CONVERTIBLE PROMISSORY NOTE
AND SECURITY AGREEMENT

US $50,000
Las Vegas
Nevada
 
April 21, 2009

For good and valuable consideration, Secured Diversified Investment, Ltd., a
Nevada Corporation, and Galaxy Gaming, Inc., a Nevada corporation,
(collectively, “Maker”), hereby jointly and severally makes and delivers this
Promissory Note and Security Agreement (this “Note”) in favor of The Kleemann
Family 2004 Revocable Trust, or its assigns (“Holder”), and hereby agree as
follows:

1.           Principal Obligation and Interest.  For value received, Maker
promises to pay to Holder at 526 Via Sinuosa, Santa Barbara, CA 93110, or at
such other place as Holder may designate in writing, in currently available
funds of the United States, the principal sum of Fifty Thousand United States
Dollars.  Maker’s obligation under this Note shall accrue interest at the rate
of Twelve Percent (12.0%) per annum from the date hereof until paid in
full.  Interest shall be computed on the basis of a 365-day year or 366-day
year, as applicable, and actual days lapsed.

2.           Payment Terms.

a. All accrued interest then outstanding shall be due and payable by the Maker
on a monthly basis, on or before fifteen (15) days from the end of each calendar
month.

b. All payments shall be applied first to late charges, then to interest, then
to principal and shall be credited to the Maker's account on the date that such
payment is physically received by the Holder.

c. All principal and accrued interest then outstanding shall be due and payable
by the Maker to the Holder on or before One Hundred and Eighty (180) Days from
the date of issuance of this Note, unless extended at the option of Holder for
an additional term of one hundred and eighty (180) days upon written notice to
Maker delivered not less than ten (10) days prior to the expiration of the
initial term.

d. Maker shall not have the right to prepay all or any part of the principal
under this Note prior to the expiration of the initial term of 180 days.  If
this Note is extended by Holder in accordance with subsection (c), above,
thereafter Maker shall have the right to prepay all or any part of the principal
under this Note without penalty upon not less than ten (10) days prior written
notice to Holder.

e. Holder may, upon not less than five (5) days written notice to Maker, convert
all or part of the then unpaid principal and accrued interest balance due of
this Note into common stock of Secured Diversified Investment, Ltd. as per the
terms of that certain Conversion and Registration Rights Agreement of even date
and executed contemporaneously herewith (the “Agreement”).
 
 
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3.           Grant of Security Interest.  As collateral security for the prompt,
complete, and timely satisfaction of all present and future indebtedness,
liabilities, duties, and obligations of Maker to Holder evidenced by or arising
under this Note, and including, without limitation, all principal and interest
payable under this Note and all attorneys’ fees, costs and expenses incurred by
Maker in the collection or enforcement of the same (collectively, the
“Obligations”), Maker hereby pledges, assigns and grants to Holder a continuing
security interest and lien in all of Maker’s right, title and interest in and to
the property, whether now owned or hereafter acquired by Maker and whether now
existing or hereafter coming into existence or acquired, including the proceeds
of any disposition thereof, described on Exhibit “A” attached hereto and
incorporated herein by this reference (collectively, the “Collateral”).  As
applicable, the terms of this Note with respect to Maker’s granting of a
security interest in the Collateral to Holder shall be deemed to be a security
agreement under applicable provisions of the Uniform Commercial Code (“UCC”),
with Maker as the debtor and Holder as the secured party.

4.           Perfection.  Upon the execution and delivery of this Note, Maker
authorizes Holder to file such financing statements and other documents in such
offices as shall be necessary or as Holder may reasonably deem necessary to
perfect and establish the relative priority of the liens granted by this Note,
including any amendments, modifications, extensions or renewals thereof. Maker
agrees, upon Holder’s request, to take all such actions as shall be necessary or
as Holder may reasonably request to perfect and establish the relative priority
of the liens granted by this Note, including any amendments, modifications,
extensions or renewals thereof. Maker shall cooperate fully with Holder in
establishing and maintaining Holder’s perfection of Holder’s security interest
in the Collateral, including notifying and keeping Holder apprised of the
current location of all of the Collateral, providing Holder with current
information including any identifying serial numbers with respect to that
portion of the Collateral consisting of the tables and related software,
electronic equipment and intellectual property that comprise Maker’s primary
product (each a “Gaming Unit” and, collectively, the “Gaming Units”).

5.           Representations and Warranties of Maker.  Maker hereby represents
and warrants the following to Holder:

a. Maker and those executing this Note on its behalf have the full right, power,
and authority to execute, deliver and perform the Obligations under this Note,
which are not prohibited or restricted under the articles of incorporation or
bylaws of Maker.  This Note has been duly executed and delivered by an
authorized officer of Maker and constitutes a valid and legally binding
obligation of Maker enforceable in accordance with its terms.

b. The execution of this Note and Maker’s compliance with the terms, conditions
and provisions hereof does not conflict with or violate any provision of any
agreement, contract, lease, deed of trust, indenture, or instrument to which
Maker is a party or by which Maker is bound, or constitute a default thereunder
or result in the imposition of any lien, charge, encumbrance, claim or security
interest of any nature whatsoever upon any of the Collateral.

 
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c. The security interest granted hereby in and to the Collateral constitutes a
present, valid, binding and enforceable security interest as collateral security
for the Obligations.

d. The approximate cost per Gaming Unit is $1,200 USD.

6.            Covenants of Maker.  For so long as any Obligations remain
outstanding:

a. Maker shall use the proceeds of this Note solely for the purpose of the
manufacture, delivery and installation of Gaming Units;

b. Maker shall not sell, assign or transfer any of the Collateral, or any part
thereof or interest therein;

c. Maker shall pay or cause to be paid promptly when due all taxes and
assessments on the Collateral; and

d. Maker shall keep Holder apprised, in writing, as to the current location of
all of the Collateral, providing Holder with current information including any
identifying serial numbers with respect to that portion of the Collateral
consisting of the Gaming Units so that Holder may perfect and maintain the
relative priority of its security interest therein.

7.           Use of Collateral.  For so long as no event of default shall have
occurred and be continuing under this Note, Maker shall be entitled to use and
possess the Collateral and to exercise its rights, title and interest in all
contracts, agreements, and licenses subject to the rights, remedies, powers and
privileges of Holder under this Note and to such use, possession or exercise not
otherwise constituting an event of default.  Notwithstanding anything herein to
the contrary, Maker shall remain liable to perform its duties and obligations
under the contracts and agreements included in the Collateral in accordance with
their respective terms to the same extent as if this Note had not been executed
and delivered; the exercise by Holder of any right, remedy, power or privilege
in respect of this Note shall not release the Maker from any of its duties and
obligations under such contracts and agreements; and Holder shall have no duty,
obligation or liability under such contracts and agreements included in the
Collateral by reason of this Note, nor shall Holder be obligated to perform any
of the duties or obligations of Maker under any such contract or agreement or to
take any action to collect or enforce any claim (for payment) under any such
contract or agreement.

8.           Defaults.  The following events shall be defaults under this Note:
 
 
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a.           Maker’s failure to remit any payment under this Note on before the
date due, if such failure is not cured in full within five (5) days of written
notice of default;

b.           Maker’s failure to perform or breach of any non-monetary obligation
or covenant set forth in this Note or in the Agreement if such failure is not
cured in full within ten (10) days following delivery of written notice thereof
from Holder to Maker;

c.           If Maker is dissolved, whether pursuant to any applicable articles
of incorporation or bylaws, and/or any applicable laws, or otherwise;

d.           Default in the Maker’s obligation for borrowed money, other than
this loan, which shall continue for a period of twenty (20) days;

e.           The commencement of any action or proceeding which affects the
Collateral or title thereto or the interest of Holder therein, including, but
not limited to eminent domain, insolvency, code enforcement or arrangements or
proceedings involving a bankrupt or decedent;

f.           The entry of a decree or order by a court having jurisdiction in
the premises adjudging the Maker bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Maker under the federal Bankruptcy code or any other
applicable federal or state law, or appointing a receiver, liquidator, assignee
or trustee of the Maker, or any substantial part if its property, or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of twenty (20) days; or

g.           Maker’s institution of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or its filing of a petition or answer or consent seeking
reorganization or relief under the federal Bankruptcy Code or any other
applicable federal or state law, or its consent to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee or trustee of
the company, or of any substantial part of its property, or its making of an
assignment for the benefit of creditors or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Maker in furtherance of any such action.

h.           The failure by Secured Diversified Investment, Ltd. to timely file
with the United States Securities and Exchange Commission (“SEC”) all reports
and other documents required of the Maker under the Securities Act of 1933
(“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”).

i.           Any act or series of acts by Maker which has the effect of Secured
Diversified Investment, Ltd. no longer being registered as a publicly reporting
company pursuant to the Exchange Act or no longer having Secured Diversified
Investment, Ltd.’s common stock trade on the OTCBB, once that common stock
begins to trade following clearance from FINRA of the trading of such stock
following the bankruptcy of Secured Diversified Investment, Ltd. concluded in or
about February 2009.
 
 
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9.           Rights and Remedies of Holder.  Upon the occurrence of an event of
default by Maker under this Note or at any time before default when the Holder
reasonably feels insecure, then, in addition to all other rights and remedies at
law or in equity, Holder may exercise any one or more of the following rights
and remedies:

a.           Accelerate the time for payment of all amounts payable under this
Note by written notice thereof to Maker, whereupon all such amounts shall be
immediately due and payable.

b.           Pursue and enforce all of the rights and remedies provided to a
secured party with respect to the Collateral under the Uniform Commercial Code.

c.           Make such appearance, disburse such sums, and take such action as
Holder deems necessary, in its sole discretion, to protect Holder’s interest,
including but not limited to (i) disbursement of attorneys’ fees, (ii) entry
upon the Maker’s property to make repairs to the Collateral, and (iii)
procurement of satisfactory insurance.  Any amounts disbursed by Holder pursuant
to this Section, with interest thereon, shall become additional indebtedness of
the Maker secured by this Note and shall be immediately due and payable and
shall bear interest from the date of disbursement at the default rate stated in
this Note.  Nothing contained in this Section shall require Holder to incur any
expense or take any action.

d.           Require Maker to assemble the Collateral and make it available to
the Maker at the place to be designated by the Holder which is reasonably
convenient to both parties. The Holder may sell all or any part of the
Collateral as a whole or in part either by public auction, private sale, or
other method of disposition.  The Holder may bid at any public sale on all or
any portion of the Collateral.  Unless the Collateral threatens to decline
speedily in value, Holder shall give Maker reasonable notice of the time and
place of any public sale or of the time after which any private sale or other
disposition of the Collateral is to be made, and notice given at least 10 days
before the time of the sale or other disposition shall be conclusively presumed
to be reasonable.

e.           Pursue any other rights or remedies available to Holder at law or
in equity.

10.           Interest To Accrue Upon Default. Upon the occurrence of an event
of default by Maker under this Note, the balance then owing under the terms of
this Note shall accrue interest at the rate of Eighteen Percent percent (18.0%)
per annum from the date of default until Holder is satisfied in full.

11.           Full Recourse.  The liability of Maker for the Obligations shall
not be limited to the Collateral, and Maker shall have full liability therefor
beyond the Collateral.
 
 
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12.           Representation of Counsel.  Maker acknowledges that they have
consulted with or have had the opportunity to consult with their legal counsel
prior to executing this Note.  This Note has been freely negotiated by Maker and
Holder and any rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Note.

13.           Choice of Laws; Actions.  This Note shall be constructed and
construed in accordance with the internal substantive laws of the State of
Nevada, without regard to the choice of law principles of said State.  Maker
acknowledges that this Note has been negotiated in Clark County,
Nevada.  Accordingly, the exclusive venue of any action, suit, counterclaim or
cross claim arising under, out of, or in connection with this Note shall be the
state or federal courts in Clark County, Nevada.  Maker hereby consents to the
personal jurisdiction of any court of competent subject matter jurisdiction
sitting in Clark County, Nevada.

14.           Usury Savings Clause.  Maker expressly agrees and acknowledges
that Maker and Holder intend and agree that this Note shall not be subject to
the usury laws of any state other than the State of Nevada.  Notwithstanding
anything contained in this Note to the contrary, if collection from Maker of
interest at the rate set forth herein would be contrary to applicable laws, then
the applicable interest rate upon default shall be the highest interest rate
that may be collected from Maker under applicable laws at such time.

15.           Costs of Collection.  Should the indebtedness represented by this
Note, or any part hereof, be collected at law, in equity, or in any bankruptcy,
receivership or other court proceeding, or this Note be placed in the hands of
any attorney for collection after default, Maker agrees to pay, in addition to
the principal and interest due hereon, all reasonable attorneys’ fees, plus all
other costs and expenses of collection and enforcement, including any fees
incurred in connection with such proceedings or collection of the Note and/or
enforcement of Holder’s rights with respect to the administration, supervision,
preservation or protection of, or realization upon, any Collateral securing
payment hereof.
 
 
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16.           Miscellaneous.

a.           This Note shall be binding upon Maker and shall inure to the
benefit of Holder and its successors, assigns, heirs, and legal representatives.

b.           Any failure or delay by Holder to insist upon the strict
performance of any term, condition, covenant or agreement of this Note, or to
exercise any right, power or remedy hereunder shall not constitute a waiver of
any such term, condition, covenant, agreement, right, power or remedy.

c.           Any provision of this Note that is unenforceable shall be severed
from this Note to the extent reasonably possible without invalidating or
affecting the intent, validity or enforceability of any other provision of this
Note.

d.           This Note may not be modified or amended in any respect except in a
writing executed by the party to be charged.

e.           Time is of the essence.

17.           Notices.   All notices required to be given under this Note shall
be given as follows or at such other address as a party may designate by written
notice to the other parties:

 
To Maker:

 
Secured Diversified Investment, Ltd.
Galaxy Gaming, Inc.
Attn:  Robert Saucier, President
6980 O’Bannon Drive
Las Vegas, NV 89117
(702) 938-1735 (fax)

 
To Holder:

 
___________________
______________________
___________________
___________________
___________________

 
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Notices may be transmitted by facsimile, certified mail, private delivery, or
any other commercially reasonable means, and shall be deemed given upon receipt
by the Party to whom they are addressed.

18.           Waiver of Certain Formalities. All parties to this Note hereby
waive presentment, dishonor, notice of dishonor and protest.  All parties hereto
consent to, and Holder is hereby expressly authorized to make, without notice,
any and all renewals, extensions, modifications or waivers of the time for or
the terms of payment of any sum or sums due hereunder, or under any documents or
instruments relating to or securing this Note, or of the performance of any
covenants, conditions or agreements hereof or thereof or the taking or release
of collateral securing this Note.  Any such action taken by Holder shall not
discharge the liability of any party to this Note.

IN WITNESS WHEREOF, this Note has been executed effective the date and place
first written above.

Secured Diversified Investment, Ltd. “Maker”:
 
 
By: ________________________________
 
Its: ________________________________
 
Print Name:
 
Date:______________________________
Galaxy Gaming, Inc. “Maker”:
 
 
By: ________________________________
 
Its: ________________________________
 
Print Name:
 
Date:______________________________
 
 
__________________________ “Holder”:
 
 
By: ________________________________
 
Its: ________________________________
 
Print Name:
 
Date:______________________________
 

 
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Exhibit “A”

Collateral

Each and all of the following in which Secured Diversified Investment, Ltd., a
Nevada Corporation, and/or Galaxy Gaming, Inc., a Nevada corporation, has any
right, title, or interest, regardless of the manner in which such items are
formally held or titled; all as defined in the Nevada Uniform Commercial Code -
Secured Transactions (Nevada Revised Statutes (“NRS”) §§ 104.9101 et. seq.) as
of the date of the Note, and as the same may be amended hereafter:

(1) Equipment, as defined in NRS 104.9102(1)(gg), specifically consisting of the
electronic components, signage, software, and intellectual property that
comprise the Gaming Units.

(2)  Accounts, as defined in NRS 104.9102(1)(a)

(3)  Cash proceeds, as defined in NRS 104.9102(1)(I)

(4) Inventory, as defined in NRS 104.9102(1)(vv)

(5) Noncash proceeds, as defined in NRS 104.9102(1)(fff)

(6) Proceeds, as defined in NRS 104.9102(1)(lll)

(7) Software, as defined in NRS 104.9102(1)(www)