Exhibit 10.1

Wachovia Bank, N.A.

2211 Michelson, 2nd Floor

Irvine, California 92612

June 26, 2008

Dan Moses

Chief Financial Officer

STEC, Inc.

3001 Daimler Street

Santa Ana, CA 92705

 

Re: $35 Million Revolving Credit Facility Commitment to STEC, Inc.

Dear Mr. Moses,

Wachovia Bank, National Association (hereafter “Wachovia” or “Bank”) is pleased
to offer you a commitment to lend as more fully described in the Summary of
Proposed Terms and Conditions attached hereto as Annex A (the “Term Sheet”, and
together with this letter, the “Commitment” or “Commitment Letter”).

Wachovia’s obligations under this Commitment are conditioned on the fulfillment
to Wachovia’s sole satisfaction of each term and condition referenced by this
Commitment. These terms and conditions are not exhaustive, and this Commitment
is subject to certain other terms and closing conditions customarily required by
Wachovia for similar transactions and may be supplemented prior to closing based
upon Wachovia’s investigation and/or as disclosure of Borrower’s circumstances
so dictate. This Commitment will expire unless it is closed on or before
July 30, 2008. This Commitment Letter shall not survive closing.

Wachovia has made this Commitment based upon the information supplied by STEC,
Inc. (the “Borrower”). Wachovia shall have the right to cancel this Commitment,
whereupon Wachovia shall have no obligations hereunder, in the event of: (i) a
material adverse change in the business, financial condition or operations of
Borrower or any Guarantor (as defined herein), (ii) a material change in the
accuracy of the information, representations, exhibits or other written
materials submitted by Borrower in connection with its request for financing;
(iii) Borrower or any Guarantor shall file or make or have filed or made against
it a petition in bankruptcy, an assignment for the benefit of creditors or an
action for the appointment of a receiver, or shall become insolvent, however
evidenced or (iv) there is a material change in the structure or ownership of
the Borrower.

This Commitment supersedes all prior commitments and proposals with respect to
this transaction, whether written or oral, including any previous loan proposals
made by Wachovia or anyone acting with its authorization. No modification shall
be valid unless made in writing and signed by an authorized officer of Wachovia.
This Commitment is not assignable, and no party other than Borrower shall be
entitled to rely on this Commitment.

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Dan Moses

June 26, 2008

Page 2

Please indicate your acceptance of this offer and the terms and conditions
contained herein by signing below and returning one executed copy of this
Commitment Letter together with one executed copy of the letter to the
undersigned dated June 25, 2008 regarding fees (the “Fee Letter”) to the
undersigned. This Commitment shall expire unless the acceptance of this
Commitment Letter and the Fee Letter is received by the undersigned on or before
5:00pm, Pacific Daylight Time, June 27, 2008.

Thank you for allowing Wachovia to be of service. Please do not hesitate to call
us if we can be of further assistance.

Sincerely,

 

WACHOVIA BANK, NATIONAL ASSOCIATION By:   /s/ Kenneth C. Coulter  

Kenneth C. Coulter

Vice President

Risk Manager

(949) 567-6289

The above Commitment Letter is agreed to and accepted on the terms and
conditions provided in this letter.

STEC, Inc.

 

By:    /s/ Dan Moses       June 26, 2008

Name: Dan Moses

     

Date

Title: Chief Financial Officer

     

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ANNEX A

SUMMARY OF PROPOSED TERMS AND CONDITIONS

BORROWER:

STEC, Inc. (the “Borrower”)

AMOUNT:

The amount of this facility shall be $35,000,000.00 (“Facility Amount”) in the
form of a revolving line of credit (the “Facility”).

PURPOSE:

This Facility shall be used to finance working capital needs.

TERM:

This Facility shall have a term of two years. Borrower may borrow, repay and
reborrow from time to time provided the total indebtedness does not exceed the
Facility Amount. Bank’s commitment to lend shall terminate on the second
anniversary of the Closing Date of the Facility.

DOCUMENTS: This Commitment does not set forth all the terms and conditions of
the Facility offered herein. As a condition of closing, Wachovia will require
the execution of definitive loan documentation, prepared by Bank’s legal
counsel, which will contain terms and conditions not set forth herein, including
such representations, warranties, affirmative and negative covenants,
indemnities, closing conditions, defaults and remedies as are typically required
by Wachovia and/or deemed appropriate for this specific transaction. The failure
of Borrower and Wachovia to reach agreement on the loan documents shall not be
deemed a breach by Wachovia of this Commitment. Unless Wachovia agrees otherwise
in writing, completion of all documents is a condition of closing.

INTEREST RATE:

Interest rates in connection with the Facility will be as specified on Schedule
I attached hereto.

The interest rate will be, for each applicable interest period, the rate
selected by the Borrower from the following:

 

  •  

The Base Rate plus the Applicable Interest Margin as outlined in Schedule I, as
that rate may change from time to time. “Base Rate” shall be the rate announced
by Wachovia from time to time as its Prime Rate, and is not necessarily the
lowest rate offered by Wachovia; or

 

  •  

1-month, 3-month, 6-month or 9-month LIBOR plus the Applicable Interest Margin
as outlined in Schedule I. “LIBOR” is the rate for U.S. dollar deposits of that
many months maturity as reported on Reuters Screen LIBOR01 Page or any successor
thereto as of 11:00 a.m., London time, on the second London business day before
the relevant interest period begins (or if not so reported, then as determined
by the Bank from another recognized Bank or interbank quotation).

 

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REPAYMENT:

This facility shall be repayable in quarterly payments of accrued interest only
until the maturity date when all remaining principal and interest shall be due.
Borrower may borrow, repay and reborrow principal under this facility.

FEES:

Borrower shall pay to the Bank an availability fee and a commitment fee as
provided in the Fee Letter.

GUARANTORS:

The obligations of the Borrower under the Facility, under any hedging agreements
entered into between any Loan Party (as defined below) and the Bank (or any
affiliate thereof) at the time such hedging agreement is executed and under any
treasury management arrangements between any Loan Party and the Bank will be
unconditionally guaranteed, on a joint and several basis, by each existing and
subsequently acquired or organized direct and indirect material subsidiary of
the Borrower (each a “Guarantor”; and such guarantee being referred to herein as
a “Guarantee”); provided that Guarantees by foreign subsidiaries will be
required only to the extent such Guarantees would not have material adverse tax
consequences for the Borrower. All Guarantees shall be guarantees of payment and
not of collection. The Borrower and the Guarantors are herein referred to as the
“Loan Parties” and, individually, as a “Loan Party.”

ACCORDION:

At any time prior to the expiration of Facility, and so long as no Default or
Event of Default shall have occurred which is continuing, the Borrower may elect
to increase the aggregate Facility Amount to an amount not exceeding
$50,000,000, provided that (i) the Borrower shall give adequate notice to be
determined, (ii) the Bank shall have the first right (but not the obligation) to
subscribe to the proposed increase in the Facility Amount, by giving adequate
notice to be determined, and only if Bank does not exercise such election may
the Borrower elect to add new lenders, (iii) the Bank shall not be required to
increase its commitment unless it shall have expressly agreed to such increase
in writing, (iv) the addition of new lenders shall be subject to approval by
both the Borrower and the Bank, which approval shall not be unreasonably
withheld, and shall be subject to certain minimum commitment amounts, (v) the
Borrower shall execute and deliver such additional or replacement Notes and the
Borrower and the new lenders shall execute and deliver such other documentation
(including evidence of proper authorization) as may be reasonably requested by
the Bank or any new lender, (vi) the Bank shall not have any right to decrease
its commitment as a result of such increase of the aggregate Facility Amount,
(vii) the Bank shall have the right to control the syndication of the increase
in the Facility Amount; provided that the Bank shall have no obligation to
arrange, find or locate any lender or new bank or financial institution to
participate in any unsubscribed portion of such increase in the aggregate
Facility Amount, (viii) the Bank shall be appointed as the administrative agent
for the Facility and shall receive an administrative agent fee to be mutually
agreed, and (ix) such

 

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option to increase the Facility Amount may only be exercised once. The Borrower
shall be required to pay (or to reimburse) any breakage costs incurred by Bank
in connection with the need to reallocate existing loans following any increase
in the Facility Amount pursuant to this provision.

FINANCIAL STATEMENTS:

Borrower and/or Guarantor, as indicated below, shall furnish to Wachovia the
following financial information, in each instance prepared in accordance with
generally accepted accounting principles consistently applied and otherwise in
form (with original signatures) and substance satisfactory to Bank and in the
case of Annual Financial Statements and Periodic Financial Statements, shall be
accompanied by management discussion and analysis thereof:

 

  •  

Annual Financial Statements. As soon as available, but in any event within
ninety (90) days after the end of each fiscal year of the Borrower, Borrower
shall deliver to the Bank a copy of the consolidated balance sheet of the
Borrower and its consolidated subsidiaries as at the end of such fiscal year and
the related consolidated statements of income, cash flows and retained earnings
of the Borrower and its consolidated subsidiaries for such year, audited by a
firm of independent certified public accountants reasonably acceptable to the
Bank, setting forth in each case in comparative form the figures for the
preceding fiscal year, reported on without a “going concern” or like
qualification, exception or assumption, or qualification or assumption
indicating that the scope of the audit was inadequate to permit such independent
certified public accountants to certify such financial statements without such
qualification.

 

  •  

Quarterly Financial Statements. As soon as available and in any event within
forty-five (45) days after the end of each fiscal quarter of the Borrower, a
company-prepared consolidated balance sheet of the Borrower and its consolidated
subsidiaries as at the end of such period and related company-prepared
consolidated statements of income, cash flows and retained earnings for the
Borrower and its consolidated subsidiaries for such quarterly period and for the
portion of the fiscal year ending with such period, in each case setting forth
in comparative form the figures for the corresponding period or periods of the
preceding fiscal year and the figures for the corresponding period or periods as
set forth in the most recent budget.

 

  •  

Budget. As soon as practicable, and in any event within forty-five (45) days
after the end of each fiscal year, a consolidated budget and cash flow
projections on a quarterly basis of the Borrower and its consolidated
subsidiaries for the next succeeding fiscal year, in form and detail reasonably
acceptable to the Bank, such budget to be prepared by the Borrower in a manner
consistent with GAAP and to include an operating and capital budget and a
summary of the material assumptions made in the preparation of such budget. Such
budget shall be accompanied by a certificate of the managing member or chief
financial officer of the Borrower to the effect that the budgets and other
financial data are based on reasonable estimates and assumptions, all of which
are fair in light of the conditions which existed at the time the budget was
made, have been prepared on the basis of the assumptions stated therein, and
reflect, as of the time so furnished, the reasonable estimate of the Borrower
and its subsidiaries of the budgeted results of the operations and other
information budgeted therein.

 

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CONDITIONS TO CLOSING:

 

  •  

Opinion of Counsel. On or prior to the closing date of the Facility, Borrower
will provide Wachovia with an opinion letter, in form and substance satisfactory
to Wachovia, from an attorney acceptable to Wachovia. The opinion will provide,
to Wachovia’s satisfaction, that the Borrower and Guarantors are duly organized
and validly existing under the laws of the jurisdictions where Borrower and any
Guarantors are organized, are qualified to transact business, and have full
power and authority to undertake the activities contemplated by the Facility;
that all Loan Documents have been duly authorized, executed and delivered by
Borrower and Guarantors; and that the loan and its terms do not violate any laws
and such other matters and opinions as Wachovia reasonably requests.

 

  •  

Operating Documents. Wachovia shall have received from each Borrower and each
Guarantor, as applicable, a copy of Borrower’s and each Guarantor’s by-laws,
partnership agreement, or operating agreement, certified as to completeness and
accuracy by an appropriate officer, manager or partner of Borrower and each
Guarantor, as applicable.

 

  •  

Charter Documents. Wachovia shall have received from Borrower and each Guarantor
a copy of its Articles of Incorporation or Organization, as appropriate, for the
legal entity and all other charter documents of Borrower and each Guarantor, as
applicable, all certified by the Secretary of State of the state of Borrower’s
and each Guarantor’s incorporation or organization, as appropriate.

 

  •  

ERISA. Each employee pension benefit plan, as defined in ERISA, maintained by
Borrower or each Guarantor, as applicable meets, as of date hereof, the minimum
funding standards of ERISA and all applicable regulations thereto and
requirements thereof, and of the Internal Revenue Code of 1986, as amended. No
“Prohibited Transaction” or “Reportable Event” (as both terms are defined by
ERISA) has occurred with respect to any such plan.

 

  •  

Certificate of Good Standing. Wachovia shall have received from Borrower and
each Guarantor, as applicable, a certificate of the Secretary of State of the
state of Borrower’s and each Guarantor’s incorporation or organization, as
applicable, as to the good standing of Borrower and each Guarantor.

 

  •  

Certificate of Incumbency. Wachovia shall have received from Borrower and each
Guarantor, as applicable, a certificate of an appropriate officer of Borrower
and each Guarantor as to the incumbency and signatures of the officers of
Borrower and each Guarantor executing the Loan Documents.

 

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  •  

Borrowing Authorization. Bank shall have received from Borrower and each
Guarantor, as applicable, a borrowing resolution or other proof of authority to
enter into the transactions contemplated herein.

 

  •  

Deposit Account. Borrower shall create a demand deposit account at Wachovia into
which advance of the loan may be credited and from which monthly payments shall
be automatically deducted.

 

  •  

Due Diligence. The Bank not becoming aware of any material information or other
matter that is inconsistent in a material and adverse manner with any previous
due diligence, information or matter (including any financial information and
projections previously delivered to the Bank).

CONDITIONS TO ALL EXTENSIONS OF CREDIT:

Each extension of credit under the Facility will be subject to the (a) absence
of any default and (b) continued accuracy of representations and warranties.

REPRESENTATIONS AND WARRANTIES:

Usual and customary for facilities of this type and such others as may be
reasonably requested by the Bank, including, without limitation, the following
(which will be applicable to the Borrower and its subsidiaries and be subject to
materiality thresholds and exceptions to be mutually agreed): corporate status,
financial statements; capital structure; corporate power and authority; no
default; no conflict with laws or material agreements; enforceability; absence
of material litigation, environmental regulations and liabilities; ERISA;
necessary consents and approvals; compliance with all applicable laws and
regulations including Regulations U and X, Investment Company Act, the Patriot
Act, environmental laws and as to not being a sanctioned person; payment of
taxes and other obligations; ownership of properties; intellectual property;
liens; insurance; solvency; absence of any material adverse change; senior debt
status; investments, location of assets; labor matters; material contracts; no
burdensome restrictions; and accuracy of disclosure.

 

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AFFIRMATIVE COVENANTS:

Usual and customary for facilities of this type and such others as may be
reasonably requested by the Bank, including, without limitation, the following
(which will be applicable to the Borrower and its subsidiaries and be subject to
materiality thresholds and exceptions to be mutually agreed): use of proceeds;
payment of taxes and other obligations; continuation of business and maintenance
of existence and rights and privileges; maintenance of all material contracts,
necessary consents, approvals, licenses and permits; compliance with laws and
regulations (including environmental laws, ERISA and the Patriot Act);
maintenance of property and insurance (including hazard and business
interruption insurance); maintenance of books and records; right of the Bank to
inspect property and books and records; notices of defaults, litigation and
other material events; financial reporting (as outlined in this Commitment);
additional Guarantors and further assurances.

NEGATIVE COVENANTS:

Usual and customary for facilities of this type and such others as may be
reasonably requested by the Bank, including, without limitation, the following
(which will be applicable to the Borrower and its subsidiaries and be subject to
materiality thresholds and exceptions to be mutually agreed): limitation on
debt; limitation on liens; limitation on further negative pledges; limitation on
investments; limitation on dividends, distributions, issuances of equity
interests (except for common stock issuances), redemptions and repurchases of
equity interests; limitation on mergers, acquisitions and asset sales;
limitation on contingent obligations and guarantees; limitation on
sale-leaseback transactions; limitation on prepayments, redemptions and
purchases of subordinated and certain other debt; limitation on transactions
with affiliates; limitation on dividend and other payment restrictions affecting
subsidiaries; limitation on changes in line of business, fiscal year and
accounting practices; limitation on speculative transactions; limitation on
amendment of organizational documents and material contracts; limitation on
additional designated senior debt.

FINANCIAL COVENANTS:

Usual and customary for facilities of this type and such others as may be
reasonably requested by the Bank, including, without limitation, the following:

 

  •  

Maximum Leverage Ratio (defined as Total Debt to EBITDA) of not more than 2.5 to
1.0 until the quarter ended December 31, 2008, or 2.0 to 1.0 thereafter; and

 

  •  

Minimum Liquidity Ratio (defined as unencumbered cash divided by Total
Liabilities) of not less than 20%.

The financial covenants will apply to the Borrower and its subsidiaries on a
consolidated basis.

EVENTS OF DEFAULT:

Usual and customary for facilities of this type and such others as may be
reasonably requested by the Bank, including, without limitation, the following
(with materiality thresholds, exceptions and grace periods to be mutually
agreed): non-payment of obligations; breach of representation

 

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or warranty; non-performance of covenants and obligations; default on other
material debt (including secured hedging agreements); change of control (to be
defined as mutually agreed) bankruptcy or insolvency; ERISA; material judgments;
and termination or default under material contracts or licenses.

YIELD PROTECTION AND INCREASED COSTS:

Customary for facilities of this type, including, without limitation, in respect
of breakage or redeployment costs incurred in connection with prepayments,
changes in capital adequacy and capital requirements or their interpretation,
illegality, unavailability, reserves without proration or offset and payments
free and clear of withholding or other taxes.

INDEMNIFICATION:

The Loan Parties will indemnify the Bank and its respective affiliates,
partners, directors, officers, agents and advisors and hold them harmless from
and against all liabilities, damages, claims, costs, expenses (including
reasonable fees, disbursements, settlement costs and other charges of counsel)
relating to the Transactions or any transactions related thereto and the
Borrower’s use of the loan proceeds or the commitments; provided that such
indemnity will not, as to any indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such indemnitee.

COSTS:

Borrower shall pay all costs, expenses and fees (including, without limitation,
any reasonable attorneys’ fees and expenses) associated with this transaction,
regardless of whether the transaction actually closes. Bank has engaged outside
legal counsel to represent Bank in the preparation of loan documentation and
closing of the transaction contemplated herein. Bank is not providing legal
advice or services to Borrower.

GOVERNING LAW:

California

BANK COUNSEL:

Mayer Brown LLP

 

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Annex A

Schedule I

PRICING GRID

The Applicable Interest Margins with respect to the Facility shall be based on
the Total Leverage Ratio pursuant to the following grid:

 

Total Debt/EBITDA

   LIBOR
Margin     Base
Margin  

>1.50 x, but <2.50x

   1.20 %   -1.00 %

>1.00 x, but <1.50x

   0.95 %   -1.25 %

<1.00x

   0.70 %   -1.50 %

 

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