Audit Committee Charter
Revised November 17, 2004

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Purpose

The purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of Storage Technology Corporation (the "Corporation") is:

  1. to assist Board oversight of: the integrity of the Corporation's financial statements; the Corporation's compliance with legal and regulatory requirements; the independent auditor's qualifications and independence; the performance of the Corporation's internal audit function and independent auditors; and the Corporation's systems of disclosure controls and procedures and internal control over financial reporting.
  2. to prepare the report that SEC rules require be included in the Corporation's annual proxy statement.

Membership

The Committee shall be composed of at least three Directors from the Board, each of whom shall be independent, as that term is defined from time-to-time by applicable laws, rules, regulations and standards. In addition, each member shall be financially literate, as that qualification is interpreted by the Board in its business judgment and at least one of the members shall have accounting or related financial management expertise, as such qualification is interpreted by the Board in its business judgment.

Members of the Committee shall be elected annually by the Board at the Annual Meeting of the Board, held in connection with the Corporation's Annual Meeting of Stockholders. The Board shall designate one member of the Committee as the Chair.

A Committee member may be removed by the Board at any time, with or without prior notice and with or without cause. The Board shall have the authority to create and fill vacancies on the Committee.

Members of the Audit Committee may not receive any compensation from the Corporation for services as a consultant or a legal or financial advisor, regardless of amount.


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Goals and Responsibilities

The goals and responsibilities of the Committee are:

  1. to directly appoint, retain, compensate, evaluate and terminate the Corporation's independent auditors (who must report directly to the Committee) and approve the audit engagement terms and pre-approve the audit fees.
  2. to pre-approve all non-audit work by the independent auditor either directly or under pre-approval policies and procedures adopted by the Committee that comply with all applicable laws, rules, regulations and standards and to specifically pre-approve all internal control-related work by the independent auditor, including, in each case, the engagements fees for and the terms of such work.
  3. to be directly responsible for the oversight of the independent auditors, including the resolution of disagreements between management and the independent auditor.
  4. to ensure that the independent auditors submit on a periodic basis to the Committee a formal written statement setting forth all relationships between the independent auditors and the Corporation; to discuss with the independent auditors their objectivity and independence in light of any non-audit relationships, including the matters required to be discussed by Statement on Accounting Standard No. 61; and to take such actions as are necessary to satisfy the Committee of the independent auditors' independence.
  5. at least annually, to obtain and review a report from the independent auditor describing the firm's internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authority, within the preceding five years, respecting one or more independent audits carried out by the firm and any steps taken to deal with any such issues.
  6. to meet and review and discuss with management, the Corporation's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q:
    1. the annual audited financial statements and quarterly financial statements;
    2. the Corporation's specific disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations";
    3. any comments from or recommendations by the independent auditors regarding such statements;
    4. any material proposed changes in the Corporation's accounting principles;
    5. any significant comments received by the Corporation from the SEC regarding accounting matters; and
    6. the accounting treatment of transactions, if any, that senior management deems to be unusual.
  7. to meet and review and discuss with the independent auditor, the Corporation's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q:
    1. the annual audited financial statements and quarterly financial statements;
    2. any comments or recommendations of the independent auditors;
    3. any difficulties encountered by the independent auditors in performing the audit or obtaining the information necessary to perform its audit and management's response;
    4. any significant disagreements between the independent auditors and management;
    5. the independent auditors' judgments about the quality, not just the acceptability, of the accounting principles used by the Corporation); and
    6. the Corporation's specific disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations".
  8. based upon review and discussion with management and the independent auditor, to recommend to the Board that the audited financial statements be included in the Corporation's Annual Report on Form 10-K
  9. to review:
    1. major issues regarding accounting principles and financial statement presentations, including any significant changes in the Corporation's selection or application of accounting principles, and major issues as to the adequacy of the Corporation's internal controls and any special audit steps adopted in light of material control deficiencies;
    2. analyses prepared by managements and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; and
    3. the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Corporation.
  10. to discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.
  11. to review the scope of the internal audit department's audit plan, its budget and staffing, and the results of audits performed.
  12. to review the adequacy of the Corporation's systems of disclosure controls and procedures and internal control over financial reporting and to review before release the disclosure regarding such systems required under SEC rules to be contained in the Corporation's periodic filings and the attestations or reports by the independent auditors relating to such disclosure.
  13. to discuss generally the Corporation's guidelines and policies to govern the process by which risk assessment and risk management is undertaken.
  14. to meet separately, periodically, with management, with internal auditors and with independent auditors.
  15. to set clear hiring policies for employees or former employees of the independent auditors that comply with all applicable laws, rules, regulations and standards.
  16. to establish procedures for receiving, retaining and treating complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters and procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
  17. to conduct an annual performance evaluation of the Committee.
  18. to review this Charter annually to ensure its adequacy and applicability, and, when appropriate, to recommend to the Board changes to this Charter.


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Operations

The Committee shall meet at least once a quarter, with such additional meetings as the Chair deems appropriate.

The Chair, or his/her designee, shall report orally to the Board on the results of each Committee meeting at the next regularly scheduled Board meeting or as soon as practical thereafter.

The Committee shall have the authority to retain, without seeking Board approval, outside legal, accounting or other advisors and experts, as the Committee deems necessary or appropriate to carry out its duties. The Committee shall receive appropriate funding from the Corporation, as determined by the Committee, for payment of compensation to such advisors and experts.

On or before the date required pursuant to applicable laws, rules, regulations and standards, the Committee's Charter shall be published on the Corporation's website.