolidated
  statements of income, shareholders equity, and cash flows for the year
  then ended. Our audit also included the financial statement schedule listed
  in the Index at Item 15(a)(2) for the year ended December 31, 2002. These financial
  statements are the responsibility of the Companys management. Our responsibility
  is to express an opinion on these financial statements based on our audit. The
  financial statements of Foundry Networks, Inc. as of December 31, 2001 and for
  each of the two years in the period ended December 31, 2001 were audited by
  other auditors who have ceased operations and whose report dated January 21,
  2002 expressed an unqualified opinion on those statements before the reclassification
  adjustments described in Note 2.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Foundry
Networks, Inc. and subsidiaries at December 31, 2002, and the consolidated
results of their operations and their cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the related financial statement schedule for the year ended December 31, 2002, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

As discussed above, the financial statements of Foundry Networks, Inc.
  as of December 31, 2001 and for each of the two years in the period ended December
  31, 2001, were audited by other auditors who have ceased operations. As disclosed
  in Note 2, the Company changed the presentation of revenues and cost of revenues
  in 2001 and 2000 to conform to the presentation required in 2002 in accordance
  with Rule 5.03 of Regulation S-X as service revenues exceed 10% of total revenues
  for the year ended December 31, 2002. We audited the reclassification adjustments
  that impacted product revenues, cost of product revenues, service revenues, and
  cost of service revenues. In our opinion, all such adjustments and disclosures
  are appropriate and the adjustments have been properly applied. However, we
  were not engaged to audit, review, or apply any procedures to the 2001 and 2000
  financial statements of the Company other than with respect to such adjustments
  and, accordingly, we do not express an opinion or any other form of assurance
  on the 2001 and 2000 financial statements taken as a whole.



|                                            |  |  |                            
|------------------------------------------- |  |  | ---------------------------
|                                            |  |  | /S/ ERNST & YOUNG
      LLP
|                                            |  |  |                            
|Palo Alto,
      CaliforniaJanuary 23, 2003 |  |  |                            

4

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This is a copy of
the audit report previously issued by Arthur Andersen LLP in connection with
Foundry Networks Inc.s filing on Form 10-K for the year ended December 31,
2001. This audit report has not been reissued by Arthur Andersen LLP in
connection with this filing on Form 10-K. See Exhibit 23.2 for further
discussion. The consolidated balance sheet as of December 31, 2000, the
consolidated statements of income, redeemable convertible preferred stock and
stockholders equity and cash flows for the year ended December 31, 1999 and the
information in the schedule for 1999 referred to in this report have not been
included in the accompanying financial statements or schedule.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Foundry Networks,
Inc.:

We have audited the accompanying consolidated balance sheets of Foundry
Networks, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2000
and 2001, and the related consolidated statements of income, redeemable
convertible preferred stock and stockholders equity and cash flows for each of
the three years in the period ended December 31, 2001. These financial
statements and the schedule referred to below are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Foundry Networks,
Inc. and subsidiaries as of December 31, 2000 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 15(a)(2) is
presented for purposes of complying with the Securities and Exchange
Commissions rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



|                                           |  |  | 
|------------------------------------------ |  |  | 
|/S/ ARTHURANDERSENLLP                      |  |  | 
|                                           |  |  | 
|San Jose,
      CaliforniaJanuary 21, 2002 |  |  | 

5

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FOUNDRY NETWORKS, INC.

CONSOLIDATED BALANCE SHEETS(in
thousands)



|                                                                                                                                                                                 |  | December 31, |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------
|                                                                                                                                                                                 |  |              |        
|                                                                                                                                                                                 |  | 2002         |        
|                                                                                                                                                                                 |  |              |        
|ASSETS                                                                                                                                                                           |  |              |        
|Current assets:                                                                                                                                                                  |  |              |        
|Cash and cash equivalents                                                                                                                                                        |  | $            | 187,719
|Short-term investments                                                                                                                                                           |  | 138,734      |        
|Accounts receivable, net of allowances for doubtful accounts of
      $5,833 and $6,648 and sales returns of $1,584 and $1,501 at December 31,
      2002 and 2001, respectively |  | 51,896       |        
|Inventories                                                                                                                                                                      |  | 33,479       |        
|Deferred tax assets                                                                                                                                                              |  | 28,560       |        
|Prepaid expenses and other current assets                                                                                                                                        |  | 3,591        |        
|                                                                                                                                                                                 |  |              |        
|Total current assets                                                                                                                                                             |  | 443,979      |        
|                                                                                                                                                                                 |  |              |        
|Property and equipment:                                                                                                                                                          |  |              |        
|Computers and related equipment                                                                                                                                                  |  | 16,463       |        
|Leasehold improvements                                                                                                                                                           |  | 1,620        |        
|Furniture and fixtures                                                                                                                                                           |  | 101          |        
|                                                                                                                                                                                 |  |              |        
|                                                                                                                                                                                 |  | 18,184       |        
|Less: Accumulated depreciation                                                                                                                                                   |  | (11,804      | )      
|                                                                                                                                                                                 |  |              |        
|Net property and equipment                                                                                                                                                       |  | 6,380        |        
|                                                                                                                                                                                 |  |              |        
|Other long-term assets                                                                                                                                                           |  | 1,176        |        
|                                                                                                                                                                                 |  |              |        
|Total assets                                                                                                                                                                     |  | $            | 451,535
|                                                                                                                                                                                 |  |              |        
|                                                                                                                                                                                 |  |              |        
|LIABILITIESANDSTOCKHOLDERSEQUITY                                                                                                                                                |  |              |        
|Current liabilities:                                                                                                                                                             |  |              |        
|Accounts payable                                                                                                                                                                 |  | $            | 11,684 
|Accrued payroll and related expenses                                                                                                                                             |  | 11,748       |        
|Warranty accrual                                                                                                                                                                 |  | 2,305        |        
|Other accrued expenses                                                                                                                                                           |  | 3,597        |        
|Income taxes payable                                                                                                                                                             |  | 3,868        |        
|Deferred support revenue                                                                                                                                                         |  | 20,234       |        
|                                                                                                                                                                                 |  |              |        
|Total current liabilities                                                                                                                                                        |  | 53,436       |        
|                                                                                                                                                                                 |  |              |        
|Commitments and contingencies (Note 3)                                                                                                                                           |  |              |        
|Stockholders equity:                                                                                                                                                            |  |              |        
|Preferred stock, $0.0001 par value:                                                                                                                                              |  |              |        
|Authorized5,000 shares at December 31, 2002 and 2001; None issued
      and outstanding as of December 31, 2002 and 2001                                                        |  |             |        
|Common stock, $0.0001 par value:                                                                                                                                                 |  |              |        
|Authorized300,000 shares at December 31, 2002 and
      2001:Issued and outstanding121,329 and 119,299
      shares at December 31, 2002 and 2001, respectively                |  | 12           |        
|Treasury stock                                                                                                                                                                   |  |             |        
|Additional paid-in capital                                                                                                                                                       |  | 282,699      |        
|Note receivable from stockholder                                                                                                                                                 |  | (480         | )      
|Deferred stock compensation                                                                                                                                                      |  | (231         | )      
|Accumulated other comprehensive income                                                                                                                                           |  | 55           |        
|Retained earnings                                                                                                                                                                |  | 116,044      |        
|                                                                                                                                                                                 |  |              |        
|Total stockholders equity                                                                                                                                                       |  | 398,099      |        
|                                                                                                                                                                                 |  |              |        
|Total liabilities and stockholders equity                                                                                                                                       |  | $            | 451,535
|                                                                                                                                                                                 |  |              |        

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

6

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FOUNDRY NETWORKS, INC.

CONSOLIDATED STATEMENTS OF INCOME(in
thousands, except per share data)



|                                                                             |  | Year Ended December 31, |        
|---------------------------------------------------------------------------- |  | ----------------------- | -------
|                                                                             |  |                         |        
|                                                                             |  | 2002                    |        
|                                                                             |  |                         |        
|Net revenues:                                                                |  |                         |        
|Product                                                                      |  | $                       | 264,998
|Service                                                                      |  | 35,744                  |        
|                                                                             |  |                         |        
|Total net revenues                                                           |  | 300,742                 |        
|Cost of revenues:                                                            |  |                         |        
|Product                                                                      |  | 134,648                 |        
|Service                                                                      |  | 5,544                   |        
|                                                                             |  |                         |        
|Total cost of revenues                                                       |  | 140,192                 |        
|                                                                             |  |                         |        
|Gross margin                                                                 |  | 160,550                 |        
|Operating expenses:                                                          |  |                         |        
|Research and development                                                     |  | 34,933                  |        
|Sales and marketing                                                          |  | 82,924                  |        
|General and administrative                                                   |  | 14,451                  |        
|Amortization of deferred stock compensation                                  |  | 1,071                   |        
|                                                                             |  |                         |        
|Total operating expenses                                                     |  | 133,379                 |        
|                                                                             |  |                         |        
|Income (loss) from operations                                                |  | 27,171                  |        
|Interest income                                                              |  | 5,025                   |        
|Write-down of minority investment                                            |  |                        |        
|                                                                             |  |                         |        
|Income before provision for income taxes                                     |  | 32,196                  |        
|Provision for income taxes                                                   |  | 9,659                   |        
|                                                                             |  |                         |        
|Net income                                                                   |  | $                       | 22,537 
|                                                                             |  |                         |        
|Basic net income per share                                                   |  | $                       | 0.19   
|                                                                             |  |                         |        
|Weighted average shares used in computing basic net income per
      share   |  | 119,482                 |        
|                                                                             |  |                         |        
|Diluted net income per share                                                 |  | $                       | 0.18   
|                                                                             |  |                         |        
|Weighted average shares used in computing diluted net income per
      share |  |                         | 123,780
|                                                                             |  |                         |        

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

7

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FOUNDRY NETWORKS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(in thousands)



|                                                      |  |              |   |                |  |        |   |             |   |                          |   | NotesReceivableFromStockholders |                            |                  |   | AccumulatedOtherComprehensiveIncome |   |                          |  |               |   |                   |  
|----------------------------------------------------- |  | ------------ | - | -------------- |  | ------ | - | ----------- | - | ------------------------ | - | ------------------------------- | -------------------------- | ---------------- | - | ----------------------------------- | - | ------------------------ |  | ------------- | - | ----------------- | -
|                                                      |  |              |   |                |  |        |   |             |   | AdditionalPaid-inCapital |   |                                 | Deferred StockCompensation |                  |   |                                     |   | TotalStockholdersEquity |  |               |  
|                                                      |  | Common Stock |   | Treasury Stock |  |        |   |             |   | RetainedEarnings         |   |                                 | ComprehensiveIncome        |                 
|                                                      |  |              |   |                |  |        |   |             |   |                          |   |                                
|                                                      |  | Shares       |   | Amount         |  | Shares |   | Amount      |   |                          |   |                                 |                            |                  |   |                                    
|                                                      |  |              |   |                |  |        |   |             |   |                          |   |                                 |                            |                  |   |                                     |   |                          |  |               |   |                   |  
|BALANCES AT DECEMBER 31, 1999                         |  | 114,190      |   | $      11      |  | 1,200  |   | $        (4 | ) | $ 191,623                |   | $         (755                  | )                          | $       (11,771  | ) |                                    |   | $    2,500               |  | $     181,604 |   |                   |  
|Issuance of common stock under stock plans            |  | 4,152        |   | 1              |  |       |   |            |   | 10,552                   |   |                                |                            |                 |   |                                    |   |                         |  | 10,553        |   |                   |  
|Exercise of stock options for notes receivable        |  | 60           |   |               |  |       |   |            |   | 3,270                    |   | (3,270                          | )                          |                 |   |                                    |   |                         |  |              |   |                   |  
|Repayment of notes receivable                         |  |             |   |               |  |       |   |            |   |                         |   | 755                             |                            |                 |   |                                    |   |                         |  | 755           |   |                   |  
|Repurchase of common stock from terminated employees  |  | (326         | ) |               |  |       |   |            |   | (121                     | ) |                                |                            |                 |   |                                    |   |                         |  | (121          | ) |                   |  
|Deferred stock compensation                           |  |             |   |               |  |       |   |            |   | 300                      |   |                                |                            | (300             | ) |                                    |   |                         |  |              |   |                   |  
|Amortization of deferred stock compensation           |  |             |   |               |  |       |   |            |   |                         |   |                                |                            | 6,185            |   |                                    |   |                         |  | 6,185         |   |                   |  
|Reduction in deferred stock compensation              |  |             |   |               |  |       |   |            |   | (306                     | ) |                                |                            | 306              |   |                                    |   |                         |  |              |   |                   |  
|Tax benefit from stock option exercises               |  |             |   |               |  |       |   |            |   | 57,858                   |   |                                |                            |                 |   |                                    |   |                         |  | 57,858        |   |                   |  
|Foreign currency translation adjustments              |  |             |   |               |  |       |   |            |   |                         |   |                                |                            |                 |   | 61                                  |   |                         |  | 61            |   | 61                |  
|Net income                                            |  |             |   |               |  |       |   |            |   |                         |   |                                |                            |                 |   |                                    |   | 88,121                   |  | 88,121        |   | 88,121            |  
|                                                      |  |              |   |                |  |        |   |             |   |                          |   |                                 |                            |                  |   |                                     |   |                          |  |               |   |                   |  
|BALANCES AT DECEMBER 31, 2000                         |  | 118,076      |   | 12             |  | 1,200  |   | (4          | ) | 263,176                  |   | (3,270                          | )                          | (5,580           | ) | 61                                  |   | 90,621                   |  | 345,016       |   | 88,182            |  
|Issuance of common stock under stock plans            |  | 2,975        |   |               |  |       |   |            |   | 12,413                   |   |                                |                            |                 |   |                                    |   |                         |  | 12,413        |   |                   |  
|Non-cash compensation expense for terminated Employee |  |             |   |               |  |       |   |            |   | 265                      |   |                                |                            |                 |   |                                    |   |                         |  | 265           |   |                   |  
|Repurchase of common stock from terminated employees  |  | (230         | ) |               |  |       |   |            |   | (45                      | ) |                                |                            |                 |   |                                    |   |                         |  | (45           | ) |                   |  
|Repurchase of common stock in open market             |  | (1,522       | ) |               |  | 1,522  |   | (14,996     | ) |                         |   |                                |                            |                 |   |                                    |   |                         |  | (14,996       | ) |                   |  
|Issuance of stock repurchased from founder            |  |             |   |               |  | (1,200 | ) | 4           |   |                         |   |                                |                            |                 |   |                                    |   |                         |  | 4             |   |                   |  
|Amortization of deferred stock compensation           |  |             |   |               |  |       |   |            |   |                         |   |                                |                            | 2,708            |   |                                    |   |                         |  | 2,708         |   |                   |  
|Reduction in deferred stock compensation              |  |             |   |               |  |       |   |            |   | (1,570                   | ) |                                |                            | 1,570            |   |                                    |   |                         |  |              |   |                   |  
|Write-down of note receivable from stockholder        |  |             |   |               |  |       |   |            |   |                         |   | 2,790                           |                            |                 |   |                                    |   |                         |  | 2,790         |   |                   |  
|Tax benefit from stock option exercises               |  |             |   |               |  |       |   |            |   | 10,501                   |   |                                |                            |                 |   |                                    |   |                         |  | 10,501        |   |                   |  
|Foreign currency translation adjustments              |  |             |   |               |  |       |   |            |   |                         |   |                                |                            |                 |   | 290                                 |   |                         |  | 290           |   | 290               |  
|Net income                                            |  |             |   |               |  |       |   |            |   |                         |   |                                |                            |                 |   |                                    |   | 2,886                    |  | 2,886         |   | 2,886             |  
|                                                      |  |              |   |                |  |        |   |             |   |                          |   |                                 |                            |                  |   |                                     |   |                          |  |               |   |                   |  
|BALANCES AT DECEMBER 31, 2001                         |  | 119,299      |   | 12             |  | 1,522  |   | (14,996     | ) | 284,740                  |   | (480                            | )                          | (1,302           | ) | 351                                 |   | 93,507                   |  | 361,832       |   | 3,176             |  
|Issuance of common stock under stock plans            |  | 2,067        |   |               |  |       |   |            |   | 8,253                    |   |                                |                            |                 |   |                                    |   |                         |  | 8,253         |   |                   |  
|Repurchase of common stock from terminated employees  |  | (37          | ) |               |  |       |   |            |   | (106                     | ) |                                |                            |                 |   |                                    |   |                         |  | (106          | ) |                   |  
|Issuance of stock repurchased from open market        |  |             |   |               |  | (1,522 | ) | 14,996      |   | (14,996                  | ) |                                |                            |                 |   |                                    |   |                         |  |              |   |                   |  
|Amortization of deferred stock compensation           |  |             |   |               |  |       |   |            |   |                         |   |                                |                            | 1,071            |   |                                    |   |                         |  | 1,071         |   |                   |  
|Tax benefit from stock option exercises               |  |             |   |               |  |       |   |            |   | 4,808                    |   |                                |                            |                 |   |                                    |   |                         |  | 4,808         |   |                   |  
|Foreign currency translation adjustments              |  |             |   |               |  |       |   |            |   |                         |   |                                |                            |                 |   | (296                                | ) |                         |  | (296          | ) | (296              | )
|Net income                                            |  |             |   |               |  |       |   |            |   |                         |   |                                |                            |                 |   |                                    |   | 22,537                   |  | 22,537        |   | 22,537            |  
|                                                      |  |              |   |                |  |        |   |             |   |                          |   |                                 |                            |                  |   |                                     |   |                          |  |               |   |                   |  
|BALANCES AT DECEMBER 31, 2002                         |  | 121,329      |   | $      12      |  |       |   | $          |   | $ 282,699                |   | $         (480                  | )                          | $           (231 | ) | $               55                  |   | $116,044                 |  | $     398,099 |   | $          22,241 |  
|                                                      |  |              |   |                |  |        |   |             |   |                          |   |                                 |                            |                  |   |                                     |   |                          |  |               |   |                   |  

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

8

---

FOUNDRY NETWORKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS(in
thousands)



|                                                                                        |  | Year Ended December 31, |         
|--------------------------------------------------------------------------------------- |  | ----------------------- | --------
|                                                                                        |  |                         |         
|                                                                                        |  | 2002                    |         
|                                                                                        |  |                         |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                   |  |                         |         
|Net income                                                                              |  | $                       | 22,537  
|Adjustments to reconcile net income to net cash provided by
      operating activities: |  |                         |         
|Depreciation                                                                            |  | 4,936                   |         
|Amortization of deferred stock compensation                                             |  | 1,071                   |         
|Provision for allowance for doubtful accounts                                           |  | 344                     |         
|Provision for allowance for sales returns                                               |  | 1,527                   |         
|Inventory provision                                                                     |  | 16,445                  |         
|Deferred tax assets                                                                     |  | 1,096                   |         
|Write-down of minority investment                                                       |  |                        |         
|Write-down of note receivable from stockholder                                          |  |                        |         
|Non-cash compensation expense                                                           |  |                        |         
|Tax benefit from stock option exercises                                                 |  | 4,808                   |         
|Change in operating assets and liabilities:                                             |  |                         |         
|Accounts receivable                                                                     |  | (1,937                  | )       
|Inventories                                                                             |  | (6,647                  | )       
|Prepaid expenses and other assets                                                       |  | 1,558                   |         
|Accounts payable                                                                        |  | (3,616                  | )       
|Accrued payroll and related expenses                                                    |  | 816                     |         
|Warranty accrual                                                                        |  | (194                    | )       
|Other accrued expenses                                                                  |  | (1,004                  | )       
|Income taxes payable                                                                    |  | 2,675                   |         
|Deferred support revenue                                                                |  | 4,453                   |         
|                                                                                        |  |                         |         
|Net cash provided by operating activities                                               |  | 48,868                  |         
|                                                                                        |  |                         |         
|                                                                                        |  |                         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                   |  |                         |         
|Purchase of minority investment                                                         |  |                        |         
|Purchases of short-term investments                                                     |  |                         | (295,267
|Maturities of short-term investments                                                    |  | 333,057                 |         
|Purchases of property and equipment                                                     |  | (5,000                  | )       
|                                                                                        |  |                         |         
|Net cash provided (used) by investing activities                                        |  | 32,790                  |         
|                                                                                        |  |                         |         
|                                                                                        |  |                         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                   |  |                         |         
|Proceeds from issuance of common stock                                                  |  | 8,253                   |         
|Repurchases of common stock                                                             |  | (106                    | )       
|Repayment of notes receivable                                                           |  |                        |         
|                                                                                        |  |                         |         
|Net cash provided (used) by financing activities                                        |  | 8,147                   |         
|                                                                                        |  |                         |         
|                                                                                        |  |                         |         
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        |  | 89,805                  |         
|Effect of exchange rate changes on cash                                                 |  | (296                    | )       
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                            |  | 98,210                  |         
|                                                                                        |  |                         |         
|CASH AND CASH EQUIVALENTS, END OF YEAR                                                  |  | $                       | 187,719 
|                                                                                        |  |                         |         
|                                                                                        |  |                         |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                     |  |                         |         
|Issuance of common stock for notes receivable                                           |  | $                       |        
|Reduction in deferred stock compensation due to employee
      terminations             |  |                        |         
|Cash paid for income taxes, net of refunds                                              |  |                         | 976     

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

9

---

FOUNDRY NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.DESCRIPTION OF BUSINESS:

Founded in 1996, Foundry designs, develops, manufactures and markets a
comprehensive, end-to-end suite of high performance Ethernet Layer 2 and Layer 3
switches, Metro routers and Internet traffic management products for
enterprises, educational institutions, government agencies, web-hosting
companies, application service providers (ASPs), electronic banking and finance
service providers, and Internet service providers (ISPs). Our product suite
includes the NetIron family of Metro routers, FastIron family of Ethernet edge
switches, EdgeIron Layer 2 Ethernet switches, BigIron family of Gigabit Ethernet
core switches and ServerIron family of Ethernet Layer 4-7 Internet traffic
management switches.

2.SIGNIFICANT ACCOUNTING POLICIES:

Principles of
Consolidation and Foreign Currency Translation

The Companys consolidated financial statements reflect the operations of
the Company and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated. Assets and liabilities of
foreign operations are translated to U.S. dollars at the exchange rate in effect
at the applicable balance sheet date, and revenues and expenses are translated
using average exchange rates prevailing during that period. Translation
adjustments have not been material to date and are included as a component of
stockholders equity.

Use of Estimates
in Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the period
reported. Actual results could differ from those estimates. Estimates are used
in accounting for, but not limited to, the accounting for inventory provisions,
product warranty, allowances for doubtful accounts, sales returns, income taxes
and depreciation. Estimates and assumptions are reviewed periodically and the
effects of revisions are reflected in the consolidated financial statements in
the period they are determined.

Cash Equivalents
and Short-Term Investments

Foundry considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. Cash and cash equivalents
consist of commercial paper, government debt securities and cash deposited in
checking and money market accounts.

Foundry accounts for its investments under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Investments in highly liquid
financial instruments with original maturities greater than three months but
less than one year are classified as short-term investments. All of Foundrys
short-term investments are stated at amortized cost and classified as
held-to-maturity.

10

---

Cash equivalents and short-term investments all mature within one year
and consist of the following (in thousands):



|                                      |  | December 31, 2002 |        
|------------------------------------- |  | ----------------- | -------
|                                      |  |                   |        
|                                      |  | AmortizedCost     |        
|                                      |  |                   |        
|Money market funds                    |  | $                 | 393    
|Corporate debt securities             |  | 5,000             |        
|Commercial paper                      |  | 91,869            |        
|Government securities                 |  | 149,415           |        
|                                      |  |                   |        
|                                      |  | $                 | 246,677
|                                      |  |                   |        
|                                      |  |                   |        
|Included in cash and cash equivalents |  | $                 | 107,943
|Included in short-term investments    |  | 138,734           |        
|                                      |  |                   |        
|                                      |  | $                 | 246,677
|                                      |  |                   |        



|                                      |  | December 31, 2001 |        
|------------------------------------- |  | ----------------- | -------
|                                      |  |                   |        
|                                      |  | AmortizedCost     |        
|                                      |  |                   |        
|Money market funds                    |  | $                 | 33,135 
|Commercial paper                      |  | 58,807            |        
|Government securities                 |  | 149,583           |        
|                                      |  |                   |        
|                                      |  | $                 | 241,525
|                                      |  |                   |        
|                                      |  |                   |        
|Included in cash and cash equivalents |  | $                 | 65,001 
|Included in short-term investments    |  | 176,524           |        
|                                      |  |                   |        
|                                      |  | $                 | 241,525
|                                      |  |                   |        

Inventories

Inventories are stated on a first-in, first-out basis at the lower of
cost or market, and include purchased parts, labor and manufacturing overhead.
Inventories consist of the following (in thousands):



|                |  | December 31, |       
|--------------- |  | ------------ | ------
|                |  |              |       
|                |  | 2002         |       
|                |  |              |       
|Purchased parts |  | $            | 12,470
|Work-in-process |  | 17,191       |       
|Finished goods  |  | 3,818        |       
|                |  |              |       
|                |  | $            | 33,479
|                |  |              |       

The networking industry is characterized by rapid technological change,
  frequent new product introductions, changes in customer requirements, and evolving
  industry standards. Our inventory purchases and commitments are made in order
  to build inventory to meet future shipment schedules based on forecasted demand
  for our products. We perform a detailed assessment of inventory each period,
  which includes a review of, among other factors, demand requirements, product
  life cycle and development plans, component cost trends, product pricing and
  quality issues. Based on this analysis, we record adjustments to inventory for
  excess, obsolescence or impairment, when appropriate, to reflect inventory at
  net realizable value. The provision reduces inventory for excess, obsolescence
  or impairment, when appropriate, to reflect inventory at net realizable value.
  Provisions for inventory in the amounts of $16.4 million, $24.9 million, and
  $13.6 million were recorded for the years ended December 31, 2002, 2001, and
  2000, respectively. Our inventory provisions increased in 2001 as a

11

---

result of the economic
  recession, significantly reduced telecommunications and infrastructure capital
  spending and a major product transition in the fourth quarter of 2001. We specifically
  reserved $9.3 million for excess and obsolete inventories in the fourth quarter
  of 2001 related to the transition from our IronCore ASICs-based products to
  the new and more powerful products incorporating our next generation JetCore
  ASIC chipset. During 2002, we physically disposed of $9.2 million of obsolete
  inventory that was previously reserved in the fourth quarter of 2001 related
  to the product transition. Total inventory write-offs were approximately $18.9 million
  in 2002, $8.9 million in 2001, and $4.4 million in 2000. Approximately $6.1
  million and $5.2 million of the Companys purchased parts and work-in-process
  inventories were consigned to contract manufacturers sites as of December
  31, 2002 and 2001, respectively.

Concentrations

Financial instruments that potentially subject Foundry to a concentration
of credit risk principally consist of cash equivalents, short-term investments
and accounts receivable. Foundry seeks to reduce credit risk on financial
instruments by investing almost exclusively in high credit quality issuers and,
by policy, limits the amount of credit exposure to any one issuer or fund.
Exposure to customer credit risk is controlled through credit approvals, credit
limits, continuous monitoring procedures and establishment of an allowance for
doubtful accounts when deemed necessary. We typically sell to customers for
which there is a history of successful collection. New customers are subjected
to a credit review process, which evaluates the customers financial positions
and ability to pay. New customers are typically assigned a credit limit based on
a formulated review of their financial position. Such credit limits are only
increased after a successful collection history with the customer has been
established. Specific allowances for bad debts are recorded when Foundry becomes
aware of a specific customers inability to meet its financial obligation to us
such as in the case of bankruptcy filings or deterioration of financial
position. Estimates are used in determining our allowances for all other
customers based on factors such as current trends, the length of time the
receivables are past due and historical collection experience. Foundry mitigates
some collection risk by requiring some international customers to secure letters
of credit or bank guarantees prior to placing an order with the Company.

Foundry purchases several key components used in the manufacture of
products from several sources and depends on supply from these sources to meet
its needs. In addition, Foundry depends on several contract manufacturers for
major portions of the manufacturing requirements. The inability of the suppliers
or manufacturers to fulfill the production requirements of Foundry could
negatively impact future results.

Property and
Equipment

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over estimated useful lives of the assets. Estimated
useful lives of 2 years are used on computer equipment and related software and
production and engineering equipment. Estimated useful lives of 3 years are used
on furniture and fixtures. Leasehold improvements are amortized over the lease
term.

Impairment of long-lived assets is recognized when events or
circumstances indicate that the carrying amount of the asset, or related groups
of assets, may not be recoverable. Under SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS 144), which supersedes SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of  (SFAS 121), a long-lived asset classified as held
for sale is initially measured at the lower of its carrying amount or fair
value less costs to sell. In the period that the held for sale criteria is
met, the Company recognizes an impairment charge for any initial adjustment of
the long-lived asset amount. Gains or losses not previously recognized resulting
from the sale of a long-lived asset are recognized on the date of sale. To date,
charges recorded by the Company for the impairment of long-lived assets have not
been significant. The adoption of SFAS 144 did not have a material impact on
Foundrys consolidated financial position, results of operations or cash flows
for the year ended December 31, 2002.

Minority
Investment in 2001

In February 2001, Foundry made a $2.5 million minority investment in a
development stage private company, who was also a customer. Foundry had no sales
to this customer during 2002. Sales to this customer during 2001 and 2000 were
insignificant. Foundrys interest in the company is significantly less than 20%
and, as such, the Company did not have the ability to exercise significant
influence. In December 2001, the Company

12

---

determined that the
        investments decline in fair value was other than temporary based on a
number of factors including the value of the most recent round of financing,
general market and industry conditions and the financial condition of and
business outlook for the company. Accordingly, Foundry wrote-down the entire
minority investment and recorded the expense in the accompanying consolidated
statement of income for the year ended December 31, 2001.

Revenue
Recognition

General.Foundrys revenue
recognition policy follows SEC Staff Accounting Bulletin (SAB) No. 101, Revenue
Recognition in Financial Statements. Specifically, Foundry recognizes revenue
when persuasive evidence of an arrangement exists, delivery has occurred, the
sales price is fixed or determinable and collectibility is reasonably
assured.

Product Revenues.Revenue is
generally recorded at the time of shipment when title and risk of loss passes to
the customer, unless Foundry has future obligations for installation or has to
obtain customer acceptance, in which case revenue is not recorded until such
obligations have been satisfied or customer acceptance has been received. For
example, revenue is not recognized when undelivered products or services are
essential to the functionality of delivered products. At the time revenue is
recognized, Foundry establishes an accrual for estimated warranty expenses
associated with its sales, recorded as a component of cost of revenues.
Foundrys standard warranty period extends 12 months from the date of sale and
the warranty accrual represents the best estimate of the amount necessary to
settle future and existing claims on products sold as of the balance sheet date.
Foundry also provides a reserve for estimated customer returns. This reserve is
based on historical returns, analysis of credit memo data and return policies.
Sales to Foundrys resellers do not provide for rights of return and the
contracts with Foundrys original equipment manufacturers do not provide for
rights of return except in the event Foundrys products do not meet
specifications or there has been an epidemic failure, as defined in the
agreements.

Service Revenues.Service revenues
  consisted primarily of revenue from customer support contracts and, to a lesser
  extent, professional and educational services. Our suite of customer support
  programs provides customers with access to technical assistance, software updates
  and upgrades, hardware repair and replacement parts. Support services are offered
  under renewable, annual fee-based contracts or as part of multiple element arrangements.
  When support services are sold under multiple element arrangements, the Company
  allocates revenue to each element based upon its relative fair value and recognizes
  the revenue for each element when the revenue recognition criteria have been
  met for each element. Fair value is generally determined based on the price
  charged when the element is sold separately. Revenue from support contracts
  is deferred and recognized ratably over the contractual period, generally one
  to five years.

Service revenues were $36.2 million, $29.8 million and $15.6 million for
2002, 2001 and 2000 or 12%, 10% and 4% of net revenue, respectively. The
increases were due to a larger installed base of our networking equipment as
customers purchased new support contracts associated with their equipment
purchases and renewed their maintenance contracts on existing equipment. A total
of $20.2 million of support revenue was deferred on the accompanying balance
sheet as of December 31, 2002. Revenue from training and installation services
accounted for less than 1% of total revenue for each of the years ended December
31, 2002, 2001 and 2000.

Segment
Reporting

SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information was adopted by Foundry in 1997 and establishes standards for
disclosures about operating segments, products and services, geographic areas
and major customers. Foundry is organized and operates as one operating segment,
the design, development, manufacturing and marketing of high performance Gigabit
Ethernet switches, switching routers, server load balancing and transparent
caching switches. Management uses one measurement for evaluating profitability
and does not disaggregate its business for internal reporting.

13

---

For the year ended December 31, 2002, one customer accounted for greater
than 10% of our net revenue. Our reseller, Mitsui in Japan, accounted for 11%
our net revenue in 2002. For the years ended December 31, 2001 and 2000, no
customer individually accounted for greater than 10% of our net revenue.

Foundry sells to various countries in North and South America, Europe,
Asia, and Australia. Foundrys foreign offices conduct sales, marketing and
support activities. Foundrys export sales represented 38%, 35% and 30% of net
revenue in 2002, 2001 and 2000, respectively. Outside of the United States, one
country, Japan, accounted for 11% of revenue in 2002. No individual country
outside of the United States accounted for greater than 10% of revenue in 2001
or 2000.

Advertising
Costs

Foundry expenses all advertising costs as incurred. Advertising expenses
for the years ended December 31, 2002, 2001 and 2000 were $3.8 million, $8.3
million and $7.7 million, respectively.

Software
Development Costs

Foundry accounts for internally generated software development costs in
accordance with SFAS No. 86, Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed. Capitalization of eligible product
development costs begins upon the establishment of technological feasibility,
which Foundry has defined as completion of a working model. Internally generated
costs which were eligible for capitalization, after consideration of factors
such as realizable value, were not material for the years ended December 31,
2002, 2001 and 2000 and, accordingly, all software development costs have been
charged to research and development expense in the accompanying statements of
income.

Computation of
Per Share Amounts

Basic and diluted net income per share (EPS) are presented in conformity
with SFAS No. 128, Earnings Per Share (SFAS 128) for all periods presented. In
accordance with SFAS 128, basic EPS has been calculated using the
weighted-average number of shares of common stock outstanding during the period,
less shares subject to repurchase.Diluted EPS has been calculated assuming the
conversion of all potentially dilutive common stock equivalents. Certain common
stock equivalents were excluded from the calculation of diluted EPS because the
exercise price of these options was greater than the average market price of the
common shares and therefore, the effect would have been anti-dilutive.
Anti-dilutive shares for the years ended December 31, 2002, 2001 and 2000 were
15.7 million, 10.4 million and 942,000 shares, respectively.



|                                                      |  | Year Ended December 31,               |        
|----------------------------------------------------- |  | ------------------------------------- | -------
|                                                      |  |                                       |        
|                                                      |  | 2002                                  |        
|                                                      |  |                                       |        
|                                                      |  | (In thousands, except per share data) |        
|Net income                                            |  | $                                     | 22,537 
|Basic:                                                |  |                                       |        
|Weighted average shares outstanding                   |  | 119,861                               |        
|Less: Weighted average shares subject to repurchase   |  | (379                                  | )      
|                                                      |  |                                       |        
|Weighted average shares used in computing basic EPS   |  |                                       | 119,482
|                                                      |  |                                       |        
|Basic EPS                                             |  | $                                     | 0.19   
|                                                      |  |                                       |        
|Diluted:                                              |  |                                       |        
|Weighted average shares outstanding                   |  | 119,861                               |        
|Add: Weighted average dilutive potential shares       |  | 3,919                                 |        
|                                                      |  |                                       |        
|Weighted average shares used in computing diluted EPS |  | 123,780                               |        
|                                                      |  |                                       |        
|Diluted EPS                                           |  | $                                     | 0.18   
|                                                      |  |                                       |        

Stock-Based
Compensation

In October 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123). This
accounting standard permits the use of either a fair value

14

---

based method or the
intrinsic value method defined in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB Opinion 25) to account for
stock-based compensation arrangements. Companies that elect to employ the
intrinsic value method provided in APB Opinion 25 are required to disclose the
pro forma net income (loss) that would have resulted from the use of the fair
value based method provided under SFAS 123. As permitted by SFAS 123, Foundry
has elected to determine the value of stock-based compensation arrangements
under the intrinsic value based method of APB Opinion 25. Accordingly, Foundry
only recognizes compensation expense when options are granted with an exercise
price below fair market value at the date of grant. Any resulting compensation
expense is recognized ratably over the vesting period. The following table sets
forth pro forma information as if compensation expense had been determined using
the fair value method under SFAS No. 123. The fair value of these options was
estimated using a Black-Scholes option-pricing model.



|                                                                                                                                  |  | Year Ended December 31,               |        
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | -------
|                                                                                                                                  |  |                                       |        
|                                                                                                                                  |  | 2002                                  |        
|                                                                                                                                  |  |                                       |        
|                                                                                                                                  |  | (in thousands, except per share data) |        
|Net income as reported                                                                                                            |  | $                                     | 22,537 
|Add: Total stock-based compensation expense included in reported
      net income, net of tax effect                              |  | 750                                   |        
|Deduct: Total stock-based compensation expense determined under
      fair value method for all awards, net of related tax effect |  |                                       | (78,677
|Pro forma net income (loss)                                                                                                       |  | (55,391                               | )      
|Basic net income per share as reported                                                                                            |  | 0.19                                  |        
|Pro forma basic net income (loss) per share                                                                                       |  | (0.46                                 | )      
|Diluted net income per share as reported                                                                                          |  | 0.18                                  |        
|Pro forma diluted net income (loss) per share                                                                                     |  | (0.45                                 | )      

The weighted average fair value of stock options granted under all stock
option plans during 2002, 2001 and 2000 was $3.41, $8.61 and $45.41 per share,
respectively. Pursuant to the provisions of SFAS No. 123, the compensation cost
associated with options granted in 2002, 2001 and 2000 was estimated on the
grant date using the Black-Scholes model. The Black-Scholes option pricing model
requires the input of highly subjective assumptions including the expected stock
price volatility. Because Foundrys employee stock options have characteristics
significantly different from those of traded shares, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
managements opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of the options. The following weighted-average
assumptions were used to estimate fair value:



|                                |  | Stock Option Plan |   | Employee Stock Purchase Plan |  
|------------------------------- |  | ----------------- | - | ---------------------------- | -
|                                |  |                   |   |                              |  
|                                |  | 2002              |   | 2001                         |  
|                                |  |                   |   |                              |  
|Average risk free interest rate |  | 3.15              | % | 3.84                         | %
|Average expected life of option |  | 3.6 years         |   | 4 years                      |  
|Dividend yield                  |  | 0                 | % | 0                            | %
|Volatility of common stock      |  | 75.0              | % | 111.0                        | %

The weighted-average fair value of shares issued under the 1999 Employee
Stock Purchase Plan for 2002, 2001 and 2000 were $3.81, $10.63 and $14.92 per
share, respectively.

Recent
Accounting Pronouncements

Accounting for
Stock-Based Compensation

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation -- Transition and Disclosure (SFAS 148) that amends
SFAS 123 to provide alternative methods of transition for a voluntary change to
SFAS 123s fair value method of accounting for stock-based employee
compensation. SFAS 148 also amends the disclosure provisions of SFAS 123 and APB
Opinion No. 28, Interim Financial Reporting, to require disclosure in the
summary of significant accounting policies of the effects of an entitys
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
The Statements amendment of the
transition and annual disclosure requirements of SFAS 123 are effective for
fiscal years ending after December 15, 2002. The interim disclosure provisions
are effective for financial reports containing financial statements for interim
periods beginning after December 15, 2002. We do not expect the adoption of SFAS
148 to have a material effect on our financial position, results of operations,
or cash flows. Foundry has elected to continue to follow the intrinsic value
method of accounting as prescribed by APB Opinion No. 25 to account for employee
stock options.

Guarantors
Accounting and Disclosure Requirements for Guarantees

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 elaborates on the
existing disclosure requirements for most guarantees, including loan guarantees
such as standby letters of credit. It also clarifies that at the time a company
issues a guarantee, the company must recognize an initial liability for the fair
market value of the obligations it assumes under that guarantee and must
disclose that information in its interim and annual financial statements. The
initial recognition and measurement provisions of FIN 45 apply on a prospective
basis to guarantees issued or modified after December 31, 2002. The disclosure
requirements are effective for financial statements or interim or annual periods
ending after December 15, 2002 and are applicable to Foundrys product warranty
liability (see Note 3 below to the

15

---

Consolidated
Financial Statements). Foundrys adoption of FIN 45 is not expected to have a
material impact on its results of operations and financial position.

Revenue
Arrangements with Multiple Deliverables

In November 2002, the EITF reached a consensus on Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables. EITF Issue No. 00-21 provides
guidance on how to account for arrangements that involve the delivery or
performance of multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. Foundry is currently
evaluating the effect that the adoption of EITF Issue No. 00-21 will have on its
results of operations and financial condition.

Accounting for
Costs Associated with Exit or Disposal Activities

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 requires that a
liability for costs associated with an exit or disposal activity be recognized
and measured initially at fair value only when the liability is incurred. SFAS
146 is effective for exit or disposal activities that are initiated after
December 31, 2002. Foundrys adoption of SFAS 146 is not expected to have a
significant impact on its operating results and financial condition.

3.COMMITMENTS AND CONTINGENCIES:

Product
Warranty

We provide all customers with a standard 1 year hardware and 90-day
software warranty. Customers can upgrade the standard warranty and extend the
warranty for 1-5 years by purchasing any of Foundrys customer support programs.
At the time revenue is recognized, Foundry establishes an accrual for estimated
warranty expenses associated with its sales, recorded as a component of cost of
revenues. The warranty accrual represents the best estimate of the amount
necessary to settle future and existing claims on products sold as of the
balance sheet date. The Company periodically assesses the adequacy of its
recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Companys product liability during the period are as
follows:



|Balance, December 31, 2001 |  | $     | 2,499  |  
|-------------------------- |  | ----- | ------ | -
|Warranties issued          |  | 1,537 |       
|Settlements made           |  |       | (1,731 | )
|                           |  |       |        |  
|Balance, December 31 2002  |  | $     | 2,305  |  
|                           |  |       |        |  

Leases

Rent expense under operating leases was $5.3 million, $7.6 million and
$2.5 million for the years ended December 31, 2002, 2001 and 2000, respectively.
At December 31, 2002, future minimum lease payments under all noncancelable
operating leases are as follows (in thousands):



|                     |  | OperatingLeases |       
|-------------------- |  | --------------- | ------
|                     |  |                 |       
|2003                 |  | $               | 4,500 
|2004                 |  | 4,033           |       
|2005                 |  | 4,026           |       
|2006                 |  | 2,008           |       
|2007                 |  | 2,051           |       
|Thereafter           |  | 2,382           |       
|                     |  |                 |       
|Total lease payments |  | $               | 19,000
|                     |  |                 |       

16

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Purchase
Commitments with Contract Manufacturers

The Company uses contract manufacturers to assemble and test our
products. In order to reduce manufacturing lead times and ensure adequate
inventories. The Companys agreements with some of these contract manufacturers
allow them to procure long lead-time component inventory on the Companys behalf
based upon a rolling production forecast provided by Foundry with lead times of
up to 6 months. Foundry may be contractually obligated to purchase long
lead-time component inventory procured by certain contract manufacturers in
accordance with the forecast, unless Foundry gives notice of order cancellation
at least 90 days prior to the delivery date. As of December 31, 2002, the
Company was potentially committed to purchase approximately $26.1 million of
such inventory.

Litigation

In December 2000, several similar shareholder class action lawsuits were
  filed against Foundry and certain of its officers in the United States Court
  for the Northern District of California, following Foundrys announcement
  in December 2000 of its anticipated financial results for the fourth quarter
  ended December 31, 2000. The lawsuits were subsequently consolidated by the
  Court, under the caption In re Foundry Networks, Inc. Securities Litigation,Master File No. C-00-4823-MMC, lead plaintiffs were
  selected as required by law and such plaintiffs filed a consolidated amended
  complaint which alleged violations of federal securities laws and purported
  to seek damages on behalf of a class of shareholders who purchased Foundrys
  common stock during the period from September 7, 2000 to December 19, 2000.
  On October 26, 2001, the Court granted the Companys motion to dismiss
  the consolidated amended complaint without prejudice and with leave to amend.
  On December 13, 2001, attorneys for lead plaintiffs filed a second amended complaint.
  On June 6, 2002, the Court granted the Companys motion to dismiss the
  second amended complaint, but without prejudice and with leave to amend. On
  July 8, 2002 attorneys for lead plaintiffs filed a third amended complaint.
  On August 5, 2002, the Company filed a motion to dismiss that complaint. On February 14, 2003,
  the Court dismissed the third amended complaint, once again, without prejudice
  and with leave to amend. On March 17, 2003, attorneys for lead plaintiffs filed
  a fourth amended complaint (FAC) which the Company is in the process of reviewing.
  The Company anticipates filing a motion to dismiss the plaintiffs FAC by the April 7, 2003 deadline.
  The Company believes the lawsuit is without merit and intends to defend itself
  vigorously.

A class action lawsuit was filed on November 27, 2001 in the United States
  District Court for the Southern District of New York on behalf of purchasers
  of Foundry common stock alleging violations of federal securities laws. The
  case is now designated asIn re Foundry Networks, Inc.
  Initial Public Offering Securities Litigation,No. 01-CV-10640 (SAS) (S.D.N.Y.),related to In
  re Initial Public Offering Securities Litigation, No.
  21 MC 92 (SAS) (S.D.N.Y.). The case is brought purportedly on behalf of all
  persons who purchased the Companys common stock from September 27, 1999
  through December 6, 2000. The Company and its officers were served with the
  complaint, only after the maximum 120 days for service allowed under the Federal
  Rules of Civil Procedure had elapsed. On or about April 19, 2002, plaintiffs
  electronically served an amended complaint. The amended complaint names as defendants,
  the Company, three of its officers, and investment banking firms that served
  as underwriters for the Companys initial public offering in September
  1999. The amended complaint alleges violations of Sections 11 and 15 of the
  Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of
  1934, on the grounds that the prospectus incorporated in the registration statement
  for the offering failed to disclose, among other things, that (i) the underwriters
  had solicited and received excessive and undisclosed commissions from certain
  investors in exchange for which the underwriters allocated to those investors
  material portions of the shares of the Companys stock sold in the initial
  public offering, and (ii) the underwriters had entered into agreements with
  customers whereby the underwriters agreed to allocate shares of the Companys
  stock sold in the initial public offering to those customers in exchange for
  which the customers agreed to purchase additional shares of the Companys
  stock in the aftermarket at pre-determined prices. The amended complaint also
  alleges that false analyst reports were issued following the IPO. No specific
  damages are claimed. We are aware that similar allegations have been made in
  lawsuits relating to more than 300 other initial public offerings conducted
  in 1999 and 2000. Those cases have been consolidated for pretrial purposes before
  the Honorable Judge Shira A. Scheindlin. Motions to dismiss the case were filed on behalf
  of all the defendants in all of the cases. On February 19, 2003, Judge Scheindlin issued a ruling on the motions.
In ruling on motions to dismiss, the Court must treat the allegations in the
Complaint as if they were true solely for purposes of deciding the motions. The
court denied the motion to dismiss the claims against the Company alleged under
the Securities Act of 1933. The same ruling was made in all but 10 of the other
cases. The Court dismissed the claims alleged under the Securities Exchange Act
of 1934, Section 10(b), against the Company and one of the individual defendants
and dismissed all of the controlling person claims alleged under that Act
against all of the Foundry Networks individual defendants. The Court denied the
motion to dismiss the Section 10(b) claims against the remaining Foundry
Networks individual defendants on the basis that those defendants sold the Companys
stock during the class period alleged in the complaint and that those
allegations were sufficient purely for pleading purposes to allow those claims
to move forward. A similar ruling was made with respect to 62 of the individual
defendants in the other cases.

17

---

Management believes that the remaining allegations in the above
referenced class action lawsuits against the Company and its officers are
without merit and management intends to contest them vigorously. The litigation
process is inherently uncertain. If the outcome of the litigation is adverse to
the Company and if, in addition, the Company is required to pay significant
monetary damages in excess of available insurance, its business could be
significantly harmed.

From time to time the Company is subject to other legal proceedings and
claims in the ordinary course of business, including claims of alleged
infringement of trademarks, copyrights, patents and other intellectual property
rights. In addition, from time to time, third parties assert patent infringement
claims against the Company in the form of letters, lawsuits and other forms of
communication. In March 2001, Nortel filed a lawsuit against Foundry in the
United States District Court for the District of Massachusetts alleging that
certain of the Companys products infringe several of Nortels patents and
seeking injunctive relief as well as unspecified damages. Nortel has also
brought suit, on the same or similar patents, against a number of other
networking companies. Foundry has analyzed the validity of Nortels claims and
believes that Nortels suit is without merit. Foundry is committed to vigorously
defending itself against these claims. On October 9, 2002, the Company filed a
lawsuit against Nortel in the United States District Court, Northern District of
California alleging that certain of Nortels products infringe a Foundry patent
as well as allegations concerning breach of contract. The Company is seeking
injunctive relief as well as damages. Irrespective of the merits of the
Companys position, litigation is always an expensive and uncertain proposition.
In the event of a determination adverse to the Company, the Company could incur
substantial monetary liability, and be required to change its business
practices. Either of these could have a material adverse effect on the Companys
financial position, results of operations, or cash flows.

4.INCOME TAXES:

Foundry accounts for income taxes pursuant to SFAS No. 109, Accounting
for Income Taxes (SFAS 109). SFAS 109 provides for an asset and liability
approach to accounting for income taxes under which deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. As of December 31, 2002 and 2001,
components of the Companys net deferred income tax assets (all current) were as
follows (in thousands):



|                                             |  | December 31, |       
|-------------------------------------------- |  | ------------ | ------
|                                             |  |              |       
|                                             |  | 2002         |       
|                                             |  |              |       
|Deferred Tax Assets:                         |  |              |       
|Accrued vacation pay                         |  | $            | 1,425 
|Inventories valuation                        |  | 11,105       |       
|Warranty                                     |  | 924          |       
|Accounts receivable valuation                |  | 5,452        |       
|Research and development credits             |  | 3,677        |       
|Asset write-down                             |  | 2,120        |       
|Depreciation and other temporary differences |  | 3,857        |       
|                                             |  |              |       
|Total deferred tax assets                    |  | $            | 28,560
|                                             |  |              |       

Management believes that the Company will likely generate sufficient
taxable income in the future to realize the tax benefits
arising from its existing deferred tax assets. Therefore, no valuation allowance
was required as of December 31, 2002 and 2001. As of December 31, 2002, the Companys
state tax credit carryforwards for income tax purposes were approximately $3.7
million. $3.3 million can be carried over indefinitely and $0.4 million will
expire in years 2009 through 2010.

18

---

As of December 31, 2002 and 2001, Foundry had no significant deferred tax
liabilities.

The provision for income taxes consists of the following components for
the years ended December 31 (in thousands):



|                  |  | 2002  |       | 2001    |         | 2000   |       
|----------------- |  | ----- | ----- | ------- | ------- | ------ | ------
|                  |  |       |       |         |         |        |       
|Current           |  |       |       |         |         |        |       
|Federal           |  | $     | 7,801 |         | $       | 13,814 |       
|Foreign           |  | 189   |       | 218     |         | 108    |       
|State             |  | 560   |       | 1,274   |         | 10,814 |       
|                  |  |       |       |         |         |        |       
|Total             |  | 8,550 |       | 15,306  |         | 59,991 |       
|Deferred          |  |       |       |         |         |        |       
|Federal           |  | 1,201 |       |         | (11,938 | )      | (5,302
|Foreign and State |  | (92   | )     | (1,599  | )       | (679   | )     
|                  |  |       |       |         |         |        |       
|Total             |  | 1,109 |       | (13,537 | )       | (5,981 | )     
|                  |  |       |       |         |         |        |       
|Total provision   |  | $     | 9,659 |         | $       | 1,769  |       
|                  |  |       |       |         |         |        |       

Income before provision for income taxes consisted of the following (in
thousands):



|              |  | December 31, |       
|------------- |  | ------------ | ------
|              |  |              |       
|              |  | 2002         |       
|              |  |              |       
|United States |  | $            | 31,748
|International |  | 448          |       
|              |  |              |       
|Total         |  | $            | 32,196
|              |  |              |       

The actual provision for income taxes and the corresponding rate differs
from the statutory U.S. federal income tax rate as follows for the years ended
December 31 (in thousands):



|                                           |  | 2002   |        | 2001 |      | 2000   |       
|------------------------------------------ |  | ------ | ------ | ---- | ---- | ------ | ------
|                                           |  |        |        |      |      |        |       
|Provision at U.S. statutory rate of 35%    |  | $      | 11,269 |      | 35.0 | %      | $     
|State income taxes, net of federal benefit |  | 1,657  |        | 5.1  | %    | (211   | )     
|Research and development credits           |  | (1,895 | )      | (5.9 | )%   |        | (1,254
|Nondeductible deferred stock compensation  |  | 424    |        | 1.3  | %    | 1,176  |       
|Foreign Sales Corporation benefit          |  | (620   | )      | (1.9 | )%   | (241   | )     
|Tax exempt interest                        |  | (1,126 | )      | (3.5 | )%   | (1,235 | )     
|Other                                      |  | (50    | )      | (0.1 | )%   | 1,905  |       
|                                           |  |        |        |      |      |        |       
|Total                                      |  | $      | 9,659  |      | 30.0 | %      | $     
|                                           |  |        |        |      |      |        |       

The Companys income taxes payable for federal and state purposes have
been reduced, and the deferred tax assets increased, by the tax benefits
associated with taxable dispositions of employee stock options. When an employee
exercises a stock option issued under a nonqualified plan or has a disqualifying
disposition related to a qualified plan, the Company receives an income tax
benefit calculated as the difference between the fair market value of the stock
issued at the time of the exercise and the option price, tax effected. These
benefits were credited directly to stockholders equity and amounted to $4.8
million, $10.5 million and $57.9 million for the years ended December 31, 2002,
2001 and 2000, respectively.

5.STOCKHOLDERS EQUITY:

Preferred Stock

Foundry is authorized to issue up to 5,000,000 shares of preferred stock,
each with a par value of $0.0001 per share. The preferred stock may be issued
from time to time in one or more series. The board of directors is authorized to
determine the rights, preferences, privileges and restrictions on these shares.
As of December 31, 2002 and 2001, no shares of preferred stock were outstanding.

19

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Stock Option
Exchange Program

On August 21, 2002, Foundry filed a Tender Offer Statement on Schedule
  TO with the Securities and Exchange Commission related to a voluntary stock
  option exchange program for its employees. Foundrys executive officers
  and directors were not eligible to participate in this program. Under the exchange
  program, employees were given the opportunity to voluntarily cancel unexercised
  vested and unvested stock options previously granted to them in exchange for
  a stock option grant equal to 0.5 times the number of tendered options on or
  about March 21, 2003. However, participants who elected to exchange any options
  were also required to exchange any other options granted to him or her in the
  previous six months. On September 20, 2002, the Company accepted for exchange
  options to purchase 5,744,500 shares of Foundry common stock. The cancelled
  options were exchanged for 2,757,100 replacement stock options on March 24,
  2003 at an exercise price of $7.76 per share. See Note 7 below for information about this subsequent event.

Stock Repurchase
Program

In January 2001, the Board of Directors authorized a stock repurchase
program to acquire up to a total of 5.0 million shares of its outstanding common
stock in the open market from time to time until January 2002. In October 2001
Foundry repurchased and retired approximately 1,522,000 shares of its common
stock for an aggregate purchase price of approximately $15.0 million. Foundry
has reserved these shares for issuance to employees under the 2000 Non-Executive Stock Option Plan.

Note Receivable
from Stockholder

In May 2000, Foundry allowed an employee to exercise stock options in
exchange for a secured promissory note of $3.3 million. The recourse note bears
interest at a rate of 6.4% per annum and is due on the earlier of (i) May 25,
2003, (ii) the date of sale of the shares or (iii) termination of employment. In
December 2001, the Company wrote-down the note by $2.8 million to reflect the
adverse impact of the significant decline in the Companys stock price on the
employees ability to sell the vested stock options at a price at or above the
exercise price as well as general concerns over the collectibility of the note.
The Company determined the fair value of the note was $480,000 based on the fair
market value of the Companys stock in December 2001. Accordingly, the Company
recorded compensation expense of $2.8 million on the accompanying consolidated
statement of income for fiscal 2001. The note is classified as a reduction of
stockholders equity.

Common
Stock

Foundry had 121,328,862 and 119,298,814 shares of common stock issued and
outstanding at December 31, 2002 and 2001, respectively. Included in such
outstanding shares are 32,940,000 shares issued to Foundrys founders in 1996
(the Founders Shares). The Founders Shares vest out of the repurchase option 25%
upon issuance, with the balance vesting ratably each month for the 48 months
after issuance. As of December 31, 2002, all Founders Shares were fully vested.
In June 1999, the Company repurchased 1,200,000 unvested shares from a founder
at $0.003 per share. These treasury shares were used for stock option grants to
employees in 2002.

In January 1999, Foundry granted 1,059,000 nonstatutory stock options to
certain key employees outside of the 1996 Stock Plan at an exercise price of
$0.83 per share. The options vest over a four-year period and expire in January
2009. During fiscal 2002 and 2001, 150,000 and 172,585 shares were exercised,
respectively. As of December 31, 2002, 300,000 shares were outstanding.

20

---

The following shares of common stock have been reserved for future
issuance as of December 31, 2002:



|1996 Stock Plan                             |  | 28,803,042 | 
|------------------------------------------- |  | ---------- | 
|1999 Directors Stock Option Plan           |  | 3,350,000  | 
|1999 Employee Stock Purchase Plan           |  | 4,630,839  | 
|Nonstatutory stock options to key employees |  | 512,000    | 
|2000 Non-Executive Stock Option Plan        |  | 3,686,927  | 
|                                            |  |            | 
|                                            |  | 40,982,808 | 
|                                            |  |            | 

1996 Stock Plan

Under Foundrys 1996 Stock Plan (the Plan), the board of directors
authorized the issuance of 63,235,683 shares of common stock to employees and
consultants as of December 31, 2002, including those issued as of that date.
Nonstatutory options granted under the Plan must be issued at a price equal to
at least 85% of the fair market value of Foundrys common stock at the date of
grant. Incentive stock options granted under the Plan must be issued at a price
at least equal to the fair market value of Foundrys common stock at the date of
grant. Options under the Plan have a term of ten years and vest over a vesting
schedule determined by the board of directors, generally four years. The number
of shares reserved for issuance under the Plan will be increased on the first
day of each fiscal year from 2000 through 2009 by the lesser of (i) 5,000,000
shares; (ii) five percent (5%) of the shares outstanding on the last day of the
immediately preceding fiscal year; or (iii) such lesser amount of shares as is
determined by the Board of Directors.

1999 Directors
Stock Option Plan

The 1999 Directors Stock Option Plan (the Directors Plan) was adopted
by the board of directors in July 1999. As of December 31, 2002, a total of
3,350,000 shares of common stock have been reserved for issuance under the
Directors Plan.

Under the Directors Plan, each non-employee director who becomes a
non-employee director after the effective date of the plan will receive an
automatic initial grant of an option to purchase 225,000 shares of common stock
upon appointment or election and annual grants to purchase 60,000 shares of
common stock. Options granted under the plan will vest at the rate of 1/4th of the total number
of shares subject to the options twelve months after the date of grant and 1/48th of the total number
of shares subject to the options each month thereafter. The exercise price of
all stock options granted under the Directors Plan shall be equal to the fair
market value of a share of common stock on the date of grant of the option.
Options granted under this plan have a term of ten years. In June 2002, the
directors received their annual grants totaling 240,000 stock options at an
exercise price of $6.86 per share. As of December 31, 2002, 1,215,000 options
were outstanding at a weighted average exercise price of $47.37 per share.

21

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2000
Non-Executive Stock Option Plan

The 2000 Non-Executive Stock Option Plan (the Non-Executive Plan) was
adopted by the board of directors in October 2000. Under the Non-Executive Plan,
the Company may issue non-qualified options to purchase common stock to
employees and external consultants other than officers and directors. As of
December 31, 2002, a total of 3,686,927 shares of common stock have been
reserved for future issuance, of which 1,799,452 shares were outstanding at a
weighted average exercise price of $10.61 per share.

The following table summarizes stock option activity under all stock
option plans during the three years ended December 31, 2002:



|                           |  | OptionsOutstanding |   | WeightedAverageExercisePrice |      
|-------------------------- |  | ------------------ | - | ---------------------------- | -----
|                           |  |                    |   |                              |      
|Balance, December 31, 1999 |  | 15,476,708         |   |                              | $    
|                           |  |                    |   |                              |      
|Granted                    |  | 10,858,400         |   |                              | 72.45
|Exercised                  |  | 3,887,378          |   |                              | 2.63 
|Cancelled                  |  | (661,187           | ) |                              | 28.73
|                           |  |                    |   |                              |      
|Balance, December 31, 2000 |  | 21,786,543         |   |                              | 37.71
|                           |  |                    |   |                              |      
|Granted                    |  | 10,505,050         |   |                              | 11.43
|Exercised                  |  | (2,525,213         | ) |                              | 2.60 
|Cancelled                  |  | (4,305,757         | ) |                              | 37.09
|                           |  |                    |   |                              |      
|Balance, December 31, 2001 |  | 25,460,623         |   |                              | 30.44
|                           |  |                    |   |                              |      
|Granted                    |  | 12,496,950         |   |                              | 6.24 
|Exercised                  |  | (1,472,887         | ) |                              | 3.00 
|Cancelled                  |  | (9,273,434         | ) |                              | 57.14
|                           |  |                    |   |                              |      
|Balance, December 31, 2002 |  | 27,211,252         |   |                              | $    
|                           |  |                    |   |                              |      

As of December 31, 2002, Foundry had issued an aggregate of 68,005,522
shares of common stock to its employees, including 32,940,000 shares issued to
Foundrys four founders. Of the 68,005,522 shares of common stock issued to
employees under all of the Companys stock option plans, 57,737 shares are
subject to repurchase rights at the option of Foundry at $0.83-$59.69 per share
upon cessation of the employees employment. In 2002, 2001 and 2000, Foundry
repurchased 36,769, 230,132 and 326,188 shares, respectively, of unvested common
stock from terminated employees at $0.03-$4.50 per share. As of December 31,
2002, an aggregate of 7,005,716 shares were available for future option grants
to only employees under all plans.

The following table summarizes information about stock options
outstanding and exercisable at December 31, 2002:



|                               |  | Stock Options Outstanding |  | Stock Options Exercisable                              |     
|------------------------------ |  | ------------------------- |  | ------------------------------------------------------ | ----
|                               |  |                           |  |                                                        |     
|Range of
      Exercise Prices |  | SharesOutstanding         |  | Weighted-AverageRemainingContractualLife
      (years) |     
|                               |  |                           |  |                                                        |     
|$0.03-$6.05                    |  | 6,989,201                 |  |                                                        | 7.24
|$6.14-$8.75                    |  | 11,564,253                |  |                                                        | 9.06
|$9.76-$14.85                   |  | 6,040,624                 |  |                                                        | 7.97
|$17.55-$128.00                 |  | 2,617,174                 |  |                                                        | 7.76
|                               |  |                           |  |                                                        |     
|Total                          |  | 27,211,252                |  |                                                        | 8.23
|                               |  |                           |  |                                                        |     

22

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As of December 31, 2001, there were 11,666,251 options exercisable at a
weighted average exercise price of $28.09 and as of December 31, 2000, there
were 11,214,058 options exercisable at a weighted average exercise price of
$4.75.

1999 Employee
Stock Purchase Plan

The 1999 Employee Stock Purchase Plan (the Purchase Plan) was adopted by
the board of directors in July 1999. As of December 31, 2002, a total of
4,630,839 shares of common stock were reserved for issuance under the Purchase
Plan. The number of shares reserved for issuance under the Purchase Plan will be
increased on the first day of each fiscal year from 2000 through 2009 by the
lesser of (i) 1,500,000 shares, (ii) 2% of Foundrys outstanding common stock on
the last day of the immediately preceding fiscal year or (iii) the number of
shares determined by the board of directors.

The Purchase Plan enables eligible employees to purchase common stock
through payroll deductions, which in any event may not exceed 20% of an
employees compensation, at a price equal to the lower of 85% of the fair market
value of the Companys common stock at the beginning of each offering period or
at the end of each purchase period. During the two purchase periods in 2002,
593,930 shares had been purchased under the Purchase Plan at an average price of
$6.45 per share.

Deferred Stock
Compensation

In connection with the issuance of certain stock options to employees,
Foundry has recorded deferred stock compensation in the aggregate amount of
approximately $17.3 million and $0.3 million in 1999 and 2000, respectively,
representing the difference between the deemed fair value of Foundrys common
stock for accounting purposes and the exercise price of stock options at the
date of grant. We recorded no additional deferred stock compensation in 2002 and 2001.
Foundry is amortizing the deferred stock compensation expense over the vesting
period, generally four years. For the years ended December 31, 2002, 2001 and
2000, amortization expense was approximately $1.1 million, $2.7 million and $6.2
million, respectively. At December 31, 2002, the remaining deferred stock
compensation of approximately $0.2 million will be amortized in 2003. The
amortization expense relates to options granted to employees in all operating
expense categories. The amortization of deferred stock compensation has not been
separately allocated to these categories. The amount of deferred stock
compensation expense to be recorded in future periods could decrease if options
for which accrued but unvested compensation has been recorded are forfeited.
Approximately $1.6 million of deferred stock compensation expense was reversed
in 2001 as a result of employee terminations. No such reversals were recorded
during 2002.

23

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Equity
Compensation Plan Information

The following table summarizes information with respect to shares of
Foundrys common stock that may be issued under the Foundrys existing equity
compensation plans as of December 31, 2002.



|Plan
      Category                                               |  | Number of securities to beissued
      upon exercise ofoutstanding
      options(a) |  | Weighted-averageexercise price
      ofoutstanding
      options(b) |   | Number of securities remainingavailable for future issuanceunder
      equity compensationplans (excluding
      securitiesreflected in column
      (a))(c) | 
|----------------------------------------------------------------- |  | ----------------------------------------------------------------------------------- |  | ------------------------------------------------------------------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|                                                                  |  |                                                                                     |  |                                                                     |   |                                                                                                                                                              | 
|Equity compensation plans approved by security
      holders:     |  |                                                                                     |  |                                                                     |   |                                                                                                                                                              | 
|1996 Stock Plan                                                   |  | 23,896,801                                                                          |  |                                                                     | $ | 10.13                                                                                                                                                        | 
|1999 Employee Stock Purchase Plan                                 |  |                                                                                    |  |                                                                     | $ |                                                                                                                                                             | 
|1999 Directors Stock Option Plan                                 |  | 1,215,000                                                                           |  |                                                                     | $ | 47.37                                                                                                                                                        | 
|                                                                  |  |                                                                                     |  |                                                                     |   |                                                                                                                                                              | 
|Equity compensation plans not approved by security
      holders: |  |                                                                                     |  |                                                                     |   |                                                                                                                                                              | 
|2000 Non-Executive Stock Option Plan                              |  | 1,799,452                                                                           |  |                                                                     | $ | 10.62                                                                                                                                                        | 

6.401(k) PLAN:

Foundry provides a tax-qualified employee savings and retirement plan
which entitles eligible employees to make tax-deferred contributions. Under the
401(k) Plan, employees may elect to reduce their current annual compensation up
to the lesser of 20% or the statutorily prescribed limit, which was $11,000 in
calendar year 2002. Employees age 50 or over may elect to contribute an
additional $1,000. The Plan provides for discretionary contributions as
determined by the board of directors each year. As of December 31, 2002, Foundry
has made no matching or discretionary contributions.

Effective January 1, 2003, employees may elect to reduce their current
annual compensation up to the lesser of 100% or the statutorily prescribed
limit, which is $12,000 for calendar year 2003. In January 2003, the board of
directors approved a matching contribution program whereby Foundry will match
dollar for dollar contributed by each employee up to $1,250 per employee for the
2003 calendar year. All matching contributions vested effective January 1, 2003.

7.SUBSEQUENT EVENT (unaudited):

In connection with the Tender Offer filed on August 21, 2002, the Company granted
  replacement stock options totaling 2,757,100 shares on March 24, 2003 to employees
  who relinquished underwater stock options totaling 5,744,500 shares on September
  20, 2002 in exchange for a stock option grant equal to 0.5 times the number
  of tendered options. The replacement stock options were granted with an exercise
  price equal to the fair market value of Foundrys stock on
  March 24, 2003, which was $7.76 per share . In order to receive the replacement stock option grant,
  an employee was required to remain employed with Foundry or one of its subsidiaries
  until March 24, 2003. The replacement options vest on a three-year schedule
  with a six month cliff, meaning 1/6th of the new option shares will vest six
  months from March 24, 2003, and the remaining shares will vest 1/36th per month
  for the remaining 30 months. The stock option exchange program did not result
  in stock compensation expense or variable accounting for replacement awards.

24

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FOUNDRY NETWORKS, INC.

Supplementary
Financial Data (Unaudited)

The following tables set forth our consolidated statement of operations
data for each of the eight quarters ended December 31, 2002, including such
amounts expressed as a percentage of net revenues. This unaudited quarterly
information has been prepared on the same basis as our audited financial
statements and, in the opinion of management, reflects all adjustments,
consisting only of normal recurring entries, necessary for a fair presentation
of the information for the periods presented. The operating results for any
quarter are not necessarily indicative of results for any future period.



|                                                |  | Quarter Ended  |       
|----------------------------------------------- |  | -------------- | ------
|                                                |  |                |       
|                                                |  | Mar.31,2001    |       
|                                                |  |                |       
|                                                |  | (in thousands) |       
|Statement of Operations Data (unaudited):       |  |                |       
|Revenues, net                                   |  | $              | 82,551
|Cost of revenues                                |  | 38,888         |       
|                                                |  |                |       
|Gross margin                                    |  | 43,663         |       
|Operating expenses:                             |  |                |       
|Research and development                        |  | 7,900          |       
|Sales and marketing                             |  | 24,817         |       
|General and administrative                      |  | 5,947          |       
|Amortization of deferred stock compensation     |  | 1,135          |       
|                                                |  |                |       
|Total operating expenses                        |  | 39,799         |       
|                                                |  |                |       
|Income (loss) from operations                   |  | 3,864          |       
|Interest income                                 |  | 2,865          |       
|Write-down of minority investment               |  |               |       
|                                                |  |                |       
|Income (loss) before provision for income taxes |  | 6,729          |       
|Income tax (expense) benefit                    |  | (2,557         | )     
|                                                |  |                |       
|Net income (loss)                               |  | $              | 4,172 
|                                                |  |                |       
|Basic net income (loss) per share               |  | $              | 0.04  
|                                                |  |                |       
|Diluted net income (loss) per share             |  | $              | 0.03  
|                                                |  |                |       

25

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|                                                |  | Mar.31,2001    |   | Jun.30,2001 |   | Sep.30,2001 |   | Dec. 31,2001 |   | Mar.31,2002 |   | Jun.30,2002 |   | Sep.30,2002 |   | Dec. 31,2002 |  
|----------------------------------------------- |  | -------------- | - | ----------- | - | ----------- | - | ------------ | - | ----------- | - | ----------- | - | ----------- | - | ------------ | -
|                                                |  |                |   |             |   |             |   |              |   |             |   |             |   |             |   |              |  
|                                                |  | (in thousands) |  
|Percentage of Revenue (unaudited):              |  |                |   |             |   |             |   |              |   |             |   |             |   |             |   |              |  
|Revenues, net                                   |  | 100.00         | % | 100.0       | % | 100.0       | % | 100.0        | % | 100.0       | % | 100.0       | % | 100.0       | % | 100.0        | %
|Cost of revenues                                |  | 47.1           |   | 46.7        |   | 49.8        |   | 62.4         |   | 47.8        |   | 47.2        |   | 46.4        |   | 45.4         |  
|                                                |  |                |   |             |   |             |   |              |   |             |   |             |   |             |   |              |  
|Gross margin                                    |  | 52.9           |   | 53.3        |   | 50.2        |   | 37.6         |   | 52.2        |   | 52.8        |   | 53.6        |   | 54.6         |  
|                                                |  |                |   |             |   |             |   |              |   |             |   |             |   |             |   |              |  
|Operating expenses:                             |  |                |   |             |   |             |   |              |   |             |   |             |   |             |   |              |  
|Research and development                        |  | 9.6            |   | 9.3         |   | 11.3        |   | 14.3         |   | 13.7        |   | 11.8        |   | 11.6        |   | 10.0         |  
|Sales and marketing                             |  | 30.0           |   | 26.3        |   | 29.6        |   | 31.5         |   | 33.0        |   | 30.1        |   | 24.1        |   | 24.5         |  
|General and administrative                      |  | 7.2            |   | 5.8         |   | 7.1         |   | 16.6         |   | 4.8         |   | 4.5         |   | 6.1         |   | 3.9          |  
|Amortization of deferred stock compensation     |  | 1.4            |   | 0.9         |   | 0.8         |   | 0.2          |   | 0.6         |   | 0.4         |   | 0.3         |   | 0.2          |  
|                                                |  |                |   |             |   |             |   |              |   |             |   |             |   |             |   |              |  
|Total operating expenses                        |  | 48.2           |   | 42.3        |   | 48.8        |   | 62.6         |   | 52.1        |   | 46.8        |   | 42.1        |   | 38.6         |  
|                                                |  |                |   |             |   |             |   |              |   |             |   |             |   |             |   |              |  
|Income (loss) from operations                   |  | 4.7            |   | 11.0        |   | 1.4         |   | (25.0        | ) | 0.1         |   | 6.0         |   | 11.5        |   | 16.0         |  
|Interest income                                 |  | 3.5            |   | 2.6         |   | 2.7         |   | 2.4          |   | 2.4         |   | 1.7         |   | 1.5         |   | 1.2          |  
|Write-down of minority investment               |  |               |   |            |   |            |   | 3.8          |   |            |   |            |   |            |   |             |  
|                                                |  |                |   |             |   |             |   |              |   |             |   |             |   |             |   |              |  
|Income (loss) before provision for income taxes |  | 8.2            |   | 13.6        |   | 4.1         |   | (26.4        | ) | 2.5         |   | 7.7         |   | 13.0        |   | 17.2         |  
|Income tax (expense) benefit                    |  | (3.1           | ) | (5.2        | ) | (1.6        | ) | 10.0         |   | (0.8        | ) | (2.3        | ) | (3.9        | ) | (5.2         | )
|                                                |  |                |   |             |   |             |   |              |   |             |   |             |   |             |   |              |  
|Net income (loss)                               |  | 5.1            | % | 8.4         | % | 2.5         | % | (16.4        | ) | 1.7         | % | 5.4         | % | 9.1         | % | 12.0         | %
|                                                |  |                |   |             |   |             |   |              |   |             |   |             |   |             |   |              |  

26

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FOUNDRY NETWORKS, INC.

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS(in thousands)



|Column A                        |  | Column B                     |  | Column C                          |  | Column D      |  | Column E                     | 
|------------------------------- |  | ---------------------------- |  | --------------------------------- |  | ------------- |  | ---------------------------- | 
|                                |  |                              |  |                                   |  |               |  |                              | 
|Description                     |  | Balance atBeginningof Period |  | Charged toCosts
      andExpenses |  | Deductions(1) |  | Balance atEnd
      ofPeriod | 
|                                |  |                              |  |                                   |  |               |  |                              | 
|Year ended December 31, 2000:   |  |                              |  |                                   |  |               |  |                              | 
|Allowance for doubtful accounts |  | 1,354                        |  | 4,698                             |  | 1,791         |  | 4,261                        | 
|Allowance for sales returns     |  | 615                          |  | 3,734                             |  | 2,848         |  | 1,501                        | 
|                                |  |                              |  |                                   |  |               |  |                              | 
|Year ended December 31, 2001:   |  |                              |  |                                   |  |               |  |                              | 
|Allowance for doubtful accounts |  | 4,261                        |  | 9,061                             |  | 6,674         |  | 6,648                        | 
|Allowance for sales returns     |  | 1,501                        |  | 3,595                             |  | 3,595         |  | 1,501                        | 
|                                |  |                              |  |                                   |  |               |  |                              | 
|Year ended December 31, 2002:   |  |                              |  |                                   |  |               |  |                              | 
|Allowance for doubtful accounts |  | 6,648                        |  | 344                               |  | 1,160         |  | 5,833                        | 
|Allowance for sales returns     |  | 1,501                        |  | 1,527                             |  | 1,444         |  | 1,584                        | 

______________

(1)Deductions
  for allowance for doubtful accounts refers to write-offs and deductions for
  allowance for sales returns refers to actual returns.



27

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Item 15. Exhibits, Financial Statement Schedules
  and Reports on Form 8-K

(a) The following documents are filed as part of this
  Form 10-K:

(1) Consolidated Financial
  Statements and Report of Independent Auditors and Public Accountants

(2) Financial Statement
  Schedules

See Item 8. Financial
  Statements and Supplementary DataSchedule IIValuation and Qualifying
  Accounts. Other schedules are omitted because they are not applicable,
  or because the information is included in the Financial Statements or the Notes
  thereto.

(3) Exhibits (numbered
  in accordance with Item 601 of Regulation S-K)

|Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|3.1    |  | Amended and Restated Certificate
        of Incorporation of Foundry Networks, Inc. (Amended and Restated Certificate
        of Incorporation filed as Exhibit 3.2 to Registrants Registration
        Statement on Form S-1 (Commission File No. 333-82577) and incorporated
        herein by reference; Certificate of Amendment to the foregoing filed as
        Exhibit 3.1 to Registrants Quarterly Report on Form 10-Q for the
        quarter ended June 30, 2000 and incorporated herein by reference.)
|3.2    |  | Amended and Restated Bylaws of Foundry
        Networks, Inc. (Filed as Exhibit 3.2 to Registrants Quarterly Report
        on Form 10-Q for the quarter ended September 30, 2000 and incorporated
        herein by reference.)                                                                                                                                                                                                                                                                                   
|10.1   |  | 1996 Stock Plan. (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.2   |  | 1999 Employee Stock Purchase Plan.
        (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.3   |  | 1999 Directors Stock Option
        Plan. (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.5   |  | OEM Purchase Agreement dated January
        6, 1999 between Foundry Networks, Inc. and Hewlett-Packard Company, Workgroup
        Networks Division. (4)                                                                                                                                                                                                                                                                                                                                                           
|10.6   |  | Reseller Agreement dated July 1,
        1997 between Foundry Networks, Inc. and Mitsui & Co., Ltd. (4)                                                                                                                                                                                                                                                                                                                                                                                                             
|10.7   |  | 2000 Non-Executive Stock Option
        Plan. (5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.11  |  | Lease agreement dated September
        28, 1999, between Foundry Networks, Inc., and Legacy Partners Commercial
        Inc., for offices located at 2100 Gold Street, San Jose, CA 95002. (6)                                                                                                                                                                                                                                                                                                                     
|16.1   |  | Letter from Arthur Andersen LLP
        to the Securities and Exchange Commission dated June 25, 2002. (7)                                                                                                                                                                                                                                                                                                                                                                                                          
|21.1   |  | List of Subsidiaries. (8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|23.1   |  | Consent of Ernst & Young LLP,
        Independent Auditors.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|23.2   |  | Notice Regarding Consent of Arthur
        Andersen LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|99.1   |  | Certification pursuant to 18 U.S.C.
        Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002.                                                                                                                                                                                                                                                                                                                                                                             

28

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|(1) |  | Copy
        of original 1996 Stock Plan incorporated herein by reference to the exhibit
        filed with the Companys Registration Statement on Form S-1 (Commission
        File No. 333-82577). Copy of 1996 Stock Plan reflecting the amendments
        approved at the 2000 Annual Meeting of Stockholders incorporated by reference
        to the Companys Definitive Proxy Statement for such meeting (Commission
        File No. 000-26689). Copy of 1996 Stock Plan reflecting the amendments
        for approval at the 2002 Annual Meeting of Stockholders incorporated by
        reference to the Companys Definitive Proxy Statement for such meeting
        (Commission File No. 000-26689).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Incorporated
        herein by reference to the exhibit filed with the Companys Registration
        Statement on Form S-1 (Commission File No. 333-82577).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(3) |  | Incorporated
        herein by reference to the exhibit filed with the Companys Registration
        Statement on Form S-1 (Commission File No. 333-82577). Copy of Directors
        Plan reflecting the amendment for approval at the 2002 Annual Meeting
        of Stockholders incorporated by reference to the Companys Definitive
        Proxy Statement for such meeting (Commission File No. 000-26689).                                                                                                                                                                                                                                                                                                
|(4) |  | Incorporated
        herein by reference to the exhibit filed with the Companys Registration
        Statement on Form S-1 (Commission File No. 333-82577); Confidential treatment
        has been granted by the Securities and Exchange Commission with respect
        to this exhibit.                                                                                                                                                                                                                                                                                                                                                                                                                         
|(5) |  | Incorporated
        herein by reference to the exhibit filed with the Companys Registration
        Statement on Form S-8 filed on October 25, 2000 (Commission File No. 333-48560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(6) |  | Incorporated
        herein by reference to the exhibit filed with the Companys Form
        10-Q for the quarter ended September 30, 1999 (Commission File No. 000-26689).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(7) |  | Incorporated
        by reference from Foundrys Report on Form 8-K filed on July 3,
        2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(8) |  | Incorporated
        by reference to the exhibit filed with the Companys Annual Report
        on Form 10-K for the year ended December 31, 2002, filed on March 31,
        2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

(b) Reports on Form 8-K.
  None.

29

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SIGNATURES

Pursuant to the requirements
  of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
  has duly caused this report to be signed on its behalf by the undersigned, thereunto
  duly authorized.

| | FOUNDRY NETWORKS, INC.
| | ----------------------
| |                       
| | By:                   
| |                       
| |                       

Date: June 4, 2003

Pursuant to the requirements
  of the Securities Exchange Act of 1934, this report has been signed below by
  the following persons on behalf of the registrant and in the capacities and
  on the dates indicated.

|Signature                                                   |  | Title                                                                                                                     |  | Date        
|----------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | ------------
|                                                            |  |                                                                                                                           |  |             
|/s/ Bobby R. Johnson,
      Jr. Bobby R. Johnson,
      Jr. |  | President, Chief Executive Officer
      and Chairman of the Board of Directors
      (Principal Executive Officer)       |  | June 4, 2003
|                                                            |  |                                                                                                                           |  |             
|/s/ Timothy D. Heffner
      Timothy D. Heffner             |  | Vice President, Finance & Administration,
      Chief Financial Offcer
      (Principal Financial and Accounting Officer) |  | June 4, 2003
|                                                            |  |                                                                                                                           |  |             
|/s/ Andrew K. Ludwick
      Andrew K. Ludwick               |  | Director                                                                                                                  |  | June 4, 2003
|                                                            |  |                                                                                                                           |  |             
|/s/ Alfred J. Amoroso Alfred J. Amoroso                     |  | Director                                                                                                                  |  | June 4, 2003
|                                                            |  |                                                                                                                           |  |             
|/s/ C. Nicholas Keating
      C. Nicholas Keating           |  | Director                                                                                                                  |  | June 4, 2003
|                                                            |  |                                                                                                                           |  |             
|/s/ J. Steven Young
      J. Steven Young                   |  | Director                                                                                                                  |  | June 4, 2003

30

---





CERTIFICATIONS

I, Bobby R. Johnson, Jr., certify that:

1. I have reviewed
  this annual report on Form 10-K of Foundry Networks, Inc.;

2. Based on my knowledge, this annual report does not
  contain any untrue statement of a material fact or omit to state a material
  fact necessary to make the statements made, in light of the circumstances under
  which such statements were made, not misleading with respect to the period covered
  by this annual report;

3. Based on my knowledge, the financial statements,
  and other financial information included in this annual report, fairly present
  in all material respects the financial condition, results of operations and
  cash flows of the registrant as of, and for, the periods presented in this annual
  report;

4. The registrants other certifying officers
  and I are responsible for establishing and maintaining disclosure controls and
  procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
  and we have:

> a) designed such disclosure controls and procedures
>     to ensure that material information relating to the registrant, including
>     its consolidated subsidiaries, is made known to us by others within those
>     entities, particularly during the period in which this annual report is being
>     prepared;
>   b) evaluated the effectiveness of the registrants
>     disclosure controls and procedures as of a date within 90 days prior to the
>     filing date of this annual report (the Evaluation Date); and
>   c) presented in this annual report our conclusions
>     about the effectiveness of the disclosure controls and procedures based on
>     our evaluations as of the Evaluation Date;

5. The registrants other certifying officers
  and I have disclosed, based on our most recent evaluation, to the registrants
  auditors and the audit committee of registrants board of directors (or
  persons performing the equivalent functions):

> a) all significant deficiencies in the design or
>     operation of internal controls which could adversely affect the registrants
>     ability to record, process, summarize and report financial data and have identified
>     for the registrants auditors any material weaknesses in internal controls;
>     and
>   b) any fraud, whether or not material, that involves
>     management or other employees who have a significant role in the registrants
>     internal controls; and

6. The registrants other certifying officers
  and I have indicated in this annual report whether there were significant changes
  in internal controls or in other factors that could significantly affect internal
  controls subsequent to the date of our most recent evaluation, including any
  corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 4, 2003

|/s/ Bobby R. Johnson, Jr.
      Bobby R. Johnson, Jr.Chief Executive Officer
      and President
|------------------------------------------------------------------------------------------------

31

---

CERTIFICATIONS

I, Timothy D. Heffner, certify that:

1. I have reviewed
  this annual report on Form 10-K of Foundry Networks, Inc.;

2. Based on my knowledge, this annual report does not
  contain any untrue statement of a material fact or omit to state a material
  fact necessary to make the statements made, in light of the circumstances under
  which such statements were made, not misleading with respect to the period covered
  by this annual report;

3. Based on my knowledge, the financial statements,
  and other financial information included in this annual report, fairly present
  in all material respects the financial condition, results of operations and
  cash flows of the registrant as of, and for, the periods presented in this annual
  report;

4. The registrants other certifying officers
  and I are responsible for establishing and maintaining disclosure controls and
  procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
  and we have:

> a) designed such disclosure controls and procedures
>     to ensure that material information relating to the registrant, including
>     its consolidated subsidiaries, is made known to us by others within those
>     entities, particularly during the period in which this annual report is being
>     prepared;
>   b) evaluated the effectiveness of the registrants
>     disclosure controls and procedures as of a date within 90 days prior to the
>     filing date of this annual report (the Evaluation Date); and
>   c) presented in this annual report our conclusions
>     about the effectiveness of the disclosure controls and procedures based on
>     our evaluations as of the Evaluation Date;

5. The registrants other certifying officers
  and I have disclosed, based on our most recent evaluation, to the registrants
  auditors and the audit committee of registrants board of directors (or
  persons performing the equivalent functions):

> a) all significant deficiencies in the design or
>     operation of internal controls which could adversely affect the registrants
>     ability to record, process, summarize and report financial data and have identified
>     for the registrants auditors any material weaknesses in internal controls;
>     and
>   b) any fraud, whether or not material, that involves
>     management or other employees who have a significant role in the registrants
>     internal controls; and

6. The registrants other certifying officers
  and I have indicated in this annual report whether there were significant changes
  in internal controls or in other factors that could significantly affect internal
  controls subsequent to the date of our most recent evaluation, including any
  corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 4, 2003

|/s/ Timothy D. HeffnerTimothy D. Heffner*Vice President, Finance and Administration,**Chief Financial Officer*
|--------------------------------------------------------------------------------------------------------------

32

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