CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”
Exhibit 10.1

EMPLOYMENT AGREEMENT

AGREEMENT made effective as of January 19, 2010 by and between CAPITAL GOLD
CORPORATION, a Delaware corporation with offices at 76 Beaver Street, 14th
Floor, New York, NY 10005 (the “Company”), and JOHN BROWNLIE, an individual
residing at 6040 Puma Ridge, Littleton, Colorado 80124 (the “Executive” and
together with the Company, the “Parties”).

WITNESSETH:

WHEREAS, the Executive has been for a number of years an executive level
employee in the gold mining field; and

WHEREAS, the Company and Executive are parties to the Engagement Agreement,
effective on October 1, 2008, as amended on January 1, 2009 (the “Engagement
Agreement”); and

WHEREAS, the Parties agree that the Engagement Agreement is hereby terminated;

WHEREAS, the Company desires to hire Executive as a full-time employee; and

WHEREAS, the Company and the Executive mutually intend to set forth herein the
terms and conditions of the Executive’s employment with the Company.

NOW, THEREFORE, the Company and the Executive, each intending to be legally
bound, hereby mutually covenant and agree as follows:

1.            Employment and Term.

(a)           Employment. Effective on the Effective Date as hereinafter
defined, the Company hereby employs the Executive as President and Chief
Operating Officer and the Executive hereby accepts such employment with the
Company, for the Term set forth in Paragraph 1(b).

(b)           Term. This Agreement shall be effective on January 19, 2010 (the
“Effective Date”).  The term of the Executive’s employment under this Agreement
(the “Term”) shall commence on the Effective Date and end on January 19, 2013,
subject to consecutive one-year extension(s) unless either the Company or the
Executive provides written notice of termination to the other Party not later
than thirty (30) days prior to the scheduled expiration of the Term as then in
effect.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

2.           Duties.  During the period of employment as provided in Paragraph
1(b) hereof, the Executive shall serve as President and Chief Operating Officer
of the Company, reporting to the Board of Directors, and shall perform duties
consistent with his position and such other duties, not inconsistent therewith,
as may be assigned from time to time by the Board of Directors.  At the
Effective Date, the duties of Executive shall include, among other things,
serving as the President of Minera Santa Rita, S.A. de C.V., a subsidiary of the
Company incorporated in Mexico.  The Executive shall devote his entire business
time and best skills and efforts (reasonable sick leave and vacations as
described below excepted) to the performance of his duties under this Agreement.
Executive further agrees that he will, without any additional compensation
thereof, serve in such executive officer capacities with respect to the Company
and any present or future subsidiaries and Affiliated corporations and divisions
as may from time to time be reasonably designated by the Board of Directors of
the Company.

 
3.
Base Salary.

(a)           For services performed by the Executive for the Company pursuant
to this Agreement during the period of employment as provided in Paragraph 1(b),
the Company shall pay the Executive a base salary (“Annual Fee”) which shall
initially be at the rate of Two Hundred Seventy-Five Thousand ($275,000) Dollars
per year payable in equal monthly installments;

(b)           Any compensation which may be paid to the Executive under any
additional compensation or incentive plan of the Company or which may be
otherwise authorized from time to time by the Board of Directors (or an
appropriate committee thereof) shall be in addition to the base salary to which
the Executive shall be entitled under this Agreement;

(c)           Upon the execution of this Agreement, Executive shall receive a
payment of $375,000 for services rendered to the Company which have assisted the
Company in achieving the following: (i) a significant increase in the Company’s
shares price; (ii) listing of the Company’s stock on the NYSE AMEX; (iii) a term
sheet with Standard Bank Plc with respect to a US$15 million Senior Secured
Revolving Loan and Term Loan Facility; (iv) a reverse split of the company’s
common stock; and (v) the Company having been positioned to become a growth gold
mining company through mergers and acquisitions and new mine construction, such
as Saric; and

(d)           Executive shall receive an additional *** payment upon
consummation of ***.

(e)           Executive shall receive stock options (the “Options”) to purchase
2,000,000 shares of common stock of the Company at a price of $0.89 per share
for a period of five years, which shall vest as follows:

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

  
(i) 666,667 on January 19, 2011;

(ii) 666,667 on January 19, 2012

(iii) 666, 666 on January 19, 2013.

4.            Other Benefits. In addition to the base salary to be paid to the
Executive pursuant to Paragraph 3 hereof, the Executive shall also be entitled
to the following:

(a)           Bonus; Participation in Plans.

(i)              Executive shall be eligible for any annual incentive bonus
opportunity offered by the Company to executive officers of the Company at
Executive’s level.  the amount of this bonus, as well as the criteria necessary
to earn a bonus, may be changed at any time by the Company and shall be within
the sole discretion of the Company. All bonuses paid pursuant to this Agreement
will be subject to applicable withholdings and deductions, if applicable.  If
applicable, the bonus shall be paid no earlier than fifteen (15) days and no
later than ninety (90) days after the Company’s fiscal year end for which the
bonus is earned.  In the event of any conflict between this Agreement and any
incentive bonus plan adopted by the Company for its officers and employees, this
Agreement shall control.  The amount of this bonus, as well as the criteria
necessary to earn a bonus, may be changed at any time by the Company and shall
be within the sole discretion of the Company.

A.                In the event Executive’s employment terminates for Cause
pursuant to Section 6(c) hereof, prior to the last day of the fiscal year for
which the bonus applies, Executive shall not be entitled to any unpaid bonus for
such fiscal year by reason of such bonus not being earned, vested due or
owing.  Executive hereby forfeits and waives any such unpaid bonus.

B.                In the event Executive’s employment terminates without Cause
or for Good Reason, pursuant to Section 6(c) below, prior to the last day of the
fiscal year for which the bonus applies, Executive will be entitled to a bonus
on a pro rated for the period form the beginning of that fiscal year to the date
of termination and such bonus shall be payable no later than Sixty (60) days
following such termination.

(ii)           The Executive shall also participate in the various benefit
plans, which shall be created by the Company and in force by the end of the
calendar year ending December 31, 2010, including any qualified pension, 401(k),
profit sharing and other retirement plans, non-qualified retirement and deferred
compensation plans, disability, medical, group life insurance, supplemental life
insurance coverage, business travel insurance, sick leave, and other similar
retirement and welfare benefit plans, programs and arrangements.  The foregoing
does not in any way limit the Company’s right to amend or terminate any benefit
plan at any time in its discretion.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

(b)           Vacation.  The Executive shall be entitled to vacation of four (4)
weeks for each full year of employment which shall be taken by Executive upon
prior notice to the Board of Directors of the Company in accordance with the
Company’s policies applicable to senior executives.  The Executive will also be
entitled to paid time off for all holidays recognized by the Company and for
sick days and personal days in accordance with the Company’s policies.

(c)           Expense Reimbursement.  The Company shall pay or reimburse the
Executive, upon a proper accounting, for reasonable business expenses and
disbursements incurred by him in the course of the performance of his duties
under this Agreement in accordance with the normal policy of the Company for
senior executives.

(d)           Technology Equipment.  The Company shall provide to Executive a
Company cell phone, and, if appropriate, a Blackberry, laptop computer and such
other equipment required to properly conduct his responsibilities.  Upon the
termination of Executive’s employment with the Company for any reason, Executive
will return the cell phone and all such other equipment to the Company.

(e)           Vehicle Use.  Without limiting the generality of the foregoing,
the Company shall provide Executive with vehicles located on site the Company’s
property in Sonora, Mexico for use by Executive in connection with the Company’s
business.  The Company shall also reimburse Executive for the expense of
gasoline, parking and tolls incurred while on Company business in accordance
with the Company’s expense reimbursement policies.  Executive may not utilize
any vehicle owned by the Company for personal use unrelated to Executive’s
duties under the Agreement.

5.           Covenants of the Employee.  In order to induce the Company to enter
into this Agreement, the Executive hereby agrees as follows:

(a)            Termination of Engagement Agreement.  Executive hereby agrees
that the Engagement Agreement shall be terminated on the date hereof.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

  
(b)       Confidentiality. The Executive acknowledges that by virtue of his
employment hereunder he will have access to Confidential Information (as defined
below) of the Company and that the communication of such Confidential
Information to third parties could irreparably injure the business of the
Company. Accordingly, the Executive agrees that he will treat and safeguard as
confidential and secret all Confidential Information received by him at any time
and that without the prior written consent of the Company, except as required by
law, he will not disclose or reveal any of the Confidential Information to any
third party whatsoever or use the same in any manner except as required in the
ordinary course of performing duties hereunder.  For purposes of the Agreement,
“Confidential Information” shall include, but not be limited to, the whole or
any portion or phase of (i) any confidential, or proprietary or trade secret,
technical, business, marketing or financial information, whether pertaining to
(1) the Company or its Affiliates, (2) its or their suppliers, or (3) any third
party which the Company or its Affiliates is under an obligation to keep
confidential including, but not limited to, strategies, analysis, concepts,
ideas, or plans; operating techniques; demographic and trade area information;
prospective site locations know-how; improvements; discoveries, developments;
designs, techniques, procedures; methods; machinery, devices; drawings;
specifications; forecasts; new products; research data, reports, or records;
marketing or business development plans, strategies, analysis, concepts or
ideas; contracts; general financial information about or proprietary to the
Company, including, but not limited to, unpublished financial statements,
budgets, projections, licenses, and costs; pricing; personnel information; and
any and all other trade secrets, trade dress, or proprietary information, and
all concepts or ideas in or reasonably related to the Company’s business, all of
which the Executive expressly acknowledges and agrees shall be confidential and
proprietary information belonging to the Company, and includes information of
that type acquired by the Company which Executive had knowledge of prior to
accepting employment with the Company by virtue of his prior relationship with
the Company pursuant to the Engagement Agreement.  Upon termination of his
employment with the Company, the Executive shall return to the Company all
documents, photographs, recorded or memory devices, papers and other property
relating to the Company, containing Confidential Information, together with any
copies thereof.

(c)           Records. All papers, books and records of every kind and
description relating to the business and affairs of the Company, or any of its
Affiliates, whether or not prepared by the Executive, other than personal notes
prepared by or at the direction of the Executive, shall be the sole and
exclusive property of the Company, and the Executive shall surrender them to the
Company at any time upon request by the Board of Directors of the Company.  As
used herein, the term “Affiliate” means any party that controls, is controlled
by or is under common control with another party as evidenced by the ownership
of fifty percent (50%) or more of the other party’s voting equity or other
ability to control the policies of the other party.

(d)        Covenants against Competition.  In consideration of the Company’s
agreement to employ the Executive and enter into this Agreement, the Executive
agrees that during the period of Executive’s employment with the Company and
terminating Thirty (30) days after the Executive’s Date of Termination as
defined below (the “Non-Competition Period”), Executive shall not, directly or
indirectly, either alone or in association with others, without the prior
written approval of the Chairman of the Board of Directors:

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

(i)  Engage in a “Competing Business’’ in the “Territory”, as those terms are
defined below, whether as a sole proprietor, partner, corporate officer,
employee, director, shareholder, consultant, agent, independent contractor,
trustee, or in any other manner by which Executive holds any beneficial interest
in a Competing Business, derives any income from any interest in a Competing
Business, or provides any service or assistance to a Competing Business.
“Competing Business” shall mean any business that mines or produces minerals
which is competitive with the business of the Company or any of its Affiliates,
as conducted or under development at any time during the term of
engagement.  “Territory” shall mean anywhere in the state of Sonora,
Mexico.  The provisions of this Section 5(c)(i) will not restrict Executive from
owning less than five percent of the outstanding stock of a publicly-traded
corporation engaged in a Competing Business;

(ii)  Acquire, lease or otherwise obtain or control any beneficial, direct or
indirect interest in mineral rights, or other rights or lands necessary to
develop, any mineral property in which the Company or any of its Affiliates at
the time of termination has a beneficial interest or is actively seeking to
acquire, or that is within a distance of five (5) kilometers from any point on
the outer perimeter of any such property in which the Company or any of its
Affiliates has a beneficial interest or that it is seeking to acquire;

(iii)  Conduct any exploration or production activities or otherwise work on or
in respect of any mineral property within a distance of five (5) kilometers from
any point on the outer perimeter of any mineral property in which the Company or
any of its affiliates then has a beneficial interest or is actively seeking to
acquire (Paragraph 5(c)(ii)-(iii) collectively, the “Business”);

(iv)  (a) Contact or solicit, or direct or assist others to contact or solicit,
for the purpose of promoting any person’s or entity’s attempt to compete with
the Company or any of its Affiliates, in any business carried on by the Company
or any of its Affiliates during the period in which Executive was employed by
the Company, any suppliers, independent contractors, vendors, or other business
associates of the Company or any of its Affiliates that were existing or
identified prospective suppliers, independent contractors, vendors, or business
associates during such period, or (b) otherwise interfere in any way in the
relationships between the Company or any of its Affiliates and their suppliers,
independent contractors, vendors, and business associates;

(v)  in any manner whatsoever, request, solicit, encourage or assist any
employee, officer or director of the Company to terminate their relationship
with the Company or any of its Affiliates, or join with any of them after the
termination by any of them of any such relationship in any direct or indirect
capacity in the Business or in any activities competitive with the Business, or
attempt to do any of the foregoing.

(e)           Disparaging Statements.  At all times during and after Executive’s
employment, Executive shall not either verbally, in writing, electronically or
otherwise (i) make any derogatory or disparaging statements about the Company,
any of its Affiliates, any of their respective officers, directors,
shareholders, employees and agents, or any of the Company’s current or past
customers and employees, or (ii) make any public statement or perform or do any
other act prejudicial or injurious to the reputation or goodwill of the Company
or any of its Affiliates or otherwise interfere with the business of the Company
or any of its Affiliates.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

(f)           Enforcement.  The Executive agrees and warrants that the covenants
contained herein are reasonable, that valid consideration has been and will be
received therefor and that the agreements set forth herein are the result of
arms-length negotiations between the parties hereto. The Executive recognizes
that the provisions of this Paragraph 5 are vitally important to the continuing
welfare of the Company, and its Affiliates, and that any violation of this
Paragraph 5 could result in irreparable harm to the Company and its Affiliates
for which money damages would constitute a totally inadequate
remedy.  Accordingly, in the event of any such violation by the Executive, the
Company and its Affiliates, in addition to any other remedies they may have,
shall have the right to institute and maintain a proceeding to compel specific
performance thereof or to obtain an injunction or other equitable relief
restraining any action by the Executive in violation of this Paragraph 5 without
posting any bond therefor, and Executive will not claim as a defense thereto
that the Company has an adequate remedy at law.  If any of the restrictions or
activities contained in this Paragraph 5 shall for any reason be held by a court
of competent jurisdiction to be excessively broad as to duration, geographical
scope, activity or subject, such restrictions shall be construed so as
thereafter to be limited or reduced to be enforceable to the extent compatible
with the applicable law; it being understood that by the execution of this
Agreement the parties hereto regard such restrictions as reasonable and
compatible with their respective rights.  Executive acknowledges that injunctive
relief may be granted immediately upon the commencement of any such action
without notice to Executive and in addition Company may recover monetary
damages.  [In the event a court requires posting of a bond, the Parties agree to
a maximum $5,000 bond.  Executive further acknowledges that his duties under
this Paragraph 5, shall survive termination of this Agreement for a period of
one (1) year from such termination, unless otherwise provided in this
Agreement.  The Parties further agree that the provisions of Paragraph 5 are
separate from and independent of the remainder of this Agreement and that
Paragraph 5 is specifically enforceable by the Company notwithstanding any claim
made by Executive against the Company.

6.            Termination.

(a)           Unless earlier terminated in accordance with the following
provisions of this Paragraph 6, the Company shall continue to employ the
Executive and the Executive shall remain employed by the Company during the
entire Term as set forth in Paragraph 1(b). Paragraph 7 hereof sets forth
certain obligations of the Company in the event that the Executive’s employment
hereunder is terminated. Certain capitalized terms used in this Paragraph 6 and
for Paragraph 7 hereof are defined in Paragraph 6(d) below.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

 (b)           Death or Disability.  Except to the extent otherwise expressly
stated herein, including without limitation, as provided in Paragraph 7(a) with
respect to certain post-Date of Termination payment obligations of the Company,
this Agreement shall terminate immediately as of the Date of Termination in the
event of the Executive’s death or in the event that the Executive becomes
disabled.  “Disability” shall mean the inability of Executive effectively to
substantially provide the services hereunder by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve (12) months.  At any time and from time to time, upon
reasonable request therefor by the Company, the Executive shall submit to
reasonable medical examination(s) for the purpose of determining the existence,
nature and extent of any such disability. The Company shall promptly give the
Executive written notice at the address provided in Paragraph 10 of any such
determination of the Executive’s disability and of the decision of the Company
to terminate the Executive’s employment by reason thereof. In the event of
disability, until the Date of Termination the base salary payable to the
Executive under Paragraph 3 hereof shall be reduced dollar-for-dollar by the
amount of disability benefits, if any, paid to the Executive in accordance with
any disability policy or program of the Company.

 (c)           Notification of Discharge for Cause or Resignation.  In
accordance with the procedures hereinafter set forth, the Company may discharge
the Executive from his employment hereunder for Cause and the Executive may
resign from his employment hereunder for Good Reason or otherwise.  Any
discharge of the Executive by the Company for Cause or resignation by the
Executive for Good Reason shall be communicated by a Notice of Termination to
the Executive (in the case of discharge) or the Company (in the case of
resignation) given in accordance with Paragraph 10 of this Agreement.  For
purposes of this Agreement, a “Notice of Termination” means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s employment under the
provision so indicated and (iii) if the Date of Termination is to be other than
the date of receipt of such notice, specifies the termination date (which date
shall in all events be within ten (10) days after the giving of such
notice).  No purported termination of the Executive’s employment for Cause shall
be effective without a Notice of Termination.  The failure by Executive to set
forth in the Notice of Termination any fact or circumstance which contributes to
a showing of Good Reason shall not waive any right of the Executive hereunder or
preclude the Executive from asserting such fact or circumstances in enforcing
the Executive’s rights hereunder.  Executive may resign without Good Reason upon
not less than sixty (60) days prior written notice of termination.

(d)           Definitions.  For purposes of this Paragraph 6 and for Paragraph 7
hereof, the following capitalized terms shall have the meanings set forth below:

(i)           “Accrued Obligations” shall mean any fees and any reasonable and
necessary business expenses incurred by Executive in connection with his
services (less any applicable withholdings and deductions), all due and payable
to him through the date of the termination of this Agreement.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

(ii)           “Cause” shall mean (a) the Executive’s intentional theft,
unauthorized appropriation or embezzlement of money or property of the Company;
the Executive’s intentional perpetration, participation in or attempted
perpetration of fraud on the Company or its subsidiaries or Affiliates; (b) the
Executive’s intentional and material failure to perform any of his duties under
this Agreement, after written notice, delivered in accordance with Paragraph 10
hereof, specifically setting forth the failure(s) and providing thirty (30) days
to cure such failure. Notwithstanding the foregoing, after the Company in good
faith has sent two (2) such notices in the aggregate during the Term of this
Agreement, the Company will no longer be required to send notice and, upon the
subsequent occurrence of any of the omissions or commissions described in this
Paragraph 6(d)(ii) the Company then may discharge Executive for “Cause”; (c) the
Executive’s conviction of any crime that either results in imprisonment or
involves embezzlement, dishonesty, or activities injurious to the Company or its
reputation; or Executive is convicted of a felony; (d) the Executive’s use of
illegal drugs or the excessive use of alcohol which materially interferes with
the performance of his obligations under this Agreement, and continues after
written warning; or (e) the Executive’s commission of any willful or intentional
act which materially injures the reputation, business or any business
relationship of the Company or its employees.

(iii)           “Date of Termination” shall mean (A) in the event of a discharge
of the Executive by the Company for Cause or a resignation by the Executive for
Good Reason, the date the Executive (in the case of discharge) or the Company
(in the case of resignation) receives a Notice of Termination, or any later date
specified in such Notice of Termination, as the case may be, (B) in the event of
a discharge of the Executive without Cause or a resignation by the Executive
without Good Reason, the date the Executive (in the case of discharge) or the
Company (in the case of resignation) receives notice of such termination of
employment, (C) in the event of the Executive’s death, the date of the
Executive’s death, and (D) in the event of termination of the Executive’s
employment by reason of disability pursuant to Paragraph 6(a), the date the
Executive receives written notice of such termination.

(iv)           “Good Reason” shall mean any of the following; (A) any failure by
the Company to comply with any material provision of this Agreement which is not
remedied by the Company or the Company failing to diligently commence to cure
within thirty (30) days after receipt of written notice thereof specifically
setting forth the failure given by the Executive in accordance with Paragraph
10; (B) any purported termination by the Company of the Executive’s employment
otherwise than as expressly permitted by this Agreement; or (C) a dispute in
good faith by Executive of the existence of a Good Reason.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

7.         Obligations of the Company and Executive Upon Termination.

(a)       Discharge for Cause, Resignation without Good Reason, Death or
Disability.  In the event of a discharge of the Executive for Cause or
resignation by the Executive without Good Reason, or in the event this Agreement
terminates pursuant to Paragraph 6(a) by reason of the death or disability of
the Executive, other than a death or disability occurring whilst Executive is
performing its duties for the Company pursuant hereto:

(i)           the Company shall pay all Accrued Obligations to the Executive, or
to his heirs or estate in the event of the Executive’s death, in a lump sum in
cash within thirty (30) days after the Date of Termination; and

(ii)          the Executive, or his beneficiary, heirs or estate in the event of
the Executive’s death, shall be entitled to receive all benefits accrued by him
as of the Date of Termination under the Qualified Plans (as defined under the
Employee Retirement Income Security Act of 1974, as amended) and all other
qualified and nonqualified retirement, pension, profit sharing and similar plans
of the Company in such manner and at such time as are provided under the terms
of such plans and arrangements; and

(iii)         all other obligations of the Company hereunder shall cease
forthwith.

(b)       Discharge without Cause, Resignation for Good Reason or Death or
Disability occurring whilst performing services for the Company.  Except
as provided in Paragraph 7(c) hereof, if the Executive is discharged other than
for Cause, the Executive is terminated from death or disability occurring whilst
performing services for the Company, or the Executive resigns with Good Reason:

(i)       the Company shall pay to the Executive or his beneficiary, heirs or
estate a cash termination payment equal to the greater of (x) Executive’s Annual
Fee in effect upon the date of termination; or (y) so long as the current term
is greater than one year, the balance of Annual Fees remaining in the then
current term of the Agreement, payable in equal monthly  installments beginning
in the month following Executive’s termination.  Such termination payments shall
cease immediately in the event Executive violates any provision of Paragraph 5
herein.  In addition, the Company shall pay Executive or his beneficiary, heirs
or estate any Accrued Obligations to the date of termination and payable in a
lump sum, less any applicable holdings and deductions, as soon as
administratively practicable (but in no event later than Sixty (60) days)
following Executive’s termination;

(ii)  the Executive or his beneficiary, heirs or estate shall be entitled to
receive all benefits accrued by him as of the Date of Termination under all
qualified and nonqualified retirement, pension, profit sharing and similar plans
of the Company in such manner and at such time as are provided under the terms
of such plans;

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

(iii)           all other obligations of the Company hereunder shall cease
forthwith.

(iv)           Notwithstanding anything to the contrary contained in this
Paragraph 7(b):

(A)           If Executive would not have a separation from service within the
meaning of Section 409A(a)(2)(A)(i) (“Separation From Service”) of the Internal
Revenue Code of 1986, as amended (the “Code”), and as a result of such
termination of engagement would receive any payment that, absent the application
of this Paragraph 7(d), would be subject to additional tax imposed pursuant to
Section 409A(a) of the Code, then such payment shall instead be payable on the
date that is the earliest of (1) Executive’s Separation From Service, (2) the
date Executive becomes disabled (within the meaning of Section 409A(a)(2)(C) of
the Code), (3) Executive’s death, or (4) such other date as will not result in
such payment being subject to such additional tax; and if

(B)           Executive is a specified employee within the meaning of Section
409A(a)(2)(B)(i) of the Code and would receive any payment sooner than six
months after Executive’s Separation From Service that, absent the application of
this Paragraph 7(d)(B), would be subject to additional tax imposed pursuant to
Section 409A(a) of the Code as a result of such status as a specified employee,
then such payment shall instead be payable on the date that is the earliest of
(1) six months after Executive’s Separation From Service, (2) Executive’s death,
or (3) such other date as will not result in such payment being subject to such
additional tax.

(C)           It is the intention of the parties that payments or benefits
payable under this Agreement not be subject to the additional tax imposed
pursuant to Section 409A of the Code.  To the extent such potential payments or
benefits could become subject to such Section, the Parties shall cooperate to
amend this Agreement with the goal of giving Executive the economic benefits
described herein in a manner that does not result in such tax being imposed.

(D)           In the event that a payment or benefit payable under this
Paragraph 7(b) is subject to the additional tax imposed by Section 409A of the
Code, and Executive has not been uncooperative in any attempts of the Company to
amend this Agreement to avoid such additional tax, Company shall (at Executive’s
option) pay directly, or reimburse Executive for such additional tax and any
interest and penalty related thereto (the “409A Amounts”) within 10 days of
Executive’s submission to Company of the taxing authority’s determination of
amounts due (which determination must be submitted by Executive to the Company
within thirty (30) days of receipt by Executive), and in the case of Executive’s
payment, evidence of such payment.  At the same time as Company’s payment or
reimbursement, Company shall pay Executive a gross-up amount to cover income,
excise, and other applicable taxes on the 409A Amounts and on the gross-up
amount (before this further gross-up).  For purposes of calculating the gross-up
amounts for taxes, Executive shall be deemed to be taxed at the highest marginal
rate under all applicable local, state, federal, and foreign tax laws for which
the payment is made.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

(c)           Termination Upon a Change of Control.  Executive shall be entitled
to the rights set forth in the Agreement Regarding Change in Control annexed
hereto as Annex I.

(d)           Return of Property. In each event the Executive shall immediately
return to the Company any vehicle made available by the Company and any other
property of the Company in the Executive’s possession.

8.           Indemnification. The Company shall pay the cost of defending the
Executive to the fullest extent permitted by applicable law in connection with
any claim, action, suit, investigation or proceeding arising out of or relating
to performance by the Executive of services for, or action of the Executive as
an officer or employee of the Company, or of any other person or enterprise at
the request of the Company.  The Company shall also pay all judgments, awards,
settlement amounts and fines associated with the foregoing.  Legal cost and
expenses incurred in defending a claim, action, suit or investigation or
criminal proceeding shall be paid by the Company in a timely manner in advance
of the final disposition thereof upon the receipt by the Company of an
undertaking by or on behalf of the Executive to repay said amount unless it
shall ultimately be determined that the Executive is entitled to be indemnified
by the Company for such legal fees and related costs; provided, however, that
this arrangement shall not apply to (i) a non-derivative action commenced by the
Company against the Executive or (ii) any matter attributable to actions taken
by Executive in bad faith or for purposes other than the best interest of the
Company.  The foregoing shall be in addition to any indemnification rights the
Executive may have by law, charter, by-law or otherwise. Company shall have the
right to select counsel to defend the Executive, subject to Executive’s
approval, which approval shall not be unreasonably withheld.  If the Company
assumes responsibility for the defense of an action brought against the
Executive, the Executive: (i) may not agree to any settlement without the
Company’s prior written approval and (ii) will fully cooperate with the
Company’s efforts in defense of the matter.

9.           Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the heirs and representatives of the Executive and the successors
and assigns of the Company.

10.         Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, or by nationally
recognized courier, addressed as follows:

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

 
 
(a)
if to the Company, to:

Capital Gold Corporation
76 Beaver Street, 14th Floor
New York, NY 10005
Tel. No. (212) 344-5158
Fax. No. (212) 344-4537
Attention: Chairman of the Board of Directors

With a copy which shall not constitute notice to:

Ellenoff Grossman & Schole, LLP
150 East 42nd Street, 11th Floor
New York, NY 10017
Tel. No. (212) 370-1300
Fax. No. (212) 370-7889
Attention: Barry I. Grossman

 
(b)
if to the Executive, to:

John Brownlie
6040 Puma ridge
Littleton, CO 80124
Tel. No. (303) 862-8688
Email: bluesky6040@aol.com

Addresses may be changed by written notice sent to the other party at the last
recorded address of that party.

11.       Assignment.  This Agreement may be assigned by the Company to any
Affiliate engaged in the Business or to a purchaser of all or substantially all
of the assets of the Company.  No payment to be made hereunder shall be subject
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
other charge.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

 
12.       Arbitration.  Except for any proceeding seeking equitable remedies in
respect hereof, any dispute, controversy, question, claim or alleged breach
arising out of, or relating to, this Agreement shall be resolved by arbitration
as set forth herein below. Any such controversy, question, claim or alleged
dispute shall be submitted to arbitration upon written notice of either party to
the other, which notice shall, in reasonable detail, set forth the controversy,
question, claim or alleged breach.  Such party may then commence an arbitration
with respect thereto pursuant to the rules of the American Arbitration
Association (“AAA”) to be held in New York City, New York before an arbitrator
to be selected by the AAA.  The decision(s) of the arbitrator shall be final and
binding and may not be appealed to any court of competent jurisdiction, or
otherwise, except upon claim of fraud or corruption as by law provided however,
that implementation of such decision(s) shall in no way be delayed or otherwise
impaired pending the outcome of any such appeal. Judgment upon the award
rendered in such arbitration may be entered by any court having jurisdiction
thereof. [The non-prevailing party does hereby covenant and agree to promptly
pay, and the arbitrator shall be obliged to award to the prevailing party, one
hundred (100%) percent of all reasonable legal fees and reasonable costs
incurred by the prevailing party.]  The parties agree that attorneys that
represented a respective party as to this Agreement may represent such party in
any subsequent arbitration or legal proceeding authorized hereunder.

13.           Execution in Counterparts. This Agreement may be executed in
several counterparts each of which shall be deemed an original by when taken
together shall constitute one and the same instrument, and each of which will be
deemed an original, but all of which together will constitute one and the same
instrument.  This Agreement may be delivered by the Parties by facsimile or
other electronic transmission.

14.           Governing Law; Choice of Forum.  This Agreement shall be governed
in all respects and for all purposes by the internal laws of the State of
Virginia without the effect of the principles of conflicts of law.   The federal
or state courts situated in the City and County of New York shall have exclusive
jurisdiction in any action or proceeding arising out of or relating to this
Agreement, whether to compel arbitration, to seek injunctive or equitable relief
or to enforce any order or award obtained in arbitration.  Each of the Parties
hereby agrees to accept service of process by registered mail and to otherwise
consent to the jurisdiction of such courts.

15.           Severability. If any provision of this Agreement shall be adjudged
by any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement, which shall remain in full force and effect and the parties will
act in good faith to seek to amend this Agreement so as to render the invalid or
unenforceable provisions valid and enforceable while retaining the original
intent and meaning of such provision to the maximum extent possible.

16.            Prior Understandings. This Agreement embodies the entire
understanding of the parties hereof, and supersedes all other oral or written
agreements or understandings between them regarding the subject matter hereof.
No change, alteration or modification hereof may be made except by writing,
signed by each of the Parties. The headings in this Agreement are for
convenience and reference only and shall not be construed as part of this
Agreement or to limit or otherwise affect the meaning hereof.

17.           Waivers.  No waiver of any provision of this Agreement will be
effective unless in writing and signed by the party to be charged therewith.  No
single waiver shall constitute a subsequent waiver of the same or any other
provision hereof.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

18.          Interpretation.  This Agreement has been subject to negotiation by
the Parties with the assistance of counsel and shall not be interpreted by or
for either of them by reason of authorship.  All Paragraph headings used in this
Agreement are for convenience of reference only and shall have no legal effect
in the interpretation of this Agreement.

19.          Amendment.   No amendment or modification of the terms of this
Agreement shall be binding upon the Parties hereto unless reduced to writing and
signed by Executive and the Company.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.

CAPITAL GOLD CORPORATION
 
By:
/s/ Gifford Dieterle
Name: Gifford Dieterle
Title: Chairman of the Board of Directors
 
EXECUTIVE
 
/s/    John Brownlie
John Brownlie
 

[Signature Page to Employment Agreement]

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

ANNEX I

AGREEMENT REGARDING CHANGE IN CONTROL

THIS AGREEMENT (“Change in Control Agreement”) is made and entered into as of
the January 19, 2010 (the “Effective Date”) by and between Capital Gold
Corporation (the “Company”) and John Brownlie (the “Executive”).  Terms not
expressly defined herein shall have the meaning set forth in the Employment
Agreement, effective January 19, 2010 (“Employment Agreement”).

WITNESSETH THAT:

WHEREAS, the Company considers it essential to the best interests of its
stockholders to foster the continuous engagement of key management personnel,
and the Board of Directors of the Company (the “Board”) recognizes that, as is
the case with many publicly held corporations, a change in control might occur
and that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and

WHEREAS, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company’s management, including the Executive, to their engagement without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company;

NOW, THEREFORE, to induce the Executive to remain engaged by the Company and in
consideration of the premises and mutual covenants set forth herein, IT IS
HEREBY AGREED by and between the parties as follows:

 
1.
Agreement Term.

(a)           This Agreement shall terminate upon the date which the Employment
Agreement terminates.

(b)           If the Employment Agreement is terminated during the Term, but
following the occurrence of a Change in Control, (a) by the Company for any
reason other than for Cause or for Disability; (b) by the Executive for Good
Reason; or (c) by the Executive for any reason after thirty (30) days following
a Change in Control, then Executive shall be entitled to such Compensation as
set forth in Section 2 herein below.

The term “Good Reason” shall mean the occurrence of any of the following
circumstances without the Executive’s express written consent:

 
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WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

(A) a significant adverse change in the nature, scope or status of the
Executive’s position, authorities or services from those in effect immediately
prior to the Change in Control, including, without limitation, if the Executive
was, immediately prior to the Change in Control, an executive officer of a
public company, the Executive ceasing to be an executive officer of a public
company;

(B) the failure by the Company to pay the Executive any portion of the
Executive’s current compensation, or to pay the Executive any portion of any
installment of deferred compensation under any deferred compensation program of
the Company, within seven (7) days of the date such compensation is due;

(C) a reduction in the Executive’s annual base compensation (or a material
change in the frequency of payment) as in effect immediately prior to the Change
in Control as the same may be increased from time to time;

(D)          the failure by the Company to award the Executive an annual bonus
in any year which is at least equal to the annual bonus awarded to the Executive
for the year immediately preceding the year of the Change in Control;

(E)           the failure by the Company to award the Executive equity-based
incentive compensation (such as stock options, shares of restricted stock, or
other equity-based compensation) on a periodic basis consistent with the
Company’s practices with respect to timing, value and terms prior to the Change
in Control;

(F)           the failure of the Company to award the Executive agreed upon
incentive compensation of any nature based on attained milestones when such
milestones are attained.

 
(G)
the failure of the Company to obtain a satisfactory agreement from any successor
to the Company to assume and agree to perform this Agreement as contemplated by
Section 12.

For purposes of any determination regarding the existence of Good Reason, any
good faith determination by the Executive that Good Reason exists shall be
conclusive.

(c)           If the Employment Agreement is terminated as a result of a
Potential Change in Control (as defined in Section 7 below) during the Term,
other than for reasons of Disability or Cause, then Executive shall be entitled
to such Compensation as set forth in Section 2 herein below; which shall be
payable within 20 business days of such termination.

2.           Compensation.  If the Executive is entitled to Compensation
pursuant to Section 1(b) above, Executive shall receive the following:

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

(a)           Upon the earlier to occur of: (i) the Change in Control; or (ii)
the termination of Executive’s employment, Executive shall receive a lump sum
payment in cash equal to the sum of:
  
(i)        the greater of an amount equal to three (3) times Executive’s base
salary in effect on the date: (i) of the Change in Control; or (ii) the date
immediately prior to the date of termination; and

(ii)       an amount equal to three (3) times Executive’s bonus award and all
other compensation for the calendar year immediately preceding the date of the
Change in Control.

(b)           The amounts payable pursuant to this Section 2, shall be inclusive
of the amounts, if any, to which Executive would otherwise be entitled to by law
and shall be in addition to (and not inclusive of) any amounts payable under any
written agreement(s) directly between Executive and the Company or any of its
subsidiaries.

(c)           All unvested Company options shall immediately become vested, and
any exercise must occur no later than twelve months after the date of
termination.

(d)           The Company shall provide Executive with and, at the Executive’s
option, directly pay for or reimburse the Executive for outplacement services
and tax and financial counseling suitable to Executive’s position, from
providers selected by Executive for services through the end of the second
taxable year of Executive after the taxable year of Executive’s separation from
service (within the meaning of Section 409A(a)(2)(A)(i) of the Code) with the
Company, or, if earlier, the date on which Executive becomes employed by another
employer.  In the event Executive has paid for any such services, the Company
shall reimburse Executive for such payments within three (3) days of submission
to the Company of a copy of the provider’s invoice for services and evidence of
payment.  Any request for reimbursement for such expenses shall be submitted no
later than 30 days before the end of the third taxable from the date the
separation from service occurred.

 
3.
Mitigation.

Executive shall not be required to mitigate the amount of any payment provided
for in this Change in Control Agreement by seeking other engagement or
otherwise.  The Company shall not be entitled to set off against the amounts
payable to Executive under this Change in Control Agreement any amounts owed to
the Company by Executive, any amounts earned by Executive in other engagements
after Executive’s termination of the Employment Agreement, or any amounts which
might have been earned by Executive in other engagements had the Executive
sought such other engagements.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

 
4.
Make-Whole Payments.

(a)           If any payment or benefit to which Executive (or any person on
account of the Executive) is entitled, whether under this Change in Control
Agreement or otherwise, in connection with a Change in Control or the
Executive’s termination of employment (a “Payment”) constitutes a “parachute
payment” within the meaning of section 280G of the Code, and as a result thereof
the Executive is subject to a tax under section 4999 of the Code, or any
successor thereto, (an “Excise Tax”), the Company shall pay to Executive an
additional amount (the “Make-Whole Amount”) which is intended to make Executive
whole for such Excise Tax.  The Make-Whole Amount shall be equal to (i) the
amount of the Excise Tax, plus (ii) the aggregate amount of any interest,
penalties, fines or additions to any tax which are imposed in connection with
the imposition of such Excise Tax, plus (iii) all income, excise and other
applicable taxes imposed on the Executive under the laws of any Federal, state
or local government or taxing authority by reason of the payments required under
clauses (i) and (ii) and this clause (iii).

(b)           For purposes of determining the Make-Whole Amount, Executive shall
be deemed to be taxed at the highest marginal rate under all applicable local,
state, federal and foreign income tax laws for the year in which the Make-Whole
Amount is paid.  The Make-Whole Amount payable with respect to an Excise Tax
shall be paid by the Company coincident with the Payment with respect to which
such Excise Tax relates.

(c)           All calculations under this Section 4 shall be made initially by
the Company and the Company shall provide prompt written notice thereof to the
Executive to enable the Executive to timely file all applicable tax
returns.  Upon request of the Executive, the Company shall provide the Executive
with sufficient tax and compensation data to enable the Executive or the
Executive’s tax advisor to independently make the calculations described in
subparagraph (b) above and the Company shall, at the Executive’s option, pay the
Executive’s advisor directly or reimburse the Executive for reasonable fees and
expenses incurred for any such verification.  Any payment or reimbursement shall
be made within three (3) days of submission of the service provider’s invoice to
the Company, and in the case of reimbursement, evidence of payment.  Executive
shall submit a copy of the service provider’s invoice for such services to the
Company within 60 days of its receipt by the Executive.

(d)           If the Executive gives written notice to the Company of any
objection to the results of the Company’s calculations within 60 days of the
Executive’s receipt of written notice thereof, the dispute shall be referred for
determination to independent tax counsel selected by the Company and reasonably
acceptable to Executive (“Tax Counsel”).  The Company shall pay all fees and
expenses of such Tax Counsel.  Pending such determination by Tax Counsel, the
Company shall pay Executive the Make-Whole Amount as determined by it in good
faith.  The Company shall pay the Executive any additional amount determined by
Tax Counsel to be due under this Section 4 (together with interest thereon at a
rate equal to 120% of the Federal short-term rate determined under section
1274(d) of the Code) within ten (10) days after such determination.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

(e)           The determination by Tax Counsel shall be conclusive and binding
upon all Parties unless the Internal Revenue Service, a court of competent
jurisdiction, or such other duly empowered governmental body or agency (a “Tax
Authority”) determines that the Executive owes a greater or lesser amount of
Excise Tax with respect to any Payment than the amount determined by Tax
Counsel.

(f)           If a Taxing Authority makes a claim against Executive which, if
successful, would require the Company to make a payment under this Section 4,
Executive agrees to contest the claim with counsel reasonably satisfactory to
the Company, on request of the Company subject to the following conditions:

(i) Executive shall notify the Company of any such claim within ten (10) days of
becoming aware thereof.  In the event that the Company desires the claim to be
contested, it shall promptly (but in no event more than 30 days after the notice
from Executive or such shorter time as the Taxing Authority may specify for
responding to such claim) request Executive to contest the claim.  Executive
shall not make any payment of any tax which is the subject of the claim before
Executive has given the notice or during the 30 day period thereafter unless
Executive receives written instructions from the Company to make such payment
together with an advance of funds sufficient to make the requested payment plus
any amounts payable under this Section 4 determined as if such advance were an
Excise Tax, in which case the Executive will act promptly in accordance with
such instructions.

(ii) If the Company so requests, Executive will contest the claim by either
paying the tax claimed and suing for a refund in the appropriate court or
contesting the claim in the United States Tax Court or other appropriate court,
as directed by the Company; provided, however, that any request by the Company
for Executive to pay the tax shall be accompanied by an advance from the Company
to Executive of funds sufficient to make the requested payment plus any amounts
payable under this Section 4 determined as if such advance were an Excise
Tax.  If directed by the Company in writing Executive will take all action
necessary to compromise or settle the claim, but in no event will Executive
compromise or settle the claim or cease to contest the claim without the written
consent of the Company; provided, however, that Executive may take any such
action if the Executive waives in writing the Executive’s right to a payment
under this Section 4 for any amounts payable in connection with such
claim.  Executive agrees to cooperate in good faith with the Company in
contesting the claim and to comply with any reasonable request from the Company
concerning the contest of the claim, including the pursuit of administrative
remedies, the appropriate forum for any judicial proceedings, and the legal
basis for contesting the claim.  Upon request of the Company, Executive shall
take appropriate appeals of any judgment or decision that would require the
Company make a payment under this Section 4.  Provided that Executive is in
compliance with the provisions this section, the Company shall be liable for and
indemnify Executive against any loss in connection with, and all costs and
expenses, including attorneys’ fees, which may be incurred as a result of,
contesting the claim, and shall provide to Executive within 30 days after each
written request therefor by Executive cash advances or reimbursement for all
such costs and expenses actually incurred or reasonably expected to be incurred
by Executive as a result of contesting the claim.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

(g)           Should a Tax Authority finally determine that an additional Excise
Tax is owed, then the Company shall pay an additional Make-Whole Amount to
Executive in a manner consistent with this Section 4 with respect to any
additional Excise Tax and any assessed interest, fines, or penalties.  If any
Excise Tax as calculated by the Company or Tax Counsel, as the case may be, is
finally determined by a Tax Authority to exceed the amount required to be paid
under applicable law, then Executive shall repay such excess to the Company
within 30 days of such determination; provided that such repayment shall be
reduced by the amount of any taxes paid by Executive on such excess which is not
offset by the tax benefit attributable to the repayment.

 
5.
Change in Control.

(a)           For purpose of this Change in Control Agreement, (except as set
forth in Section 5(b) of this Agreement and as otherwise consented or agreed to
by Executive prior to such event) a “Change in Control” shall be deemed to have
occurred on the earliest of the following dates:

(i)           the date any Person (as defined below) is or becomes the
Beneficial Owner (as defined below), directly or indirectly, of securities of
the Company representing 30% or more of the combined voting power of the
Company’s then outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in clause (x) of
paragraph (c) below; or

(ii)           the date on which the following individuals cease for any reason
to constitute a majority of the number of directors then serving: individuals
who, on the date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company’s
stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was previously
so approved or recommended; or

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

(iii)           the date on which there is consummated a merger or consolidation
of the Company or any direct or indirect subsidiary of the Company with any
other corporation or other entity, other than (x) a merger or consolidation (A)
immediately following which the individuals who comprise the Board immediately
prior thereto constitute at least a majority of the board of directors of the
Company, the entity surviving such merger or consolidation or, if the Company or
the entity surviving such merger or consolidation is then a subsidiary, the
ultimate parent thereof and (B) which results in the voting securities of the
Company outstanding immediately prior to such merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary of the Company, at least
50% of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such merger
or consolidation, or (y) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is
or becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the Company’s
then outstanding securities; or

(iv)           the date on which the stockholders of the Company approve a plan
of complete liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or substantially all
of the Company’s assets, other than a sale or disposition by the Company of all
or substantially all of the Company’s assets to an entity, at least 50% of the
combined voting power of the voting securities of which are owned by
stockholders of the Company, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any subsidiary of the Company, in substantially the same proportions as their
ownership of the Company immediately prior to such sale.

(b) ***

(c) Notwithstanding the foregoing, a “Change in Control” shall not be deemed to
have occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.

For purposes of this Agreement: “Affiliate” shall have the meaning set forth in
Rule 12b-2 promulgated under Section 12 of the Exchange Act; “Beneficial Owner”
shall have the meaning set forth in Rule 13d-3 under the Exchange Act; “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time; and “Person” shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.

 
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WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

6.           Potential Change in Control.

(a)          A “Potential Change in Control” shall exist during any period in
which the circumstances described in paragraphs (a), (b), (c) or (d), of this
Section 6 exist (provided, however, that a Potential Change in Control shall
cease to exist not later than the occurrence of a Change in Control):

(i)           The Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control, provided that a Potential
Change in Control described in this paragraph (i) shall cease to exist upon the
expiration or other termination of all such agreements;

(ii)          Any Person (without regard to the exclusions set forth in
subsections (i) through (iv) of such definition) publicly announces an intention
to take or to consider taking actions the consummation of which would constitute
a Change in Control; provided that a Potential Change in Control described in
this paragraph (ii) shall cease to exist upon the withdrawal of such intention,
or upon a determination by the Board that there is no reasonable chance that
such actions would be consummated;

(iii)         Any Person becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 20% or more of either the then
outstanding shares of common stock of the Company or the combined voting power
of the Company’s then outstanding securities; or

(iv)         The Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control exists; provided that a Potential
Change in Control described in this paragraph (d) shall cease to exist upon a
determination by the Board that the reasons that gave rise to the resolution
providing for the existence of a Potential Change in Control have expired or no
longer exist.

7.           Nonalienation. The interests of Executive under this Agreement are
not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Executive or the Executive’s beneficiary.

8.           Amendment.  This Agreement may be amended or canceled only by
mutual agreement of the parties in writing without the consent of any other
person.  So long as the Executive lives, no person, other than the parties
hereto, shall have any rights under or interest in this Agreement or the subject
matter hereof.

9.           Applicable Law.  The provisions of this Agreement shall be
construed in accordance with the laws of the State of New York, without regard
to the conflict of law provisions of any state.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

10.           Severability.  The invalidity or unenforceability of any provision
of this Agreement will not affect the validity or enforceability of any other
provision of this Agreement, and this Agreement will be construed as if such
invalid or unenforceable provision were omitted (but only to the extent that
such provision cannot be appropriately reformed or modified).

11.           Waiver of Breach.  No waiver by any party hereto of a breach of
any provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party of any similar or dissimilar provisions and conditions at the same or any
prior or subsequent time.  The failure of any party hereto to take any action by
reason of such breach will not deprive such party of the right to take action at
any time while such breach continues.

12.           Successor, assumption of contract. This Agreement shall be binding
upon and inure to the benefit of the Company and any successor of the
Company.  The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no succession had taken place.  This Agreement is
personal to Executive and may not be assigned by Executive without the written
consent of the Company.  However, to the extent that rights or benefits under
this Agreement otherwise survive Executive’s death, the Executive’s heirs and
estate shall succeed to such rights and benefits pursuant to Executive’s will or
the laws of descent and distribution; provided that Executive shall have the
right at any time and from time to time, by notice delivered to the Company, to
designate or to change the beneficiary or beneficiaries with respect to such
benefits.

13.           Notices.  Notices and all other communications provided for in
this Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid
(provided that international mail shall be sent via overnight or two-day
delivery), or sent by facsimile or prepaid overnight courier to the parties at
the addresses set forth below.  Such notices, demands, claims and other
communications shall be deemed given:

(a)           in the case of delivery by overnight service with guaranteed next
day delivery, the next day or the day designated for delivery;

(b)           in the case of certified or registered U.S. mail, five days after
deposit in the U.S.  mail; or

(c)           in the case of facsimile, the date upon which the transmitting
party received confirmation of receipt by facsimile, telephone or otherwise;

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

provided, however, that in no event shall any such communications be deemed to
be given later than the date they are actually received.  Communications that
are to be delivered by the U.S.  mail or by overnight service or two-day
delivery service are to be delivered to the addresses set forth below:

to the Company:

Capital Gold Corporation
76 Beaver Street
14th Floor
New York, NY 10005

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

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

           Chief Financial Officer
           Capital Gold Corporation
76 Beaver Street
14th Floor
New York, NY 10005

or to the Executive:

John Brownlie
6040 Puma Ridge
Littleton, Colorado 80124

Each party, by written notice furnished to the other party, may modify the
applicable delivery address, except that notice of change of address shall be
effective only upon receipt.

14.           Legal and Enforcement Costs.  The provisions of this Section 14
shall apply if it becomes necessary or desirable for the Executive to retain
legal counsel or incur other costs and expenses in connection with enforcing any
and all rights under this Agreement or any other compensation plan maintained by
the Company:

(a)           The Executive shall be entitled to recover from the Company
reasonable attorneys’ fees, costs and expenses incurred in connection with such
enforcement or defense.

(b)           Payments required under this Section 14 shall be made by the
Company to the Executive (or directly to the Executive’s attorney) promptly
following submission to the Company of appropriate documentation evidencing the
incurrence of such attorneys’ fees, costs, and expenses.

(c)           The Executive shall be entitled to select legal counsel; provided,
however, that such right of selection shall not affect the requirement that any
costs and expenses reimbursable under this Section 14 be reasonable.

(d)           The Executive’s rights to payments under this Section 14 shall not
be affected by the final outcome of any dispute with the Company.

15.           Survival of Agreement.  Except as otherwise expressly provided in
this Agreement, the rights and obligations of the parties to this Agreement
shall survive the termination of the Executive’s engagement with the Company.

 
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CONFIDENTIAL TREATMENT REQUESTED
WITH RESPECT TO CERTAIN PORTIONS HEREOF
DENOTED WITH “***”

16.           Entire Agreement.  Except as otherwise provided herein, this
Agreement constitutes the entire agreement between the parties concerning the
subject matter hereof and supersedes all prior or contemporaneous agreements,
between the parties relating to the subject matter hereof; provided, however,
that nothing in this Change in Control Agreement shall be construed to limit any
policy or agreement that is otherwise applicable relating to confidentiality,
rights to inventions, copyrightable material, business and/or technical
information, trade secrets, solicitation of employees, interference with
relationships with other businesses, competition, and other similar policies or
agreement for the protection of the business and operations of the Company and
the subsidiaries.

17.           Counterparts.  This Agreement may be executed in several
counterparts each of which shall be deemed an original by when taken together
shall constitute one and the same instrument, and each of which will be deemed
an original, but all of which together will constitute one and the same
instrument.  This Agreement may be delivered by the Parties by facsimile or
other electronic transmission.

18.           Interpretation.  This Agreement has been subject to negotiation by
the Parties with the assistance of counsel and shall not be interpreted by or
for either of them by reason of authorship.  All Paragraph headings used in this
Agreement are for convenience of reference only and shall have no legal effect
in the interpretation of this Agreement.

IN WITNESS THEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written above.

 
/s/ John Brownlie
 
John Brownlie
 
CAPITAL GOLD CORPORATION
   
By:
Gifford A.  Dieterle
 
Gifford A.  Dieterle, President

[Signature Page to Agreement Regarding Change of Control]

 
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