Silver Dragon Resources Inc.: Exhibit 4.1 - Filed by newsfilecorp.com






SECURED CONVERTIBLE
PROMISSORY NOTE 

	Effective Date: May 25, 2016 	U.S. $170,000.00 


FOR VALUE RECEIVED, SILVER DRAGON
RESOURCES INC., a Delaware corporation (“Borrower”), promises to pay to
TONAQUINT, INC., a Utah corporation, or its successors or assigns
(“Lender”), $170,000.00 and any interest, fees, charges, and late fees on
February 28, 2017 (the “Maturity Date”) in accordance with the terms set
forth herein and to pay interest on the Outstanding Balance at the rate of
twelve percent (12%) per annum from the Purchase Price Date until the same is
paid in full. This Secured Convertible Promissory Note (this “Note”) is
issued and made effective as of May 25, 2016 (the “Effective Date”). This
Note is issued pursuant to that certain Settlement and Securities Purchase
Agreement dated April 7, 2016, as the same may be amended from time to time, by
and between Borrower and Lender (the “Purchase Agreement”). All interest
calculations hereunder shall be computed on the basis of a 360-day year
comprised of twelve (12) thirty (30) day months, shall compound daily and shall
be payable in accordance with the terms of this Note. Certain capitalized terms
used herein are defined in Attachment 1 attached hereto and incorporated
herein by this reference. 

This Note carries an OID of
$15,000.00. In addition, Borrower agrees to pay $5,000.00 to Lender to cover
Lender’s legal fees, accounting costs, due diligence, monitoring and other
transaction costs incurred in connection with the purchase and sale of this Note
(the “Transaction Expense Amount”), all of which amount is included in
the initial principal balance of this Note. The purchase price for this Note
shall be $150,000.00 (the “Purchase Price”), computed as follows:
$170,000.00 original principal balance, less the OID, less the Transaction
Expense Amount. The Purchase Price (as defined in the Purchase Agreement) shall
be payable by a wire transfer of immediately available funds in the amount of
the Purchase Price.

1.                  
Payment; Prepayment.
Provided there is an Outstanding Balance, on each Installment Date (as defined
below), Borrower shall pay to Lender an amount equal to the Installment Amount
(as defined below) due on such Installment Date in accordance with Section 8.
The entire remaining Outstanding Balance of this Note shall be due and payable
on the Maturity Date. All payments owing hereunder shall be in lawful money of
the United States of America or Conversion Shares (as defined below), as
provided for herein, and delivered to Lender at the address furnished to
Borrower for that purpose. All payments shall be applied first to (a) costs of
collection, if any, then to (b) fees and charges, if any, then to (c) accrued
and unpaid interest, and thereafter, to (d) principal. Notwithstanding the
foregoing, Borrower may, but only with Lender’s prior written consent, pay,
without penalty, all or any portion of the Outstanding Balance along with any
accrued but unpaid interest on this Note at any time prior to the Maturity
Date.

2.                  
Security. This Note is
secured by: (a) that certain Security Agreement dated April 7, 2016 by and
between Borrower and Lender, as the same may be amended from time to time (the
“Security Agreement”), whereby Borrower granted a security interest in
all of its assets in favor of Lender to secure the performance of its
obligations under this Note, as more specifically set forth in the Security
Agreement, all the terms and conditions of which are hereby incorporated into
and made a part of this Note; and (b) that certain Pledge Agreement dated April
7, 2016 by and between Borrower and Lender, as the same may be amended from time
to time (the “Pledge Agreement”), whereby Borrower pledged all of its
right, title and interest in and to the Sino-Top Interest to secure the
performance of its obligations under this Note, as more specifically set forth
in the Pledge Agreement, all the terms and conditions of which are hereby
incorporated into and made a part of this Note. 




3.                  
Lender Optional Conversion. 

3.1.                  
Lender Conversion
Price. Subject to adjustment as set forth in this Note, the conversion price
for each Lender Conversion (as defined below) shall be $0.015 (the “Lender
Conversion Price”). However, in the event the Market Capitalization falls
below $4,000,000.00 at any time, then in such event (a) the Lender Conversion
Price for all Lender Conversions occurring after the first date of such
occurrence shall equal the lower of the Lender Conversion Price and the Market
Price as of any applicable date of Conversion, and (b) the true-up provisions of
Section 11 below shall apply to all Lender Conversions that occur after the
first date the Market Capitalization falls below $4,000,000.00 provided that all
references to the “Installment Notice” in Section 11 shall be replaced with
references to a “Lender Conversion Notice” for purposes of this Section 3.1, all
references to “Installment Conversion Shares” in Section 11 shall be replaced
with references to “Lender Conversion Shares” for purposes of this Section 3.1,
and all references to the “Installment Conversion Price” in Section 11 shall be
replaced with references to the “Lender Conversion Price” for purposes of this
Section 3.1. 

3.2.
                  Lender Conversions.
Lender has the right at any time after the six (6) month anniversary of the
Purchase Price Date until the Outstanding Balance has been paid in full,
including without limitation during or after any Fundamental Default Measuring
Period, at its election, to convert (each instance of conversion is referred to
herein as a “Lender Conversion”) all or any part of the Outstanding
Balance into shares (“Lender Conversion Shares”) of fully paid and
non-assessable common stock, $0.0001 par value per share (“Common
Stock”), of Borrower as per the following conversion formula: the number of
Lender Conversion Shares equals the amount being converted (the “Conversion
Amount”) divided by the Lender Conversion Price. Conversion notices in the
form attached hereto as Exhibit A (each, a “Lender Conversion
Notice”) may be effectively delivered to Borrower by any method of Lender’s
choice (including but not limited to facsimile, email, mail, overnight courier,
or personal delivery), and all Lender Conversions shall be cashless and not
require further payment from Lender. Borrower shall deliver the Lender
Conversion Shares from any Lender Conversion to Lender in accordance with
Section 9 below.

3.3.
                  Application to
Installments. Notwithstanding anything to the contrary herein, including
without limitation Section 8 hereof, Lender may, in its sole discretion, apply
all or any portion of any Lender Conversion toward any Installment Conversion
(as defined below), even if such Installment Conversion is pending, as
determined in Lender’s sole discretion, by delivering written notice of such
election (which notice may be included as part of the applicable Lender
Conversion Notice) to Borrower at any date on or prior to the applicable
Installment Date. In such event, Borrower may not elect to allocate such portion
of the Installment Amount being paid pursuant to this Section 3.3 in the manner
prescribed in Section 8.3; rather, Borrower must reduce the applicable
Installment Amount by the Conversion Amount described in this Section 3.3.

4.                  Defaults; Remedies. 

4.1.
                  Defaults. The
following are events of default under this Note (each, an “Event of
Default”): (a) Borrower shall fail to pay any principal, interest, fees,
charges, or any other amount when due and payable hereunder; (b) Borrower shall
fail to deliver any Lender Conversion Shares in accordance with the terms
hereof; (c) Borrower shall fail to deliver any Installment Conversion Shares (as
defined below) or True-Up Shares (as defined below) in accordance with the terms
hereof; (d) a receiver, trustee or other similar official shall be appointed
over Borrower or a material part of its assets and such appointment shall remain
uncontested for twenty (20) days or shall not be dismissed or discharged within
sixty (60) days; (e) Borrower shall become insolvent or generally fails to pay,
or admits in writing its inability to pay, its debts as they become due, subject
to applicable grace periods, if any; (f) Borrower shall make a general
assignment for the benefit of creditors; (g) Borrower shall file a petition for
relief under any bankruptcy, insolvency or similar law (domestic or foreign);
(h) an involuntary proceeding shall be commenced or filed against Borrower; (i)
Borrower shall default or otherwise fail to observe or perform any covenant,
obligation, condition or agreement of Borrower contained herein or in any other
Transaction Document (as defined in the Purchase Agreement), other than those
specifically set forth in this Section 4.1 and Section 6 of the Purchase
Agreement; (j) any representation, warranty or other statement made or furnished
by or on behalf of Borrower to Lender herein, in any Transaction Document, or
otherwise in connection with the issuance of this Note shall be false,
incorrect, incomplete or misleading in any material respect when made or
furnished; (k) the occurrence of a Fundamental Transaction without Lender’s
prior written consent; (l) Borrower shall fail to put in place and maintain the
Share Reserve as required under the Purchase Agreement; (m) Borrower effectuates
a reverse split of its Common Stock without twenty (20) Trading Days prior
written notice to Lender; (n) any money judgment, writ or similar process shall
be entered or filed against Borrower or any subsidiary of Borrower or any of its
property or other assets for more than $100,000.00, and shall remain unvacated,
unbonded or unstayed for a period of twenty (20) calendar days unless otherwise
consented to by Lender; (o) Borrower shall fail to be DWAC Eligible; or (p)
Borrower shall fail to observe or perform any covenant set forth in Section 6 of
the Purchase Agreement. 

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4.2.                  Remedies. At any time
and from time to time after Lender becoming aware of the occurrence of any Event
of Default, Lender may accelerate this Note by written notice to Borrower, with
the Outstanding Balance becoming immediately due and payable in cash at the
Mandatory Default Amount. Notwithstanding the foregoing, at any time following
the occurrence of any Event of Default, Lender may, at its option, elect to
increase the Outstanding Balance by applying the Default Effect (subject to the
limitation set forth below) via written notice to Borrower without accelerating
the Outstanding Balance, in which event the Outstanding Balance shall be
increased as of the date of the occurrence of the applicable Event of Default
pursuant to the Default Effect, but the Outstanding Balance shall not be
immediately due and payable unless so declared by Lender (for the avoidance of
doubt, if Lender elects to apply the Default Effect pursuant to this sentence,
it shall reserve the right to declare the Outstanding Balance immediately due
and payable at any time and no such election by Lender shall be deemed to be a
waiver of its right to declare the Outstanding Balance immediately due and
payable as set forth herein unless otherwise agreed to by Lender in writing).
Notwithstanding the foregoing, upon the occurrence of any Event of Default
described in clauses (d), (e), (f), (g) or (h) of Section 4.1, the Outstanding
Balance as of the date of acceleration shall become immediately and
automatically due and payable in cash at the Mandatory Default Amount, without
any written notice required by Lender. At any time following the occurrence of
any Event of Default, upon written notice given by Lender to Borrower, interest
shall accrue on the Outstanding Balance beginning on the date the applicable
Event of Default occurred at an interest rate equal to the lesser of 22% per
annum or the maximum rate permitted under applicable law (“Default
Interest”); provided, however, that no Default Interest shall accrue
during the Fundamental Default Measuring Period. For the avoidance of doubt,
Lender may continue making Lender Conversions at any time following an Event of
Default until such time as the Outstanding Balance is paid in full.
Additionally, following the occurrence of any Event of Default, Borrower may, at
its option, pay any Lender Conversion in cash instead of Lender Conversion
Shares by paying to Lender on or before the applicable Delivery Date (as defined
below) a cash amount equal to the number of Lender Conversion Shares set forth
in the applicable Lender Conversion Notice multiplied by the highest intra-day
trading price of the Common Stock that occurs during the period beginning on the
date the applicable Event of Default occurred and ending on the date of the
applicable Lender Conversion Notice. In connection with acceleration described
herein, Lender need not provide, and Borrower hereby waives, any presentment,
demand, protest or other notice of any kind, and Lender may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law.
Such acceleration may be rescinded and annulled by Lender at any time prior to
payment hereunder and Lender shall have all rights as a holder of the Note until
such time, if any, as Lender receives full payment pursuant to this Section 4.2.
No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon. Nothing herein shall limit Lender’s right
to pursue any other remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to Borrower’s failure to timely deliver Conversion Shares upon
Conversion of the Notes as required pursuant to the terms hereof. 

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4.3.                  Fundamental Default
Remedies. Notwithstanding anything to the contrary herein, in addition to
all other remedies set forth herein, the Fundamental Liquidated Damages Amount
shall be added to the Outstanding Balance upon Lender’s delivery to Borrower of
a notice (which notice Lender may deliver to Borrower at any time following the
occurrence of a Fundamental Default) setting forth its election to declare a
Fundamental Default and the Fundamental Liquidated Damages Amount that will be
added to the Outstanding Balance. 

4.4.                  Certain Additional
Rights. Notwithstanding anything to the contrary herein, in the event
Borrower fails to make any payment or otherwise to deliver any Conversion Shares
as and when required under this Note, then (a) the Lender Conversion Price for
all Lender Conversions occurring after the date of such failure to pay shall
equal the lower of the Lender Conversion Price and the Market Price as of any
applicable date of Conversion, and (b) the true-up provisions of Section 11
below shall apply to all Lender Conversions that occur after the date of such
failure to pay, provided that all references to the “Installment Notice” in
Section 11 shall be replaced with references to a “Lender Conversion Notice” for
purposes of this Section 4.4, all references to “Installment Conversion Shares”
in Section 11 shall be replaced with references to “Lender Conversion Shares”
for purposes of this Section 4.4, and all references to the “Installment
Conversion Price” in Section 11 shall be replaced with references to the “Lender
Conversion Price” for purposes of this Section 4.4. For the avoidance of doubt,
Lender’s exercise of the rights granted to it pursuant to this Section 4.4 shall
not relieve Borrower of its obligation to continue paying the Installment Amount
on all future Installment Dates. 

4.5.                  Cross Default. A
breach or default by Borrower of any covenant or other term or condition
contained in any Other Agreements shall, at the option of Lender, be considered
an Event of Default under this Note, in which event Lender shall be entitled
(but in no event required) to apply all rights and remedies of Lender under the
terms of this Note. 

5.                  Unconditional Obligation;
No Offset. Borrower acknowledges that this Note is an unconditional, valid,
binding and enforceable obligation of Borrower not subject to offset, deduction
or counterclaim of any kind. Borrower hereby waives any rights of offset it now
has or may have hereafter against Lender, its successors and assigns, and agrees
to make the payments or Conversions called for herein in accordance with the
terms of this Note. 

6.                  Waiver. No waiver of
any provision of this Note shall be effective unless it is in the form of a
writing signed by the party granting the waiver. No waiver of any provision or
consent to any prohibited action shall constitute a waiver of any other
provision or consent to any other prohibited action, whether or not similar. No
waiver or consent shall constitute a continuing waiver or consent or commit a
party to provide a waiver or consent in the future except to the extent
specifically set forth in writing. 

7.                  Rights Upon Issuance of Securities.

7.1.                  Subsequent Equity
Sales. Except with respect to Excluded Securities, if Borrower or any
subsidiary thereof, as applicable, at any time this Note is outstanding, shall
sell, issue or grant any Common Stock, option to purchase Common Stock, right to
reprice, preferred shares convertible into Common Stock, or debt, warrants,
options or other instruments or securities to Lender or any third party which
are convertible into or exercisable for shares of Common Stock (collectively,
the “Equity Securities”), including without limitation any
Deemed Issuance, at an effective price per share less than the then effective
Lender Conversion Price (such issuance is referred to herein as a
“Dilutive Issuance”), then, the Lender Conversion Price shall
be automatically reduced and only reduced to equal such lower effective price
per share. If the holder of any Equity Securities so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options, or rights per share which are issued in connection with such Dilutive
Issuance, be entitled to receive shares of Common Stock at an effective price
per share that is less than the Lender Conversion Price, such issuance shall be
deemed to have occurred for less than the Lender Conversion Price on the date of
such Dilutive Issuance, and the then effective Lender Conversion Price shall be
reduced and only reduced to equal such lower effective price per share. Such
adjustments described above to the Lender Conversion Price shall be permanent
(subject to additional adjustments under this section), and shall be made
whenever such Equity Securities are issued. Borrower shall notify Lender, in
writing, no later than the Trading Day following the issuance of any Equity
Securities subject to this Section 7.1, indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price, or
other pricing terms (such notice, the “Dilutive
Issuance Notice”). For purposes of clarification, whether or
not Borrower provides a Dilutive Issuance Notice pursuant to this Section 7.1,
upon the occurrence of any Dilutive Issuance, on the date of such Dilutive
Issuance the Lender Conversion Price shall be lowered to equal the applicable
effective price per share regardless of whether Borrower or Lender accurately
refers to such lower effective price per share in any Installment Notice or
Lender Conversion Notice. 

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7.2.                  Adjustment of Lender
Conversion Price upon Subdivision or Combination of Common Stock.
Without limiting any provision hereof, if Borrower at any time on or after the
Effective Date subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common Stock into
a greater number of shares, the Lender Conversion Price in effect immediately
prior to such subdivision will be proportionately reduced. Without limiting any
provision hereof, if Borrower at any time on or after the Effective Date
combines (by combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a smaller number of shares, the
Lender Conversion Price in effect immediately prior to such combination will be
proportionately increased. Any adjustment pursuant to this Section 7.2 shall
become effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment under this Section 7.2 occurs
during the period that a Lender Conversion Price is calculated hereunder, then
the calculation of such Lender Conversion Price shall be adjusted appropriately
to reflect such event. 

7.3.                  Other Events. In the
event that Borrower (or any subsidiary) shall take any action to which the
provisions hereof are not strictly applicable, or, if applicable, would not
operate to protect Lender from dilution or if any event occurs of the type
contemplated by the provisions of this Section 7 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then Borrower’s board of directors shall in good faith determine and implement
an appropriate adjustment in the Lender Conversion Price so as to protect the
rights of Lender, provided that no such adjustment pursuant to this Section 7.3
will increase the Lender Conversion Price as otherwise determined pursuant to
this Section 7, provided further that if Lender does not accept such adjustments
as appropriately protecting its interests hereunder against such dilution, then
Borrower’s board of directors and Lender shall agree, in good faith, upon an
independent investment bank of nationally recognized standing to make such
appropriate adjustments, whose determination shall be final and binding and
whose fees and expenses shall be borne by Borrower. 

5 




8.                  Borrower Installments. 

8.1.                  Installment Conversion
Price. Subject to the adjustments set forth herein, the conversion price for
each Installment Conversion (the “Installment Conversion Price”) shall be
the lesser of (a) the Lender Conversion Price, and (b) the Market Price.

8.2.                  Installment
Conversions. Beginning on December 31, 2016 and on the same day of each
month thereafter until the Maturity Date (each, an “Installment Date”),
if paying in cash, Borrower shall pay to Lender the applicable Installment
Amount due on such date subject to the provisions of this Section 8, and if
paying in Installment Conversion Shares (as defined below), Borrower shall
deliver such Installment Conversion Shares on or before the Delivery Date.
Payments of each Installment Amount may be made (a) in cash, or (b) by
converting such Installment Amount into shares of Common Stock (“Installment
Conversion Shares”, and together with the Lender Conversion Shares, the
“Conversion Shares”) in accordance with this Section 8 (each an
“Installment Conversion”) per the following formula: the number of
Installment Conversion Shares equals the portion of the applicable Installment
Amount being converted divided by the Installment Conversion Price, or (c) by
any combination of the foregoing, so long as the cash is delivered to Lender on
the applicable Installment Date and the Installment Conversion Shares are
delivered to Lender on or before the applicable Delivery Date. Notwithstanding
the foregoing, Borrower will not be entitled to elect an Installment Conversion
with respect to any portion of any applicable Installment Amount and shall be
required to pay the entire amount of such Installment Amount in cash if on the
applicable Installment Date there is an Equity Conditions Failure, and such
failure is not waived in writing by Lender. Moreover, in the event Borrower
desires to pay all or any portion of any Installment Amount in cash, it must
notify Lender in writing of such election and the portion of the applicable
Installment Amount it elects to pay in cash not more than twenty-five (25) or
less than fifteen (15) Trading Days prior to the applicable Installment Date. If
Borrower fails to so notify Lender, it shall not be permitted to elect to pay
any portion of such Installment Amount in cash unless otherwise agreed to by
Lender in writing or proposed by Lender in an Installment Notice delivered by
Lender to Borrower. Notwithstanding that failure to repay this Note in full by
the Maturity Date is an Event of Default, the Installment Dates shall continue
after the Maturity Date pursuant to this Section 8 until the Outstanding Balance
is repaid in full, provided that Lender shall, in Lender’s sole discretion,
determine the Installment Amount for each Installment Date after the Maturity
Date. 

8.3.                  Allocation of Installment
Amounts. Subject to Section 8.2 regarding an Equity Conditions Failure, for
each Installment Date, Borrower may elect to allocate the amount of the
applicable Installment Amount between cash and via an Installment Conversion, by
email or fax delivery of a notice to Lender substantially in the form attached
hereto as Exhibit B (each, an “Installment Notice”), provided,
that to be effective, each applicable Installment Notice must be received by
Lender not more than twenty-five (25) or less than fifteen (15) Trading Days
prior to the applicable Installment Date. If Lender has not received an
Installment Notice within such time period, then Lender may prepare the
Installment Notice and deliver the same to Borrower by fax or email. Following
its receipt of such Installment Notice, Borrower may either ratify Lender’s
proposed allocation in the applicable Installment Notice or elect to change the
allocation by written notice to Lender by email or fax on or before 12:00 p.m.
New York time on the applicable Installment Date, so long as the sum of the cash
payments and the amount of Installment Conversions equal the applicable
Installment Amount, provided that Lender must approve any increase to the
portion of the Installment Amount payable in cash. If Borrower fails to notify
Lender of its election to change the allocation prior to the deadline set forth
in the previous sentence (and seek approval to increase the amount payable in
cash), it shall be deemed to have ratified and accepted the allocation set forth
in the applicable Installment Notice prepared by Lender. If neither Borrower nor
Lender prepare and deliver to the other party an Installment Notice as outlined
above, then Borrower shall be deemed to have elected that the entire Installment
Amount be converted via an Installment Conversion. 

6 




Borrower acknowledges and agrees that regardless of which party
prepares the applicable Installment Notice, the amounts and calculations set
forth thereon are subject to correction or adjustment because of error, mistake,
or any adjustment resulting from an Event of Default or other adjustment
permitted under the Transaction Documents (an “Adjustment”). Furthermore,
no error or mistake in the preparation of such notices, or failure to apply any
Adjustment that could have been applied prior to the preparation of an
Installment Notice may be deemed a waiver of Lender’s right to enforce the terms
of any Note, even if such error, mistake, or failure to include an Adjustment
arises from Lender’s own calculation. Borrower shall deliver the Installment
Conversion Shares from any Installment Conversion to Lender in accordance with
Section 9 below on or before each applicable Delivery Date. 

9.                  Method of Conversion Share
Delivery. On or before the close of business on the third (3rd)
Trading Day following the Installment Date or the third (3rd) Trading
Day following the date of delivery of a Lender Conversion Notice, as applicable
(the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at
such time, deliver or cause its transfer agent to deliver the applicable
Conversion Shares electronically via DWAC to the account designated by Lender in
the applicable Lender Conversion Notice or Installment Notice. If
Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as
designated in the Lender Conversion Notice or Installment Notice, as
applicable), via reputable overnight courier, a certificate representing the
number of shares of Common Stock equal to the number of Conversion Shares to
which Lender shall be entitled, registered in the name of Lender or its
designee. For the avoidance of doubt, Borrower has not met its obligation to
deliver Conversion Shares by the Delivery Date unless Lender or its broker, as
applicable, has actually received the certificate representing the applicable
Conversion Shares no later than the close of business on the relevant Delivery
Date pursuant to the terms set forth above. Moreover, and notwithstanding
anything to the contrary herein or in any other Transaction Document, in the
event Borrower or its transfer agent refuses to deliver any Conversion Shares to
Lender on grounds that such issuance is in violation of Rule 144 under the
Securities Act of 1933, as amended (“Rule 144”), Borrower shall deliver
or cause its transfer agent to deliver the applicable Conversion Shares to
Lender with a restricted securities legend, but otherwise in accordance with the
provisions of this Section 9. In conjunction therewith, Borrower will also
deliver to Lender a written opinion from its counsel or its transfer agent’s
counsel opining as to why the issuance of the applicable Conversion Shares
violates Rule 144. 

10.                  Conversion Delays. If
Borrower fails to deliver Conversion Shares or True-Up Shares in accordance with
the timeframes stated in Sections 9 or 11, as applicable, Lender, at any time
prior to selling all of those Conversion Shares or True-Up Shares, as
applicable, may rescind in whole or in part that particular Conversion
attributable to the unsold Conversion Shares or True-Up Shares, with a
corresponding increase to the Outstanding Balance (any returned amount will tack
back to the Purchase Price Date for purposes of determining the holding period
under Rule 144). In addition, for each Lender Conversion, in the event that
Lender Conversion Shares are not delivered by the fourth Trading Day (inclusive
of the day of the Lender Conversion), a late fee equal to the greater of (a)
$500.00 and (b) 2% of the applicable Lender Conversion Share Value rounded to
the nearest multiple of $100.00 (but in any event the cumulative amount of such
late fees for each Lender Conversion shall not exceed 200% of the applicable
Lender Conversion Share Value) will be assessed for each day after the third
Trading Day (inclusive of the day of the Lender Conversion) until Lender
Conversion Share delivery is made; and such late fee will be added to the
Outstanding Balance (such fees, the “Conversion Delay Late Fees”). For
illustration purposes only, if Lender delivers a Lender Conversion Notice to
Borrower pursuant to which Borrower is required to deliver 100,000 Lender
Conversion Shares to Lender and on the Delivery Date such Lender Conversion
Shares have a Lender Conversion Share Value of $20,000.00 (assuming a Closing
Trade Price on the Delivery Date of $0.20 per share of Common Stock), then in
such event a Conversion Delay Late Fee in the amount of $500.00 per day (the
greater of $500.00 per day and $20,000.00 multiplied by 2%, which is $400.00)
would be added to the Outstanding Balance of the Note until such Lender
Conversion Shares are delivered to Lender. For purposes of this example, if the
Lender Conversion Shares are delivered to Lender twenty (20) days after the
applicable Delivery Date, the total Conversion Delay Late Fees that would be
added to the Outstanding Balance would be $10,000.00 (20 days multiplied by
$500.00 per day). If the Lender Conversion Shares are delivered to Lender one
hundred (100) days after the applicable Delivery Date, the total Conversion
Delay Late Fees that would be added to the Outstanding Balance would be
$40,000.00 (100 days multiplied by $500.00 per day, but capped at 200% of the
Lender Conversion Share Value). 

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11.                  True-Up. On the date
that is twenty (20) Trading Days (a “True-Up Date”) from each date that
the Installment Conversion Shares delivered by Borrower to Lender become Free
Trading, there shall be a true-up where Borrower shall deliver to Lender
additional Installment Conversion Shares (“True-Up Shares”) if the
Installment Conversion Price as of the True-Up Date is less than the Installment
Conversion Price used in the applicable Installment Notice. In such event,
Borrower shall deliver to Lender within three (3) Trading Days of the True-Up
Date (the “True-Up Share Delivery Date”) a number of True-Up Shares equal
to the difference between the number of Installment Conversion Shares that would
have been delivered to Lender on the True-Up Date based on the Installment
Conversion Price as of the True-Up Date and the number of Installment Conversion
Shares originally delivered to Lender pursuant to the applicable Installment
Notice. For the avoidance of doubt, if the Installment Conversion Price as of
the True-Up Date is higher than the Installment Conversion Price set forth in
the applicable Installment Notice, then Borrower shall have no obligation to
deliver True-Up Shares to Lender, nor shall Lender have any obligation to return
any excess Installment Conversion Shares to Borrower under any circumstance. For
the convenience of Borrower only, Lender may, in its sole discretion, deliver to
Borrower a notice (pursuant to a form of notice substantially in the form
attached hereto as Exhibit C) informing Borrower of the number of True-Up
Shares it is obligated to deliver to Lender as of any given True-Up Date,
provided that if Lender does not deliver any such notice, Borrower shall not be
relieved of its obligation to deliver True-Up Shares pursuant to this Section
11. Notwithstanding the foregoing, if Borrower fails to deliver any required
True-Up Shares on or before any applicable True-Up Share Delivery Date, then in
such event the Outstanding Balance of this Note will automatically increase by a
sum equal to the number of True-Up Shares deliverable as of the applicable
True-Up Date multiplied by the Market Price for the Common Stock as of the
applicable True-Up Date (under Lender’s and Borrower’s expectations that any
such increase will tack back to the Purchase Price Date for purposes of
determining the holding period under Rule 144). 

12.                  Sale of Sino-Top Interest.

12.1.                  Upon the sale, transfer,
assignment, pledge, hypothecation, or any other encumbrance of 40% or more of
the Sino-Top Interest (an “Interest Sale”) or all or substantially all of
Borrower’s assets, Lender may, at its election, cause Borrower to redeem this
Note at the greater of (a) the Outstanding Balance, and (b) the Redemption
Amount (either (a) or (b) above, whichever is greater, the “Payoff
Amount”). 

12.2.                  In furtherance of the
foregoing, at any time while this Note is outstanding, if Borrower desires to
engage in an Interest Sale, then the following will apply: (a) Borrower will
notify Lender in writing of the final terms and conditions of the Interest Sale
and (i) if the purchase price (in U.S. Dollars) of the Interest Sale is greater
than the Payoff Amount, request a Payoff Letter from Lender, or (ii) if the
purchase price (in U.S. Dollars) of the Interest Sale is less than the Payoff
Amount, request Lender’s consent to the Interest Sale and a Payoff Letter from
Lender; (b) if applicable, Lender will provide the Payoff Amount by delivering a
Payoff Letter to Borrower; (c) upon the closing of the Interest Sale, Borrower
shall cause the buyer to deliver the Payoff Amount directly to the account
designated by Lender in the Payoff Letter; and (d) upon receipt of the Payoff
Amount, Lender shall promptly confirm such receipt and take any actions
reasonably necessary to release Lender’s lien on and security interest in the
Sino-Top Interest.

8 




13.                  Ownership Limitation.
Notwithstanding anything to the contrary contained in this Note or the other
Transaction Documents, if at any time Lender shall or would be issued shares of
Common Stock under any of the Transaction Documents, but such issuance would
cause Lender (together with its affiliates) to beneficially own a number of
shares exceeding 9.99% of the number of shares of Common Stock outstanding on
such date (including for such purpose the shares of Common Stock issuable upon
such issuance) (the “Maximum Percentage”), then Borrower must not issue
to Lender shares of Common Stock which would exceed the Maximum Percentage. For
purposes of this section, beneficial ownership of Common Stock will be
determined pursuant to Section 13(d) of the 1934 Act. The shares of Common Stock
issuable to Lender that would cause the Maximum Percentage to be exceeded are
referred to herein as the “Ownership Limitation Shares”.
Borrower will reserve the Ownership Limitation Shares for the exclusive benefit
of Lender. From time to time, Lender may notify Borrower in writing of the
number of the Ownership Limitation Shares that may be issued to Lender without
causing Lender to exceed the Maximum Percentage. Upon receipt of such notice,
Borrower shall be unconditionally obligated to immediately issue such designated
shares to Lender, with a corresponding reduction in the number of the Ownership
Limitation Shares. By written notice to Borrower, Lender may increase, decrease
or waive the Maximum Percentage as to itself but any such waiver will not be
effective until the 61st day after delivery thereof. The foregoing 61-day notice
requirement is enforceable, unconditional and non-waivable and shall apply to
all affiliates and assigns of Lender. 

14.                  Payment of Collection
Costs. If this Note is placed in the hands of an attorney for collection or
enforcement prior to commencing arbitration or legal proceedings, or is
collected or enforced through any arbitration or legal proceeding, or Lender
otherwise takes action to collect amounts due under this Note or to enforce the
provisions of this Note, then Borrower shall pay the costs incurred by Lender
for such collection, enforcement or action including, without limitation,
attorneys’ fees and disbursements. Borrower also agrees to pay for any costs,
fees or charges of its transfer agent that are charged to Lender pursuant to any
Conversion or issuance of shares pursuant to this Note. 

15.                  Opinion of Counsel. In
the event that an opinion of counsel is needed for any matter related to this
Note, Lender has the right to have any such opinion provided by its counsel.
Lender also has the right to have any such opinion provided by Borrower’s
counsel. 

16.                  Governing Law; Venue.
This Note shall be construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of this
Note shall be governed by, the internal laws of the State of Utah, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Utah or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Utah. The provisions set
forth in the Purchase Agreement to determine the proper venue for any disputes
are incorporated herein by this reference. 

17.                  Resolution of
Disputes.

17.1.                  Arbitration of
Disputes. By its acceptance of this Note, each party agrees to be bound by
the Arbitration Provisions (as defined in the Purchase Agreement) set forth as
an exhibit to the Purchase Agreement. 

17.2.                  Calculation
Disputes. Notwithstanding the Arbitration Provisions, in the case of a
dispute as to any Calculation (as defined in the Purchase Agreement), such
dispute will be resolved in the manner set forth in the Purchase Agreement. 

18.                  Cancellation. After
repayment or conversion of the entire Outstanding Balance (including without
limitation delivery of True-Up Shares pursuant to the payment of the final
Installment Amount, if applicable), this Note shall be deemed paid in full,
shall automatically be deemed canceled, and shall not be reissued. 

9 




19.                  Amendments. The prior
written consent of both parties hereto shall be required for any change or
amendment to this Note. 

20.                  Assignments. Borrower
may not assign this Note without the prior written consent of Lender. This Note
and any shares of Common Stock issued upon conversion of this Note may be
offered, sold, assigned or transferred by Lender without the consent of
Borrower. 

21.                  Time is of the
Essence. Time is expressly made of the essence with respect to each and
every provision of this Note and the documents and instruments entered into in
connection herewith. 

22.                  Notices. Whenever
notice is required to be given under this Note, unless otherwise provided
herein, such notice shall be given in accordance with the subsection of the
Purchase Agreement titled “Notices.”

 23.                  Liquidated Damages. Lender and
  Borrower agree that in the event Borrower fails to comply with any of the terms
  or provisions of this Note, Lender’s damages would be uncertain and difficult
  (if not impossible) to accurately estimate because of the parties’ inability to
  predict future interest rates, future share prices, future trading volumes and
  other relevant factors. Accordingly, Lender and Borrower agree that any fees,
  balance adjustments, Default Interest or other charges assessed under this Note
  are not penalties but instead are intended by the parties to be, and shall be
  deemed, liquidated damages (under Lender’s and Borrower’s expectations that any
  such liquidated damages will tack back to the Purchase Price Date for purposes
  of determining the holding period under Rule 144). 

24.                  Waiver of Jury Trial.
EACH OF LENDER AND BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY
HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
ANY WAY RELATED TO THIS NOTE OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED
BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY
ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION.
FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND
VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY. 

25.                  Voluntary Agreement.
Borrower has carefully read this Note and has asked any questions needed for
Borrower to understand the terms, consequences and binding effect of this Note
and fully understand them. Borrower has had the opportunity to seek the advice
of an attorney of Borrower’s choosing, or has waived the right to do so, and is
executing this Note voluntarily and without any duress or undue influence by
Lender or anyone else. 

26.                  Severability. If any
part of this Note is construed to be in violation of any law, such part shall be
modified to achieve the objective of Borrower and Lender to the fullest extent
permitted by law and the balance of this Note shall remain in full force and
effect. 

10 




27.                  Par Value Adjustments.
If at any time Lender delivers a Lender Conversion Notice to Borrower and as of
such date the Lender Conversion Price would be less than the Par Value, then, as
liquidated damages, Borrower must pay to Lender the Par Value Adjustment Amount
in cash within one (1) Trading Day of delivery of the applicable Conversion
Notice (a “Par Value Adjustment”). If Borrower does not deliver the Par
Value Adjustment Amount as required, then such amount shall automatically be
added to the Outstanding Balance. The number of Conversion Shares deliverable
pursuant to any relevant Lender Conversion Notice following a Par Value
Adjustment shall be equal to (a) the Conversion Amount, divided by (b) the Par
Value. In the event of a Par Value Adjustment, Lender will use a Lender
Conversion Notice in substantially the form attached hereto as Exhibit D.


[Remainder of page intentionally left blank; signature page
follows]

11 




IN WITNESS WHEREOF, Borrower has
caused this Note to be duly executed as of the Effective Date.

	 	BORROWER: 
	 	SILVER DRAGON RESOURCES INC.
    
	 	  	  
	 	  	  
	 	By: 	/s/
      Marc Hazout 
	 	Name: 	Marc
      Hazout 
	 	Title: 	President and CEO 


ACKNOWLEDGED, ACCEPTED AND AGREED: 

LENDER: 

TONAQUINT, INC.


By:         
/s/ John M.
Fife                                     
 
John M. Fife, President 

[Signature Page to Secured Convertible Promissory Note]





ATTACHMENT 1 
DEFINITIONS 

For purposes of this Note, the
following terms shall have the following meanings:

A1.                  “Adjusted Outstanding
Balance” means the Outstanding Balance of this Note as of the date the
applicable Fundamental Default occurred less any Conversion Delay Late Fees
included in such Outstanding Balance. 

A2.                  “Approved Stock Plan”
means any stock option plan which has been approved by the board of directors of
Borrower and is in effect as of the Purchase Price Date, pursuant to which
Borrower’s securities may be issued to any employee, officer or director for
services provided to Borrower. 

A3.                  “Bloomberg” means
Bloomberg L.P. (or if that service is not then reporting the relevant
information regarding the Common Stock, a comparable reporting service of
national reputation selected by Lender and reasonably satisfactory to Borrower).


A4.                  “Book Value Per Share”
means the value of all of Company’s assets, including, but not limited to, all
current assets, all long term assets, and any proceeds received or to be
received in connection with an Interest Sale (regardless of any contingencies or
conditions to Company receiving the full proceeds thereof), less the Company’s
outstanding payables and notes payable, divided by the number of Company’s
issued and outstanding shares of Common Stock.

A5.                  “Closing Bid Price”
and “Closing Trade Price” means the last closing bid price and last
closing trade price, respectively, for the Common Stock on its principal market,
as reported by Bloomberg, or, if its principal market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing
trade price (as the case may be) then the last bid price or last trade price,
respectively, of the Common Stock prior to 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if its principal market is not the principal
securities exchange or trading market for the Common Stock, the last closing bid
price or last trade price, respectively, of the Common Stock on the principal
securities exchange or trading market where the Common Stock is listed or traded
as reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price or last trade price, respectively, of the Common Stock in the
over-the-counter market on the electronic bulletin board for the Common Stock as
reported by Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for the Common Stock by Bloomberg, the average of the
bid prices, or the ask prices, respectively, of any market makers for the Common
Stock as reported by OTC Markets Group, Inc., and any successor thereto. If the
Closing Bid Price or the Closing Trade Price cannot be calculated for the Common
Stock on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Trade Price (as the case may be) of the Common Stock on such date
shall be the fair market value as mutually determined by Lender and Borrower. If
Lender and Borrower are unable to agree upon the fair market value of the Common
Stock, then such dispute shall be resolved in accordance with the procedures in
Section 17.2. All such determinations shall be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during such period. 

A6.                  “Conversion” means a
Lender Conversion under Section 3 or an Installment Conversion under Section 8.


A7.                  “Conversion Factor”
means 70%, subject to the following adjustments. If at any time after the
Effective Date, Borrower is not DWAC Eligible, then the then-current Conversion
Factor will automatically be reduced by 5% for all future Conversions. If at any
time after the Effective Date, the Conversion Shares are not DTC Eligible, then
the then-current Conversion Factor will automatically be reduced by an
additional 5% for all future Conversions. Finally, in addition to the Default
Effect, if any Major Default occurs after the Effective Date, the Conversion
Factor shall automatically be reduced for all future Conversions by an
additional 5% for each of the first three (3) Major Defaults that occur after
the Effective Date (for the avoidance of doubt, each occurrence of any Major
Default shall be deemed to be a separate occurrence for purposes of the
foregoing reductions in Conversion Factor, even if the same Major Default occurs
three (3) separate times). For example, the first time Borrower is not DWAC
Eligible, the Conversion Factor for future Conversions thereafter will be
reduced from 70% to 65% for purposes of this example. Following such event, the
first time the Conversion Shares are no longer DTC Eligible, the Conversion
Factor for future Conversions thereafter will be reduced from 65% to 60% for
purposes of this example. If, thereafter, there are three (3) separate
occurrences of a Major Default pursuant to Section 4.1(c), then for purposes of
this example the Conversion Factor would be reduced by 5% for the first such
occurrence, and so on for each of the second and third occurrences of such Major
Default. 

Attachment 1 to Secured Convertible Promissory Note, Page 1 




A8.                  “Deemed Issuance”
means an issuance of Common Stock that shall be deemed to have occurred on the
latest possible permitted date pursuant to the terms hereof in the event
Borrower fails to deliver Conversion Shares as and when required pursuant to
Section 9 of the Note. For the avoidance of doubt, if Borrower has elected or is
deemed under Section 8.3 to have elected to pay an Installment Amount in
Installment Conversion Shares and fails to deliver such Installment Conversion
Shares, such failure shall be considered a Deemed Issuance hereunder even if an
Equity Conditions Failure exists at that time or other relevant date of
determination. 

A9.                  “Deemed Redemption
Shares” means the number of shares of Common Stock Lender would receive as
of the date the Payoff Letter is delivered if it were to convert the entire
Outstanding Balance of this Note into Common Stock at the lower of (a) the
Market Price, and (b) the Lender Conversion Price (even if such shares could not
otherwise be issued as a result of the Ownership Limitation, Rule 144
eligibility, lack of authorized shares or for any other reason).

A10.                  “Default Effect”
means multiplying the Outstanding Balance as of the date the applicable Event of
Default occurred by (a) 15% for each occurrence of any Major Default, or (b) 5%
for each occurrence of any Minor Default, and then adding the resulting product
to the Outstanding Balance as of the date the applicable Event of Default
occurred, with the sum of the foregoing then becoming the Outstanding Balance
under this Note as of the date the applicable Event of Default occurred;
provided that the Default Effect may only be applied three (3) times hereunder
with respect to Major Defaults and three (3) times hereunder with respect to
Minor Defaults; and provided further that the Default Effect shall not apply to
any Event of Default pursuant to Section 4.1(b) hereof. 

A11.                  “DTC” means the
Depository Trust Company or any successor thereto. 

A12.                  “DTC Eligible” means,
with respect to the Common Stock, that such Common Stock is eligible to be
deposited in certificate form at the DTC, cleared and converted into electronic
shares by the DTC and held in the name of the clearing firm servicing Lender’s
brokerage firm for the benefit of Lender. 

A13.                  “DTC/FAST Program”
means the DTC’s Fast Automated Securities Transfer program. 

A14.                   “DWAC”
means the DTC’s Deposit/Withdrawal at Custodian system. 

A15.                  “DWAC Eligible” means
that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant
to DTC’s operational arrangements, including without limitation transfer through
DTC’s DWAC system, (b) Borrower has been approved (without revocation) by DTC’s
underwriting department, (c) Borrower’s transfer agent is approved as an agent
in the DTC/FAST Program, (d) the Conversion Shares are otherwise eligible for
delivery via DWAC; (e) Borrower has previously delivered all Conversion Shares
to Lender via DWAC; and (f) Borrower’s transfer agent does not have a policy
prohibiting or limiting delivery of the Conversion Shares via DWAC. 

A16.                  “Equity Conditions
Failure” means that any of the following conditions has not been satisfied
during any applicable Equity Conditions Measuring Period (as defined below): (a)
with respect to the applicable date of determination all of the Conversion
Shares would be freely tradable under Rule 144 or without the need for
registration under any applicable federal or state securities laws (in each
case, disregarding any limitation on conversion of this Note); (b) on each day
during the period beginning one month prior to the applicable date of
determination and ending on and including the applicable date of determination
(the “Equity Conditions Measuring Period”), the Common Stock is listed or
designated for quotation (as applicable) on any of NYSE, NASDAQ, OTCQX, or OTCQB
(each, an “Eligible Market”) and shall not have been suspended from
trading on any such Eligible Market (other than suspensions of not more than two
(2) Trading Days and occurring prior to the applicable date of determination due
to business announcements by Borrower); (c) on each day during the Equity
Conditions Measuring Period, Borrower shall have delivered all shares of Common
Stock issuable upon conversion of this Note on a timely basis as set forth in
Section 9 hereof and all other shares of capital stock required to be delivered
by Borrower on a timely basis as set forth in the other Transaction Documents;
(d) any shares of Common Stock to be issued in connection with the event
requiring determination may be issued in full without violating Section 12
hereof (Lender acknowledges that Borrower shall be entitled to assume that this
condition has been met for all purposes hereunder absent written notice from
Lender); (e) any shares of Common Stock to be issued in connection with the
event requiring determination may be issued in full without violating the rules
or regulations of the Eligible Market on which the Common Stock is then listed
or designated for quotation (as applicable); (f) on each day during the Equity
Conditions Measuring Period, no public announcement of a pending, proposed or
intended Fundamental Transaction shall have occurred which has not been
abandoned, terminated or consummated; (g) Borrower shall have no knowledge of
any fact that would reasonably be expected to cause any of the Conversion Shares
to not be freely tradable without the need for registration under any applicable
state securities laws (in each case, disregarding any limitation on conversion
of this Note); (h) on each day during the Equity Conditions Measuring Period,
Borrower otherwise shall have been in material compliance with each, and shall
not have breached any, term, provision, covenant, representation or warranty of
any Transaction Document; (i) without limiting clause (j) above, on each day
during the Equity Conditions Measuring Period, there shall not have occurred an
Event of Default or an event that with the passage of time or giving of notice
would constitute an Event of Default; (k) on each Installment Date, the average
and median daily dollar volume of the Common Stock on its principal market for
the previous twenty (20) Trading Days shall be greater than $2,500.00 (l) the
ten (10) day average VWAP of the Common Stock is greater than $0.005, and (m)
the Common Stock shall be DWAC Eligible as of each applicable Installment Date
or other date of determination.

Attachment 1 to Secured Convertible Promissory Note, Page 2 




A17.                  “Excluded Securities”
means any shares of Common Stock, options, or convertible securities issued or
issuable in connection with any Approved Stock Plan; provided that the
option term, exercise price or similar provisions of any issuances pursuant to
such Approved Stock Plan are not amended, modified or changed on or after the
Purchase Price Date. 

A18.                  “Free Trading” means
that (a) the shares or certificate(s) representing the applicable shares of
Common Stock have been cleared and approved for public resale by the compliance
departments of Lender’s brokerage firm and the clearing firm servicing such
brokerage, and (b) such shares are held in the name of the clearing firm
servicing Lender’s brokerage firm and have been deposited into such clearing
firm’s account for the benefit of Lender. 

A19.                  “Fundamental Default”
means that Borrower either fails to pay the entire Outstanding Balance to Lender
on or before the Maturity Date or fails to pay the Mandatory Default Amount
within three (3) Trading Days of the date Lender delivers any notice of
acceleration to Borrower pursuant to Section 4.2 of this Note. 

A20.                  “Fundamental Default
Conversion Value” means the Adjusted Outstanding Balance multiplied by the
highest Fundamental Default Ratio that occurs during the Fundamental Default
Measuring Period. 

A21.                  “Fundamental Default
Measuring Period” means a number of months equal to the Outstanding Balance
as of the date the Fundamental Default occurred divided by the Installment
Amount, with such number being rounded up to the next whole month; provided,
however, that if Borrower repays the entire Outstanding Balance prior to the
conclusion of the Fundamental Default Measuring Period, the Fundamental Default
Measuring Period shall end on the date of repayment. For illustration purposes
only, if the Outstanding Balance were equal to $125,000.00 as of the date a
Fundamental Default occurred and if the Installment Amount were $28,500.00, then
the Fundamental Default Measuring Period would equal five (5) months calculated
as follows: $125,000.00/ $28,500.00 equals 4.386, rounded up to five (5). 

A22.                  “Fundamental Default
Ratio” means a ratio that will be calculated on each Trading Day during the
Fundamental Default Measuring Period by dividing the Closing Trade Price for the
Common Stock on a given Trading Day by the Lender Conversion Price (as adjusted
pursuant to the terms hereof) in effect for such Trading Day. 

A23.                  “Fundamental Liquidated
Damages Amount” means the greater of (a) (i) the quotient of the Outstanding
Balance on the date the Fundamental Default occurred divided by the then-current
Conversion Factor, minus (ii) the Outstanding Balance on the date the
Fundamental Default occurred, or (b) the Fundamental Default Conversion Value.


A24.                  “Fundamental
Transaction” means that (a) (i) Borrower or any of its subsidiaries shall,
directly or indirectly, in one or more related transactions, consolidate or
merge with or into (whether or not Borrower or any of its subsidiaries is the
surviving corporation) any other person or entity, or (ii) Borrower or any of
its subsidiaries shall, directly or indirectly, in one or more related
transactions, sell, lease, license, assign, transfer, convey or otherwise
dispose of all or substantially all of its respective properties or assets to
any other person or entity, or (iii) Borrower or any of its subsidiaries shall,
directly or indirectly, in one or more related transactions, allow any other
person or entity to make a purchase, tender or exchange offer that is accepted
by the holders of more than 50% of the outstanding shares of voting stock of
Borrower (not including any shares of voting stock of Borrower held by the
person or persons making or party to, or associated or affiliated with the
persons or entities making or party to, such purchase, tender or exchange
offer), or (iv) Borrower or any of its subsidiaries shall, directly or
indirectly, in one or more related transactions, consummate a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with any
other person or entity whereby such other person or entity acquires more than
50% of the outstanding shares of voting stock of Borrower (not including any
shares of voting stock of Borrower held by the other persons or entities making
or party to, or associated or affiliated with the other persons or entities
making or party to, such stock or share purchase agreement or other business
combination), or (v) Borrower or any of its subsidiaries shall, directly or
indirectly, in one or more related transactions, reorganize, recapitalize or
reclassify the Common Stock, other than an increase in the number of authorized
shares of Borrower’s Common Stock, or (b) any “person” or “group” (as these
terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the
rules and regulations promulgated thereunder) is or shall become the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of
50% of the aggregate ordinary voting power represented by issued and outstanding
voting stock of Borrower, or (vi) a change in the composition Borrower’s board
of directors occurs whereby fewer than a majority of the members of Borrower’s
board of directors are Incumbent Directors (for example, if there are currently
four (4) members of Borrower’s board of directors, then a Fundamental
Transaction shall have occurred if two (2) such Incumbent Directors are replaced
with directors who are not Incumbent Directors and the number of members of the
board of directors remains at four (4); likewise, if the number of members of
the board of directors is increased to eight (8), then a Fundamental Transaction
will also have occurred even if four (4) of such directors are Incumbent
Directors). 

Attachment 1 to Secured Convertible Promissory Note, Page 3 




A25.                  “Incumbent Directors”
means members of Borrower’s board of directors who either (i) are directors as
of the Effective Date, or (ii) are elected, or nominated for election, to
Borrower’s board of directors with the affirmative votes of at least a majority
of the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to
Borrower). 

A26.                  “Installment Amount”
means $55,000. 

A27.                  “Lender Conversion Share
Value” means the product of the number of Lender Conversion Shares
deliverable pursuant to any Lender Conversion multiplied by the Closing Trade
Price of the Common Stock on the Delivery Date for such Lender Conversion. 

A28.                  “Major Default” means
any Event of Default occurring under Sections 4.1(a) (payments), 4.1(c)
(delivery of Installment Conversion Shares or True-Up Shares), 4.1(l) (Share
Reserve), or 4.1(p) (breach of certain covenants) of this Note. 

A29.                  “Mandatory Default
Amount” means the greater of (a) the Outstanding Balance divided by the
Installment Conversion Price on the date the Mandatory Default Amount is
demanded, multiplied by the VWAP on the date the Mandatory Default Amount is
demanded, or (b) the Outstanding Balance following the application of the
Default Effect. 

A30.                  “Market
Capitalization” means the product equal to (a) the average VWAP of the
Common Stock for the immediately preceding fifteen (15) Trading Days, multiplied
by (b) the aggregate number of outstanding shares of Common Stock as reported on
Borrower’s most recently filed Form 10-Q or Form 10-K. 

A31.                  “Market Price” means
the Conversion Factor multiplied by the average of the ten (10) lowest Closing
Bid Prices in the twenty (20) Trading Days immediately preceding the applicable
Conversion. 

A32.                  “Minor Default” means
any Event of Default that is not a Major Default or a Fundamental Default. 

A33.                  “OID” means an
original issue discount. 

A34.                  “Optional Prepayment
Liquidated Damages Amount” means an amount equal to the difference between
(a) the product of (i) the number of shares of Common Stock obtained by dividing
(1) the applicable Optional Prepayment Amount by (2) the Lender Conversion Price
as of the date Borrower delivered the applicable Optional Prepayment Amount to
Lender, multiplied by (ii) the Closing Trade Price of the Common Stock on the
date Borrower delivered the applicable Optional Prepayment Amount to Lender, and
(b) the applicable Optional Prepayment Amount paid by Borrower to Lender. For
illustration purposes only, if the applicable Optional Prepayment Amount were
$50,000.00, the Lender Conversion Price as of the date the Optional Prepayment
Amount was paid to Lender was equal to $0.75 per share of Common Stock, and the
Closing Trade Price of a share of Common Stock as of such date was equal to
$1.00, then the Optional Prepayment Liquidated Damages Amount would equal
$16,666.67 computed as follows: (a) $66,666.67 (calculated as (i) (1) $50,000.00
divided by (2) $0.75 multiplied by (ii) $1.00) minus (b) $50,000.00. 

Attachment 1 to Secured Convertible Promissory Note, Page 4 




A35.                  “Other Agreements”
means, collectively, (a) all existing and future agreements and instruments
between, among or by Borrower (or an affiliate), on the one hand, and Lender (or
an affiliate), on the other hand, and (b) any financing agreement or a material
agreement that affects Borrower’s ongoing business operations. 

A36.                  “Outstanding Balance”
means as of any date of determination, the Purchase Price, as reduced or
increased, as the case may be, pursuant to the terms hereof for payment,
Conversion, offset, or otherwise, plus the Transaction Expense Amount, accrued
but unpaid interest, collection and enforcements costs (including attorneys’
fees) incurred by Lender, transfer, stamp, issuance and similar taxes and fees
related to Conversions, and any other fees or charges (including without
limitation Conversion Delay Late Fees) incurred under this Note. 

A37.                  “Payoff Letter” means
the letter sent by Lender to Borrower with the Payoff Amount and wire transfer
instructions.

A38.                  “Par Value” means the
par value of the Common Stock on any relevant date of determination. The Par
Value as of the Effective Date is $0.0001. 

A39.                  “Par Value Adjustment
Amount” means an amount calculated as follows: (a) the number of Lender
Conversion Shares deliverable under a particular Lender Conversion Notice (prior
to any Par Value Adjustment) multiplied by the Par Value, less (b) the
Conversion Amount (prior to any Par Value Adjustment), plus (c) $500.00. For
illustration purposes only, if for a given Conversion, the Conversion Amount was
$20,000.00, the Conversion Price was $0.0008 and the Par Value was $0.001 then
the Par Value Adjustment Amount would be $5,500.00 (25,000,000 Conversion Shares
($20,000.00/ $0.0008) multiplied by the Par Value of $0.001 ($25,000.00) minus
the Conversion Amount of $20,000.00 plus $500.00 equals $5,500.00) . 

A40.                  “Purchase Price Date”
means the date the Purchase Price is delivered by Lender to Borrower.  

A41.                  “Redemption Amount” means the Deemed Redemption Shares multiplied by the
Book Value Per Share; provided, however, that in no event shall the
Redemption Amount exceed three (3) times the Outstanding Balance on the date the
Payoff Letter is delivered.

A42.                  “Sino-Top” means
Sanhe Sino-Tip Resources & Technologies, Ltd., a Chinese foreign cooperative
joint venture. 

A43.                  “Sino-Top Interest”
means all equity interests held by Borrower in Sino-Top or any other claims,
rights or interests Borrower has in or against Sino-Top.

A44.                  “Trading Day” means
any day on which the New York Stock Exchange is open for trading. 

A45.                  “VWAP” means the
volume weighted average price of the Common stock on the principal market for a
particular Trading Day or set of Trading Days, as the case may be, as reported
by Bloomberg. 

Attachment 1 to Secured Convertible Promissory Note, Page 5 




EXHIBIT A 

Tonaquint, Inc. 
303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601 

	Silver Dragon Resources Inc. 	
    Date:
____________________________________

	Attn: Marc Hazout, CEO 	  
	200 Davenport Road 	  
	Toronto, ONT M5R 1J2 Canada 	  


LENDER CONVERSION NOTICE 

The above-captioned Lender
hereby gives notice to Silver Dragon Resources Inc., a Delaware corporation (the
“Borrower”), pursuant to that certain Secured Convertible Promissory Note
made by Borrower in favor of Lender on May 25, 2016 (the “Note”), that
Lender elects to convert the portion of the Note balance set forth below into
fully paid and non-assessable shares of Common Stock of Borrower as of the date
of conversion specified below. Said conversion shall be based on the Lender
Conversion Price set forth below. In the event of a conflict between this Lender
Conversion Notice and the Note, the Note shall govern, or, in the alternative,
at the election of Lender in its sole discretion, Lender may provide a new form
of Lender Conversion Notice to conform to the Note. Capitalized terms used in
this notice without definition shall have the meanings given to them in the
Note. 

	 	A. 	Date of Conversion:  ________________	  
	 	B. 	Lender Conversion #:  ________________	  
	 	C. 	Conversion Amount:  ________________	  
	 	D. 	Lender Conversion Price: 
    ________________	  
	 	E. 	Lender Conversion Shares: ________________ (C
      divided by D) 	 
	 	F. 	Remaining Outstanding Balance of Note:
      ________________ * 	 


* Subject to adjustments for corrections, defaults, interest
and other adjustments permitted by the Transaction Documents (as defined in the
Purchase Agreement), the terms of which shall control in the event of any
dispute between the terms of this Lender Conversion Notice and such Transaction
Documents. 

$_________________of the Conversion Amount converted hereunder
shall be deducted from the Installment Amount(s) relating to the following
Installment Date(s): __________________________________________. 

Please transfer the Lender Conversion Shares
electronically (via DWAC) to the following account: 

	Broker:  ________________________________________	Address: 
      _____________________________________
	DTC#:  _________________________________________	                  _____________________________________
	Account #:  _____________________________________	                  _____________________________________
	Account Name:  __________________________________	  


To the extent the Lender
Conversion Shares are not able to be delivered to Lender electronically via the
DWAC system, deliver all such certificated shares to Lender via reputable
overnight courier after receipt of this Lender Conversion Notice (by facsimile
transmission or otherwise) to: 



_____________________________________

_____________________________________

_____________________________________

Exhibit A to Secured Convertible Promissory Note, Page 1 




Sincerely, 

Lender:

TONAQUINT, INC.


By:
_________________________
       John M. Fife,
President 

Exhibit A to Secured Convertible Promissory Note, Page 2 




EXHIBIT B 

Silver Dragon Resources Inc. 
200 Davenport Road 
Toronto,
ONT M5R 1J2 Canada 

	Tonaquint, Inc.  	
    Date: _____________________

	Attn: John Fife 	  
	303 East Wacker Drive, Suite 1040 	  
	Chicago, Illinois 60601 	  


INSTALLMENT NOTICE 

The above-captioned Borrower hereby gives notice to Tonaquint,
Inc., a Utah corporation (the “Lender”), pursuant to that certain Secured
Convertible Promissory Note made by Borrower in favor of Lender on May 25, 2016
(the “Note”), of certain Borrower elections and certifications related to
payment of the Installment Amount of $_________________due on ___________, 201_
(the “Installment Date”). In the event of a conflict between this
Installment Notice and the Note, the Note shall govern, or, in the alternative,
at the election of Lender in its sole discretion, Lender may provide a new form
of Installment Notice to conform to the Note. Capitalized terms used in this
notice without definition shall have the meanings given to them in the Note.


INSTALLMENT CONVERSION AND CERTIFICATIONS

AS OF THE INSTALLMENT DATE 

	A. 	
      INSTALLMENT CONVERSION




	 	A. 	Installment Date: ____________, 201_

	 	B. 	Installment Amount: ____________
	 	C. 	Portion of Installment Amount to be Paid in
      Cash: ____________
	 	D. 	Portion of Installment Amount to be Converted
      into Common Stock: ____________ (B minus C) 
		E. 	Installment Conversion Price: ____________
      (lower of (i) Lender Conversion Price in effect and (ii) Market Price as
      of Installment Date) 
	 	F. 	Installment Conversion Shares: ____________ (D
      divided by E) 
	 	G. 	Remaining Outstanding Balance of Note:
      ____________ * 


* Subject to adjustments for corrections, defaults, interest
and other adjustments permitted by the Transaction Documents (as defined in the
Purchase Agreement), the terms of which shall control in the event of any
dispute between the terms of this Installment Notice and such Transaction
Documents. 

	B. 	
      EQUITY CONDITIONS
CERTIFICATION




	1. 	
      Market
Capitalization:________________



(Check One) 

	2. 	
      _________Borrower herby certifies that no Equity
      Conditions Failure exists as of the Installment
Date.




	3. 	
      _________Borrower hereby gives notice that an Equity
      Conditions Failure has occurred and requests a waiver from Lender with
      respect thereto. The Equity Conditions Failure is as
  follows:



Exhibit B to Secured Convertible Promissory Note, Page 1 




_________________________________________________________________________________

_________________________________________________________________________________

_________________________________________________________________________________

_________________________________________________________________________________


Sincerely, Borrower: 

SILVER DRAGON RESOURCES
INC. 

By: _______________________________________

Name: _____________________________________

Title: ______________________________________

ACKNOWLEDGED AND CERTIFIED BY: 

Lender: 

TONAQUINT, INC.


By: 
_________________________
        John M.
Fife, President 

Exhibit B to Secured Convertible Promissory Note, Page 2 




EXHIBIT C 

Tonaquint, Inc. 
303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601 

	Silver Dragon Resources Inc. 	Date: ________________________________
	Attn: Marc Hazout, CEO 	  
	200 Davenport Road 	  
	Toronto, ONT M5R 1J2 Canada 	  


TRUE-UP NOTICE 

The above-captioned Lender hereby gives notice to Silver Dragon
Resources Inc., a Delaware corporation (the “Borrower”), pursuant to that
certain Secured Convertible Promissory Note made by Borrower in favor of Lender
on May 25, 2016 (the “Note”), of True-Up Conversion Shares related to
_____________, 201_ (the “Installment Date”). In the event of a conflict
between this True-Up Notice and the Note, the Note shall govern, or, in the
alternative, at the election of Lender in its sole discretion, Lender may
provide a new form of True-Up Notice to conform to the Note. Capitalized terms
used in this notice without definition shall have the meanings given to them in
the Note. 

TRUE-UP CONVERSION SHARES AND
CERTIFICATIONS 

AS OF THE TRUE-UP DATE 

	1. 	
      TRUE-UP CONVERSION
SHARES




	 	A. 	Installment Date: ____________, 201_ 
	 	 	 
	 	B. 	True-Up Date: ____________, 201_ 
	 	 	 
	 	C. 	Portion of Installment Amount Converted into
      Common Stock:  ____________
	 	 	 
		D. 	True-Up Conversion Price:
      ____________ (lower of (i) Lender Conversion Price in effect and (ii)
      Market Price as of True-Up Date) 
	 	 	 
	 	E. 	True-Up Conversion Shares: ____________ (C
      divided by D) 
	 	 	 
		F. 	Installment Conversion Shares Delivered:
      ____________
	 	 	 
		G. 	True-Up Conversion Shares to be Delivered:
      ____________ (only applicable if E minus F is greater than zero)
  



	2. 	
      EQUITY CONDITIONS CERTIFICATION (Section to be
      completed by Borrower)



A.            
Market Capitalization: ________________


(Check One) 

B.             
 _________Borrower herby certifies that no Equity Conditions Failure exists
as of the applicable True-Up Date. 

Exhibit C to Secured Convertible Promissory Note, Page 1 




C.            
_________   Borrower hereby gives notice that an Equity Conditions
Failure has occurred and requests a waiver from Lender with respect thereto. The
Equity Conditions Failure is as follows: 

_________________________________________________________________________________

_________________________________________________________________________________

_________________________________________________________________________________

_________________________________________________________________________________


Sincerely, 

Lender:

TONAQUINT, INC.


By: 
_________________________
        John M.
Fife, President 

Exhibit C to Secured Convertible Promissory Note, Page 2 




EXHIBIT D 

Tonaquint, Inc. 
303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601 

	Silver Dragon Resources Inc. 	
    Date:  _________________

	Attn: Marc Hazout, CEO 	  
	200 Davenport Road 	  
	Toronto, ONT M5R 1J2 Canada 	  


LENDER CONVERSION NOTICE 

The above-captioned Lender
hereby gives notice to Silver Dragon Resources Inc., a Delaware corporation (the
“Borrower”), pursuant to that certain Secured Convertible Promissory Note
made by Borrower in favor of Lender on May 25, 2016 (the “Note”), that
Lender elects to convert the portion of the Note balance set forth below into
fully paid and non-assessable shares of Common Stock of Borrower as of the date
of conversion specified below. Said conversion shall be based on the Conversion
Price set forth below. In the event of a conflict between this Conversion Notice
and the Note, the Note shall govern, or, in the alternative, at the election of
Lender in its sole discretion, Lender may provide a new form of Conversion
Notice to conform to the Note. Capitalized terms used in this notice without
definition shall have the meanings given to them in the Note. 

	 	A. 	Date of Conversion:  _________________	  
	 	B. 	Lender Conversion #:  _________________	  
	 	C. 	Conversion Amount:  _________________	  
	 	D. 	Par Value Adjustment Amount: 
      _________________	  
	 	E. 	Lender Conversion Price: _________________ (Par
      Value) 	 
	 	F. 	Lender Conversion Shares:
      _________________ (C divided by E) 
	 	G. 	Remaining Outstanding Balance of Note: 
      _________________	           
                     *



* Subject to adjustments for corrections, defaults, interest
and other adjustments permitted by the Transaction Documents (as defined in the
Purchase Agreement), the terms of which shall control in the event of any
dispute between the terms of this Lender Conversion Notice and such Transaction
Documents. 

$_________________of the Conversion Amount converted hereunder
shall be deducted from the Installment Amount(s) relating to the following
Installment Date(s): __________________________________________. 

Please transfer the Lender Conversion Shares
electronically (via DWAC) to the following account: 

	Broker: ___________________________________	Address:      
      ___________________________________
	DTC#:  ___________________________________	                      
      ___________________________________
	Account #:  _______________________________	                      
      ___________________________________
	Account Name:  ____________________________	  


To the extent the Lender Conversion Shares are not able to be
delivered to Lender electronically via the DWAC system, deliver all such
certificated shares to Lender via reputable overnight courier after receipt of
this Lender Conversion Notice (by facsimile transmission or otherwise) to:



_____________________________________

_____________________________________

_____________________________________


Exhibit D to Secured Convertible Promissory Note, Page 1 




The Par Value Adjustment Amount must be paid in cash within one
(1) Trading Day of your receipt of this Conversion Notice. 

Sincerely, 

Lender:

TONAQUINT, INC.


By: 
_________________________
        John M.
Fife, President 

Exhibit D to Secured Convertible Promissory Note, Page 2