In the rule “Dragon”, replace:-

The Dragon’s Behaviour is to select a Knight at random from those which are not Wielding a Weapon or Shield (if any such Knights exist), and to remove half of that Knight’s Gold (rounding down). The removed Gold is then added to the Dragon’s Hoard by the Baron.

with:-

The Dragon’s Behaviour is to randomly select a Knight from those who are Vulnerable, and to remove half of that Knight’s Gold (rounding down). The removed Gold is added to the Dragon’s Hoard.

A Knight is Vulnerable if no other Knight has a lower Defence score than them. A Knight’s Defence score defaults to zero, and is increased by 1 if they are Wielding a Weapon, and by a further 1 if they are also Wielding a Shield.