On January 20, 2022, Lantronix, Inc. entered into a lease agreement with Jet 55 Property Owner LLC (Landlord). Pursuant to the Lease, the Company will lease approximately 65,983 square feet in a building located at 12755 State Highway 55, Plymouth, Minnesota to house the operations of the Transition Networks businesses purchased from Communications Systems, Inc. in August 2021 and to serve as a central warehouse and shipping hub for all USA-based business of Lantronix. The Company will take possession of the Premises commencing on the date of the Lease.

Beginning on May 1, 2022 (the “Rent Commencement Date”), the initial basic rent payable under the Lease will be $46,737.96 per month (with the first three months of rent abated), subject to annualized rent increases of 3% over the period of the Lease. The initial term of the Lease (the “Initial Term”) commences on the date of the Lease and ends on the last day of the 123rd full calendar month after the Rent Commencement Date, or July 31, 2032. The aggregate basic rent payable under the Lease during the Initial Term is approximately $6.5 million.

The Company is also obligated to pay as additional rent its proportionate share of Landlord's operating expenses, including property taxes. The Lease contains an option for the Company to extend the lease for one 60-month extension period at the net rent rate for the last year of the Initial Term or the then-market net rent, as determined pursuant to the Lease, as well as a right of first offer for the Company on any space adjacent to the Premises during the Initial Term. The Company also has the right to terminate the Lease at the end of the 87th full calendar month after the Rent Commencement Date (the “Early Termination Date”) by delivery of a written notice at least six months prior to the Early Termination Date and payment of a termination fee.

The Lease requires the Company to pay Landlord a $84,806 security deposit to secure the Company's obligations under the Lease. In addition, the Landlord will reimburse the Company for its actual out-of-pocket costs for certain tenant improvements to the Premises, with an allowance of up to $1,500,000 to be paid in three installments in accordance with the Lease. The Company has entered into a standard subordination, non-disturbance, and attornment agreement with the Landlord's lender.