DATA I/O CORP

The five-year Notes mature on October 20, 2031, unless earlier converted, and bears interest at a rate of 5.0% per annum, payable semiannually on November 1 and May 1, beginning on the first such date after the original issue date of the Notes, on each conversion date (as to that principal amount then being converted), and on the maturity date. On each anniversary of the original issue date, the interest rate then in effect shall increase by one percentage point effective on such anniversary. The interest is paid in cash. The Purchasers may convert their respective Notes into shares of either Common Stock or Preferred Stock at the conversion price. The conversion price for Common Stock is $2.68 per share of Common Stock. The conversion price for Preferred Stock is $1,000 per share of Preferred Stock. If the Company fails to hold a Shareholder Meeting by the Shareholder Meeting Deadline (as such terms are defined in the Notes), the Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount at the rate of 8% per annum, subject to adjustment provisions of the Notes. Upon an event of default, the default interest rate increases to 18% per annum. If shareholders approve a proposal to be submitted at a special meeting of shareholders, the Notes will automatically convert into either Common Stock or Preferred Stock, as applicable. The shareholder proposal seeks approval of the potential issuance of 20% or more of the Company’s issued and outstanding common stock at prices that may be less than the Nasdaq Minimum Price (as defined by NASDAQ) to the holders of the Notes and of any change of control that may be deemed to occur in connection with such issuance.

The foregoing description of the Notes does not purport to be complete and is qualified in its entirety by reference to the full text of the form of Convertible Debenture for Common Stock, a copy of which is filed herewith as Exhibit 10.2, and the form of Convertible Debenture for Preferred Stock, a copy of which is filed herewith as Exhibit 10.3, both of which are incorporated herein by reference.