CONVERTIBLE PROMISSORY NOTE AND SECURITY AGREEMENT

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 Cane Clark Productions, LLC a Nevada Limited Liability Company, or its assigns (“ Holder ”), and hereby agree as follows:

1.             Principal Obligation and Interest .   For value received , Maker promises to pay to Holder at 3273 E. Warm Springs Road, Las Vegas, NV 89120 , or at such other place as Holder may designate in writing, in currently available funds of the United States, the principal sum of One Hundred Twenty Five 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 October 5, 2009 , 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 October 5, 2009.

d.   Maker shall not have the right to prepay all or any part of the principal under this Note prior to October 5, 2009.  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 ”).

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 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 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.

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, and, except as to leased equipment or purchase-money encumbrances existing as of the date of this Note as expressly disclosed to Holder in writing, such interests, upon perfection, will be senior and prior to any liens, encumbrances, charges, title defects, interests and rights of any others with respect to such Collateral.

d.   The security interest granted hereby shall be a first priority lien on the Collateral and no prior or superior liens, security interests or encumbrances exist with respect to any part of the Collateral.

e.   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 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