January 18, 2000

Mr. Gary R. Anderson
1604 Foothills Drive South
Golden, Colorado 80401

RE:   Retention Agreement

Dear Gary:

You have  agreed  to  remain  an  employee  of  Storage  Technology  Corporation
("StorageTek"   or  the   "Company")   through  at  least  March  31,  2001.  In
consideration  of your willingness to stay with the Company until at least March
31,  2001,  this  letter will  confirm our  agreement  concerning  the  possible
termination  of your  employment  with  StorageTek on that date. In that regard,
this  letter  will  define  the terms of your  severance  under  this  Retention
Agreement (the "Retention  Agreement") and your Executive  Employment  Agreement
dated  September  30,  1999  (the  "Employment  Agreement")  at the date of your
termination (the "Termination  Date"). This Retention  Agreement  supersedes all
previous oral and written agreements  regarding your employment with StorageTek,
including the  understanding  that the terms and  conditions  of this  Retention
Agreement, to the degree that they may conflict with the terms and conditions of
your  Employment  Agreement,  shall  in all  cases  supersede  the  terms of the
Employment  Agreement,  which agreement  shall,  unless otherwise stated herein,
remain in full force and effect.


      REPORTING  RELATIONSHIP  AND  DUITES:  During  your  period  of  continued
      employment  with the Company,  you will remain a Corporate Vice President.
      Although it is  envisioned  that in such  capacity  you will report to the
      CEO,  this  reporting  relationship  may be  changed  at any  time  by the
      Company.  You further  understand  that your present and future duties and
      responsibilities could also be substantially changed by the Company. It is
      further  understood  and  agreed by you that  such  changes  will not,  in
      combination or in and of themselves, constitute and Involutary Termination
      under the terms of the Employment Agreement.

      GOALS AND OBJECTIVES:  During your period of continued employment with the
      Company  you have  agreed to focus  on:  (i)  assisting  in  defining  and
      implementing the on-going corporate  restructuring,  (ii) assisting in the
      continued refinement and implementation of corporate-wide cost reductions,
      (iii)  helping  to  improve  the  cycle  time  for  implementing  business
      processes  improvements,  (iv) working to enhance supply chain  management
      (SLM)  efficiencies,  and  (v)  such  other  tasks  as may  be  reasonably
      requested of you, from time-to-time,  by the Board of Directors,  the CEO,
      President or COO as the case may be.

      SEPARATION:  After your successful  participation in the attainment of the
      objectives  stated  above,  and  your  continued  employment  through  the
      Termination  Date, the Company will pay, within 30 days of the Termination
      Date,  a separation  payment to you equal to: (i) one and  one-half  times
      your then current annual salary, and (ii) one and one-half times your then
      current target annual MBO bonus. Additionally, all of your outstanding and
      unvested stock options will vest on the Termination Date (according to the
      terms of your Stock Option  Agreements and the Company's 1995 Stock Option
      Plan) and the Company's right to repurchase any of your previously granted
      restricted  stock will  terminate.  Pursuant to the terms of  StorageTek's
      Stock  Option  Plan,  you will have 90 days from the  Termination  Date to
      exercise all of your vested options.

      NO ADVERSE COMMENT: You agree that during your employment with the Company
      through  the  Termination  Date and for at least  one year  following  the
      Termination Date, you will not, except as specifically  required by law or
      court process or consented to in writing by the Company,  (a)  communicate
      to any  person  or  entity  any  adverse  information,  written  or  oral,
      concerning the Company,  its officers,  directors,  employees,  attorneys,
      agents or advisers  (including any  communication  concerning  information
      that  related to the  business,  operations,  prospects  or affairs of the
      Company or any of its subsidiaries or affiliates)  under the circumstances
      in which there is a reasonable  possibility that such information might be
      publicly  reported or  disclosed  or  otherwise  made  available  to third
      parties  (regardless of whether the  communication  of such information is
      intended  to have or cause that  result is within  your  control),  or (b)
      provide to any person (other than your attorney or  accountant)  or entity
      any  information   that  concerns  or  related  to  the   negotiations  or
      circumstances leading to the execution of this Retention Agreement.

      NON-SOLICITATION PROVISIONS: Per the terms of Section 8 of your Employment
      Agreement, you confirm that during the two-year period commencing with the
      Termination Date, you will not, directly, or indirectly, hire, solicit, or
      encourage any then-current  Company employees to apply for employment with
      any person or entity  (a) with  which you are (or intend to be)  employed,
      (b) by whom you or an entity in which you are employed or have a financial
      interest is engaged as a consultant,  recruited, independent contractor or
      otherwise,  or (c) in which you further  covenant  and agree that you will
      not  provide to any other  person or entity the names of any person who is
      then employed by the Company.

      NON-COMPETE  PROVISIONS:  Per the terms of  Section  8 of your  Employment
      Agreement,  you  confirm  that for a period of  eighteen  months  from the
      Termination Date that you will not, either directly or indirectly,  engage
      in any activity in competition  with any product or service of the Company
      (said  competitive  activities  to be  determined  and  identified  at the
      reasonable  discretion of the Company), or harmful or contrary to the best
      interest of the Company, including accepting employment with or serving as
      a consultant to any entity that is in  competition  with the Company.  Per
      Section 8, those companies  deemed to be competitors to StorageTek will be
      identified at the time of your termination.

      EARLY TERMINATION: In the event of your Involuntary Termination,  prior to
      the  Termination  Date,  the Company will pay you the  separation  pay and
      benefits  identified above at the time of your termination,  provided that
      you sign the  Settlement  and Release  Agreement  attached as Exhibit A to
      your Employment  Agreement.  During the period of your employment with the
      Company,  all other terms of your  employment as stated in your Employment
      Agreement,  including the "Change in Control" and  termination for "Cause"
      provisions  will remain in effect  through the  Termination  Date.  If you
      voluntarily   terminate  your  employment  with  the  Company  before  the
      Termination  Date,  then you will not be  entitled  to receive  any of the
      separation benefits set forth in this Retention Agreement.

      EMPLOYMENT EXTENSION:  Should you and the Company reach an agreement on or
      before the  Termination  Date  whereby you would remain an employee of the
      Company beyond the  Termination  Date, then you and the Company will enter
      into a new employment  agreement at that time. The terms and conditions of
      that new employment agreement will then supersede the terms and conditions
      of both this Retention Agreement and the Employment Agreement.

      SETTELMENT AND RELEASE:  The payments recited in this Retention  Agreement
      are  contingent  upon  your  execution  and  delivery  to  the  Company  a
      Settlement  and Release  Agreement  substantially  in the form attached as
      Exhibit A to your Employment Agreement.

      NONDISCLOSURE:  Unless  otherwise  required  to do so by law,  subpoena or
      court order,  you will not in any way  communicate or discuss the terms of
      this Retention  Agreement or the  circumstances  of its execution with any
      person,  other than your attorneys or authorized Company  personnel,  said
      personnel to be explicitly  designated by the Company's President and CEO.
      You understand that this nondisclosure  provision applies  particularly to
      current and former  employees of the Company and the Company's  customers,
      clients and vendors.

      Please sign both copies of this letter below,  indicating your acceptance,
      and return one copy for our files.

Accepted and Agreed:                            Very truly yours,
                                          STORAGE TECHNOLOGY CORP.


--------------------------                      ------------------------------
GARY R. ANDERSON                          David E. Weiss
                                          Chairman, President and
                                          Chief Executive Officer