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






EXHIBIT 4.2 

THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SUCH ACT
AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SILVER DRAGON RESOURCES INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.

SILVER DRAGON RESOURCES INC. 

WARRANT TO PURCHASE SHARES OF COMMON STOCK 

1. Issuance. In consideration of good and valuable
consideration as set forth in the Purchase Agreement (defined below), including
without limitation the Purchase Price (as defined in the Purchase Agreement),
the receipt and sufficiency of which is hereby acknowledged by Silver Dragon
Resources Inc., a Delaware corporation (the “Company”), Tonaquint,
Inc., a Utah corporation, its successors or registered assigns (the
“Holder”), is hereby granted the right to purchase at any time on
or after the Issue Date (as defined below) until the date which is the last
calendar day of the month in which the third anniversary of the Issue Date
occurs (the “Expiration Date”), a number of fully paid and
nonassessable shares (the “Warrant Shares”) of the Company’s
common stock, par value $0.0001 per share (the “Common Stock”),
equal to $500,000.00 divided by 70% of the average of the three (3) lowest VWAPs
(as defined below) of the Common Stock reported by Bloomberg (defined below)
during the ten (10) Trading Days (defined below) immediately preceding the Issue
Date, as such number may be modified according to the terms hereof. This Warrant
to purchase Shares of Common Stock (this “Warrant”) is being
issued pursuant to the terms of that certain Note and Warrant Purchase Agreement
of even date herewith (the “Purchase Agreement”), to which the
Company and the Holder (or the Holder’s predecessor in interest) are parties.


Unless otherwise indicated herein, capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Purchase Agreement. 

This Warrant was originally issued to the Holder or the
Holder’s predecessor in interest on February 15, 2011 (the “Issue
Date”). 

2. Exercise of Warrant. 

2.1 General. 

(a) This Warrant is exercisable in whole or in part at any time
and from time to time commencing on the Issue Date and ending on the Expiration
Date. Such exercise shall be effectuated by submitting to the Company (either by
delivery to the Company or by email or facsimile transmission) a completed and
duly executed Notice of
Exercise (substantially in the form attached to this Warrant as Exhibit A). The date such Notice of Exercise is either faxed, emailed or delivered to the Company shall be the “Exercise Date,” provided that, if
such exercise represents the full exercise of the outstanding balance of the Warrant, the Holder of this Warrant shall tender this Warrant to the Company within five (5) Trading Days thereafter. The Notice of Exercise shall be executed by the Holder
of this Warrant and shall indicate (i) the number of shares then being purchased pursuant to such exercise and (ii) if applicable (as provided below), whether the exercise is a cashless exercise. 









For purposes of this Warrant, the term “Trading Day” means any day during which the principal market on which the Common Stock is traded (the “Principal Market”) shall be open for business. 


(b) Notwithstanding any other provision contained herein or in any other Transaction Document (as defined in the Purchase Agreement) to the contrary, at any time after the date that is six months from the Issue Date and prior to the Expiration Date,
the Holder may elect a “cashless” exercise of this Warrant for any Warrant Shares whereby the Holder shall be entitled to receive a number of shares of Common Stock equal to (x) the excess of the Current Market Value (as defined below)
over the aggregate Exercise Price of the portion of the Warrant then being exercised, divided by (y) the Market Price of the Common Stock (as defined below).


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


“Current Market Value” shall mean an amount equal to the Market Price of the Common Stock, multiplied by the number of shares of Common Stock specified in the applicable Notice of Exercise. 


“Closing Price” means the 4:00 P.M. last sale price of the Common Stock on the Principal Market on the relevant Trading Day(s), as reported by Bloomberg LP (or if that service is not then reporting the relevant information
regarding the Common Stock, a comparable reporting service of national reputation selected by the Holder and reasonably acceptable to the Company) (“Bloomberg”) for the relevant date. 


“Exercise Price” shall mean $0.50 per share of Common Stock. 


“Market Price of the Common Stock” shall mean the average of the Closing Prices of the Common Stock for the thirty (30) Trading Days prior to the date of determination of the Market Price of the Common Stock. 


(c) If the Notice of Exercise form elects a “cash” exercise (or if the cashless exercise referred to in the immediately preceding subsection (b) is not available in accordance with the terms hereof), the Exercise Price per share of
Common Stock for the shares then being exercised shall be payable, at the election of the Holder, in cash or by
certified or official bank check or by wire transfer in accordance with instructions provided by the Company at the request of the Holder. 


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(d) Upon the appropriate payment to the Company, if any, of the Exercise Price for the shares of Common Stock purchased, together with the surrender of this Warrant (if required), the Company shall promptly deliver the applicable Warrant Shares
electronically via Deposit/Withdrawal at Custodian (“DWAC”) to the account designated by the Holder on the Notice of Exercise. If for any reason the Company is not able to deliver the Warrant Shares via DWAC (including if
the Company is not able to issue the Warrant Shares without restrictive legends), notwithstanding its best efforts to do so, the Company shall deliver certificates representing the Warrant Shares to the Holder as provided in the Notice of Exercise
(the certificates delivered in such manner, the “Warrant Share Certificates”) within three (3) Trading Days (such third Trading Day, a “Delivery Date”) of (i) with respect to a “cashless
exercise,” the Exercise Date as the case may be, or, (ii) with respect to a “cash” exercise, the later of the Exercise Date or the date the payment of the Exercise Price for the relevant Warrant Shares is received by the Company.



(e) The Company understands that a delay in the electronic delivery of Warrant Shares or the delivery of the Warrant Share Certificates, as the case may be, beyond the Delivery Date (assuming electronic delivery is not available) could result in
economic loss to the Holder. As compensation to the Holder for such loss, the Company agrees to pay late payment fees (as liquidated damages and not as a penalty) to the Holder for late delivery of Warrant Shares or Warrant Share Certificates, as
applicable, in the amount of $100.00 per Trading Day after the Delivery Date for each $10,000.00 of the total Exercise Price of the Warrant Shares subject to the delivery default. The Company shall pay any payments incurred under this
subsection in immediately available funds upon demand. Furthermore, in addition to any other remedies which may be available to the Holder, in the event that the Company fails for any reason to effect delivery of the Warrant Shares or the Warrant
Share Certificates, as applicable, by the Delivery Date, the Holder may revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to the Company, whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to the exercise of the relevant portion of this Warrant, except that the liquidated damages described above shall be payable through the date notice of revocation or rescission is given to the Company. 


(f) For purposes of the adjustments described in Section 5, the Holder shall be deemed to be the holder of the Warrant Shares issuable to it in accordance with the provisions of this Section 2.1 on the Exercise Date. 


2.2 Ownership Limitation. Notwithstanding the provisions of this Warrant, if at any time after the date hereof, the Holder shall or would receive shares of Common Stock upon exercise of this Warrant, so that the Holder would, together with
other shares of Common Stock held by it or its Affiliates (as defined in the Purchase Agreement), be the owner or beneficial owner (as described in Section 13(d) of the Securities Exchange Act of 1934 or its related rules) by virtue of such action
or receipt of additional shares of Common Stock a number of shares exceeding 9.99% of the number of shares of the
Company’s Common Stock outstanding on such date (the “9.99% Cap”), the Company shall not be obligated and shall not issue to the Holder shares of its Common Stock which would exceed the 9.99% Cap, but only until such
time as the 9.99% Cap would no longer be exceeded by any such receipt of shares of Common Stock by the Holder. The foregoing limitations are enforceable, unconditional and non-waivable. 


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 3. Mutilation or Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory
indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver to the Holder a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall
thereupon become void. 


4. Rights of the Holder. The Holder shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in the Company, either at law or in equity, and the rights of the Holder are limited to those expressed in this Warrant
and are not enforceable against the Company except to the extent set forth herein. 


5. Protection Against Dilution and Other Adjustments. 


5.1 Capital Adjustments. If the Company shall at any time prior to the expiration of this Warrant and before the Holder has exercised this Warrant in full, subdivide the Common Stock, by split-up or stock split, or otherwise, or combine its
Common Stock, or issue additional shares of its Common Stock as a dividend, the number of remaining Warrant Shares issuable on the exercise of this Warrant shall forthwith be automatically increased proportionately in the case of a subdivision,
split or stock dividend, or proportionately decreased in the case of a combination.  Appropriate adjustments shall also be made to the purchase price payable per Warrant Share, but the aggregate purchase price payable for the total number of Warrant
Shares purchasable under this Warrant (as adjusted) shall remain the same.  Any adjustment under this Section 5.1 shall become effective automatically at the close of business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend. 


5.2 Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided
for in Section 5.1 above), then the Company shall make appropriate provision so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of shares of Common Stock as were purchasable by the
Holder immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable
with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and
appropriate adjustments shall be made to the purchase price per Warrant Share payable hereunder, provided the aggregate purchase price shall remain the same. 


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5.3 Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of this Warrant, or in the Exercise Price, pursuant to the terms hereof, the Company shall promptly notify the
Holder of such event and of the number of Warrant Shares or other securities or property thereafter purchasable upon exercise of this Warrant.


6. Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock issuable on the exercise of this Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other
appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (a) the number of shares of Common Stock outstanding or deemed to be outstanding, and (b) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in
effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder of the Warrant and any Warrant Agent of the Company
(appointed pursuant to Section 8 hereof). 


7. Transfer to Comply with the Securities Act. This Warrant, and the Warrant Shares, have not yet been registered under the 1933 Act. Neither this Warrant nor any of the Warrant Shares or any other security issued or issuable upon exercise of
this Warrant may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to the Company that registration is not
required under the Act. Until such time as registration has occurred under the 1933 Act or the Company has received an opinion of counsel reasonably satisfactory to it, each certificate for this Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend, in form and substance satisfactory to counsel for the Company, setting forth the restrictions on transfer contained in this Section. Any such transfer shall be accompanied by a
transferor assignment substantially in the form of Exhibit B (the “Transferor Assignment”), executed by the transferor and the transferee and submitted to the Company. Upon receipt of the duly executed
Transferor Assignment, the Company shall register the transferee thereon as the new Holder on the books and records of the Company and such transferee shall be deemed a “registered holder” or “registered assign” for all
purposes hereunder, and shall have all the rights of the Holder hereof. 


8. Warrant Agent. The Company may, by written notice to the Holder, appoint an agent (a “Warrant Agent”) for the purpose of issuing Common Stock on the exercise of this Warrant pursuant hereto, exchanging this
Warrant pursuant hereto, and replacing this Warrant pursuant hereto, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such office by such Warrant Agent. 


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9. Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. 


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


11. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement and all other Transaction Documents
(as defined in the Purchase Agreement), taken together, contain the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings other than
expressly contained herein and therein. 


12. Governing Law. This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of Utah, without reference to the choice of law provisions thereof. The Company and, by accepting this Warrant, the Holder,
each irrevocably submits to the exclusive personal jurisdiction of the courts of the State of Utah located in Salt Lake County and any United States District Court for the District of Utah for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Warrant and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Warrant. The Company and, by accepting this Warrant, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such
court. The Company and, by accepting this Warrant, the Holder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.


13. Remedies. The Company stipulates that the remedies at law of the Holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and
will not be adequate and that, without limiting any other remedies available to the Holder, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or
by an injunction against a violation of any of the terms hereof or otherwise. 


14. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same instrument. Signature delivered via facsimile or email shall be considered original signatures for purposes hereof. 


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15. Descriptive Headings.  Descriptive headings of the sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 


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IN WITNESS WHEREOF, the Company has caused this Warrant
to be duly executed by an officer thereunto duly authorized. 

Dated: February 15, 2011 

	 	 	SILVER DRAGON RESOURCES INC. 
	 	 	 
	 	 	By:
      /s/ Marc Hazout 
	 	 	 
	 	 	Marc
      Hazout
	 	 	(Print Name) 
	 	 	 
	 	 	Pres
      & CEO 
	 	 	(Title) 


[Signature page to Warrant]




EXHIBIT A 

NOTICE OF EXERCISE OF WARRANT 

	TO: 	SILVER DRAGON RESOURCES INC. 
	  	ATTN: 
	  	VIA FAX TO: ( ) 


The undersigned hereby irrevocably elects to exercise the
right, represented by the Warrant to Purchase Shares of Common Stock dated as of
February 15, 2011 (the “Warrant”), to purchase shares of
the Common Stock, $0.0001 par value (“Common Stock”), of SILVER
DRAGON RESOURCES INC., and tenders herewith payment in accordance with Section 2
of the Warrant, as follows: 

_______         
CASH: $__________________________= (Exercise Price x number of shares of Common
Stock issuable upon exercise (“Exercise Shares”)) 

	_______   	Payment is being made by: 
	 	_______                                enclosed
      check 
	 	_______                                wire
      transfer 
	 	_______                                other
    



	_______    	CASHLESS EXERCISE: 	  
	 	Net number of Warrant Shares to be issued to
      Holder: 	* 



	_______    	* based on: 	Current Market Value - (Exercise Price x
      Exercise Shares) 
	 	  	                        Market
      Price of Common Stock 



	 	Where: 	  	  
	 	Market Price of Common Stock [“MP”] 	= 	$____________ 
	 	Current Market Value [MP x Exercise Shares] 	= 	$____________ 
	 	Exercise Price 	= 	$____________ 


Capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Warrant. 

It is the intention of the Holder to comply with the provisions
of Section 2.2 of the Warrant regarding certain limits on the Holder’s right to
exercise thereunder. The Holder believes this exercise complies with the
provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the
exercise effected hereby, the Holder would have more shares than permitted under
Section 2.2, this notice should be amended and revised, ab initio, to
refer to the exercise which would result in the issuance of the maximum number
of shares permitted under such provision. Any exercise above such amount is
hereby deemed void and revoked. 




As contemplated by the Warrant, this Notice of Exercise is
being sent by facsimile to the fax number and officer indicated above. 

If this Notice of Exercise represents the full exercise of the
outstanding balance of the Warrant, the Holder either (1) has previously
surrendered the Warrant to the Company or (2) will surrender (or cause to be
surrendered) the Warrant to the Company at the address indicated above by
express courier within five (5) Trading Days after delivery or email or
facsimile transmission of this Notice of Exercise. 

The certificates representing the Warrant Shares should be
transmitted by the Company to the Holder 

_______via express courier, or 

_______by electronic transfer 

after receipt of this Notice of Exercise (by facsimile
transmission or otherwise) to: 


_____________________________________
_____________________________________
_____________________________________


Dated: _____________________

___________________________
[Name of Holder] 

By:________________________





EXHIBIT B 

FORM OF TRANSFEROR ENDORSEMENT 
(To be signed only on
transfer of Warrant) 


For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading “Transferees” the
right represented by the within Warrant to Purchase Shares of Common Stock to
purchase the percentage and number of shares of Common Stock of SILVER DRAGON
RESOURCES INC. to which the within Warrant to Purchase Shares of Common Stock
relates specified under the headings “Percentage Transferred” and “Number
Transferred,” respectively, opposite the name(s) of such person(s) and appoints
each such person attorney to transfer the undersigned’s respective right on the
books of SILVER DRAGON RESOURCES INC. with full power of substitution in the
premises. 

	Transferees 	Percentage Transferred 	Number Transferred 


Dated:___________, ______


______________________________

[Transferor Name must conform to the name of 
Holder as
specified on face of Warrant] 


By:
___________________________
Name: _________________________



Signed in the presence of: 

_________________________ 
(Name) 


ACCEPTED AND AGREED: 

_________________________ 
[TRANSFEREE]


By: ______________________
Name:
_____________________