APPENDIX A

CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
NETWORK APPLIANCE, INC.

Purpose

The purpose of the Committee is to monitor and/or assist the Board in monitoring (1) the selection and independence of the Company’s external auditors, (2) the audit, compliance, accounting and financial reporting procedures of the Company, (3) the adequacy of the Company’s internal financial controls, and (4) the overall integrity of the Company’s financial statements.

The Committee’s function is one of oversight only and shall not relieve the responsibilities of the Company’s management for preparing financial statements, which accurately and fairly present the Company’s financial results and condition, or the responsibilities of the independent auditors relating to the audit or review of financial statements. Nothing in this charter is intended to preclude or impair the protection provided in Section 141(e) of the Delaware General Corporation Law for good faith reliance by members of the Committee on reports or other information provided by others.

Composition of the Committee

The Committee shall consist of at least three directors, all of whom shall meet the independence requirements of the Sarbanes-Oxley Act of 2002 and rules adopted in connection therewith by the Securities and Exchange Commission. The composition of the Committee must also satisfy the listing requirements of The NASDAQ Stock Market, including those concerning independence and the ability to read and understand fundamental financial statements. At least one member of the Committee shall have the financial sophistication described in such listing requirements.

The members of the Committee shall be appointed by the Board upon the recommendation of the Nominating Committee.

Selection and Oversight of Independent Auditors

The Audit Committee shall be directly responsible for the appointment, compensation, retention, termination and oversight of the work of the company’s independent auditors, including resolution of disagreements between the Company’s management and the auditor regarding financial reporting, and such independent auditors shall report directly to the Committee. The Committee shall have ultimate authority to approve all audit engagement fees and terms.

The Committee will review at least annually:

·         the qualifications of the responsible partner or manager of the independent auditors who is engaged on the company’s account,

·         the quality control procedures of the independent auditors,

·         the amount billed or to be billed for audit and non-audit services and the portion of this work being performed by persons who are not full-time, permanent employees, and

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Annual Financial Reporting

In connection with the audit of each fiscal year’s financial statements, the Committee will:

·         meet with representatives of the independent auditor prior to the audit to review planning and staffing of the audit;

·         review and discuss the audited financial statements and related accounting and auditing principles and practices with appropriate members of the Company’s management;

·         discuss with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, including (1) the quality as well as acceptability of the accounting principles applied in the financial statements, and (2) new or changed accounting policies; significant estimates, judgments, uncertainties or unusual transactions; and accounting policies relating to significant financial statement items;

·         review with appropriate management and auditor representatives their analysis of significant matters which relate to (1) the selection, application and effects of critical accounting policies applied by the Company, (2) internal auditing, financial management and control personnel, systems and procedures, (3) the status of any new, proposed or alternative accounting or financial reporting requirements, and (4) issues raised by any management letter from the auditors, difficulties encountered in the audit, disagreements with management, or other significant aspects of the audit;

·         receive from the independent auditors a written disclosure and statement of all relationships between the auditors and the Company consistent with Independence Standards Board Standard No. 1;

·         discuss with the auditors any disclosed relationships or services that may impact the objectivity or independence of the auditors and take, or recommend that the full Board take, appropriate action to oversee the independence of the auditor;

·         obtain from the independent auditors a statement of the audit fees and other categories of fees billed for the last fiscal year which are required to be disclosed in the Company’s proxy statement for its annual meeting under the SEC’s proxy rules, and consider whether the provision of any non-audit services is compatible with maintaining the auditors’ independence;

·         pre-approve, or establish pre-approval policies and procedures for the approval of, all audit and permissible non-audit services to be provided by the independent auditors;

·         recommend whether or not the audited financial statements should be included in the Company’s Annual Report on Form 10-K for filing with the SEC; and

Quarterly Financial Reporting

At a Committee meeting or through the Chair of the Committee, the Committee will review with the independent auditors and appropriate Company officers the Company’s interim financial results to be included in the Company’s earnings release and on each Form 10-Q. The Committee’s review will normally include:

·         the results of the independent auditors’ review of the quarterly financial statements,

·         management’s analysis of any significant accounting issues, changes, estimates, judgments or extraordinary items relating to the financial statements, and

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Internal Controls

The Committee will review at least annually:

·         internal control systems and procedures of the Company,

·         status of management responses to prior period audit management letter by the independent auditors,

·         succession planning and staffing levels for the Company’s finance and accounting employees, and

·         the status and implementation of conduct codes concerning related party transactions, conflicts of interest, ethical conduct, and compliance with applicable laws and regulatory policies, and

Other Committee Review Functions

The Committee will review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board.

The Committee will review and approve all related party transactions.

The Committee will establish procedures for receiving, retaining and treating complaints received by the Company 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.

The Committee may discuss and review with Company management, internal or outside legal counsel, or the independent auditors any other topics relating to the purpose of the Committee which may come to the Committee’s attention, including:

·         published reports, regulatory or accounting initiatives, or communications from employees, government agencies or others, which raise significant issues concerning Company financial statements or accounting policies;

·         off balance sheet, related party, or other transactions which could affect the Company’s financial results or condition;

·         any issues concerning the Company which the independent auditors have discussed with their national or supervisory office;

·         reports concerning significant subsidiary or foreign operations; and

Meetings, Reports and Resources of the Committee

The Committee will meet at least quarterly. The Committee may also hold special meetings or act by unanimous written consent as the Committee may decide. Committee meetings will be governed by the quorum and other procedures generally applicable to meetings of the Board under the Company’s bylaws, unless otherwise stated by resolution of the Board or the Committee.

The Committee, as it may determine to be appropriate, will meet in separate executive sessions with the chief financial officer, controller or principal accounting officer, and representatives of the independent auditors, and may meet with other Company employees, agents or representatives invited by the Committee.

The Committee will prepare the audit committee report required to be included in the Company’s annual meeting proxy statement and report to the Board on the other matters relating to the Committee or its purposes, as required by the SEC proxy rules.

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The Committee is at all times authorized to have direct, independent access to the independent auditors and to the Company’s management and internal audit and finance personnel. The Committee is authorized to communicate in confidence with any of these individuals.

The Committee is authorized to conduct investigations, and to retain, at the expense of the Company, independent legal, accounting, or other professional consultants selected by the Committee, for any matters relating to the purpose of the Committee. The Committee is further authorized to retain, at the expense of the Company, separate accounting or finance professional advisers that the Committee may consider necessary or helpful in reviewing the Company’s accounting policies and financial statements. The Committee will advise the Board in advance of engaging outside professional services and the expected fees and costs to be incurred.