Document:

Silver Dragon Resources Inc. - Exhibit10.2  - Filed by newsfilecorp.com

S E C U R I T Y   AG R E E M E N T

      
     THIS SECURITY AGREEMENT (this “Agreement”),
dated as of April 7, 2016, is executed by Silver Dragon Resources Inc., a
Delaware corporation (“Debtor”), in favor of Tonaquint, Inc., a Utah
corporation (“Secured Party”).

            A.       
Debtor has issued to Secured Party a certain Secured Convertible Promissory Note
of even date herewith, as may be amended from time to time, in the original face
amount of $6,836,556.53 (the “Note”). 

            B.       
In order to induce Secured Party to extend the credit evidenced by the Note,
Debtor has agreed to enter into this Agreement and to grant Secured Party the
security interest in the Collateral (as defined below). 

            NOW,
THEREFORE, in consideration of the above recitals and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby agrees with Secured Party as follows:

             1.              
Definitions and Interpretation. When used in this Agreement, the
following terms have the following respective meanings: 

                         
     “Collateral” has the meaning given to that term
in Section 2 hereof.

                               “Intellectual
Property” means all patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses (software or otherwise), information,
know-how, inventions, discoveries, published and unpublished works of
authorship, processes, any and all other proprietary rights, and all rights
corresponding to all of the foregoing throughout the world, now owned and
existing or hereafter arising, created or acquired. 

                               “Lien”
shall mean, with respect to any property, any security interest, mortgage,
pledge, lien, claim, charge or other encumbrance in, of, or on such property or
the income therefrom, including, without limitation, the interest of a vendor or
lessor under a conditional sale agreement, capital lease or other title
retention agreement, or any agreement to provide any of the foregoing, and the
filing of any financing statement or similar instrument under the UCC or
comparable law of any jurisdiction. 

                               “Obligations”
means (a) all loans, advances, future advances, debts, liabilities and
obligations, howsoever arising, owed by Debtor to Secured Party or any affiliate
of Secured Party of every kind and description, now existing or hereafter
arising, whether created by the Note, any Additional Note (as defined in the
Purchase Agreement (as defined below)), this Agreement, that certain Settlement
and Securities Purchase Agreement of even date herewith, entered into by and
between Debtor and Secured Party (the “Purchase Agreement”), any other
Transaction Documents (as defined in the Purchase Agreement) or Additional
Investment Documents (as defined in the Purchase Agreement), any modification or
amendment to any of the foregoing, guaranty of payment or other contract or by a
quasi-contract, tort, statute or other operation of law, whether incurred or
owed directly to Secured Party or as an affiliate of Secured Party or acquired
by Secured Party or an affiliate of Secured Party by purchase, pledge or
otherwise, (b) all costs and expenses, including attorneys’ fees, incurred by
Secured Party or any affiliate of Secured Party in connection with the Note, any
Additional Note, or in connection with the collection or enforcement of any
portion of the indebtedness, liabilities or obligations described in the
foregoing clause (a), (c) the payment of all other sums, with interest thereon,
advanced in accordance herewith to protect the security of this Agreement, and
(d) the performance of the covenants and agreements of Debtor contained in this
Agreement and all other Transaction Documents. 

1

                        “Permitted
Liens” means (a) Liens for taxes not yet delinquent or Liens for taxes being
contested in good faith and by appropriate proceedings for which adequate
reserves have been established, and (b) Liens in favor of Secured Party under
this Agreement or arising under the other Transaction Documents. 

                        “UCC”
means the Uniform Commercial Code as in effect in the state whose laws would
govern the security interest in, including without limitation the perfection
thereof, and foreclosure of the applicable Collateral. 

Unless otherwise defined herein, all terms defined in the UCC
have the respective meanings given to those terms in the UCC. 

            2.              
Grant of Security Interest. As security for the Obligations, Debtor
hereby pledges to Secured Party and grants to Secured Party a security interest
in all right, title, interest, claims and demands of Debtor in and to the
property described in Schedule A hereto, and all replacements, proceeds,
products, and accessions thereof (collectively, the “Collateral”). 

            3.              
Authorization to File Financing Statements. Debtor hereby irrevocably
authorizes Secured Party at any time and from time to time to file in any filing
office in any Uniform Commercial Code jurisdiction or other jurisdiction of
Debtor or its subsidiaries (including without limitation Delaware) any financing
statements or documents having a similar effect and amendments thereto that
provide any other information required by the Uniform Commercial Code (or
similar law of any non-United States jurisdiction, if applicable) of such state
or jurisdiction for the sufficiency or filing office acceptance of any financing
statement or amendment, including whether Debtor is an organization, the type of
organization and any organization identification number issued to Debtor. Debtor
agrees to furnish any such information to Secured Party promptly upon Secured
Party’s request. 

            4.              
General Representations and Warranties. Debtor represents and warrants to
Secured Party that (a) Debtor is the owner of the Collateral and that no other
person has any right, title, claim or interest (by way of Lien or otherwise) in,
against or to the Collateral, other than Permitted Liens, and (b) upon the
filing of UCC-1 financing statements with the Delaware Secretary of State,
Secured Party shall have a perfected first-position security interest in the
Collateral to the extent that a security interest in the Collateral can be
perfected by such filing, except for Permitted Liens. 

            5.              
Additional Covenants. Debtor hereby agrees: 

                             
5.1.        to perform all acts that may be
necessary to maintain, preserve, protect and perfect in the Collateral, the Lien
granted to Secured Party therein, and the perfection and priority of such Lien,
except for Permitted Liens; 

                             
5.2.        to procure, execute (including
endorse, as applicable), and deliver from time to time any endorsements,
assignments, financing statements, certificates of title, and all other
instruments, documents and/or writings reasonably deemed necessary or
appropriate by Secured Party to perfect, maintain and protect Secured Party’s
Lien hereunder and the priority thereof; 

                             
5.3.        to provide at least fifteen (15)
days prior written notice to Secured Party of any of the following events: (a)
any changes or alterations of Debtor’s name, (b) any changes with respect to
Debtor’s address or principal place of business, (c) the formation of any
subsidiaries of Debtor, or (d) any changes in the location of any Collateral;

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                          5.4.       
upon the occurrence of an Event of Default (as defined in the Note) under the
Note or any Additional Note and, thereafter, at Secured Party’s request, to
endorse (up to the outstanding amount under such promissory notes at the time of
Secured Party’s request), assign and deliver any promissory notes included in
the Collateral to Secured Party, accompanied by such instruments of transfer or
assignment duly executed in blank as Secured Party may from time to time
specify; 

                          5.5.       
to the extent the Collateral is not delivered to Secured Party pursuant to this
Agreement, to keep the Collateral at the principal office of Debtor (unless
otherwise agreed to by Secured Party in writing), and not to relocate the
Collateral to any other locations without the prior written consent of Secured
Party; 

                          5.6.       
not to sell or otherwise dispose, or offer to sell or otherwise dispose, of the
Collateral or any interest therein (other than inventory in the ordinary course
of business); 

                          5.7.       
not to, directly or indirectly, allow, grant or suffer to exist any Lien upon
any of the Collateral, other than Permitted Liens; 

                          5.8.       
not to grant any license or sublicense under any of its Intellectual Property,
or enter into any other agreement with respect to any of its Intellectual
Property, except in the ordinary course of Debtor’s business; 

                          5.9.       
to the extent commercially reasonable and in Debtor’s good faith business
judgment: (a) to file and prosecute diligently any patent, trademark or service
mark applications pending as of the date hereof or hereafter until all
Obligations shall have been paid in full, (b) to make application on unpatented
but patentable inventions and on trademarks and service marks, (c) to preserve
and maintain all rights in all of its Intellectual Property, and (d) to ensure
that all of its Intellectual Property is and remains enforceable. Any and all
costs and expenses incurred in connection with each of Debtor’s obligations
under this Section 5.9 shall be borne by Debtor. Debtor shall not knowingly and
unreasonably abandon any right to file a patent, trademark or service mark
application, or abandon any pending patent application, or any other of its
Intellectual Property, without the prior written consent of Secured Party except
for Intellectual Property that Debtor determines, in the exercise of its good
faith business judgment, is not or is no longer material to its business; 

                          5.10.     
upon the request of Secured Party at any time or from time to time, and at the
sole cost and expense (including, without limitation, reasonable attorneys’
fees) of Debtor, Debtor shall take all actions and execute and deliver any and
all instruments, agreements, assignments, certificates and/or documents
reasonably required by Secured Party to collaterally assign any and all of
Debtor’s foreign patent, copyright and trademark registrations and applications
now owned or hereafter acquired to and in favor of Secured Party; and 

                          5.11.     
at any time amounts paid by Secured Party under the Transaction Documents are
used to purchase Collateral, Debtor shall perform all acts that may be
necessary, and otherwise fully cooperate with Secured Party, to cause (a) any
such amounts paid by Secured Party to be disbursed directly to the sellers of
any such Collateral, (b) all certificates of title pertaining to such Collateral
(as applicable) to be properly filed and reissued to reflect Secured Party’s
Lien on such Collateral, and (c) all such reissued certificates of title to be
delivered to and held by Secured Party. 

            6.       
Authorized Action by Secured Party. Debtor hereby irrevocably appoints
Secured Party as its attorney-in-fact (which appointment is coupled with an
interest) and agrees that Secured Party may perform (but Secured Party shall not
be obligated to and shall incur no liability to Debtor or any third party for
failure so to do) any act which Debtor is obligated by this Agreement to
perform, and to exercise such rights and powers as Debtor might exercise with respect to
the Collateral, including the right to (a) collect by legal proceedings or
otherwise and endorse, receive and receipt for all dividends, interest,
payments, proceeds and other sums and property now or hereafter payable on or on
account of the Collateral; (b) enter into any extension, reorganization,
deposit, merger, consolidation or other agreement pertaining to, or deposit,
surrender, accept, hold or apply other property in exchange for the Collateral;
(c) make any compromise or settlement, and take any action Secured Party deems
advisable, with respect to the Collateral; (d) file a copy of this Agreement
with any governmental agency, body or authority, at the sole cost and expense of
Debtor; (e) insure, process and preserve the Collateral; (f) pay any
indebtedness of Debtor relating to the Collateral; (g) execute and file UCC
financing statements and other documents, certificates, instruments and
agreements with respect to the Collateral or as otherwise required or permitted
hereunder; and (h) take any and all appropriate action and execute any and all
documents and instruments that may be necessary or useful to accomplish the
purposes of this Agreement; provided, however, that Secured Party shall
not exercise any such powers granted pursuant to clauses (a) through (c) above
prior to the occurrence of an Event of Default and shall only exercise such
powers during the continuance of an Event of Default. The powers conferred on
Secured Party under this Section 6 are solely to protect its interests in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Secured Party shall be accountable only for the amounts that it actually
receives as a result of the exercise of such powers, and neither Secured Party
nor any of its stockholders, directors, officers, managers, employees or agents
shall be responsible to Debtor for any act or failure to act, except with
respect to Secured Party’s own gross negligence or willful misconduct. Nothing
in this Section 6 shall be deemed an authorization for Debtor to take any action
that it is otherwise expressly prohibited from undertaking by way of other
provision of this Agreement. 

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            7.       
Default and Remedies. 

                      
7.1.        Default. Debtor shall be
deemed in default under this Agreement upon the occurrence of an Event of
Default.

                       7.2.       
Remedies. Upon the occurrence of any such Event of Default, Secured Party
shall have the rights of a secured creditor under the UCC, all rights granted by
this Agreement and by law, including, without limiting the foregoing, (a) the
right to require Debtor to assemble the Collateral and make it available to
Secured Party at a place to be designated by Secured Party, and (b) the right to
take possession of the Collateral, and for that purpose Secured Party may enter
upon premises on which the Collateral may be situated and remove the Collateral
therefrom. Debtor hereby agrees that fifteen (15) days’ notice of a public sale
of any Collateral or notice of the date after which a private sale of any
Collateral may take place is reasonable. In addition, Debtor waives any and all
rights that it may have to a judicial hearing in advance of the enforcement of
any of Secured Party’s rights and remedies hereunder, including, without
limitation, Secured Party’s right following an Event of Default to take
immediate possession of Collateral and to exercise Secured Party’s rights and
remedies with respect thereto. Secured Party may also have a receiver appointed
to take charge of all or any portion of the Collateral and to exercise all
rights of Secured Party under this Agreement. Secured Party may exercise any of
its rights under this Section 7.2 without demand or notice of any kind. The
remedies in this Agreement, including without limitation this Section 7.2, are
in addition to, not in limitation of, any other right, power, privilege, or
remedy, either in law, in equity, or otherwise, to which Secured Party may be
entitled. No failure or delay on the part of Secured party in exercising any
right, power, or remedy will operate as a waiver thereof, nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right hereunder. All of Secured Party’s rights and
remedies, whether evidenced by this Agreement or by any other agreement,
instrument or document shall be cumulative and may be exercised singularly or
concurrently.

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     7.3.       
Standards for Exercising Rights and Remedies. To the extent that
applicable law imposes duties on Secured Party to exercise remedies in a
commercially reasonable manner, Debtor acknowledges and agrees that it is not
commercially unreasonable for Secured Party (a) to fail to incur expenses
reasonably deemed significant by Secured Party to prepare Collateral for
disposition, (b) to fail to obtain third party consents for access to Collateral
to be disposed of, or to obtain or, if not required by other law, to fail to
obtain governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors or other persons obligated on Collateral or to
fail to remove liens or encumbrances on or any adverse claims against
Collateral, (d) to exercise collection remedies against account debtors and
other persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (e) to advertise dispositions of
Collateral through publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (f) to contact other persons, whether
or not in the same business as Debtor, for expressions of interest in acquiring
all or any portion of the Collateral, (g) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the
Collateral is of a specialized nature, (h) to dispose of Collateral by utilizing
Internet sites that provide for the auction of assets of the types included in
the Collateral or that have the reasonable capability of doing so, or that match
buyers and sellers of assets, (i) to dispose of assets in wholesale rather than
retail markets, (j) to disclaim disposition warranties, (k) to purchase
insurance or credit enhancements to insure Secured Party against risks of loss,
collection or disposition of Collateral or to provide to Secured Party a
guaranteed return from the collection or disposition of Collateral, or (l) to
the extent deemed appropriate by Secured Party, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist
Secured Party in the collection or disposition of any of the Collateral. Debtor
acknowledges that the purpose of this Section is to provide non-exhaustive
indications of what actions or omissions by Secured Party would fulfill Secured
Party’s duties under the UCC in Secured Party’s exercise of remedies against the
Collateral and that other actions or omissions by Secured Party shall not be
deemed to fail to fulfill such duties solely on account of not being indicated
in this Section. Without limitation upon the foregoing, nothing contained in
this Section shall be construed to grant any rights to Debtor or to impose any
duties on Secured Party that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section. 

               
     7.4.       
Marshalling. Secured Party shall not be required to marshal any present
or future Collateral for, or other assurances of payment of, the Obligations or
to resort to such Collateral or other assurances of payment in any particular
order, and all of its rights and remedies hereunder and in respect of such
Collateral and other assurances of payment shall be cumulative and in addition
to all other rights and remedies, however existing or arising. To the extent
that it lawfully may, Debtor hereby agrees that it will not invoke any law
relating to the marshalling of Collateral which might cause delay in or impede
the enforcement of Secured Party’s rights and remedies under this Agreement or
under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, Debtor hereby irrevocably waives the benefits of
all such laws. 

               
     7.5.       
Application of Collateral Proceeds. The proceeds and/or avails of the
Collateral, or any part thereof, and the proceeds and the avails of any remedy
hereunder (as well as any other amounts of any kind held by Secured Party at the
time of, or received by Secured Party after, the occurrence of an Event of
Default) shall be paid to and applied as follows: 

                                  
(a)        First, to the payment of
reasonable costs and expenses, including all amounts expended to preserve the
value of the Collateral, of foreclosure or suit, if any, and of such sale and
the exercise of any other rights or remedies, and of all proper fees, expenses,
liability and advances, including reasonable legal expenses and attorneys’ fees,
incurred or made hereunder by Secured Party; 

5

                          (b)       
Second, to the payment to Secured Party of the amount then owing or unpaid on
the Note and all Additional Notes, if any (to be applied first to accrued
interest and second to outstanding principal), and all amounts owed under any of
the other Transaction Documents; and 

                         
(c)        Third, to the payment of the
surplus, if any, to Debtor, its successors and assigns, or to whosoever may be
lawfully entitled to receive the same. 

In the absence of final payment and satisfaction in full of all
of the Obligations, Debtor shall remain liable for any deficiency. 

            8.       
Miscellaneous. 

                  
     8.1.       
Notices. Any notice required or permitted hereunder shall be given in the
manner provided in the subsection titled “Notices” in the Purchase Agreement,
the terms of which are incorporated herein by this reference. 

                        8.2.       
Non-waiver. No failure or delay on Secured Party’s part in exercising any
right hereunder shall operate as a waiver thereof or of any other right nor
shall any single or partial exercise of any such right preclude any other
further exercise thereof or of any other right. 

                        8.3.       
Amendments and Waivers. This Agreement may not be amended or modified,
nor may any of its terms be waived, except by written instruments signed by
Debtor and Secured Party. Each waiver or consent under any provision hereof
shall be effective only in the specific instances for the purpose for which
given. 

                        8.4.       
Assignment. This Agreement shall be binding upon and inure to the benefit
of Secured Party and Debtor and their respective successors and assigns;
provided, however, that Debtor may not sell, assign or delegate rights
and obligations hereunder without the prior written consent of Secured Party.

                        8.5.       
Cumulative Rights, etc. The rights, powers and remedies of Secured Party
under this Agreement shall be in addition to all rights, powers and remedies
given to Secured Party by virtue of any applicable law, rule or regulation of
any governmental authority, the Note, or any Additional Notes, all of which
rights, powers, and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Secured Party’s rights hereunder.
Debtor waives any right to require Secured Party to proceed against any person
or entity or to exhaust any Collateral or to pursue any remedy in Secured
Party’s power. 

                        8.6.       
Partial Invalidity. If any part of this Agreement is construed to be in
violation of any law, such part shall be modified to achieve the objective of
the parties to the fullest extent permitted and the balance of this Agreement
shall remain in full force and effect. 

                        8.7.       
Expenses. Debtor shall pay on demand all reasonable fees and expenses,
including reasonable attorneys’ fees and expenses, incurred by Secured Party in
connection with the custody, preservation or sale of, or other realization on,
any of the Collateral or the enforcement or attempt to enforce any of the
Obligations which are not performed as and when required by this Agreement. 

                        8.8.       
Entire Agreement. This Agreement and the other Transaction Documents,
taken together, constitute and contain the entire agreement of Debtor and
Secured Party with respect to this particular matter and supersede any and all
prior agreements, negotiations, correspondence, understandings and communications between the parties, whether
written or oral, respecting the subject matter hereof. 

6

                        8.9.       
Governing Law; Venue. Except as otherwise specifically set forth herein,
the parties expressly agree that this Agreement shall be governed solely by the
laws of the State of Utah, without giving effect to the principles thereof
regarding the conflict of laws; provided, however, that enforcement of
Secured Party’s rights and remedies against the Collateral as provided herein
will be subject to the UCC. The provisions set forth in the Purchase Agreement
to determine the proper venue for any disputes are incorporated herein by this
reference. 

                        8.10.    
 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY
AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT 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 IT IS
KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY. 

                        8.11.    
 Purchase Agreement; Arbitration of Disputes. By executing this
Agreement, each party agrees to be bound by the terms, conditions and general
provisions of the Purchase Agreement and the other Transaction Documents,
including without limitation the Arbitration Provisions (as defined in the
Purchase Agreement) set forth as an exhibit to the Purchase Agreement. 

                        8.12.    
 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one instrument. Any electronic copy of a party’s executed counterpart
will be deemed to be an executed original. 

                        8.13.    
 Termination of Security Interest. Upon the payment in full of all
Obligations, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to Debtor. Upon such termination, Secured Party
hereby authorizes Debtor to file any UCC termination statements necessary to
effect such termination and Secured Party will execute and deliver to Debtor any
additional documents or instruments as Debtor shall reasonably request to
evidence such termination. 

                        8.14.     
 Time of the Essence. Time is expressly made of the essence with
respect to each and every provision of this Agreement. 

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

7

            IN
WITNESS WHEREOF, Secured Party and Debtor have caused this Agreement to be
executed as of the day and year first above written. 

SECURED PARTY:

TONAQUINT,
INC. 

 

By: /s/ John M. Fife                     

       John M. Fife,
President 

DEBTOR:

SILVER DRAGON
RESOURCES INC.

 

By: /s/ Marc Hazout                       

Name: Marc Hazout
Title: President and CEO

[Signature Page to Security Agreement]

SCHEDULE A 
TO SECURITY AGREEMENT

            All
right, title, interest, claims and demands of Debtor in and to the following
property:

            1.       
All goods and equipment now owned or hereafter acquired, including, without
limitation, all laboratory equipment, computer equipment, office equipment,
machinery, fixtures, vehicles, and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located; 

            2.       
All inventory now owned or hereafter acquired, including, without limitation,
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products including such inventory as is temporarily
out of Debtor’s custody or possession or in transit and including any returns
upon any accounts or other proceeds, including insurance proceeds, resulting
from the sale or disposition of any of the foregoing and any documents of title
representing any of the above, and Debtor’s books relating to any of the
foregoing; 

            3.       
All contract rights, general intangibles, healthcare insurance receivables,
payment intangibles and commercial tort claims, now owned or hereafter acquired,
including, without limitation, all patents, patent rights and patent
applications (including without limitation, the inventions and improvements
described and claimed therein, and (a) all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof, (b) all income,
royalties, damages, proceeds and payments now and hereafter due or payable under
or with respect thereto, including, without limitation, damages and payments for
past or future infringements thereof, (c) the right to sue for past, present and
future infringements thereof, and (d) all rights corresponding thereto
throughout the world), trademarks and service marks (and applications and
registrations therefor), inventions, discoveries, copyrights and mask works (and
applications and registrations therefor), trade names, trade styles, software
and computer programs including source code, trade secrets, methods, published
and unpublished works of authorship, processes, know how, drawings,
specifications, descriptions, and all memoranda, notes, and records with respect
to any research and development, goodwill, license agreements, information, any
and all other proprietary rights, franchise agreements, blueprints, drawings,
purchase orders, customer lists, route lists, infringements, claims, computer
programs, computer disks, computer tapes, literature, reports, catalogs, design
rights, income tax refunds, payments of insurance and rights to payment of any
kind and whether in tangible or intangible form or contained on magnetic media
readable by machine together with all such magnetic media, and all rights
corresponding to all of the foregoing throughout the world, now owned and
existing or hereafter arising, created or acquired; 

            4.       
All now existing and hereafter arising accounts, contract rights, royalties,
license rights and all other forms of obligations owing to Debtor arising out of
the sale or lease of goods, the licensing of technology or the rendering of
services by Debtor (subject, in each case, to the contractual rights of third
parties to require funds received by Debtor to be expended in a particular
manner), whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Debtor and Debtor’s books relating to any of the foregoing; 

            5.       
All documents, cash, deposit accounts, letters of credit, letter of credit
rights, supporting obligations, certificates of deposit, instruments, chattel
paper, electronic chattel paper, tangible chattel paper and investment property,
including, without limitation, all securities, whether certificated or
uncertificated, security entitlements, securities accounts, commodity contracts
and commodity accounts, and all financial assets held in any securities account
or otherwise, wherever located, now owned or hereafter acquired and Debtor’s
books relating to the foregoing, including without limitation Debtor’s entire ownership interest in Sanhe Sino-Top Resources &
Technologies, Ltd., a Chinese foreign cooperative joint venture, and any
affiliates, subsidiaries, or related entities; 

            6.       
All other goods and personal property of Debtor, wherever located, whether
tangible or intangible, and whether now owned or hereafter acquired; and 

            7.       
Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof, including,
without limitation, insurance, condemnation, requisition or similar payments and
the proceeds thereof.Silver Dragon Resources Inc. - Exhibit10.3  - Filed by newsfilecorp.com

PLEDGE AGREEMENT

            This
Pledge Agreement (this “Agreement”) is entered into as of April 7, 2016,
by and between Silver Dragon Resources Inc., a Delaware corporation
(“Pledgor”), and Tonaquint, Inc., a Utah corporation
(“Lender”).

            A.       
Pledgor, as borrower thereunder, has issued to Lender that certain Secured
Convertible Promissory Note of even date herewith in the face amount of
$6,836,556.53 (the “Note”). 

            B.       
The Note was issued pursuant to the terms of a certain Settlement and Securities
Purchase Agreement of event date herewith, entered into between Pledgor and
Lender (the “Purchase Agreement”). 

            C.       
As set forth in the Purchase Agreement, Pledgor may issue certain Additional
Notes (as defined in the Purchase Agreement, and together with the Note, the
“Notes”) to Lender pursuant to the terms thereof. 

            D.       
Pledgor hereby desires to pledge pursuant to this Agreement its entire equity
interest (the “Pledged Equity Interest”) in Sanhe Sino-Top Resources
& Technologies, Ltd., a Chinese foreign cooperative joint venture (the
“Company”).

            E.       
As borrower under the Note, Pledgor shall benefit from the loans and other
financial accommodations granted to Pledgor pursuant to the Note. 

            F.       
In order to induce Lender to make certain loans and other financial
accommodations to Pledgor pursuant to the Note, Pledgor has agreed to pledge the
Pledged Equity Interest as security for performance and payment of all
obligations under the Notes. 

            NOW,
THEREFORE, the parties hereto agree as follows:

            1.       
Defined Terms. All capitalized terms used and not otherwise defined
herein shall have the meanings set forth in the Note. The following terms shall
have the following meanings: 

                      
“Article 8 Matter” shall mean any action, decision, determination or
election by the Company or its equityholders that the ownership interests or
other equity interests in the Company, or any of them, be, or cease to be, a
“security” as defined in and governed by Article 8 of the UCC. 

                        “Event
of Default” shall have the meaning set forth in the applicable Note or
Additional Note. 

                        
“Lien” means any mortgage, lien, deed of trust, charge, pledge, security
interest, or other encumbrance. 

                        “Proceeds”
shall mean “proceeds,” as such term is defined in section 9-306(1) of the UCC
and, in any event, shall include, without limitation, (1) all dividends or
distributions in cash or in kind made to Pledgor from time to time in respect of
the Pledged Equity Interest, (2) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Pledgor from time to time with
respect to any of the Pledged Equity Interest, (3) any and all payments (in any form whatsoever) made or due and payable to Pledgor from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Pledged Equity Interest by any
foreign or domestic government or any instrumentality or agency thereof (a
“Governmental Authority”) (or any person acting under color of any such
Governmental Authority) and (4) any and all other amounts from time to time paid
or payable under or in connection with any of the Pledged Equity Interest. In
addition, the term Proceeds shall include, without limitation, all accounts,
chattel paper, deposit accounts, instruments, intellectual property, equipment,
inventory, consumer goods, farm products, documents, general intangibles and
other proceeds which arise from the sale, lease, transfer, or other use or
disposition of any kind of the Pledged Equity Interest and all proceeds of any
type (all of the foregoing shall have the meaning given them in the UCC except
as otherwise defined herein). 

                        “UCC”
shall mean the Uniform Commercial Code as the same may, from time to time, be in
effect in the State of Utah; provided, however, that in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection,
priority or exercise of remedies of Lender’s security interest in any of the
Pledged Equity Interest is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than the State of Utah, the term “UCC” shall mean
the Uniform Commercial Code as adopted and in effect in such other jurisdiction
for purposes of the provisions hereof relating to such attachment, perfection,
priority or exercise of remedies and for purposes of definitions related to such
provisions. 

            2.       
Grant of Security Interest. 

                      
a.        Grant. As collateral
security for the prompt and complete payment and performance when due (whether
at stated maturity, by acceleration or otherwise) of the Notes (including both
the Note and all Additional Notes issued by Pledgor to Lender), Pledgor hereby
grants to Lender for its benefit a security interest in all of Pledgor’s right,
title and interest in, to and under the Pledged Equity Interest and the Proceeds
with respect to the foregoing. 

                      
b.        Certificates. All
certificates and instruments, if any, representing or evidencing the Pledged
Equity Interest shall be delivered to and held by or on behalf of Lender
pursuant hereto and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to Lender. Upon the occurrence of an
Event of Default, Lender shall have the right at any time, in its discretion and
without further notice to Pledgor, to transfer to or register in the name of
Lender or any of its nominees any or all of the Pledged Equity Interest. 

            3.       
Limitations on Lender’s Rights and Obligations. As long as Lender holds
the Pledged Equity Interest as pledgee, it is expressly agreed by Pledgor that,
anything herein to the contrary notwithstanding, (a) Lender shall not have any
obligation or liability for the performance by Pledgor of its obligations as an
equityholder of the Company by reason of or arising out of this Agreement or the
granting to Lender of the security interest provided for herein or the receipt
by Lender of any payment relating hereto, and (b) Lender shall not be required
or obligated in any manner to perform or fulfill any of the obligations of
Pledgor in its capacity as an equityholder of the Company or to make any inquiry
as to the nature or the sufficiency of any payment received by Pledgor or the
sufficiency of any performance by any other party of any obligation owed to
Pledgor, as the case may be, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to Lender or to which Lender may be entitled at any time
or times. 

2

            4.       
Representations and Warranties. Pledgor hereby represents and warrants
that: 

                       a.       
Capitalization. The Pledged Equity Interest constitutes 20% of the
Company’s outstanding equity, which is Pledgor’s entire equity interest in the
Company. 

                      
b.        Title. Except for the
security interest granted to Lender pursuant to this Agreement, Pledgor is the
sole owner of the Pledged Equity Interest having good and marketable title
thereto, free and clear of any and all Liens and any transfer restrictions
affecting the Pledged Equity Interest other than any restrictions on transfer
which may be imposed under the Company’s operating agreement or other governing
documents or applicable securities laws. 

                      
c.        No Other Security Interests.
No Lien exists or will exist on any part of the Pledged Equity Interest. 

                
      d.       
First Priority Perfected Security Interest. This Agreement is effective
to create a valid and continuing first priority Lien on and first priority
perfected security interest in the Pledged Equity Interest in favor of Lender
and prior to all other Liens, and is enforceable as such as against creditors of
and purchasers from Pledgor. 

                      
e.        No Conflict. Neither
Pledgor’s execution and delivery hereof nor its consummation of the transactions
contemplated hereby nor its compliance with any of the terms and provisions
hereof (i) does or will contravene any existing requirement of any Governmental
Authority applicable to or binding on it or any of its properties, (ii) does or
will contravene or result in any breach of or constitute any default under, or
result in the creation of any Lien (other than the Lien created hereby) upon any
of its property under any organizational document, the joint venture agreement
governing the Pledged Equity Interest, indenture, mortgage, chattel mortgage,
deed of trust, conditional sales contract, bank loan or credit agreement,
partnership agreement, limited liability company agreement or other agreement or
instrument to which it is a party or by which it or any of its properties be
bound or affected, except as may have been validly waived in connection with
this Agreement. 

                      
f.        Enforceability. Pledgor has
duly executed and delivered this Agreement and this Agreement constitutes a
legal, valid and binding obligation of Pledgor enforceable against Pledgor in
accordance with the terms hereof, except for the effect of applicable laws
regarding bankruptcy, insolvency, moratorium or fraudulent transfer or similar
laws affecting the enforcement of creditors’ rights generally or by equitable
principles relating to enforceability. 

                      
g.        Litigation. There are no
actions or proceedings pending or, to Pledgor’s knowledge, threatened, against
or affecting the Pledged Equity Interest before any court or administrative
agency or arbitrator. 

                      
h.        Legal Capacity. Pledgor has
full power, authority and legal right and capacity to enter into and perform its
obligations under this Agreement and each other document contemplated hereby to
which Pledgor is or will be a party and to consummate the transactions
contemplated hereby and thereby. 

            5.       
Covenants. Pledgor covenants and agrees with Lender that from
and after the effectiveness of this Agreement until the full payment and
performance of Pledgor under all of the Notes: 

3

                  
   a.        Further
Assurances. At any time and from time to time, upon the written request of
Lender, Pledgor will promptly execute and deliver any and all such further
instruments and documents as Lender may reasonably deem necessary to obtain the
full benefits and security of this Agreement, including, without limitation,
executing and filing such financing or continuation statements, securities
account control agreements or amendments thereto, as may be necessary or
desirable or that Lender may reasonably request in order to perfect, preserve
and enforce the security interest created hereby. 

                      
b.        Limitation on Liens on Pledged
Equity Interest. Pledgor will not create, permit or suffer to exist, and
will defend the Pledged Equity Interest against and take such other action as is
necessary to remove, any Lien on the Pledged Equity Interest, except the Lien
granted pursuant to this Agreement, and will defend the right, title and
interest of Lender in and to Pledgor’s rights under the Pledged Equity Interest
against the claims and demands of all third parties whomsoever. Pledgor shall
not cause or permit any amendment to any provision of any purchase agreements
with the Company or the operating agreement or other governing documents of the
Company that would impair or otherwise negatively affect the Pledged Equity
Interest or Lender without the prior written consent of Lender. 

                      
c.        Limitations on Disposition.
Pledgor will not, without Lender’s consent, sell, assign, exchange, lease,
transfer, pledge or otherwise dispose of, or grant any option or other rights
with respect to, the Pledged Equity Interest or any portion thereof for an
amount that is less than would be necessary to repay all outstanding Notes in
full. 

                      
d.        Possession of Pledged Equity
Interest Collateral. Pledgor shall deliver any and all additional
certificates or other indicia of ownership of the Pledged Equity Interest, if
any, to Lender within three business days after receipt by Pledgor and, upon
Lender’s request, shall execute all pledge agreements, security agreements,
stock powers, financing statements and all other documents that Lender deems
necessary or advisable to grant Lender a valid, perfected first priority
security interest in such Pledged Equity Interest. 

                      
e.        No Debts. Pledgor shall not
permit or cause the Company to guaranty or become obligated for the debts of any
other entity or person or hold itself out to be responsible for the debts of
another entity or person, nor shall it cause or permit the Company to incur any
indebtedness whatsoever, whether secured or unsecured, without Lender’s prior
written consent. 

            6.       
Voting Rights. Pledgor shall be permitted to exercise all voting rights
with respect to the Pledged Equity Interest; provided, however, that no vote
shall be cast or other action taken which would impair the Pledged Equity
Interest or which would be inconsistent with or result in any violation of any
provision of any Note, any other documents related to this transaction, or any
other provision of this Agreement. 

            7.       
Remedies. 

                      
a.        If an Event of Default has occurred
and is continuing (and has not been rescinded or waived pursuant to the Notes),
in addition to, and not by way of limitation of, all rights and remedies granted
in this Agreement and in any other instrument or agreement securing, evidencing
or relating to the Notes or otherwise available at law or in equity, without any
other notice to or demand upon Pledgor, Lender shall have all rights and
remedies of a secured party under the UCC. Without limiting the generality of
the foregoing, Lender, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by applicable
law referred to below) to or upon Pledgor or any third party (all and each of
which demands, defenses, advertisements and notices are to the fullest extent
permitted by applicable law hereby waived), may in such circumstances forthwith
collect, receive, appropriate and realize upon the Pledged Equity Interest so
pledged hereunder, or any part thereof, and/or may forthwith sell, assign, give
option or options to purchase or otherwise dispose of and deliver the Pledged
Equity Interest or any part thereof (or contract to do any of the foregoing), in
one or more units at public or private sale or sales upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
Lender shall have the right upon any such public sale or sales, and, to the
fullest extent permitted by applicable law, upon any such private sale or sales,
to purchase the whole or any part of the Pledged Equity Interest so sold, free
of any right or equity of redemption in Pledgor, which right or equity is hereby
waived or released. Lender shall apply any Proceeds from time to time held by it
and the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Pledged Equity Interest or in any way relating to the Pledged Equity Interest or
the rights of Lender hereunder, including, without limitation, reasonable
attorneys’ fees and disbursements, to the payment in whole or in part of the
Notes, and only after such application and after the payment by Lender of any
other amount required by any provision of applicable law. 

4

                      
b.        Pledgor recognizes that Lender may
be unable to effect an unrestricted public sale of any or all of the Pledged
Equity Interest, by reason of certain prohibitions in the Securities Act of
1933, as amended, and applicable securities laws or otherwise, and may be
compelled to resort to one or more public or private sales thereof to a
restricted group of purchasers which will be obligated to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Pledgor acknowledges and
agrees that any such private sale or restricted public sale may result in prices
and other terms less favorable to Lender than if such sale were an unrestricted
public sale and agrees that such circumstances shall not, in and of themselves,
result in a determination that such sale was not made in a commercially
reasonable manner.

            8.       
Reinstatement. This Agreement shall, to the fullest extent
permitted by applicable law, remain in full force and effect and continue to be
effective should any petition be filed by or against Pledgor for liquidation or
reorganization, should Pledgor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or any
significant part of Pledgor’s assets, and shall continue to be effective or be
reinstated, as the case may be, to the fullest extent permitted by applicable
law, if at any time payment and performance of the Notes, or any part thereof,
is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of any Note, whether as a
“voidable preference,” “fraudulent conveyance,” or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the applicable Note,
to the fullest extent permitted by applicable law, shall be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned. 

            9.       
Successors and Assigns. The terms and provisions of this Agreement shall
be binding upon, and, subject to the provisions of this Section 9, the benefits
thereof shall inure to, the parties hereto and their respective successors and assigns;
provided, however, that Pledgor shall not assign this Agreement or any of the
rights, duties or obligations of Pledgor hereunder without the prior written
consent of Lender. 

5

            10.     
Notices. Any notice required or permitted hereunder shall be given in the
manner provided in the subsection titled “Notices” in the Purchase Agreement,
the terms of which are incorporated herein by this reference. 

            11.     
Severability. If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of Lender in order to carry out the
intentions of the parties hereto as nearly as may be possible and (b) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction. 

            12.     
Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The parties hereto
confirm that any telecopy or electronic copy of another party’s executed
counterpart of this Agreement (or its signature page thereof) will be deemed to
be an executed original thereof. 

            13.     
No Waiver; Cumulative Remedies. Lender shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by Lender, and
then only to the extent therein set forth. A waiver by Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Lender would otherwise have had on any future occasion. No
failure to exercise nor any delay in exercising on the part of Lender, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are in addition to
any rights and remedies provided by law. None of the terms or provisions of this
Agreement may be waived, altered, modified or amended except by an instrument in
writing, duly executed by Lender and, where applicable, by Pledgor. 

            14.     
Attorneys’ Fees. In the event that any suit or action is instituted under
or in relation to this Agreement, including, without limitation, to enforce any
provision in this Agreement, the prevailing party in such dispute shall be
entitled to recover from the losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with respect to this
Agreement, including, without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals. 

            15.     
Construction and Interpretation. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement and each party has
been represented by its own legal counsel. In the event an ambiguity or question
of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. 

6

            16.    
 Governing Law and Consent to Jurisdiction. Except as otherwise
specifically set forth herein, the parties expressly agree that this Agreement
shall be governed solely by the laws of 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.     
Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY
AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT 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 IT IS
KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY. 

            18.     
Purchase Agreement; Arbitration of Disputes. By executing this Agreement,
each party agrees to be bound by the terms, conditions and general provisions of
the Purchase Agreement and the other Transaction Documents (as defined in the
Purchase Agreement), including without limitation the Arbitration Provisions (as
defined in the Purchase Agreement) set forth as an exhibit to the Purchase
Agreement. 

            19.    
 Headings. Captions and headings in this Agreement are for
convenience only and are not to be deemed part of this Agreement. 

            20.     
Power of Attorney; Appointment and Powers of Lender. Upon the occurrence
and during the continuance of an Event of Default, Pledgor hereby irrevocably
constitutes and appoints Lender and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Pledgor or in Lender’s
own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments that may be necessary or desirable to accomplish the purposes of
this Agreement and, without limiting the generality of the foregoing, hereby
gives such attorneys the power and right, on behalf of Pledgor, without notice
to or assent by Pledgor, to do the following: 

                      
a.        generally to sell, transfer,
pledge, make any agreement with respect to or otherwise deal with any of the
Pledged Equity Interest in such manner as is consistent with the UCC and as
fully and completely as though Lender was the absolute owner thereof for all
purposes, and to do at Pledgor’s expense, at any time, or from time to time, all
acts and things which Lender deems necessary to protect, preserve or realize
upon the Pledged Equity Interest and Lender’s security interest therein, in
order to effect the intent of this Agreement, all as fully and effectively as
Pledgor might do, including, without limitation, (A) upon written notice to
Pledgor, the exercise of voting rights with respect to the Pledged Equity
Interest, which rights may be exercised, if Lender so elects, with a view to
causing the liquidation of assets of the Company, and (B) the execution,
delivery and recording, in connection with any sale or other disposition of any
Pledged Equity Interests, of the endorsements, assignments or other instruments
of conveyance or transfer with respect to such Pledged Equity Interest; and 

                      
b.        to the extent that Pledgor’s
authorization given in Section 23 is not sufficient, to file such financing
statements with respect hereto, with or without Pledgor’s signature, or a photocopy of this Agreement in substitution for
a financing statement, as Lender may deem appropriate and to execute in
Pledgor’s name such financing statements and amendments thereto and continuation
statements which may require Pledgor’s signature. 

7

            21.     
Irrevocable Proxy. Solely with respect to Article 8 Matters, Pledgor
hereby irrevocably grants and appoints Lender, from the date of this Agreement
until the termination of this Agreement in accordance with its terms, as
Pledgor’s true and lawful proxy, for and in Pledgor’s name, place and stead to
vote the Pledged Equity Interest in the Company owned by Pledgor, whether
directly or indirectly, beneficially or of record, now owned or hereafter
acquired, with respect to such Article 8 Matters. The proxy granted and
appointed in this Section 21 shall include the right to sign Pledgor’s name (as
an equityholder of the Company) to any consent, certificate or other document
relating to an Article 8 Matter and the Pledged Equity Interest that applicable
law may permit or require, to cause the Pledged Equity Interest to be voted in
accordance with the preceding sentence. Pledgor hereby represents and warrants
that there are no other proxies and powers of attorney with respect to an
Article 8 Matter and the Pledged Equity Interest that Pledgor may have granted
or appointed. Pledgor will not give a subsequent proxy or power of attorney or
enter into any other voting agreement with respect to the Pledged Equity
Interest with respect to any Article 8 Matter and any attempt to do so with
respect to an Article 8 Matter shall be void and of no effect. 

            22.     
Termination. Upon the full payment and performance of the Notes
(including without limitation the Note and all Additional Notes, if any, issued
by Pledgor in favor of Lender), this Agreement shall terminate and be of no
further force and effect. Upon any such termination, Lender shall authenticate
and deliver to Pledgor the Pledged Equity Interest together with such documents
as Pledgor may reasonably request to evidence such termination at Pledgor’s
expense. 

            23.    
 Authorization to File UCC Financing Statements. Pledgor hereby
authorizes Lender to file UCC financing statements concerning the Pledged Equity
Interest. Pledgor will execute and deliver any documents (properly endorsed, if
necessary) reasonably requested by Lender for the perfection or enforcement of
any security interest or lien, give good faith, diligent cooperation to Lender,
and perform such acts reasonably requested by Lender for perfection and
enforcement of any security interest or lien, including, without limitation,
obtaining control for purposes of perfection with respect to the Pledged Equity
Interest. Lender is authorized to file, record, or otherwise utilize such
documents as it deems necessary to perfect and/or enforce any security interest
or lien granted hereunder.

[Remainder of page intentionally left blank]

8

      
     IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed as set forth above. 

PLEDGOR:

SILVER DRAGON RESOURCES INC.

By: /s/ Marc Hazout                              

Name: Marc Hazout
Title: President and CEO

Agreed and Accepted:

TONAQUINT, INC. 

By: /s/ John M. Fife                        

       John
M. Fife, President

[Signature Page to Pledge Agreement]

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