Exhibit 10.3


 





LANTRONIX
FORM OF CHANGE IN CONTROL AGREEMENT


 


 


Fathi Hakam


Vice President, Engineering


 


 


Re: Change
In Control Agreement


 


Dear Fathi:


 


In connection with your employment
at Lantronix, Inc (the “Lantronix” or “Company”) the undersigned parties hereby agree on the following provisions
relating to a Change in Control of the Company.


 


CHANGE IN CONTROL: 


 


In the event your
employment with the Company is terminated by you for Good Reason or by the Company without Cause within 60 days prior to or 12
months following a Change in Control (as defined below), then subject to your execution and non-revocation of a release of claims in
a form provided by the Company, in keeping with past practice, and resignation from any Company affiliated board positions, all
unvested Company equity awards that you then hold shall fully vest and be settled or become exercisable, as applicable, and you will
be entitled to receive (as applicable, the “Change-in-Control Severance Payment”):


 


(a)          In
the event of a Change in Control where the transaction results in Lantronix shareholders receiving at closing consideration with a value
of less than a value of $5 per share on a fully diluted basis, in lieu of any other severance benefits, you will be entitled to receive
severance pay in a total amount equal to the sum of (i) six (6) months of your then current Base Salary, plus (ii) an amount equal to
fifty percent (50%) of your previous 12 months bonus. The Company will also provide you, your spouse and your eligible dependents with
continued group health, dental and vision coverage pursuant to the provisions of COBRA at the level in effect and upon substantially
the same terms and conditions as existed under applicable insurance plans immediately prior to the date of termination of your employment
(including without limitation contributions required by you, if any, for such benefits), for the first six (6) months following the date
of termination your employment without Cause or for Good Reason or until you become eligible for comparable benefits from another employer.


 


(b)          In
the event of a Change in Control where the transaction results in Lantronix shareholders receiving at closing consideration with a value
of $5 per share or greater on a fully diluted basis, in lieu of any other severance benefits, you will be entitled to receive severance
pay in a total amount equal to the sum of (i) twelve (12) months of your then current Base Salary, plus (ii) an amount equal to one hundred
percent (100%) of your then current target bonus. The Company will also provide you, your spouse and your eligible dependents with continued
group health, dental and vision coverage pursuant to the provisions of COBRA at the level in effect and upon substantially the same terms
and conditions as existed under applicable insurance plans immediately prior to the date of termination of your employment (including
without limitation contributions required by you, if any, for such benefits), for the first twelve (12) months following the date of
termination your employment without Cause or for Good Reason or until you become eligible for comparable benefits from another employer.


 


Any Change-of-Control
Severance Payments shall be less required tax deductions and withholdings and shall be paid in a lump sum on the 53rd day following
your date of termination or such later date as is required to avoid potentially adverse taxation under Internal Revenue Code Section 409A
as described under the caption “Section 409A” below. Change-of-Control Severance Payments may also be subject to reduction
required to avoid potentially adverse taxation under Internal Revenue Code Section 280G as described under the caption “Section
280G” below.


 


 


 






    	 	1	 



     


    

 


For purposes of this
letter, “Change in Control” shall mean the occurrence of any of the following events: (i)  any “person” (as such
term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than
the TL Parties, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or, more of the total voting power represented by the Company’s
then outstanding voting securities; or (ii) the consummation of the sale or disposition by the Company of all or substantially all of
the Company’s assets, other than to the TL Parties; (iii) the consummation of a merger or consolidation of the Company with any
other corporation, other than (A) a merger or consolidation with the TL Parties or (B) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or
consolidation; or (iv) a majority of the members of the Board are replaced during any twelve-month period by directors whose appointment
or election is not endorsed by a majority of the Board or the TL Parties before the date of appointment or election. In no event shall
a “Change in Control” be deemed to have occurred for purposes of this letter solely because the Company engages in an internal
reorganization, which may include a transfer of assets to, or a merger or consolidation with, one or more affiliates.


 


For purposes of this
letter, “TL Parties” shall mean, either individually or collectively, Bernhard Bruscha, TL Investments.


 


SECTION 409A: 


 


This letter is intended
to comply with Section 409A of the Internal Revenue Code (“Section 409A”) or an exemption thereunder and shall be construed
and administered in accordance with Section 409A. Notwithstanding any other provision of this offer letter, payments provided under this
letter may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this
letter that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term
deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each instalment payment provided
under this letter shall be treated as a separate payment. Any payments to be made under this letter upon a termination of employment shall
only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations
that the payments and benefits provided under this letter comply with Section 409A and in no event shall the Company be liable for all
or any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of noncompliance with Section
409A.


 


Notwithstanding any
other provision of this letter, if any payment or benefit provided to you in connection with termination of employment is determined to
constitute “nonqualified deferred compensation” within the meaning of Section 409A and you are determined to be a “specified
employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to
occur following the six-month anniversary of your termination date (the “Specified Employee Payment Date”) or, if earlier,
on the date of your death. The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date
shall be paid to you in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without
delay in accordance with their original schedule. To the extent necessary to avoid application of any tax under Section 409A applying
to any compensation or benefit included herein that constitutes nonqualified deferred compensation, the definition of “Change in
Control” shall be reformed such that a transaction will only qualify as a Change in Control if it also constitutes a “change
in control event” as defined under Section 409A.


 


SECTION 280G: 


 


Notwithstanding any
other provision of this letter or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided
or to be provided by the Company or its affiliates to you or for your benefit pursuant to the terms of this letter or otherwise (“Covered
Payments”) constitute parachute payments (“Parachute Payments”) within the meaning of Section 280G of the Internal Revenue
Code (“Section 280G”) and would, but for this section be subject to the excise tax imposed under Section 4999 of the Internal
Revenue Code (or any successor provision thereto) (“Section 4999”) or any similar tax imposed by state or local law or any
interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments,
a calculation shall be made comparing (i) the Net Benefit (as defined below) to you of the Covered Payments after payment of the Excise
Tax to (ii) the Net Benefit to you if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax.
Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum
extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax (that amount, the “Reduced Amount”).
“Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment,
and excise taxes.


 


 


 






    	 	2	 



     


    

 


Any such reduction
shall be made in accordance with Section 409A and the following: (i) the Covered Payments which do not constitute nonqualified
deferred compensation subject to Section 409A shall be reduced first; and (ii) all other Covered Payments shall then be reduced as
follows: (A) cash payments shall be reduced before non-cash payments; and (B) payments to be made on a later payment date shall be
reduced before payments to be made on an earlier payment date.


 


Any determination required
under this section shall be made in writing in good faith by the accounting firm that was the Company’s independent registered public
accounting firm immediately before the change in control (the “Accountants”), which shall provide detailed supporting calculations
to the Company and you as requested by the Company or you. The Company and you shall provide the Accountants with such information and
documents as the Accountants may reasonably request in order to make a determination under this section. For purposes of making the calculations
and determinations required by this section, the Accountants may rely on reasonable, good faith assumptions and approximations concerning
the application of Section 280G and Section 4999. The Accountants’ determinations shall be final and binding on the Company and
you. The Company shall be responsible for all fees and expenses incurred by the Accountants in connection with the calculations required
by this section.


 


This Agreement shall
expire on May 31, 2024. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Any
dispute hereunder, including with respect to validity, construction and breach shall be resolved exclusively by arbitration, before a
single arbitrator appointed by the Judicial Arbitration Mediation Service (“JAMS”) in accordance with the JAMS Streamlined
Arbitration Rules. The Arbitration shall be conducted in Orange County and if that venue is not available than at a nearest JAMS facility.


 


Please indicate your
acceptance of this Agreement by executing a copy of this Agreement at the space provided below and returning the same to our attention.


 


 


 


LANTRONIX, INC.








	 	 	 	 
	 	 	 	 
	By:	/s/ Jeremy Whitaker	 	04 / 25 / 2021
	 	Jeremy Whitaker	 	Date
	 	Chief Financial Officer	 	 






 


 


 


 

























ACCEPTED AND
AGREED TO:





	 	 	 	 
	 	 	 	 
	By:	/s/ Mohammed Fathi Hakam	 	04 / 23 / 2021
	 	Fathi Hakam	 	Date
	 	   	 	 





 


 


 


 











 






    	 	3