THIS BRIDGE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), NOR UNDER ANY STATE SECURITIES LAW AND
MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNLESS (I) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT, AND ANY
APPLICABLE STATE SECURITIES LAW REQUIREMENTS HAVE BEEN MET OR (II) EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND THE REGISTRATION
OR QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS ARE AVAILABLE.
 
$________
 
BEAMZ INTERACTIVE, INC.

 
CONVERTIBLE SECURED SUBORDINATED PROMISSORY NOTE
 
_______, 2013
 
Beamz Interactive, Inc. a Delaware corporation (the “Company”), the principal
office of which is located at 15334 N. 83rd Way, Suite 102, Scottsdale, Arizona
85260, for value received hereby promises to pay to _________________ or its
registered assigns (“Holder”), the sum of _________________ Dollars
($_________.00), or such lesser amount as shall then be outstanding hereunder,
together with interest from the date of this Convertible Secured Subordinated
Promissory Note (this “Note”) on the unpaid principal balance at a rate equal to
10.00% per annum, computed on the basis of the actual number of days elapsed and
a year of 365 days (the “Initial Interest Rate”); provided, however, in the
event that the principal amount of this Note is not paid in full when such
amount becomes due and payable hereunder, the interest on this Note shall accrue
at the rate equal to the lesser of (a) the Initial Interest Rate plus five
percent (5.0%) or (b) the highest rate then permitted by law until such balance
is paid in full.  This Note is one in a series of Notes (collectively, the
“Notes”) issued by the Company pursuant to that certain 2013 Convertible Debt
and Security Agreement, dated as of May 1, 2013, by and among the Company,
Holder and certain other persons (the “Purchase Agreement”).  The Company and
Holder are sometimes each referred to herein as a “Party” and collectively, as
the “Parties”.
 
The following is a statement of the rights of the Holder of this Note and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
 
1. Payments.
 
(a) All unpaid principal, together with any then unpaid and accrued interest,
shall be due and payable on the earlier of (i) December 31, 2014 unless
automatically extended as provided below (the “Maturity Date”), (ii) upon the
closing of at least an aggregate of $2 million of subscriptions under the
Permanent Financing (as defined in the Purchase Agreement); or (iii) when, upon
the occurrence and during the continuance of an Event of Default (as defined
below), such amounts are declared due and payable by Holder or made
automatically due and payable, in each case, in accordance with the terms
hereof.  Payment for all amounts due hereunder shall be made by mail to the
registered address of Holder.  (b) The Company may prepay this Note in whole or
in part, provided that (i) any prepayment of this Note may only be made in
connection with the prepayment of all Notes on a pro rata basis, based on the
respective aggregate outstanding principal amounts of each such Note and
(ii) any such prepayment will be applied first to the payment of expenses due
under this Note, second to interest accrued on this Note and third, if the
amount of prepayment exceeds the amount of all such expenses and accrued
interest, to the payment of principal of this Note.
 
 
 
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2. Security Interest and Subordination.  This Note is secured by a security
interest and subordinated to Senior Indebtedness as described in Article 3 of
the Purchase Agreement.
 
3. Optional Conversion.  The principal balance of and accrued, but unpaid
interest on, this Note may be converted at the option of Holder as described in
Section 2.1(f) of the Purchase Agreement
 
4. Automatic Conversion.  The principal balance of and accrued, but unpaid
interest on, this Note shall be automatically converted on the date of the
Permanent Financing Closing as described in Section 2.1(g) of the Purchase
Agreement.
 
5. Events of Default.  The occurrence of any of the following shall constitute
an “Event of Default” under this Note and the other Transaction Agreements:
 
(i) failure by the Company to make any payment under this Note of the principal
or unpaid accrued interest of this Note when due and payable if such failure is
not cured by the Company within ten (10) days after Holder has given the Company
written notice of such default; or
 
(ii) failure of the Company to perform any other covenant contained herein or in
any other Transaction Agreement (as defined in the Purchase Agreement), if the
same has continued for thirty (30) days after written notice specifying such
failure has been delivered to the Company by Holder; or
 
(iii) any representation, warranty, certificate, or other statement (financial
or otherwise) made or furnished by or on behalf of the Company to Holder in
writing in connection with this Note or any of the other Transaction Agreements,
or as an inducement to Investor to enter into this Note and the other
Transaction Agreements, shall be false, incorrect, incomplete or misleading in
any material respect when made or furnished; or
 
(iv) an Event of Default occurs on any of the other Notes and such default is
not cured within any applicable cure period in such Note; or
 
(v) the institution by the Company of proceedings to be adjudicated as bankrupt
or insolvent, or the consent by it to institution of bankruptcy or insolvency
proceedings against it or the filing by it of a petition or answer or consent
seeking reorganization or release under the federal Bankruptcy Act, or any other
applicable federal or state law, or the consent by it to the filing of any such
petition or the appointment of a receiver, liquidator, assignee, trustee, or
other similar official of the Company, or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors, or
the taking of corporate action by the Company in furtherance of any such action;
or
 
 
 
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(vi) if, within sixty (60) days after the commencement of an action against the
Company (and service of process in connection therewith on the Company) seeking
any bankruptcy, insolvency, reorganization, liquidation, dissolution, or similar
relief under any present or future statute, law, or regulation, such action
shall not have been resolved in favor of the Company or all orders or
proceedings thereunder affecting the operations or the business of the Company
stayed, or if the stay of any such order or proceeding shall thereafter be set
aside, or if, within sixty (60) days after the appointment without the consent
or acquiescence of the Company of any trustee, receiver, or liquidator of the
Company or of all or any substantial part of the properties of the Company, such
appointment shall not have been vacated.
 
Upon the occurrence of any Event of Default, and at any time thereafter during
the continuance of such Event of Default, Holder may, by written notice to the
Company, declare all outstanding obligations payable by the Company hereunder to
be immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein or in the other Transaction Agreements to the contrary
notwithstanding.  In addition to the foregoing remedies, upon the occurrence and
during the continuance of any Event of Default, Holder may exercise any other
right power or remedy granted to it by the Transaction Agreements or otherwise
permitted to it by law, either by suit in equity or by action at law, or both.
 
6. Assignment.  The rights and obligations of the Company and Holder shall be
binding upon and benefit the successors, assigns, heirs, administrators, and
transferees of each of the Parties; provided, however, that neither the Holder
nor the Company may assign any of its rights or obligations hereunder without
the prior written consent of the other party.
 
7. Waiver and Amendment.  Any provision of this Note may be amended, waived, or
modified upon the written consent of the Company and Holder.
 
8. Pari Passu Notes.  Holder acknowledges and agrees that the payment of all or
any portion of the outstanding principal amount of this Note and all interest
hereon shall be pari passu in right of payment and in all other respects to the
other Notes.  In the event Holder receives payments in excess of its pro rata
share of the Company’s payments to the holders of all of the Notes, then Holder
shall hold in trust all such excess payments for the benefit of the holders of
the other Notes and shall pay such amounts held in trust to such other holders
upon demand by such holders.
 
9. Usury.  It is the intent of the Company and Holder to conform to and contract
in strict compliance with applicable usury law from time to time in effect.  In
no way, nor in any event or contingency (including but not limited to
prepayment, default, demand for payment, or acceleration of the maturity of any
obligation), shall the rate of interest taken, reserved, contracted for, charged
or received under this Note exceed the highest lawful interest rate permitted
under applicable law.  If Holder shall ever receive anything of value which is
characterized as interest under applicable law and which would apart from this
provision be in excess of the highest lawful interest rate permitted under
applicable law, an amount equal to the amount which would have been excessive
interest shall, without penalty, be applied to the reduction of the principal
amount owing on this Note and not to the payment of interest, or refunded to the
Company or the other payor thereof if and to the extent such amount which would
have been excessive exceeds such unpaid principal.  All interest paid or agreed
to be paid to Holder shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full stated term
(including any renewal or extension) of this Note so that the amount of interest
on account of such obligation does not exceed the maximum permitted by
applicable law.  As used in this Section, the term “applicable law” shall mean
the laws of the State of Arizona or the federal laws of the United States,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
 
 
 
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10. Waivers.  The Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.  No delay or omission on the part of the
holder of this Note in the exercise of any power, remedy or right under this
Note, or under any other instrument executed pursuant hereto, shall operate as a
waiver thereof, nor shall a single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other right or power hereunder.
 
11. Attorneys’ Fees and Costs.  In the event an Event of Default and if this
Note is thereafter placed in the hands of an attorney for collection, or in the
event this Note is collected in whole or in part through legal proceedings of
any nature after the occurrence of an Event of Default, then and in any such
case the Company promises to pay all reasonable costs of collection, including,
but not limited to, reasonable attorneys’ fees and court costs incurred by the
holder hereof on account of such collection, whether or not suit is filed.
 
12. Severability.  In case any one or more of the provisions contained in this
Note shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision hereof.
 
13. Notices.  Any notice, request, or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given on the
date of service if personally served on the Party to whom such notice is to be
given, on the date of transmittal of service via telecopy to the party to whom
notice is to be given (with a confirming copy delivered within 24 hours
thereafter), or on the third day after mailing if mailed to the Party to whom
notice is to be given, by first class mail, registered or certified mail,
postage prepaid, or via a recognized overnight courier providing a receipt for
delivery and properly addressed at the respective addresses of the Parties as
set forth in the Purchase Agreement.  Any Party may by notice so given change
its address for future notice hereunder.
 
14. Governing Law.  This Note, the entire relationship of the Parties, and any
litigation between the Parties (whether grounded in contract, tort, statute, law
or equity) shall be interpreted, construed, and enforced in accordance with the
laws of the State of Arizona, without regard to its choice of law principles.
 
15. Heading; References.  All headings used herein are used for convenience only
and shall not be used to construe or interpret this Note. Except where otherwise
indicated, all references herein to Sections refer to Sections hereof.
 
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date
first set forth above.
 

 
BEAMZ INTERACTIVE, INC.
 
 
By: ____________________________                                                                 
Charles R. Mollo
Chief Executive Officer

 

 
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