THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

SEVERANCE AGREEMENT AND RELEASE

This SEVERANCE AGREEMENT AND RELEASE (this “Agreement”) is made between (i)
JEFFREY W. PRITCHARD (“Employee”) and (ii) CAPITAL GOLD CORPORATION, a Delaware
corporation (the “Company”).  Employee and the Company are referred to
collectively as the “Parties” and individually as a “Party.”

RECITALS

WHEREAS, as further discussed below, Employee’s employment with the Company will
end effective as of September 15, 2009;

WHEREAS, the Parties wish to resolve fully and finally any potential disputes
regarding Employee’s employment with the Company and any other potential
disputes between the Parties; and

WHEREAS, in order to accomplish this end, the Parties are willing to enter into
this Agreement.

NOW THEREFORE, in consideration of the mutual promises and undertakings
contained herein, the sufficiency of which is acknowledged by the Parties, the
Parties to this Agreement agree as follows:

TERMS

1.           Separation, Effective Date and Resignation as a Company Director.

(a)           Employee’s employment with the Company ends effective as of
September 15, 2009.  This Agreement shall become effective (the “Effective
Date”) on the eighth day after Employee’s execution of this Agreement, provided
that employee has not revoked Employee’s acceptance pursuant to Section 6(g)
below.

(b)           Employee, in consideration of the Severance Payments (as defined
in Section 2(a) below), resigns as a director of the Company, effective on the
Effective Date.

(c)           Employee, in consideration of the Severance Payments (as defined
in Section 2(a) below), waives the 30 days notice requirement of Section 4(e) of
the Employment Agreement and accepts a termination date effective as of
September 15, 2009.

 
 

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

2.           Severance Payments and other matters.

(a)           After the expiration of the Effective Date, and on the express
condition that Employee has not revoked this Agreement, the Company will pay
Employee severance payments in an amount and in the manner set forth on Schedule
A attached hereto and, by this reference, incorporated herein, less applicable
withholdings and deductions (“Severance Payments”).  It is understood that the
Severance Payments supersede and satisfy any such Severance Payment benefits due
Employee pursuant to  Section 4 of Employee’s Employment Agreement effective
January 1, 2009 with the Company (the “Employment Agreement”).  The Severance
Payments will be mailed to Employee or direct deposited to an account designated
by Employee pursuant to Schedule A.

(b)           Reporting of and withholding on any Severance Payment under this
Section 2 for tax purposes shall be at the discretion of the Company in
conformance with applicable tax laws.  If a claim is made against the Company
for any additional tax or withholding in connection with or arising out of the
Severance Payments pursuant to Section 2(a), Employee shall pay any such claim
within thirty (30) days of being notified by the Company and agrees to indemnify
the Company and hold it harmless against such claims, including but not limited
to any taxes, attorneys’ fees, penalties or interest, which are or become due
from the Company.

(c)           Employee agrees that Section 4(i)(iii) of the Employment Agreement
is hereby terminated and that Employee shall have no rights thereunder and shall
not seek indemnification from the Company should there be an issue or any tax
assessed under Section 409A of the Internal Revenue Code of 1986, as amended
(“Section 409A”), provided that the Company agrees to report any amount paid or
payable to Employee as in compliance with, or not subject to, as applicable,
Code Section 409A, in the absence of future guidance from the Internal Revenue
Service or court decision to the contrary.

(d)           Employer hereby agrees that Employee shall be entitled to “Change
in Control Benefits” as defined in Section 3 of the January 1, 2009 Agreement
Regarding Change In Control between Employee and the Company (the “CC
Agreement”) in the event that the Company enters into a transaction with [* * *]
on or before December 31, 2009 and such transaction would be deemed a “Change in
Control” as defined in the CC Agreement.  This subsection does not otherwise
amend, change or revive any rights of Employee under the CC Agreement.

3.           General Release.

(a)           Employee, for himself and for his affiliates, successors, heirs,
subrogees, assigns, principals, agents, partners, employees, associates,
attorneys, and representatives, voluntarily, knowingly and intentionally
releases and discharges the Company and its predecessors, successors, parents,
subsidiaries, affiliates, and assigns and each of their respective officers,
directors, principals, shareholders, agents, attorneys, board members, and
employees from any and all claims, actions, liabilities, demands, rights,
damages, costs, expenses, and attorneys’ fees (including but not limited to any
claim of entitlement for attorneys’ fees under any contract, statute, or rule of
law allowing a prevailing party or plaintiff to recover attorneys’ fees), of
every kind and description from the beginning of time through the Effective Date
(the “Released Claims”).

 
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

(b)           The Released Claims include but are not be limited to those which
arise out of, relate to, or are based upon: (i) Employee’s employment with the
Company or the termination thereof; (ii) statements, acts, or omissions by the
Parties whether in their individual or representative capacities; (iii) express
or implied agreements between the Parties (except as provided herein) and claims
under any severance plan; (iv) any stock or stock option grant, agreement, or
plan; (v) all federal, state, and municipal statutes, ordinances, and
regulations, including, but not limited to, claims of discrimination based on
race, national origin, sex, disability, whistleblower status, public policy, or
any other characteristic of Employee under the Age Discrimination in Employment
Act, the Older Workers Benefit Protection Act, the Americans with Disabilities
Act, the Fair Labor Standards Act, the Equal Pay Act, Title VII of the Civil
Rights Act of 1964 (as amended), the Employee Retirement Income Security Act of
1974, the Rehabilitation Act of 1973, the Worker Adjustment and Retraining
Notification Act, or any other federal, state, or municipal law prohibiting
discrimination or termination for any reason; (vi) state and federal common law;
and (vii) any claim which was or could have been raised by Employee, including
any claim that this Agreement was fraudulently induced.

4.           Unknown Facts.  This Agreement includes claims of every nature and
kind, known or unknown, suspected or unsuspected.  Employee hereby acknowledges
that he may hereafter discover facts different from, or in addition to, those
which he now knows or believes to be true with respect to this Agreement, and he
agrees that this Agreement and the release contained herein shall be and remain
effective in all respects, notwithstanding such different or additional facts or
the discovery thereof.

5.           No Admission of Liability.  The Parties agree that nothing
contained herein, and no action taken by any Party hereto with regard to this
Agreement, shall be construed as an admission by any Party of liability or of
any fact that might give rise to liability for any purpose whatsoever.

6.           Warranties.  Employee warrants and represents as follows:

a.           He has read this Agreement, and he agrees to the conditions and
obligations set forth in it.

b.           He voluntarily executes this Agreement after having been advised to
consult with legal counsel and after having had opportunity to consult with
legal counsel and without being pressured or influenced by any statement or
representation or omission of any person acting on behalf of the Company
including, without limitation, the officers, directors, board members, committee
members, employees, agents, and attorneys for the Company.

c.           He has no knowledge of the existence of any lawsuit, charge, or
proceeding against the Company or any of its officers, directors, board members,
committee members, employees, or agents arising out of or otherwise connected
with any of the matters herein released.

 
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

d.           Prior to Employee’s execution of this Agreement, he has not used or
disclosed any information in a manner that would be a violation of Sections 7 or
8 set forth below if such use or disclosure were to be made after the execution
of this Agreement.

e.           He has full and complete legal capacity to enter into this
Agreement.

f.           He has had at least twenty-one (21) days in which to consider the
terms of this Agreement.  In the event that Employee executes this Agreement in
less time, it is with the full understanding that he had the full twenty-one
(21) days if he so desired and that he was not pressured by the Company or any
of its representatives or agents to take less time to consider the
Agreement.  In such event, Employee expressly intends such execution to be a
waiver of any right he had to review the Agreement for a full twenty-one (21)
days.

g.           He understands that this Agreement waives any claim he may have
under the Age Discrimination in Employment Act.  Employee may revoke this
Agreement for up to seven days following its execution, and this Agreement shall
not become enforceable and effective until seven days after such execution.  If
Employee chooses to revoke this Agreement, he must provide written notice to the
President and Chief Executive Officer of the Company by hand delivery and by
facsimile within seven calendar days of Employee’s execution of this
Agreement.  If Employee does not revoke within the seven-day period, the right
to revoke is lost.

h.           He admits, acknowledges, and agrees that he is not otherwise
entitled to the Severance Payments set forth in Section 2, and that such
Severance Payments are good and sufficient consideration for this Agreement.  He
admits, acknowledges, and agrees that he has been fully and finally paid or
provided all wages, compensation, vacation, expenses (including, but not limited
to, relocation and travel expenses), bonuses, stock, stock options, or other
benefits from the Company which are or could be due to Employee from the
Company.

i.           He has not taken any action or made any statement adverse to the
Company’s interests prior to signing this Agreement.

7.           Confidential Information.  Except as herein provided, all
discussions regarding this Agreement, including, but not limited to, the amount
of consideration, offers, counteroffers or other terms or conditions of the
negotiations, shall be kept confidential by Employee from all persons and
entities other than the Parties to this Agreement.  Employee may disclose the
amount received in consideration of the Agreement only if necessary (i) for the
limited purpose of making disclosures required by law to agents of the local,
state, or federal governments; (ii) for the purpose of enforcing any term of
this Agreement; or (iii) in response to compulsory process, and only then after
giving the Company ten days advance notice of the compulsory process and
affording the Company the opportunity to obtain any necessary or appropriate
protective orders.  Otherwise, in response to inquiries about this matter,
Employee shall state, “My employment with the Company has ended,” and nothing
more.  Employee hereby expressly acknowledges that any breach of this Section 7
shall result in a claim for injunctive relief, damages and/or criminal sanctions
and penalties against Employee by the Company, and possibly others.

 
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

8.           Non-Disparagement.  Employee agrees not to make to any person any
statement that disparages the Company or reflects negatively on the Company,
including, but not limited to, statements regarding the Company’s financial
condition, employment practices, or its officers, directors, board members,
employees, affiliates, attorneys, customers, or vendors.

9.           Return of Company Property and Information.  Employee represents
and warrants that, prior to his execution of this Agreement, he will return to
the Company any and all property, documents, and files, including any documents
(in any recorded media, such as papers, computer disks, copies, photographs,
maps, transparencies, and microfiche) that relate in any way to the Company or
the Company’s business whether or not developed, produced, or conceived, in
whole or in part, by Employee during the term of his employment with the
Company.  Employee agrees that, to the extent that he possesses any files, data,
or information relating in any way to the Company or the Company’s business on
any personal computer, he will delete those files, data, or information (and
will retain no copies in any form).  Employee also will return any Company
tools, equipment, calling cards, credit cards, access cards or keys, any keys to
any filing cabinets, vehicles, vehicle keys, and all other Company property in
any form prior to the date he executes this Agreement.  Employee hereby
expressly acknowledges that the foregoing steps are necessary to protect the
Company’s proprietary interests in its trade secrets, confidential information,
and copyrights, and that Employee is not entitled to use, disclose, or otherwise
benefit from the Company’s proprietary interests.  Employee understands that any
breach of this Section 9 will also constitute a misappropriation of the
Company’s proprietary rights, and may constitute a theft of the Company’s trade
secrets under applicable local, state, and federal statutes, and will result in
a claim for injunctive relief, damages, and/or criminal sanctions and penalties
against Employee by the Company, and possibly others.

10.           Severability.  If any provision of this Agreement is held illegal,
invalid, or unenforceable, such holding shall not affect any other provisions
hereof.  In the event any provision is held illegal, invalid, or unenforceable,
such provision shall be limited so as to effect the intent of the Parties to the
fullest extent permitted by applicable law.  Any claim by Employee against the
Company shall not constitute a defense to enforcement by the Company.

11.           Assignment.  The Company may assign its rights under this
Agreement.  Employee cannot assign his rights under this Agreement without the
written consent of the Company.

12.           Enforcement.  The releases contained herein do not release any
claims for enforcement of the terms, conditions, or warranties contained in this
Agreement.  The Parties shall be free to pursue any remedies available to them
to enforce this Agreement.

 
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

13.           Survival of Employment Agreement Terms and Agreement Regarding
Change In Control.  Except as set forth in Sections 1 and 2 above, this
Agreement in no way affects or alters the surviving provisions set forth in
Section 18 of the Employment Agreement, or the CC Agreement.  Those provisions
and the CC Agreement are hereby incorporated by reference and serve as part of
the consideration for this Agreement.  Employee agrees to continue to abide by
the surviving provisions set forth in Section 18 of the Employment Agreement to
the extent that those provisions impose any obligation upon Employee.

14.           Entire Agreement.  This Agreement, the surviving provisions set
forth in Section 18 of the Employment Agreement and the CC Agreement constitute
the entire agreement between the Parties with respect to the subject matter
contained herein.  This Agreement supersedes any and all prior oral or written
promises or agreements between the Parties, except as otherwise provided
herein.  Employee acknowledges that he has not relied on any promise,
representation, or statement other than those set forth in this Agreement.  This
Agreement cannot be modified except in writing signed by all Parties.

15.           Venue and Applicable Law.  This Agreement shall be interpreted and
construed in accordance with the laws of the State of New York, without regard
to its conflicts of law provisions.  Venue and jurisdiction shall be in the
federal or state courts in New York, New York.

16.           Counterparts.  This Agreement may be executed in counterparts,
which together shall constitute a single instrument.

[SIGNATURE PAGE FOLLOWS]

 
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

IN WITNESS WHEREOF, the Parties have executed this Agreement on the dates
written below.

EMPLOYEE:

/s/ Jeffrey W. Pritchard
 
September 29, 2009
Jeffrey W. Pritchard
 
 Date

THE COMPANY:
 
CAPITAL GOLD CORPORATION

 
By:
/s/ Gifford A. Dieterle
 
September 29, 2009
 
Gifford A. Dieterle, President
 
Date

 
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

Schedule A

Severance Payments shall consist of the following gross amounts, from which the
Company will make required withholdings and deductions and be paid as follows:

1.           $425,961, representing the present value of 24 monthly payments of
Employee’s annual base salary in effect on the Effective Date (“Lump Sum
Payment”), payable within 15 days after the Effective Date.

2.           $65,406, representing the balance of the amount of Employee’s base
salary under the term of the Employment Agreement (“Balance”), payable in
January 2011.
 
Payment of the Lump Sum Payment, Balance and Other Payments shall be made by
direct deposit to the account on file with the Company for the Employee’s salary
payments.

 
 

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