AMENDED AND RESTATED SEVERANCE AGREEMENT

This Amended and Restated Severance Agreement ("Agreement") is made and entered into by and between LANTRONIX, INC., a Delaware corporation ("Company"), and Reagan Y. Sakai ("Executive"), and is effective as of December 29, 2008.

WHEREAS, Executive is employed as Senior Vice President, Chief Financial Officer of the Company;

WHEREAS, the Company and the Executive entered into that certain Severance Agreement effective as of May 15, 2007 (the "Original Agreement") in order to provide certain benefits to Executive as described therein as an incentive for Executive to serve the Company; and

WHEREAS, the Company and Executive desire to amend, restate and completely supersede the Original Agreement as set forth herein, effective as of the date set forth above.

1.         Termination Without Cause or Resignation With "Good Reason" During Specified Pre-Change Period or Specified Post-Change Period .  If a "Change of Control" (as hereinafter defined) of the Company occurs after the effective date hereof, and either (i) the Company terminates Executive without "Cause" (as hereinafter defined) during the Specified Post-Change Period or the Specified Pre-Change Period (each as defined below), or (ii) Executive resigns with "Good Reason" (as hereinafter defined) during the Specified Post-Change Period or the Specified Pre-Change Period, then, subject to the terms of this Agreement, as a severance benefit and in lieu of all other compensation or damages, the Company shall:

a.         Pay Executive a sum equal to the greater of either (i) twelve (12) months of his base salary in effect on the date of termination or resignation, or (ii) twelve (12) months of his base salary in effect as of (A) the Execution Date (as defined in Paragraph 3(e) below) in the event the Company terminates Executive without Cause or Executive resigns with Good Reason, during a Specified Pre-Change Period, or (B) the date of the Change of Control in the event the Company terminates Executive without Cause or Executive resigns with Good Reason during a Specified Post-Change Period, payable as follows and less required tax deductions and withholdings:  (x) one-half of such amount within thirty (30) days after the later of (1) the date of the consummation of the Change of Control, or (2) the date of such termination or resignation, and (y) one-half of such amount following the end of the Executive's taxable year in which such termination or resignation occurred but on or before the date that is twelve (12) months following the later of (1) the date of the consummation of the Change of Control, or (2) the date of such termination or resignation.  Subject to any delay pursuant to Sections 5 or 8(d) hereof, such payments shall be made to the Executive during the applicable twelve-month period set forth in the preceding sentence on the Company's regular payroll dates (in accordance with the Company's payroll practices in existence on the later of (i) the date of the consummation of the Change of Control, or (ii) the date of such termination or resignation);

b.         Continue to provide Executive, at the Company's expense, all medical, dental insurance coverages and executive automobile benefits provided to him immediately prior to the date of such termination or resignation for a period of twelve (12) months following the date of such termination or resignation, or, if any of such benefits cannot be provided to Executive for such twelve (12) month period under the Company's policies as then in effect or under applicable law (for example, if Executive must elect COBRA continuation coverage to receive such benefits), then the Company shall pay Executive an amount equal to the monthly sums paid on behalf of Executive for such benefits at the time of such termination or resignation for a period beginning on the date Executive's participation in such benefits is disallowed and ending on the date that is no more than twelve (12) months following the date of such termination or resignation, payable in monthly installments within five business days after the end of each month.  If the Executive is terminated without Cause or resigns with Good Reason during a Specified Pre-Change Period, then payments to the Executive under this Paragraph 1(b) shall not begin until after the consummation of the Change of Control associated with such Specified Pre-Change Period and the first payment made to Executive under this Paragraph 1(b) after the consummation of such Change of Control shall include amounts described in this Paragraph 1(b) for the period between the date of such termination or resignation and the consummation of such Change of Control.  Such amounts are subject to withholding and/or taxation;

c.         Subject to the provisions of the Company's stock option plan(s), accelerate the vesting of 100% of all unvested stock options granted to Executive under the Company's stock option or other benefit plan. Subject to the provisions of the Company's stock option plan(s), Executive shall have until the earlier of the following three dates to exercise each of Executive's vested options (including options accelerated pursuant to the foregoing provisions of this paragraph c.):  (i) twenty-four (24) months after the date of Executive's termination or resignation, (ii) for each option, the latest date on which such option could have expired by its original terms under any circumstances, or (iii) for each option, ten (10) years after the original grant date of such option.  Notwithstanding the foregoing provisions of this paragraph c., if and to the extent that any stock option held by Executive is intended to be an "incentive stock option," within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), the post-termination exercise period of such incentive stock option shall not, without the prior written consent of Executive, be extended beyond three (3) months following the date of termination or resignation (or twelve (12) months following the date of termination or resignation if Executive's employment with the Company was terminated, or Executive resigned, as a result of Executive becoming disabled (within the meaning of Section 22(e)(3) of the Code)); and

d.         The Company shall pay to Executive within 30 days of the later of (1) the date of the consummation of the Change of Control, or (2) the date of such termination or resignation, a lump-sum payment, less required tax deductions and withholdings, equal to the larger of either (i) the highest amount of bonus incentive cash compensation paid to Executive for services in any past one year period (if any) or (ii) 100% of the Executive’s Target Bonus (if any) approved by the Board of Directors.

2.         Termination Without Cause Not During Specified Pre-Change Period or Specified Post-Change Period.   If the Company terminates Executive without "Cause" other than during a Specified Pre-Change Period or a Specified Post-Change Period (each as defined below), then, subject to the terms of this Agreement, as a severance benefit and in lieu of all other compensation or damages, the Company shall:

a.         Continue to pay Executive his current base salary, less required tax deductions and withholdings, as in effect on the date of such termination through the end of the week in which the applicable termination occurred and continuing for a period of nine (9) months.  Subject to any delay pursuant to Sections 5 or 8(d) hereof, such payments shall be made to the Executive during such nine-month period on the Company's regular payroll dates (in accordance with the Company's payroll practices in existence on the effective date of the Executive's termination);

b.         Continue to provide Executive, at the Company's expense, all medical, dental insurance coverages and executive automobile benefits provided to him immediately prior to the date of such termination for a period of nine (9) months following the date of such termination, or, if any of such benefits cannot be provided to Executive for such nine (9) month period under the Company's policies as then in effect or under applicable law (for example, if Executive must elect COBRA continuation coverage to receive such benefits), then the Company shall pay Executive an amount equal to the monthly sums paid on behalf of Executive for such benefits at the time of such termination for a period beginning on the date Executive's participation in such benefits is disallowed and ending on the date that is nine (9) months following the date of such termination, payable in monthly installments within five business days after the end of each month. Such sums are subject to withholding and/or taxation;

c.         Allow Executive to exercise any and all stock options that were granted to Executive and vested as of the date of termination.  Subject to the provisions of the Company's stock option plan(s), Executive shall have until the earlier of the following three dates to exercise each of Executive's vested options:  (i) eighteen (18) months after the date of Executive's termination, (ii) for each option, the latest date on which such option could have expired by its original terms under any circumstances, or (iii) for each option, ten (10) years after the original grant date of such option.  Notwithstanding the foregoing provisions of this paragraph c., if and to the extent that any stock option held by Executive is intended to be an "incentive stock option," within the meaning of Section 422 of the Code, the post-termination exercise period of such incentive stock option shall not, without Executive's prior written consent, be extended beyond three (3) months following the date of termination (or twelve (12) months following the date of termination if Executive's employment with the Company was terminated as a result of Executive becoming disabled (within the meaning of Section 22(e)(3) of the Code)); and

d.         Pay to Executive a prorated bonus, less applicable tax withholdings and deductions, based on the percentage of the current bonus period during which Executive was included in the bonus plan and the actual bonus pool amount for the position granted by the Company’s Board of Directors for the current bonus period, payable within five business days such bonuses are calculated and paid generally.

3.          Definitions .

a.          Change of Control .  For purposes of this Agreement, the term "Change of Control" means the occurrence of any of the following events, but only if such event also constitutes a "change in control event" as defined in Treasury Regulation Section 1.409A-3(i)(5)(i):

(i)           Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) 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; or

(iii)         The consummation of a merger or consolidation of the Company with any other corporation, other than 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 seventy percent (70%) 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.

c.          Resignation with Good Reason .  Executive may resign at any time with or without Good Reason. For purposes of this Agreement, Executive shall be de