Document:

Silver Dragon Resources Inc. - Exhibit 4.2 - Filed by newsfilecorp.com

SECURED CONVERTIBLE
PROMISSORY NOTE

	Effective Date: _____________ __, ___________	U.S. $[__________] 

            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”), $[__________] and any interest,
fees, charges, and late fees on ___________ (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 April 7,
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 [__________]. In addition, Borrower agrees to pay
$[__________] 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 $[__________] (the “Purchase
Price”), computed as follows: $[__________] 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 of
even date herewith 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 of even date herewith 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 $[____] (the “Lender Conversion
Price”). However, in the event the Market Capitalization falls below
$[______] 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 $[______] 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. 

2

                      
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. 

3

                      
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. 

4

                      
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 [__________] 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). 

7

           
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 of the Sino-Top
Interest or all or substantially all of Borrower’s assets, Lender may, at its
election, cause Borrower to either (a) repay the Outstanding Balance, or (b)
redeem this Note in the amount of the Redemption Value (either (a) or (b) above,
as elected by Lender, the “Payoff Amount”). 

                      
12.2.        In furtherance of the foregoing,
at any time while this Note is outstanding, if Borrower desires to engage in any
transaction whereby the Sino-Top Interest would be sold, transferred or assigned
(the “Interest Sale”), then the following shall 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 Redemption Value, request a Payoff Letter from Lender, or (i) if the
purchase price (in U.S. Dollars) of the Interest Sale is less than the
Redemption Value, 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. 

            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

10

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:
_________________________
       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.        “Balance Reduction Amount”
means the portion of the Outstanding Balance that Lender elects to use to
calculate the Deemed Redemption Shares; provided, however, that Lender
may not elect to use a Balance Reduction Amount that would result in the deemed
issuance of Deemed Redemption Shares that would exceed the Share Cap.

            A4.       
“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). 

            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 [__]%, 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 [__]% to [__]% 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 [__]% to [__]%for purposes of this example. If, thereafter, there
are three (3) separate occurrences of a Major Default pursuant to Section
4.1(c), then

Attachment 1 to Secured Convertible Promissory Note, Page 1

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. 

            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 be deemed to receive upon exercise of its redemption right set
forth in Section 12 above calculated as follows: the Balance Reduction Amount
divided by the Redemption Conversion Price.

            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;

Attachment 1 to Secured Convertible Promissory Note, Page 2

(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 $[______] (l) the ten (10) day
average VWAP of the Common Stock is greater than $[______], and (m) the Common
Stock shall be DWAC Eligible as of each applicable Installment Date or other
date of determination.

            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

Attachment 1 to Secured Convertible Promissory Note, Page 3

(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). 

            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 $[_________].

            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 [____] 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

Attachment 1 to Secured Convertible Promissory Note, Page 4

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. 

            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
highest intra-day trading price of the Common Stock in the sixty (60)
consecutive Trading Days prior to Lender’s delivery of a Payoff Letter;
provided, however, that in no event shall the Redemption Amount exceed
three (3) times the Balance Reduction Amount.

           
A42.        “Redemption Conversion
Price” means 70% of the lowest intra-day trading price of the Common Stock
for the sixty (60) consecutive Trading Days prior to the date Lender delivers
the Payoff Letter.

            A43.       
“Redemption Outstanding Balance” means the Outstanding Balance less the
Balance Reduction Amount.

           
A44.        “Redemption Value” means
the Redemption Amount plus the Redemption Outstanding Balance. 

           
A45.        “Sino-Top” means Sanhe
Sino-Tip Resources & Technologies, Ltd., a Chinese foreign cooperative joint
venture.

           
A46.        “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.

           
A47.        “Share Cap” means
150,000,000 Deemed Redemption Shares.

           
A48.        “Trading Day” means any
day on which the New York Stock Exchange is open for trading. 

           
A49.        “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 April 7, 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 April 7, 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 April 7, 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 April 7, 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 2Silver Dragon Resources Inc. - Exhibit10.1  - Filed by newsfilecorp.com

S E T T L E M E N T   A N D  S E C U R I T I E
S   P U R C H A S E   A G R E E M E N T 

            THIS
SETTLEMENT AND SECURITIES PURCHASE AGREEMENT (this “Agreement”) is
executed as of April 7, 2016 by and between Silver Dragon Resources Inc., a
Delaware corporation (“Company”), and Tonaquint, Inc., a Utah
corporation, its successors and/or assigns (“Investor”).

            A.       
Pursuant to that certain Securities Purchase Agreement dated February 15, 2011
(the “Purchase Agreement”) between Investor and Company, Company issued
to Investor, among other securities, a certain Secured Convertible Promissory
Note in the original principal amount of $2,766,500.00 and having an original
issue date of February 15, 2011 (the “Prior Note”).

            B.       
Among other defaults, Company failed to repay the Prior Note by its maturity
date.

            C.       
As a result of such defaults under the Prior Note, Investor filed a lawsuit
against Company in United States District Court, District of Utah, Central
Division, as Case No. 2:16-cv-00182 (the “Lawsuit”). 

            D.       
In the Lawsuit, Investor asserted an outstanding balance of the Prior Note in
the amount of $9,093,950.00 (the “Prior Note Balance”). 

            E.       
After weeks of negotiation, the parties have reached an agreement to settle the
Lawsuit (the “Settlement”).

            F.       
Investor and Company have agreed that as part of the Settlement: (i) Investor
will forgive $2,677,393.47 of the Prior Note Balance, (ii) Investor will make a
new cash investment in Company in the amount of $400,000.00 (the “New
Investment Amount”), (iii) Investor will cancel the remaining $6,416,556.53
outstanding balance of the Prior Note, and (iv) Company will issue to Investor a
new Secured Convertible Promissory Note in the original principal amount of
$6,836,556.53 and substantially in the form attached hereto as Exhibit A
(the “New Note”).

            G.       
Company and Investor are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by the rules and
regulations promulgated by the United States Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”). 

            H.       
This Agreement, the New Note, the Security Agreement (as defined below), the
Pledge Agreement (as defined below), and all other certificates, documents,
agreements, resolutions and instruments delivered to any party under or in
connection with this Agreement, as the same may be amended from time to time,
are collectively referred to herein as the “Transaction Documents”.

            I.       
This Agreement, any Additional Note (as defined below), and all other
certificates, documents, agreements, resolutions and instruments delivered to
any party under or in connection with the issuance of such Additional Note, as
the same may be amended from time to time, are collectively referred to herein
as the “Additional Investment Documents”.

            J.       
For purposes of this Agreement: “Conversion Shares” means all shares of
Common Stock issuable upon conversion of all or any portion of the New Note or
any Additional Note; and “Securities” means the Notes (as defined below)
and the Conversion Shares. 

            K.       
The parties now desire to settle the Lawsuit in accordance with the terms and
conditions set forth in this Agreement.

            NOW,
THEREFORE, in consideration of the premises and the mutual promises herein made,
and in consideration of the representations, warranties and covenants herein
contained, the parties hereto agree as follows: 

            1.       
Purchase and Sale of Notes. 

                        1.1.       
Issuance of New Note. On the Initial Closing Date (as defined below),
Company shall issue and sell to Investor and Investor shall purchase from
Company the New Note. In consideration thereof, Investor shall pay to Company
the New Note Purchase Price (as defined below) in the manner described in
Section 1.3 below. 

                        1.2.       
Additional Investments. Company and Investor agree that upon the mutual
agreement of both parties, Investor may make additional investments (each such
investment, an “Additional Investment”) in Company pursuant to a Secured
Convertible Promissory Note substantially in the form attached hereto as
Exhibit B (each, an “Additional Note”, and together with the New
Note, the “Notes”).

                        1.3.       
Form of Payment. On the Initial Closing Date, Investor shall pay the New
Note Purchase Price by delivering the New Investment Amount via wire transfer of
immediately available funds to Company and surrendering the Prior Note to
Company for cancellation. The New Investment Amount will be included in the
outstanding balance of the New Note. On any Subsequent Closing Date (as defined
below), if applicable, Investor shall pay the purchase price for any Additional
Note via wire transfer of immediately available funds.

                        1.4.       
Transaction Expense Amount; New Note Purchase Price. Company acknowledges
that the outstanding balance of the New Note will include a $20,000.00 fee to
cover Investor’s legal fees, accounting costs, due diligence, monitoring and
other transaction costs incurred in connection with the Settlement (the
“Transaction Expense Amount”). The “New Note Purchase Price”,
therefore, shall be $6,816,556.53, computed as follows: $6,836,556.53 initial
principal balance, less the Transaction Expense Amount. The New Investment
Amount shall be the New Note Purchase Price less the Prior Note Balance
(following forgiveness by Investor of $2,677,393.47) .

                        1.5.       
Collateral for the Notes. The New Note and any Additional Notes shall be
secured by: (i) that certain Security Agreement substantially in the form
attached hereto as Exhibit C (the “Security Agreement”), whereby
Borrower granted a security interest in all of its assets in favor of Investor
to secure the performance its obligations under the New Note and all Additional
Notes; and (ii) that certain Pledge Agreement substantially in the form attached
hereto as Exhibit D (the “Pledge Agreement”), whereby Borrower
pledged all of its right, title and interest in and to the equity interests held
by Company in Sanhe Sino-Tip Resources & Technologies, Ltd., a Chinese
foreign cooperative joint venture (the “Sino-Top Interest”), to secure
the performance of its obligations under the New Note and all Additional Notes.

                        1.6.       
Closings.

                                        (a)       
Subject to the satisfaction (or written waiver) of the conditions set forth in
Section 2 and Section 3 below, the closing of the purchase of the New Note (the
“Initial Closing”) along with the delivery of the Prior Note and the
other Transaction Documents (as defined below) shall occur on the date that is
mutually agreed to by Company and Investor (the “Initial Closing
Date”) by means of the exchange by express courier and email of .pdf
documents, but shall be deemed to have occurred at the offices of Hansen Black
Anderson Ashcraft PLLC in Lehi, Utah.

2 

                                        (b)       
Subject to the satisfaction (or written waiver) of the conditions set forth in
Section 2 and Section 3 below, the closing of any Additional Investment (each, a
“Subsequent Closing”, and together with the Initial Closing, the
“Closings”) and issuance of any Additional Notes shall occur on a date
that is mutually agreed to by Company and Investor (each, a “Subsequent
Closing Date”, and together with the Initial Closing Date, the
“Closing Dates”) by means of the exchange by express courier and email of
..pdf documents, but shall be deemed to have occurred at the offices of Hansen
Black Anderson Ashcraft PLLC in Lehi, Utah.

            2.       
Conditions to Company’s Obligations to Sell. The obligation of Company
hereunder to issue and sell the Notes to Investor at the Closings is subject to
the satisfaction, on or before the applicable Closing Date, of each of the
following conditions: 2.1. With respect to the Initial Closing, Investor shall
have executed this Agreement and delivered the same to Company. 

                        2.2.       
With respect to the Initial Closing, Investor shall have delivered the
Additional Investment Amount to Company. 

                        2.3.       
With respect to the Initial Closing, Investor shall have delivered the Prior
Note to Company for cancellation.

                        2.4.       
With respect to each Subsequent Closing, if any, Investor shall have delivered
the applicable purchase price for such Additional Note to Company. 

           
3.        Conditions to Investor’s
Obligation to Purchase. The obligation of Investor hereunder to purchase the
Notes at the Closings is subject to the satisfaction, on or before the
applicable Closing Date, of each of the following conditions, provided that
these conditions are for Investor’s sole benefit and may be waived by Investor
at any time in its sole discretion: 

                        3.1.       
With respect to the Initial Closing, Company shall have executed this Agreement,
the Security Agreement and the Pledge Agreement and delivered the same to
Investor. 

                        3.2.       
With respect to each Closing, Company shall have executed and delivered the
applicable Note to Investor.

                        3.3.       
With respect to the Initial Closing, Company shall have delivered to Investor a
fully executed Letter of Instructions to Transfer Agent (“TA Letter”)
substantially in the form attached hereto as Exhibit E acknowledged and
agreed to in writing by Company’s transfer agent (the “Transfer
Agent”).

                        3.4.       
With respect to the Initial Closing, Company shall have delivered to Investor a
fully executed Secretary’s Certificate substantially in the form attached hereto
as Exhibit F evidencing Company’s approval of the applicable transaction
documents. 

                        3.5.       
With respect to the Initial Closing, Company shall have delivered to Investor a
fully executed Share Issuance Resolution substantially in the form attached
hereto as Exhibit G to be delivered to the Transfer Agent. 

                        3.6      
.. With respect to the Initial Closing, Company shall have delivered to Investor
a fully executed Confession of Judgment substantially in the form attached
hereto as Exhibit H. 

3 

                        3.7.       
With respect to each Subsequent Closing, Company shall have delivered to
Investor fully executed copies of all other documents required to be executed by
Company or otherwise requested by Investor for Company to execute, including,
but not limited to, an updated TA Letter, Secretary’s Certificate or Share
Issuance Resolution. 

            4.       
Representations, Warranties and Covenants of Investor. Investor hereby
represents and warrants to Company that the following are true and correct as of
the date hereof, and as of each Closing Date: (i) this Agreement has been duly
and validly authorized; (ii) this Agreement constitutes a valid and binding
agreement of Investor enforceable in accordance with its terms; (iii) Investor
is an “accredited investor” as that term is defined in Rule 501(a) of Regulation
D of the 1933 Act; (iv) Investor is purchasing the Notes and any securities of
the Company issuable upon conversion of or otherwise pursuant to the Notes for
its own account and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered or exempted from
registration under the 1933 Act; and (v) Investor has carefully reviewed the
Company’s filings with the SEC including the the risk factors set forth therein.

            5.       
Representations, Warranties, and Covenants of Company. Company hereby
represents and warrants to Investor that the following are true and correct as
of the date hereof, and as of each Closing Date: (i) Company is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has the requisite corporate power to own its
properties and to carry on its business as now being conducted; (ii) Company is
duly qualified as a foreign corporation to do business and is in good standing
in each jurisdiction where the nature of the business conducted or property
owned by it makes such qualification necessary; (iii) Company has registered its
Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the “1934 Act”), and is obligated to file reports pursuant to
Section 13 or Section 15(d) of the 1934 Act; (iv) each of the Transaction
Documents and the Additional Investment Documents, if applicable, and the
transactions contemplated hereby and thereby, have been duly and validly
authorized by Company; (v) this Agreement, the New Note, the Security Agreement,
and the other Transaction Documents have been duly executed and delivered by
Company and constitute the valid and binding obligations of Company enforceable
in accordance with their terms; (vi) the execution and delivery of the
Transaction Documents and the Additional Investment Documents, if applicable, by
Company, the issuance of Securities in accordance with the terms hereof and
thereof, and the consummation by Company of the other transactions contemplated
by the Transaction Documents and the Additional Investment Documents do not and
will not (except in the case of clause (vi)(a) or (vi)(b) for such conflict or
breach that would not, individually or in the aggregate, have a material adverse
effect on the business, properties, assets, liabilities, operations, results of
operations, condition (financial or otherwise) or prospects of the Company and
its subsidiaries, taken as a whole, or on the transactions contemplated hereby)
conflict with or result in a breach by Company of any of the terms or provisions
of, or constitute a default under (a) Company’s formation documents or bylaws,
each as currently in effect, (b) any indenture, mortgage, deed of trust, or
other material agreement or instrument to which Company is a party or by which
it or any of its properties or assets are bound, including any listing agreement
for the Common Stock, or (c) any existing applicable law, rule, or regulation or
any applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over Company or any of Company’s properties or assets; (i) no
further authorization, approval or consent of any court, governmental body,
regulatory agency, self-regulatory organization, or stock exchange or market or
the stockholders or any lender of Company is required to be obtained by Company
for the issuance of the Securities to Investor; (ii) none of Company’s filings
with the SEC contained, at the time they were filed, any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading; (iii) Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by Company with the SEC under 

4 

the 1934 Act on a timely basis or has received a valid
extension of such time of filing and has filed any such report, schedule, form,
statement or other document prior to the expiration of any such extension; (iv)
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board or body pending or, to the knowledge of Company, threatened
against or affecting Company before or by any governmental authority or
non-governmental department, commission, board, bureau, agency or
instrumentality or any other person, wherein an unfavorable decision, ruling or
finding which would adversely affect the validity or enforceability of, or the
authority or ability of Company to perform its obligations under, any of the
Transaction Documents; (v) Company has not consummated any material financing
transaction that has not been disclosed in a periodic filing or current report
with the SEC under the 1934 Act; (vi) Company is not, nor has it been at any
time in the previous twelve (12) months, a “Shell Company,” as such type of
“issuer” is described in Rule 144(i)(1) under the 1933 Act; (vii) with respect
to any commissions, placement agent or finder’s fees or similar payments that
will or would become due and owing by Company to any person or entity as a
result of this Agreement or the transactions contemplated hereby (“Broker
Fees”), any such Broker Fees will be made in full compliance with all
applicable laws and regulations and only to a person or entity that is a
registered investment adviser or registered broker-dealer; (viii) Investor shall
have no obligation with respect to any Broker Fees or with respect to any claims
made by or on behalf of other persons for fees of a type contemplated in this
subsection that may be due in connection with the transactions contemplated
hereby and Company shall indemnify and hold harmless each of Investor,
Investor’s employees, officers, directors, stockholders, members, managers,
agents, and partners, and their respective affiliates, from and against all
claims, losses, damages, costs (including the costs of preparation and
attorneys’ fees) and expenses suffered in respect of any such claimed or
existing Broker Fees; (ix) when issued, the Conversion Shares will be duly
authorized, validly issued, fully paid for and non-assessable, free and clear of
all liens, claims, charges and encumbrances; (x) neither Investor nor any of its
officers, directors, stockholders, members, managers, employees, agents or
representatives has made any representations or warranties to Company or any of
its officers, directors, employees, agents or representatives except as
expressly set forth in the Transaction Documents and the Additional Investment
Documents and, in making its decision to enter into the transactions
contemplated by the Transaction Documents and the Additional Investment
Documents, Company is not relying on any representation, warranty, covenant or
promise of Investor or its officers, directors, members, managers, employees,
agents or representatives other than as set forth in the Transaction Documents
and the Additional Investment Documents; (xi) Company acknowledges that the
State of Utah has a reasonable relationship and sufficient contacts to the
transactions contemplated by the Transaction Documents and the Additional
Investment Documents and any dispute that may arise related thereto such that
the laws and venue of the State of Utah, as set forth more specifically in
Section 12.3 below, shall be applicable to the Transaction Documents, the
Additional Investment Documents, and the transactions contemplated therein;
(xii) the Prior Note represents Company’s unconditional obligation to pay the
outstanding balance of the Prior Note pursuant to the terms thereof and,
immediately prior to its cancellation pursuant to the terms of this Agreement,
is not subject to any offset, counterclaim, defense, or reduction of any kind;
and (xiii) Company has performed due diligence and background research on
Investor and its affiliates including, without limitation, John M. Fife, and, to
its satisfaction, has made inquiries with respect to all matters Company may
consider relevant to the undertakings and relationships contemplated by the
Transaction Documents including, among other things, the following: http://investing.businessweek.com/research/stocks/people/person.asp?personId=7505107&ticker=UAHC;
SEC Civil Case No. 07-C-0347 (N.D. Ill.); SEC Civil Action No. 07-CV-347 (N.D.
Ill.); and FINRA Case #2011029203701. Company, being aware of the matters
described in subsection (xiii) above, acknowledges and agrees that such matters,
or any similar matters, have no bearing on the transactions contemplated by the
Transaction Documents and covenants and agrees it will not use any such
information as a defense to performance of its obligations under the Transaction
Documents or in any attempt to a void, modify or reduce such obligations. 

5 

            6.       
Company Covenants. Until all of Company’s obligations under all of the
Transaction Documents and, if applicable, all Additional Investment Documents,
are paid and performed in full, or within the timeframes otherwise specifically
set forth below, Company shall comply with the following covenants: (i) so long
as Investor beneficially owns any of the Securities and for at least twenty (20)
Trading Days thereafter, Company shall timely file on the applicable deadline
all reports required to be filed with the SEC pursuant to Sections 13 or 15(d)
of the 1934 Act, and shall take all reasonable action under its control to
ensure that adequate current public information with respect to Company, as
required in accordance with Rule 144 of the 1933 Act, is publicly available, and
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination; (ii) the Common Stock shall be listed or quoted for
trading on OTCQB, OTC Pink Current Information, or any or any equivalent
replacement market, the Nasdaq stock market, the New York Stock Exchange, or the
NYSE MKT; (iii) when issued, the Conversion Shares shall be duly authorized,
validly issued, fully paid for and non-assessable, free and clear of all liens,
claims, charges and encumbrances; trading in Company’s Common Stock shall not be
suspended, halted, chilled, frozen, reach zero bid or otherwise cease on
Company’s principal trading market; (iv) Company shall not transfer, assign, or
sell the Sino-Top Interest for an amount less than would be required to repay
the New Note and any Additional Note in full without the prior written consent
of Investor, which consent may be given or withheld in Investor’s sole and
absolute discretion; (v) Company shall not pledge, hypothecate or otherwise
alienate or encumber the Sino-Top Interest in any way without the prior written
consent of Investor, which consent may be given or withheld in Investor’s sole
and absolute discretion; (vi) Company shall not at any given time have any
Variable Security Investors (as defined below), excluding Investor, without
Investor’s prior written consent, which consent may be granted or withheld in
Investor’s sole and absolute discretion; (vii) at the Initial Closing and on the
first day of each calendar quarter for so long as any Note remains outstanding
or on any other date during which any Note is outstanding, as may be requested
by Investor, the Chief Executive Officer of Company shall provide to Investor a
certificate in substantially the form attached hereto as Exhibit I (the
“Officer’s Certificate”) certifying in his personal capacity and in his
capacity as Chief Executive Officer of Company the number of Variable Security
Holders of Company as of the date the applicable Officer’s Certificate is
executed; (viii) within three (3) Trading Days of the Initial Closing Date,
Company will file with the SEC a Current Report on Form 8-K describing the terms
of the Settlement, including, but not limited to, specifically and conspicuously
describing the participation right granted to Investor in Section 10 below; and
(ix) if at any time the Common Stock trades below $0.0005, Company shall, as
soon as practicable but in no event longer than sixty (60) days thereafter,
reduce the par value of its Common Stock to $0.00001 or below. For purposes
hereof, the term “Variable Security Holder” means any holder of any
Company securities that (A) have or may have conversion rights of any kind,
contingent, conditional or otherwise, in which the number of shares that may be
issued pursuant to such conversion right varies with the market price of the
Common Stock, or (B) are or may become convertible into Common Stock (including
without limitation convertible debt, warrants or convertible preferred stock),
with a conversion price that varies with the market price of the Common Stock,
even if such security only becomes convertible following an event of default,
the passage of time, or another trigger event or condition (each a “Variable
Security Issuance”). For avoidance of doubt, the issuance of shares of
Common Stock under, pursuant to, in exchange for or in connection with any
contract or instrument, whether convertible or not, is deemed a Variable
Security Issuance for purposes hereof if the number of shares of Common Stock to
be issued is based upon or related in any way to the market price of the Common
Stock, including, but not limited to, Common Stock issued in connection with a
Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar
settlement or exchange. 

           
7.        Mutual Release and
Waiver.

                        7.1.       
Release by the Investor. Upon the execution of this Agreement by all
parties hereto and issuance of the New Note, Investor, for itself and its
officers, directors, shareholders, officers, employees, agents, attorneys, subsidiaries, affiliates,
successors and assigns, and any and all past and present such persons acting by,
through or under Investor (collectively, the “Investor Releasing
Parties”), forever relieves, releases and discharges Company and each of its
directors, officers, stockholders, employees, agents, attorneys, successors and
assigns, and any and all past and present such persons (collectively, the
“Company Released Parties”), from any and all claims, debts, liabilities,
demands, obligations, promises, acts, agreements, costs and expenses (including,
but not limited to, attorneys’ fees), damages, injuries, actions and causes of
actions, of whatever kind or nature, whether legal or equitable, known or
unknown, suspected or unsuspected, contingent or fixed (each, a “Claim”,
and collectively, the “Claims”), that Investor or any of the other
Investor Releasing Parties may have that are based upon, relate to or arise out
of the Lawsuit or the Prior Note, arising or accruing before the Initial Closing
Date. Each Company Released Party is an intended third party beneficiary of the
release and waiver contained in this Section. 

6 

                 
      7.2.       
Release by Company. Upon the execution of this Agreement by all parties
hereto and the issuance of the New Note, Company, for itself and its officers,
directors, stockholders, employees, agents, attorneys, subsidiaries, affiliates,
successors and assigns, and any and all past and present such persons acting by,
through or under Company (collectively, the “Company Releasing Parties”),
forever relieves, releases and discharges Investor and each of its officers,
directors, shareholders, employees, agents, attorneys, affiliates, successors
and assigns, and any and all past and present such persons (the “Investor
Released Parties”), from any and all Claims that Company or any other
Company Releasing Party may have that are based upon, relate to or arise out of
the Lawsuit or the Prior Note, arising or accruing before the Initial Closing
Date. Each Investor Released Party is an intended third party beneficiary of the
release and waiver contained in this Section. 

         
              7.3.       
Release Representations. Each party hereto, for itself and on behalf of
such party’s other respective releasing parties, represents, warrants and agrees
that (a) the release and waiver contained in this Section shall not apply to any
obligations, covenants, conditions, representations or warranties arising under
any of the Transaction Document or Additional Investment Documents, (b) such
party hereby waives any Claims such party has against any of the parties it is
releasing hereunder, and covenants not to institute against any of the parties
it is releasing hereunder any proceeding, suit or action, at law or in equity,
of whatsoever kind or nature, whether criminal or civil, or in any way to aid in
or encourage the institution or prosecution thereof, for damages, expenses,
compensation, injunctive relief or otherwise, arising from, related to, or based
upon any Claim, and (c) none of the Claims such party is releasing and waiving
hereunder have been sold, assigned or otherwise transferred or encumbered
(directly or indirectly) to any person or party whatsoever, and such party has
the full right and power to grant, execute and deliver the full and complete
release and waiver contained herein. 

            
           7.4.       
Unknown Claims. Each party hereto represents that it is not aware of any
claim against or involving any party it is releasing hereunder other than the
Claims, all of which are released hereunder. Each party hereto acknowledges that
it has been advised by legal counsel and is familiar with a legal principle that
may provide that a general release does not extend to claims which the releasor
does not know or suspect to exist in its favor at the time of executing the
release, which if known by it must have materially affected its settlement with
the releasee. Each party hereto, being aware of said principle, agrees to
expressly waive any rights to this effect, as well as under any other statute or
common law principles of similar effect. 

            8.       
Dismissal of Lawsuit. Upon the execution and delivery of all the
Transaction Documents by all parties thereto, the parties agree to cause the
Lawsuit to be dismissed. Such dismissal shall be with prejudice and upon the
merits and shall occur by way of a Stipulated Motion to Dismiss and Order of
Dismissal, to be appropriately executed and filed with the court in which the
Lawsuit has been filed no later than five (5) business days after the Initial
Closing Date. The parties agree that the Order of Dismissal shall have claim and issue preclusive effect on all
claims and/or issues that were or could have been raised in the Lawsuit.

7 

            9.       
Reservation of Shares. Upon the earlier of (i) Company’s next annual
meeting of stockholders, and (ii) six (6) months from the date hereof (the
“Share Reserve Date”), Company will reserve 150,000,000 shares of Common
Stock from its authorized and unissued Common Stock to provide for the issuance
of Common Stock pursuant to conversions of the Notes (the “Share
Reserve”). In furtherance thereof, from and after the Share Reserve Date and
until such time that all outstanding Notes have been paid in full, Company shall
require the Transfer Agent to maintain the Share Reserve. Company shall further
require the Transfer Agent to hold such shares of Common Stock exclusively for
the benefit of Investor and to issue such shares to Investor promptly upon
Investor’s delivery of a conversion notice under the Notes. 

            10.       
Participation Right. Pursuant to the terms of this Section 10, Company
hereby grants Investor a right of participation with respect to any financing by
Company (whether debt, debt with equity features, convertible debt, common
stock, preferred stock, warrants, or any other type of financing) (a
“Financing Transaction”) that Company proposes to enter into at any time
during the period beginning on the Initial Closing Date and ending on the date
that all of Company’s obligations hereunder, under the New Note and under any
issued Additional Note are paid and performed in full; provided, however,
that Investor may only elect to participate in acquiring up to 50% of the
principal balance of such Financing Transaction. Company shall give written
notice of any such proposed Financing Transaction to Investor (the “Financing
Notice”), which Financing Notice shall identify the proposed parties and the
terms of the proposed Financing Transaction. Investor shall then have a period
of five (5) calendar days from receipt of the Financing Notice to notify Company
whether Investor elects to exercise its right to participate in up to 50% of the
proposed Financing Transaction upon the same terms as the proposed Financing
Transaction. If Investor elects not to exercise its right to participate,
Company and the proposed parties shall have a period of sixty (60) calendar days
to consummate the proposed Financing Transaction on the terms set forth in the
Financing Notice. In such case, if the Financing Transaction is not consummated
within such period or if the terms of the proposed Financing Transaction change
from those set forth in the applicable Financing Notice, Company shall again
submit the Financing Transaction to Investor before consummating it so that
Investor may exercise its right to participate with respect thereto pursuant to
this subsection. If Investor elects to exercise its right of participation with
respect to any proposed Financing Transaction, Company shall diligently proceed
to consummate its portion of the Financing Transaction with Investor on the
terms identified in the Financing Notice and within a timeframe reasonably
acceptable to both Investor and Company.

            11.       
Board Observer Right. So long as the New Note or any Additional Note is
outstanding, Company will grant Investor the right to appoint a board observer.
The board observer shall have the right to receive timely notice of and
participate in all board of directors and board committee meetings including,
without limitation, the right to receive all meeting materials and participate
in all discussions at all such meetings. Notwithstanding the foregoing, (i) the
board observer shall not have any voting rights with respect to any matters
voted on by Company’s board of directors, and (ii) Company reserves the right to
exclude the observer from access to any material or meeting or portion thereof
if Company believes upon advice of counsel that such exclusion is reasonably
necessary to preserve the attorney-client privilege; provided, however,
in the event Company elects to exclude the board observer on such grounds, it
must provide the board observer with written notice of such exclusion, a general
description of the matter the board observer is being excluded from (which
description shall be general enough as to not affect the attorney-client
privilege), and an explanation as to why it is reasonably necessary to exclude
the board observer from such matter. The written notice described in the
foregoing sentence shall be signed by the Chief Executive Officer of Company and
shall certify that only the matters described in such notice will be discussed
while the board observer is being excluded. The initial board observer shall be John M. Fife. Investor shall have the right change the person
appointed as its board observer at any time with three (3) days written notice
to Company.

8 

            12.       
Miscellaneous. The provisions set forth in this Section 12 shall apply to
this Agreement, as well as all other Transaction Documents and Additional
Investment Documents as if these terms were fully set forth therein;
provided, however, that in the event there is a conflict between any
provision set forth in this Section 12 and any provision in any other
Transaction Document, the provision in such other Transaction Document shall
govern. 

               
        12.1.       
Certain Capitalized Terms. To the extent any capitalized term used in any
Transaction Document or Additional Investment Document is defined in any other
Transaction Document or Additional Investment Document (as noted therein), such
capitalized term shall remain applicable in the Transaction Document or
Additional Investment Document in which it is so used even if the other
Transaction Document or Additional Investment Document (wherein such term is
defined) has been released, satisfied, or is otherwise cancelled. 

             
         
12.2.        Arbitration of Claims.
The parties shall submit all Claims (as defined in Exhibit J)
arising under this Agreement, any other Transaction Document, any Additional
Investment Document, or any other agreement between the parties and their
affiliates to binding arbitration pursuant to the arbitration provisions set
forth in Exhibit J attached hereto (the “Arbitration Provisions”).
The parties hereby acknowledge and agree that the Arbitration Provisions are
unconditionally binding on the parties hereto and are severable from all other
provisions of this Agreement. By executing this Agreement, Company represents,
warrants and covenants that Company has reviewed the Arbitration Provisions
carefully, consulted with legal counsel about such provisions (or waived its
right to do so), understands that the Arbitration Provisions are intended to
allow for the expeditious and efficient resolution of any dispute hereunder,
agrees to the terms and limitations set forth in the Arbitration Provisions, and
that Company will not take a position contrary to the foregoing representations.
Company acknowledges and agrees that Investor may rely upon the foregoing
representations and covenants of Company regarding the Arbitration Provisions.

              
         12.3.       
Governing Law; Venue. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement 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. Each party consents to and expressly agrees that
the exclusive venue for arbitration of any dispute arising out of or relating to
any Transaction Document, any Additional Investment Document or the relationship
of the parties or their affiliates shall be in Salt Lake County or Utah County,
Utah. Without modifying the parties obligations to resolve disputes hereunder
pursuant to the Arbitration Provisions, for any litigation arising in connection
with any of the Transaction Documents or any of the Additional Investment
Documents (and notwithstanding the terms (specifically including any governing
law and venue terms) of any transfer agent services agreement or other agreement
between the Transfer Agent and Company, such litigation specifically includes,
without limitation any action between or involving Company and the Transfer
Agent under the TA Letter or otherwise related to Investor in any way
(specifically including, without limitation, any action where Company seeks to
obtain an injunction, temporary restraining order, or otherwise prohibit the
Transfer Agent from issuing shares of Common Stock to Investor for any reason)),
each party hereto hereby (i) consents to and expressly submits to the exclusive
personal jurisdiction of any state or federal court sitting in Salt Lake County,
Utah, (ii) expressly submits to the exclusive venue of any such court for the
purposes hereof, (iii) agrees to not bring any such action (specifically
including, without limitation, any action where Company seeks to obtain an
injunction, temporary restraining order, or otherwise prohibit the Transfer
Agent from issuing shares of Common Stock to Investor for any reason) outside of any state or
federal court sitting in Salt Lake County, Utah, and (iv) waives any claim of
improper venue and any claim or objection that such courts are an inconvenient
forum or any other claim or objection to the bringing of any such proceeding in
such jurisdiction or to any claim that such venue of the suit, action or
proceeding is improper. Finally, Company covenants and agrees to name Investor
as a party in interest in, and provide written notice to Investor in accordance
with Section 12.12 below prior to bringing or filing, any action (including
without limitation any filing or action against any person or entity that is not
a party to this Agreement, including without limitation the Transfer Agent) that
is related in any way to the Transaction Documents or Additional Investment
Documents or any transaction contemplated herein or therein, including without
limitation any action brought by Company to enjoin or prevent the issuance of
any shares of Common Stock to Investor by the Transfer Agent, and further agrees
to name Investor as a party to any such action. Company acknowledges that the
governing law and venue provisions set forth in this Section 12.3 are material
terms to induce Investor to enter into the Transaction Documents and the
Additional Investment Documents, if applicable, and that but for Company’s
agreements set forth in this Section 12.3 Investor would not have entered into
the Transaction Documents or the Additional Investment Documents, if applicable. 

9 

                  
     12.4.       
Specific Performance. Company acknowledges and agrees that irreparable
damage would occur to Investor in the event that Company fails to perform any
provision of this Agreement, any of the other Transaction Documents or any of
the other Additional Investment Documents, if applicable, in accordance with its
specific terms. It is accordingly agreed that Investor shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement or such other Transaction Document or Additional Investment Document
and to enforce specifically the terms and provisions hereof or thereof, this
being in addition to any other remedy to which any Investor may be entitled
under the Transaction Documents or Additional Investment Documents, at law or in
equity. For the avoidance of doubt, in the event Investor seeks to obtain an
injunction against Company or specific performance of any provision of any
Transaction Document or Additional Investment Document, such action shall not be
a waiver of any right of Investor under any Transaction Document or Additional
Investment Document, at law, or in equity, including without limitation its
rights to arbitrate any Claim pursuant to the terms of the Transaction Documents
or Additional Investment Documents. 

              
         12.5.       
Calculation Disputes. Notwithstanding the Arbitration Provisions, in the
case of a dispute as to any determination or arithmetic calculation under the
Transaction Documents or Additional Investment Documents, including without
limitation, calculating the Outstanding Balance, Lender Conversion Price (as
defined in the New Note), Lender Conversion Shares (as defined in the New Note),
Installment Conversion Price (as defined in the New Note), Installment
Conversion Shares (as defined in the New Note), Conversion Factor (as defined in
the New Note), Market Price (as defined in the New Note), or VWAP (as defined in
the New Note) (each, a “Calculation”), Company or Investor (as the case
may be) shall submit any disputed Calculation via email or facsimile with
confirmation of receipt (i) within two (2) Trading Days after receipt of the
applicable notice giving rise to such dispute to Company or Investor (as the
case may be) or (ii) if no notice gave rise to such dispute, at any time after
Investor learned of the circumstances giving rise to such dispute. If Investor
and Company are unable to agree upon such Calculation within two (2) Trading
Days of such disputed Calculation being submitted to Company or Investor (as the
case may be), then Investor shall, within two (2) Trading Days, submit via email
or facsimile the disputed Calculation to Unkar Systems Inc. (“Unkar
Systems”). Company shall cause Unkar Systems to perform the Calculation and
notify Company and Investor of the results no later than ten (10) Trading Days
from the time it receives such disputed Calculation. Unkar Systems’
determination of the disputed Calculation shall be binding upon all parties
absent demonstrable error. Unkar Systems’ fee for performing such Calculation
shall be paid by the incorrect party, or if both parties are incorrect, by the
party whose Calculation is furthest from the correct Calculation as determined
by Unkar Systems. In the event Company is the losing party, no extension of the
Delivery Date (as defined in the New Note) shall be granted and Company shall incur all
effects for failing to deliver the applicable shares in a timely manner as set
forth in the Transaction Documents.

10 

           
            12.6.       
Counterparts. Each Transaction Document and Additional Investment
Document may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one instrument.
The parties hereto confirm that any electronic copy of another party’s executed
counterpart of a Transaction Document or an Additional Investment Document (or
such party’s signature page thereof) will be deemed to be an executed original
thereof. 

          
             12.7.       
Headings. The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of, this
Agreement. 

             
          12.8.       
Severability. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform to such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.

              
         12.9.       
Entire Agreement. This Agreement, together with the other Transaction
Documents and, if applicable, the Additional Investment Documents, contains the
entire understanding of the parties with respect to the matters covered herein
and therein and, except as specifically set forth herein or therein, neither
Company nor Investor makes any representation, warranty, covenant or undertaking
with respect to such matters. For the avoidance of doubt, all prior term sheets
or other documents between Company and Investor, or any affiliate thereof,
related to the transactions contemplated by the Transaction Documents and the
Additional Investment Documents, if applicable (collectively, “Prior
Agreements”), that may have been entered into between Company and Investor,
or any affiliate thereof, are hereby null and void and deemed to be replaced in
their entirety by the Transaction Documents and the Additional Investment
Documents, if applicable. To the extent there is a conflict between any term set
forth in any Prior Agreement and the term(s) of the Transaction Documents or
Additional Investment Documents, the Transaction Documents or Additional
Investment Documents, as applicable, shall govern. 

             
          12.10.     
No Reliance. Company acknowledges and agrees that neither Investor nor
any of its officers, directors, shareholders, representatives or agents has made
any representations or warranties to Company or any of its officers, directors,
representatives, agents or employees except as expressly set forth in the
Transaction Documents or Additional Investment Documents and, in making its
decision to enter into the transactions contemplated by the Transaction
Documents or Additional Investment Documents, Company is not relying on any
representation, warranty, covenant or promise of Investor or its officers,
directors, members, managers, agents or representatives other than as set forth
in the Transaction Documents or Additional Investment Documents. 

                 
      12.11.     
Amendments. The prior written consent of both parties hereto shall be
required for any change or amendment to this Agreement. 

             
          12.12.    
 Notices. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of: (i) the date delivered, if delivered by personal
delivery as against written receipt therefor or by email to an executive
officer, or by facsimile (with successful transmission confirmation), (ii) the
earlier of the date delivered or the third Trading Day after deposit, postage
prepaid, in the United States Postal Service by certified mail, or (iii) the
earlier of the date delivered or the third Trading Day after mailing by express
courier, with delivery costs and fees prepaid, in each case, addressed to each
of the other parties thereunto entitled at the following addresses (or at such other addresses as such
party may designate by five (5) calendar days’ advance written notice similarly
given to each of the other parties hereto): 

11 

If to Company: 

Silver Dragon Inc. 
Attn: Marc
Hazout 
200 Davenport Road 
Toronto, Ontario M5R 1J2 
Canada 

With a copy to (which copy shall not
constitute notice):

Sichenzia Ross Friedman Ference
LLP
Attn: Thomas Rose 
61 Broadway, 32nd Floor 
New York,
New York 10006 

If to Investor: 

Tonaquint, Inc. 
Attn: John Fife

303 East Wacker Drive, Suite 1040 
Chicago, Illinois 60601

With a copy to (which copy shall not
constitute notice):

Hansen Black Anderson Ashcraft PLLC

Attn: Jonathan Hansen 
3051 West Maple Loop Drive, Suite 325 
Lehi,
Utah 84043 

         
              12.13.    
 Successors and Assigns. This Agreement or any of the severable
rights and obligations inuring to the benefit of or to be performed by Investor
hereunder may be assigned by Investor to a third party, including its financing
sources, in whole or in part, without the need to obtain Company’s consent
thereto. Company may not assign its rights or obligations under this Agreement
or delegate its duties hereunder without the prior written consent of Investor.

           
            12.14.    
 Survival. The representations and warranties of Company and the
agreements and covenants set forth in this Agreement shall survive the Closing
hereunder notwithstanding any due diligence investigation conducted by or on
behalf of Investor. Company agrees to indemnify and hold harmless Investor and
all its officers, directors, employees, attorneys, and agents for loss or damage
arising as a result of or related to any breach or alleged breach by Company of
any of its representations, warranties and covenants set forth in this Agreement
or any of its covenants and obligations under this Agreement, including
advancement of expenses as they are incurred. 

          
             12.15.     
Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby. 

12 

               
        12.16.    
 Investor’s Rights and Remedies Cumulative; Liquidated Damages. All
rights, remedies, and powers conferred in this Agreement, the Transaction
Documents and the Additional Investment Documents are cumulative and not
exclusive of any other rights or remedies, and shall be in addition to every
other right, power, and remedy that Investor may have, whether specifically
granted in this Agreement or any other Transaction Document or Additional
Investment Document, or existing at law, in equity, or by statute, and any and
all such rights and remedies may be exercised from time to time and as often and
in such order as Investor may deem expedient. The parties acknowledge and agree
that upon Company’s failure to comply with the provisions of the Transaction
Documents or Additional Investment Documents, Investor’s damages would be
uncertain and difficult (if not impossible) to accurately estimate because of
the parties’ inability to predict future interest rates and future share prices,
Investor’s increased risk, and the uncertainty of the availability of a suitable
substitute investment opportunity for Investor, among other reasons.
Accordingly, any fees, charges, and default interest due under the New Note and
the other Transaction Documents and Additional Investment Documents are intended
by the parties to be, and shall be deemed, liquidated damages (under Company’s
and Investor’s expectations that any such liquidated damages will tack back to
the Closing Date for purposes of determining the holding period under Rule 144
under the 1933 Act). The parties agree that such liquidated damages are a
reasonable estimate of Investor’s actual damages and not a penalty, and shall
not be deemed in any way to limit any other right or remedy Investor may have
hereunder, at law or in equity. The parties acknowledge and agree that under the
circumstances existing at the time this Agreement is entered into, such
liquidated damages are fair and reasonable and are not penalties. All fees,
charges, and default interest provided for in the Transaction Documents and
Additional Investment Documents are agreed to by the parties to be based upon
the obligations and the risks assumed by the parties as of the Initial Closing
Date and are consistent with investments of this type. The liquidated damages
provisions of the Transaction Documents and Additional Investment Documents
shall not limit or preclude a party from pursuing any other remedy available at
law or in equity; provided, however, that the liquidated damages provided
for in the Transaction Documents and Additional Investment Documents are
intended to be in lieu of actual damages. 

          
             12.17.    
 Ownership Limitation. Notwithstanding anything to the contrary
contained in this Agreement or the other Transaction Documents, if at any time
Investor shall or would be issued shares of Common Stock under any of the
Transaction Documents or Additional Investment Documents, but such issuance
would cause Investor (together with its affiliates) to beneficially own a number
of shares exceeding the Maximum Percentage (as defined in the New Note), then
Company must not issue to Investor the shares that would cause Investor to
exceed the Maximum Percentage. The shares of Common Stock issuable to Investor
that would cause the Maximum Percentage to be exceeded are referred to herein as
the “Ownership Limitation Shares”. Company will reserve the Ownership
Limitation Shares for the exclusive benefit of Investor. From time to time,
Investor may notify Company in writing of the number of the Ownership Limitation
Shares that may be issued to Investor without causing Investor to exceed the
Maximum Percentage. Upon receipt of such notice, Company shall be
unconditionally obligated to immediately issue such designated shares to
Investor, with a corresponding reduction in the number of the Ownership
Limitation Shares. For purposes of this Section, beneficial ownership of Common
Stock will be determined under Section 13(d) of the 1934 Act. By written notice
to Company, Investor 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
Investor. 

           
            12.18.    
 Attorneys’ Fees and Cost of Collection. In the event of any
arbitration or action at law or in equity to enforce or interpret the terms of
this Agreement or any of the other Transaction Documents, the parties agree that
the party who is awarded the most money (which, for the avoidance of doubt,
shall be determined without regard to any statutory fines, penalties, fees, or
other charges awarded to any party) shall be deemed the prevailing party for all
purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees,
deposition costs, and expenses paid by such prevailing party in connection with
arbitration or litigation without reduction or apportionment based upon the
individual claims or defenses giving rise to the fees and expenses. Nothing
herein shall restrict or impair an arbitrator’s or a court’s power to award fees
and expenses for frivolous or bad faith pleading. If (i) any 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 Investor otherwise takes action to collect
amounts due under any Note or to enforce the provisions of any Note; or (ii)
there occurs any bankruptcy, reorganization, receivership of Company or other
proceedings affecting Company’s creditors’ rights and involving a claim under
any Note; then Company shall pay the costs incurred by Investor for such
collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, without limitation,
attorneys’ fees, expenses, deposition costs, and disbursements. 

13 

                
       12.19.    
 Waiver. No waiver of any provision of this Agreement 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. 

             
          12.20.    
 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT 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
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, ANY ADDITIONAL INVESTMENT DOCUMENT,
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. 

            
           12.21.    
 Time is of the Essence. Time is expressly made of the essence with
respect to each and every provision of this Agreement and the other Transaction
Documents. 

         
              12.22.    
 Voluntary Agreement. Company has carefully read this Agreement and
each of the other Transaction Documents and has asked any questions needed for
Company to understand the terms, consequences and binding effect of this
Agreement and each of the other Transaction Documents and Additional Investment
Documents, if applicable, and fully understand them. Company has had the
opportunity to seek the advice of an attorney of Company’s choosing, or has
waived the right to do so, and is executing this Agreement and each of the other
Transaction Documents and Additional Investment Documents, if applicable,
voluntarily and without any duress or undue influence by Investor or anyone
else. 

[Remainder of the page intentionally left blank; signature
page to follow] 

14 

            IN
WITNESS WHEREOF, each of the undersigned represents that the foregoing
statements made by it above are true and correct and that it has caused this
Securities Purchase to be duly executed on its behalf (if an entity, by one of
its officers thereunto duly authorized) as of the date first above written. 

HOLDER: 

TONAQUINT, INC. 

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

COMPANY: 

SILVER DRAGON RESOURCES INC. 

By: /s/ Marc Hazout                                 

Name: Marc Hazout
Title: President and CEO

ATTACHMENTS: 

	Exhibit A 	New Note 
	Exhibit B 	Form of Additional Note 
	Exhibit C 	Security Agreement 
	Exhibit D 	Pledge Agreement 
	Exhibit E 	Transfer Agent Letter 
	Exhibit F 	Secretary’s Certificate 
	Exhibit G 	Share Issuance Resolution 
	Exhibit H 	Confession of Judgment 
	Exhibit I 	Officer’s Certificate 
	Exhibit J 	Arbitration Provisions
  

[Signature Page to Settlement and Securities Agreement]

Exhibit J 

ARBITRATION PROVISIONS

1.        Dispute
Resolution. For purposes of this Exhibit J, the term “Claims”
means any disputes, claims, demands, causes of action, requests for injunctive
relief, requests for specific performance, liabilities, damages, losses, or
controversies whatsoever arising from, related to, or connected with the
transactions contemplated in the Transaction Documents and any communications
between the parties related thereto, including without limitation any claims of
mutual mistake, mistake, fraud, misrepresentation, failure of formation, failure
of consideration, promissory estoppel, unconscionability, failure of condition
precedent, rescission, and any statutory claims, tort claims, contract claims,
or claims to void, invalidate or terminate the Agreement (or these Arbitration
Provisions (defined below)) or any of the other Transaction Documents. The term
“Claims” specifically excludes a dispute over Calculations. The parties to the
Agreement (the “parties”) hereby agree that the arbitration provisions
set forth in this Exhibit J (“Arbitration
Provisions”) are binding on each of them. As a result, any attempt to
rescind the Agreement (or these Arbitration Provisions) or declare the Agreement
(or these Arbitration Provisions) or any other Transaction Document invalid or
unenforceable for any reason is subject to these Arbitration Provisions. These
Arbitration Provisions shall also survive any termination or expiration of the
Agreement. Any capitalized term not defined in these Arbitration Provisions
shall have the meaning set forth in the Agreement. 

2.       
Arbitration. Except as otherwise provided herein, all Claims must be
submitted to arbitration (“Arbitration”) to be conducted exclusively in
Salt Lake County or Utah County, Utah and pursuant to the terms set forth in
these Arbitration Provisions. Subject to the arbitration appeal right provided
for in Paragraph 5 below (the “Appeal Right”), the parties
agree that the award of the arbitrator rendered pursuant to Paragraph 4 below
(the “Arbitration Award”) shall be (a) final and binding
upon the parties, (b) the sole and exclusive remedy between them regarding any
Claims, counterclaims, issues, or accountings presented or pleaded to the
arbitrator, and (c) promptly payable in United States dollars free of any tax,
deduction or offset (with respect to monetary awards). Subject to the Appeal
Right, any costs or fees, including without limitation attorneys’ fees, incurred
in connection with or incident to enforcing the Arbitration Award shall, to the
maximum extent permitted by law, be charged against the party resisting such
enforcement. The Arbitration Award shall include default interest (as defined or
otherwise provided for in the applicable Note (“Default
Interest”)) (with respect to monetary awards) at the rate specified
in the applicable Note for Default Interest both before and after the
Arbitration Award. Judgment upon the Arbitration Award will be entered and
enforced by any state or federal court sitting in Salt Lake County, Utah. 

3.        The Arbitration
Act. The parties hereby incorporate herein the provisions and procedures set
forth in the Utah Uniform Arbitration Act, U.C.A. § 78B–11–101 et
seq. (as amended or superseded from time to time, the
“Arbitration Act”). Notwithstanding the foregoing, pursuant
to, and to the maximum extent permitted by, Section 105 of the Arbitration Act,
in the event of conflict or variation between the terms of these Arbitration
Provisions and the provisions of the Arbitration Act, the terms of these
Arbitration Provisions shall control and the parties hereby waive or otherwise
agree to vary the effect of all requirements of the Arbitration Act that may
conflict with or vary from these Arbitration Provisions. 

4.        Arbitration
Proceedings. Arbitration between the parties will be subject to the
following: 

            4.      
1 Initiation of Arbitration. Pursuant to
Section 110 of the Arbitration Act, the parties agree that a party may initiate
Arbitration by giving written notice to the other party (“Arbitration
Notice”) in the same manner that notice is permitted under Section
12.12 of the Agreement; provided, however, that the
Arbitration Notice may not be given by email or fax. Arbitration will be deemed
initiated as of the date that the Arbitration Notice is deemed delivered to such
other party under Section 12.12 of the Agreement (the “Service
Date”). After the Service Date, information may be delivered, and
notices may be given, by email or fax pursuant to Section 12.12 of the Agreement
or any other method permitted thereunder. The Arbitration Notice must describe
the nature of the controversy, the remedies sought, and the election to commence
Arbitration proceedings. All Claims in the Arbitration Notice must be pleaded
consistent with the Utah Rules of Civil Procedure. 

Arbitration Provisions, Page 1 

            4.2       
Selection and Payment of
Arbitrator. 

                          
(a) Within ten (10) calendar days after the Service Date, Investor shall select
and submit to Company the names of three (3) arbitrators that are designated as
“neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such three (3)
designated persons hereunder are referred to herein as the “Proposed
Arbitrators”). For the avoidance of doubt, each Proposed Arbitrator
must be qualified as a “neutral” with Utah ADR Services. Within five (5)
calendar days after Investor has submitted to Company the names of the Proposed
Arbitrators, Company must select, by written notice to Investor, one (1) of the
Proposed Arbitrators to act as the arbitrator for the parties under these
Arbitration Provisions. If Company fails to select one of the Proposed
Arbitrators in writing within such 5–day period, then Investor may select the
arbitrator from the Proposed Arbitrators by providing written notice of such
selection to Company. 

                          
(b) If Investor fails to submit to Company the Proposed Arbitrators within ten
(10) calendar days after the Service Date pursuant to subparagraph (a) above,
then Company may at any time prior to Investor so designating the Proposed
Arbitrators, identify the names of three (3) arbitrators that are designated as
“neutrals” or qualified arbitrators by Utah ADR Service by written notice to
Investor. Investor may then, within five (5) calendar days after Company has
submitted notice of its Proposed Arbitrators to Investor, select, by written
notice to Company, one (1) of the Proposed Arbitrators to act as the arbitrator
for the parties under these Arbitration Provisions. If Investor fails to select
in writing and within such 5–day period one (1) of the three (3) Proposed
Arbitrators selected by Company, then Company may select the arbitrator from its
three (3) previously selected Proposed Arbitrators by providing written notice
of such selection to Investor. 

                          
(c) If a Proposed Arbitrator chosen to serve as arbitrator declines or is
otherwise unable to serve as arbitrator, then the party that selected such
Proposed Arbitrator may select one (1) of the other three (3) Proposed
Arbitrators within three (3) calendar days of the date the chosen Proposed
Arbitrator declines or notifies the parties he or she is unable to serve as
arbitrator. If all three (3) Proposed Arbitrators decline or are otherwise
unable to serve as arbitrator, then the arbitrator selection process shall begin
again in accordance with this Paragraph 4.2. 

                          
(d) The date that the Proposed Arbitrator selected pursuant to this Paragraph
4.2 agrees in writing (including via email) delivered to both parties to serve
as the arbitrator hereunder is referred to herein as the “Arbitration
Commencement Date”. If an arbitrator resigns or is
unable to act during the Arbitration, a replacement arbitrator shall be chosen
in accordance with this Paragraph 4.2 to continue the Arbitration. If Utah ADR
Services ceases to exist or to provide a list of neutrals, then the arbitrator
shall be selected under the then prevailing rules of the American Arbitration
Association. 

                          
(e) Subject to Paragraph 4.10 below, the cost of the arbitrator must be paid
equally by both parties. Subject to Paragraph 4.10 below, if one party refuses
or fails to pay its portion of the arbitrator fee, then the other party can
advance such unpaid amount (subject to the accrual of Default Interest
thereupon), with such amount being added to or subtracted from, as applicable,
the Arbitration Award. 

            4.3       
Applicability of Certain
Utah Rules. The parties agree that the Arbitration
shall be conducted generally in accordance with the Utah Rules of Civil
Procedure and the Utah Rules of Evidence. More specifically, the Utah Rules of
Civil Procedure shall apply, without limitation, to the filing of any pleadings,
motions or memoranda, the conducting of discovery, and the taking of any
depositions. The Utah Rules of Evidence shall apply to any hearings, whether
telephonic or in person, held by the arbitrator. Notwithstanding the foregoing,
it is the parties’ intent that the incorporation of such rules will in no event
supersede these Arbitration Provisions. In the event of any conflict between the
Utah Rules of Civil Procedure or the Utah Rules of Evidence and these
Arbitration Provisions, these Arbitration Provisions shall control. 

            4.4       
Answer and Default. An answer and any
counterclaims to the Arbitration Notice shall be required to be delivered to the
party initiating the Arbitration within twenty (20) calendar days after the
Arbitration Commencement Date. If an answer is not delivered by the required
deadline, the arbitrator must provide written notice to the defaulting party
stating that the arbitrator will enter a default award against such party if
such party does not file an answer within five (5) calendar days of receipt of
such notice. If an answer is not filed within the five (5) day extension period,
the arbitrator must render a default award, consistent with the relief requested
in the Arbitration Notice, against a party that fails to submit an answer within
such time period. 

Arbitration Provisions, Page 2 

            4.5       
Related Litigation. The party that delivers the Arbitration
Notice to the other party shall have the option to also commence concurrent
legal proceedings with any state or federal court sitting in Salt Lake County,
Utah (“Litigation Proceedings”), subject to the following:
(a) the complaint in the Litigation Proceedings is to be substantially similar
to the claims set forth in the Arbitration Notice, provided that an additional
cause of action to compel arbitration will also be included therein, (b) so long
as the other party files an answer to the complaint in the Litigation
Proceedings and an answer to the Arbitration Notice, the Litigation Proceedings
will be stayed pending an Arbitration Award (or Appeal Panel Award (defined
below), as applicable) hereunder, (c) if the other party fails to file an answer
in the Litigation Proceedings or an answer in the Arbitration proceedings, then
the party initiating Arbitration shall be entitled to a default judgment
consistent with the relief requested, to be entered in the Litigation
Proceedings, and (d) any legal or procedural issue arising under the Arbitration
Act that requires a decision of a court of competent jurisdiction may be
determined in the Litigation Proceedings. Any award of the arbitrator (or of the
Appeal Panel (defined below)) may be entered in such Litigation Proceedings
pursuant to the Arbitration Act. 

            4.6       
Discovery. Pursuant to Section 118(8) of the Arbitration Act, the parties
agree that discovery shall be conducted as follows: 

                          
(a)        Written discovery will only be
allowed if the likely benefits of the proposed written discovery outweigh the
burden or expense thereof, and the written discovery sought is likely to reveal
information that will satisfy a specific element of a claim or defense already
pleaded in the Arbitration. The party seeking written discovery shall always
have the burden of showing that all of the standards and limitations set forth
in these Arbitration Provisions are satisfied. The scope of discovery in the
Arbitration proceedings shall also be limited as follows: 

            (i)       
To facts directly connected with the transactions contemplated by the
Agreement.

             (ii)       To
facts and information that cannot be obtained from another source or in another
manner that is more convenient, less burdensome or less expensive than in the
manner requested. 

                          
(b)        No party shall be allowed (i) more
than fifteen (15) interrogatories (including discrete subparts), (ii) more than
fifteen (15) requests for admission (including discrete subparts), (iii) more
than ten (10) document requests (including discrete subparts), or (iv) more than
three (3) depositions (excluding expert depositions) for a maximum of seven (7)
hours per deposition. The costs associated with depositions will be borne by the
party taking the deposition. The party defending the deposition will submit a
notice to the party taking the deposition of the estimated attorneys’ fees that
such party expects to incur in connection with defending the deposition. If the
party defending the deposition fails to submit an estimate of attorneys’ fees
within five (5) calendar days of its receipt of a deposition notice, then such
party shall be deemed to have waived its right to the estimated attorneys’ fees.
The party taking the deposition must pay the party defending the deposition the
estimated attorneys’ fees prior to taking the deposition, unless such obligation
is deemed to be waived as set forth in the immediately preceding sentence. If
the party taking the deposition believes that the estimated attorneys’ fees are
unreasonable, such party may submit the issue to the arbitrator for a decision.
All depositions will be taken in Utah. 

                          
(c)        All discovery requests (including
document production requests included in deposition notices) must be submitted
in writing to the arbitrator and the other party. The party submitting the
written discovery requests must include with such discovery requests a detailed
explanation of how the proposed discovery requests satisfy the requirements of
these Arbitration Provisions and the Utah Rules of Civil Procedure. The
receiving party will then be allowed, within five (5) calendar days of receiving
the proposed discovery requests, to submit to the arbitrator an estimate of the
attorneys’ fees and costs associated with responding to such written discovery
requests and a written challenge to each applicable discovery request. After
receipt of an estimate of attorneys’ fees and costs and/or challenge(s) to one
or more discovery requests, consistent with subparagraph (c) above, the
arbitrator will within three (3) calendar days make a finding as to the likely
attorneys’ fees and costs associated with responding to the discovery requests
and issue an order that (i) requires the requesting party to prepay the
attorneys’ fees and costs associated with responding to the discovery requests,
and (ii) requires the responding party to respond to the discovery requests as
limited by the arbitrator within twenty–five (25) calendar days of the
arbitrator’s finding with respect to such discovery requests. If a party
entitled to submit an estimate of attorneys’ fees and costs and/or a challenge
to discovery requests fails to do so within such 5–day period, the arbitrator
will make a finding that (A) there are no attorneys’ fees or costs associated
with responding to such discovery requests, and (B) the responding party must respond to such discovery
requests (as may be limited by the arbitrator) within twenty–five (25) calendar
days of the arbitrator’s finding with respect to such discovery requests. Any
party submitting any written discovery requests, including without limitation
interrogatories, requests for production subpoenas to a party or a third party,
or requests for admissions, must prepay the estimated attorneys’ fees and costs,
before the responding party has any obligation to produce or respond to the
same, unless such obligation is deemed waived as set forth above. 

Arbitration Provisions, Page 3 

                          
(d)        In order to allow a written
discovery request, the arbitrator must find that the discovery request satisfies
the standards set forth in these Arbitration Provisions and the Utah Rules of
Civil Procedure. The arbitrator must strictly enforce these standards. If a
discovery request does not satisfy any of the standards set forth in these
Arbitration Provisions or the Utah Rules of Civil Procedure, the arbitrator may
modify such discovery request to satisfy the applicable standards, or strike
such discovery request in whole or in part. 

                          
(e)        Each party may submit expert
reports (and rebuttals thereto), provided that such reports must be submitted
within sixty (60) days of the Arbitration Commencement Date. Each party will be
allowed a maximum of two (2) experts. Expert reports must contain the following:
(i) a complete statement of all opinions the expert will offer at trial and the
basis and reasons for them; (ii) the expert’s name and qualifications, including
a list of all the expert’s publications within the preceding ten (10) years, and
a list of any other cases in which the expert has testified at trial or in a
deposition or prepared a report within the preceding ten (10) years; and (iii)
the compensation to be paid for the expert’s report and testimony. The parties
are entitled to depose any other party’s expert witness one (1) time for no more
than four (4) hours. An expert may not testify in a party’s case–in–chief
concerning any matter not fairly disclosed in the expert report. 

            4.6       
Dispositive Motions. Each party shall have the right to
submit dispositive motions pursuant Rule 12 or Rule 56 of the Utah Rules of
Civil Procedure (a “Dispositive Motion”). The party
submitting the Dispositive Motion may, but is not required to, deliver to the
arbitrator and to the other party a memorandum in support (the
“Memorandum in Support”) of the Dispositive
Motion. Within seven (7) calendar days of delivery of the Memorandum in Support,
the other party shall deliver to the arbitrator and to the other party a
memorandum in opposition to the Memorandum in Support (the “Memorandum
in Opposition”). Within seven (7) calendar days of
delivery of the Memorandum in Opposition, as applicable, the party that
submitted the Memorandum in Support shall deliver to the arbitrator and to the
other party a reply memorandum to the Memorandum in Opposition (“Reply
Memorandum”). If the applicable party shall fail to deliver the
Memorandum in Opposition as required above, or if the other party fails to
deliver the Reply Memorandum as required above, then the applicable party shall
lose its right to so deliver the same, and the Dispositive Motion shall proceed
regardless. 

            4.7       
Confidentiality. All information disclosed by either party (or such
party’s agents) during the Arbitration process (including without limitation
information disclosed during the discovery process or any Appeal (defined
below)) shall be considered confidential in nature. Each party agrees not to
disclose any confidential information received from the other party (or its
agents) during the Arbitration process (including without limitation during the
discovery process or any Appeal) unless (a) prior to or after the time of
disclosure such information becomes public knowledge or part of the public
domain, not as a result of any inaction or action of the receiving party or its
agents, (b) such information is required by a court order, subpoena or similar
legal duress to be disclosed if such receiving party has notified the other
party thereof in writing and given it a reasonable opportunity to obtain a
protective order from a court of competent jurisdiction prior to disclosure, or
(c) such information is disclosed to the receiving party’s agents,
representatives and legal counsel on a need to know basis who each agree in
writing not to disclose such information to any third party. Pursuant to Section
118(5) of the Arbitration Act, the arbitrator is hereby authorized and directed
to issue a protective order to prevent the disclosure of privileged information
and confidential information upon the written request of either party. 

            4.8       
Authorization; Timing; Scheduling
Order. Subject to all other portions of these Arbitration Provisions,
the parties hereby authorize and direct the arbitrator to take such actions and
make such rulings as may be necessary to carry out the parties’ intent for the
Arbitration proceedings to be efficient and expeditious. Pursuant to Section 120
of the Arbitration Act, the parties hereby agree that an Arbitration Award must
be made within one hundred twenty (120) calendar days after the Arbitration
Commencement Date. The arbitrator is hereby authorized and directed to hold a
scheduling conference within ten (10) calendar days after the Arbitration Commencement Date in order
to establish a scheduling order with various binding deadlines for discovery,
expert testimony, and the submission of documents by the parties to enable the
arbitrator to render a decision prior to the end of such 120–day period. 

Arbitration Provisions, Page 4 

            4.9       
Relief. The arbitrator shall have the right to award or include in the
Arbitration Award (or in a preliminary ruling) any relief which the arbitrator
deems proper under the circumstances, including, without limitation, specific
performance and injunctive relief, provided that the arbitrator may not award
exemplary or punitive damages. 

            4.10     
Fees and Costs. As part of the Arbitration
Award, the arbitrator is hereby directed to require the losing party (the party
being awarded the least amount of money by the arbitrator, which, for the
avoidance of doubt, shall be determined without regard to any statutory fines,
penalties, fees, or other charges awarded to any party) to (a) pay the full
amount of any unpaid costs and fees of the Arbitration, and (b) reimburse the
prevailing party for all reasonable attorneys’ fees, arbitrator costs and fees,
deposition costs, other discovery costs, and other expenses, costs or fees paid
or otherwise incurred by the prevailing party in connection with the
Arbitration. 

5.        Arbitration
Appeal. 

            5.1       
Initiation of Appeal. Following the
entry of the Arbitration Award, either party (the “Appellant”) shall have
a period of thirty (30) calendar days in which to notify the other party (the
“Appellee”), in writing, that the Appellant elects to appeal (the
“Appeal”) the Arbitration Award (such notice, an “Appeal
Notice”) to a panel of arbitrators as provided in Paragraph 5.2
below. The date the Appellant delivers an Appeal Notice to the Appellee is
referred to herein as the “Appeal Date”. The Appeal Notice
must be delivered to the Appellee in accordance with the provisions of Paragraph
4.1 above with respect to delivery of an Arbitration Notice. In addition,
together with delivery of the Appeal Notice to the Appellee, the Appellant must
also pay for (and provide proof of such payment to the Appellee together with
delivery of the Appeal Notice) a bond in the amount of 110% of the sum the
Appellant owes to the Appellee as a result of the Arbitration Award the
Appellant is appealing. In the event an Appellant delivers an Appeal Notice to
the Appellee (together with proof of payment of the applicable bond) in
compliance with the provisions of this Paragraph 5.1, the Appeal will occur as a
matter of right and, except as specifically set forth herein, will not be
further conditioned. In the event a party does not deliver an Appeal Notice
(along with proof of payment of the applicable bond) to the other party within
the deadline prescribed in this Paragraph 5.1, such party shall lose its right
to appeal the Arbitration Award. If no party delivers an Appeal Notice (along
with proof of payment of the applicable bond) to the other party within the
deadline described in this Paragraph 5.1, the Arbitration Award shall be final.
The parties acknowledge and agree that any Appeal shall be deemed part of the
parties’ agreement to arbitrate for purposes of these Arbitration Provisions and
the Arbitration Act. 

            5.2       
Selection and Payment of
Appeal Panel. In the event an Appellant delivers
an Appeal Notice to the Appellee (together with proof of payment of the
applicable bond) in compliance with the provisions of Paragraph 5.1 above, the
Appeal will be heard by a three (3) person arbitration panel (the “
Appeal Panel”). 

                          
(a)        Within ten (10) calendar days
after the Appeal Date, the Appellee shall select and submit to the Appellant the
names of five (5) arbitrators that are designated as “neutrals” or qualified
arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such five (5)
designated persons hereunder are referred to herein as the “Proposed
Appeal Arbitrators”). For the avoidance of doubt, each
Proposed Appeal Arbitrator must be qualified as a “neutral” with Utah ADR
Services, and shall not be the arbitrator who rendered the Arbitration Award
being appealed (the “Original Arbitrator”). Within five (5)
calendar days after the Appellee has submitted to the Appellant the names of the
Proposed Appeal Arbitrators, the Appellant must select, by written notice to the
Appellee, three (3) of the Proposed Appeal Arbitrators to act as the members of
the Appeal Panel. If the Appellant fails to select three (3) of the Proposed
Appeal Arbitrators in writing within such 5–day period, then the Appellee may
select such three (3) arbitrators from the Proposed Appeal Arbitrators by
providing written notice of such selection to the Appellant. 

                          
(b)        If the Appellee fails to submit to
the Appellant the names of the Proposed Appeal Arbitrators within ten (10)
calendar days after the Appeal Date pursuant to subparagraph (a) above, then the
Appellant may at any time prior to the Appellee so designating the Proposed
Appeal Arbitrators, identify the names of five (5) arbitrators that are
designated as “neutrals” or qualified arbitrators by Utah ADR Service (none of
whom may be the Original Arbitrator) by written notice to the Appellee. The
Appellee may then, within five (5) calendar days after the Appellant has
submitted notice of its selected arbitrators to the Appellee, select, by written notice to the Appellant, three (3) of such selected
arbitrators to serve on the Appeal Panel. If the Appellee fails to select in
writing within such 5–day period three (3) of the arbitrators selected by the
Appellant to serve as the members of the Appeal Panel, then the Appellant may
select the three (3) members of the Appeal Panel from the Appellant’s list of
five (5) arbitrators by providing written notice of such selection to the
Appellee. 

Arbitration Provisions, Page 5 

                          
(c)        If a selected Proposed Appeal
Arbitrator declines or is otherwise unable to serve, then the party that
selected such Proposed Appeal Arbitrator may select one (1) of the other five
(5) designated Proposed Appeal Arbitrators within three (3) calendar days of the
date a chosen Proposed Appeal Arbitrator declines or notifies the parties he or
she is unable to serve as an arbitrator. If at least three (3) of the five (5)
designated Proposed Appeal Arbitrators decline or are otherwise unable to serve,
then the Proposed Appeal Arbitrator selection process shall begin again in
accordance with this Paragraph 5.2; provided, however, that
any Proposed Appeal Arbitrators who have already agreed to serve shall remain on
the Appeal Panel. 

                          
(d)        The date that all three (3)
Proposed Appeal Arbitrators selected pursuant to this Paragraph 5.2 agree in
writing (including via email) delivered to both the Appellant and the Appellee
to serve as members of the Appeal Panel hereunder is referred to herein as the
“Appeal Commencement Date”. No later than
five (5) calendar days after the Appeal Commencement Date, the Appellee shall
designate in writing (including via email) to the Appellant and the Appeal Panel
the name of one (1) of the three (3) members of the Appeal Panel to serve as the
lead arbitrator in the Appeal proceedings. Each member of the Appeal Panel shall
be deemed an arbitrator for purposes of these Arbitration Provisions and the
Arbitration Act, provided that, in conducting the Appeal, the Appeal Panel may
only act or make determinations upon the approval or vote of no less than the
majority vote of its members, as announced or communicated by the lead
arbitrator on the Appeal Panel. If an arbitrator on the Appeal Panel ceases or
is unable to act during the Appeal proceedings, a replacement arbitrator shall
be chosen in accordance with Paragraph 5.2 above to continue the Appeal as a
member of the Appeal Panel. If Utah ADR Services ceases to exist or to provide a
list of neutrals, then the arbitrators for the Appeal Panel shall be selected
under the then prevailing rules of the American Arbitration Association. 

                          
(d)        Subject to Paragraph 5.7 below,
the cost of the Appeal Panel must be paid entirely by the Appellant. 

            5.3       
Appeal Procedure. The Appeal will be deemed an
appeal of the entire Arbitration Award. In conducting the Appeal, the Appeal
Panel shall conduct a de novo review of all Claims described or otherwise set
forth in the Arbitration Notice. Subject to the foregoing and all other
provisions of this Paragraph 5, the Appeal Panel shall conduct the Appeal in a
manner the Appeal Panel considers appropriate for a fair and expeditious
disposition of the Appeal, may hold one or more hearings and permit oral
argument, and may review all previous evidence and discovery, together with all
briefs, pleadings and other documents filed with the Original Arbitrator (as
well as any documents filed with the Appeal Panel pursuant to Paragraph 5.4(a)
below). Notwithstanding the foregoing, in connection with the Appeal, the Appeal
Panel shall not permit the parties to conduct any additional discovery or raise
any new Claims to be arbitrated, shall not permit new witnesses or affidavits,
and shall not base any of its findings or determinations on the Original
Arbitrator’s findings or the Arbitration Award. 

            5.4       
Timing.

                          
(a)        Within seven (7) calendar days of
the Appeal Commencement Date, the Appellant (i) shall deliver or cause to be
delivered to the Appeal Panel copies of the Appeal Notice, all discovery
conducted in connection with the Arbitration, and all briefs, pleadings and
other documents filed with the Original Arbitrator (which material Appellee
shall have the right to review and supplement if necessary), and (ii) may, but
is not required to, deliver to the Appeal Panel and to the Appellee a Memorandum
in Support of the Appellant’s arguments concerning or position with respect to
all Claims, counterclaims, issues, or accountings presented or pleaded in the
Arbitration. Within seven (7) calendar days of the Appellant’s delivery of the
Memorandum in Support, as applicable, the Appellee shall deliver to the Appeal
Panel and to the Appellant a Memorandum in Opposition to the Memorandum in
Support. Within seven (7) calendar days of the Appellee’s delivery of the
Memorandum in Opposition, as applicable, the Appellant shall deliver to the
Appeal Panel and to the Appellee a Reply Memorandum to the Memorandum in
Opposition. If the Appellant shall fail to substantially comply with the
requirements of clause (i) of this subparagraph (a), the Appellant shall lose
its right to appeal the Arbitration Award, and the Arbitration Award shall be
final. If the Appellee shall fail to deliver the Memorandum in Opposition as
required above, or if the Appellant shall fail to deliver the Reply Memorandum as required above, then the Appellee or the
Appellant, as the case may be, shall lose its right to so deliver the same, and
the Appeal shall proceed regardless. 

Arbitration Provisions, Page 6 

                          (b)       
Subject to subparagraph (a) above, the parties hereby agree that the Appeal must
be heard by the Appeal Panel within thirty (30) calendar days of the Appeal
Commencement Date, and that the Appeal Panel must render its decision within
thirty (30) calendar days after the Appeal is heard (and in no event later than
sixty (60) calendar days after the Appeal Commencement Date). 

            5.5       
Appeal Panel Award. The Appeal Panel
shall issue its decision (the “Appeal Panel
Award”) through the lead arbitrator on the Appeal Panel.
Notwithstanding any other provision contained herein, the Appeal Panel Award
shall (a) supersede in its entirety and make of no further force or effect the
Arbitration Award (provided that any protective orders issued by the Original
Arbitrator shall remain in full force and effect), (b) be final and binding upon
the parties, with no further rights of appeal, (c) be the sole and exclusive
remedy between the parties regarding any Claims, counterclaims, issues, or
accountings presented or pleaded in the Arbitration, and (d) be promptly payable
in United States dollars free of any tax, deduction or offset (with respect to
monetary awards). Any costs or fees, including without limitation attorneys’
fees, incurred in connection with or incident to enforcing the Appeal Panel
Award shall, to the maximum extent permitted by law, be charged against the
party resisting such enforcement. The Appeal Panel Award shall include Default
Interest (with respect to monetary awards) at the rate specified in applicable
Note for Default Interest both before and after the Arbitration Award. Judgment
upon the Appeal Panel Award will be entered and enforced by a state or federal
court sitting in Salt Lake County, Utah. 

            5.6       
Relief. The Appeal Panel shall have the right to award or include in
the Appeal Panel Award any relief which the Appeal Panel deems proper under the
circumstances, including, without limitation, specific performance and
injunctive relief, provided that the Appeal Panel may not award exemplary or
punitive damages. 

            5.7       
Fees and Costs. As part of the Appeal
Panel Award, the Appeal Panel is hereby directed to require the losing party
(the party being awarded the least amount of money by the arbitrator, which, for
the avoidance of doubt, shall be determined without regard to any statutory
fines, penalties, fees, or other charges awarded to any party) to (a) pay the
full amount of any unpaid costs and fees of the Arbitration and the Appeal
Panel, and (b) reimburse the prevailing party (the party being awarded the most
amount of money by the Appeal Panel, which, for the avoidance of doubt, shall be
determined without regard to any statutory fines, penalties, fees, or other
charges awarded to any part) the reasonable attorneys’ fees, arbitrator and
Appeal Panel costs and fees, deposition costs, other discovery costs, and other
expenses, costs or fees paid or otherwise incurred by the prevailing party in
connection with the Arbitration (including without limitation in connection with
the Appeal).

6. Miscellaneous. 

            6.1       
Severability. If any part of these Arbitration Provisions is found
to violate or be illegal under applicable law, then such provision shall be
modified to the minimum extent necessary to make such provision enforceable
under applicable law, and the remainder of the Arbitration Provisions shall
remain unaffected and in full force and effect. 

            6.2       
Governing Law. These Arbitration Provisions shall be
governed by the laws of the State of Utah without regard to the conflict of laws
principles therein. 

            6.3       
Interpretation. The headings of these Arbitration Provisions are for
convenience of reference only and shall not form part of, or affect the
interpretation of, these Arbitration Provisions. 

            6.4       
Waiver. No waiver of any provision of these Arbitration Provisions shall
be effective unless it is in the form of a writing signed by the party granting
the waiver. 

            6.5       
Time is of the
Essence. Time is expressly made of the essence with respect to each
and every provision of these Arbitration Provisions. 

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Arbitration Provisions, Page 7

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