SEVERANCE
AGREEMENT AND GENERAL RELEASE





This
SEVERANCE AGREEMENT AND GENERAL RELEASE (this “Agreement”) is made between (i)
Gifford A. Deiterle (“Employee”), a New York resident, 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,
the Parties entered into an Executive Employment Agreement (the “Employment
Agreement”), dated January 1, 2009, which, by its terms, expires on December 31,
2011;





WHEREAS,
Employee wishes to voluntarily resign his position as Chief Executive Officer
of, and any and all other employment with, the Company effective March 18,
2010;





WHEREAS,
Employee currently serves as Chairman (“Chairman”) of the Company’s Board of
Directors (the “Board”) and wishes to tender his resignation as Chairman of the
Board effective March 18, 2009;





WHEREAS,
Employee currently serves as Vice President of the board of Managers and Chief
Executive Officer of Minera Santa Rita S. de R.L. de C.V, Vice President of the
Board of Managers of Oro de Altar S. de R.L. de C.V. and Attorney in fact of
Caborca Industrial S.A. de C.V. (“Caborca”), each of which are subsidiaries of
the Company, and wishes to tender his resignation from each such
position;





WHEREAS,
Employee currently holds forty nine common shares of Caborca and wishes to
relinquish such shares (the “Caborca Shares”);





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 these ends, 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 and Effective
Date.  Subject to the terms of this Agreement, Employee hereby
voluntarily resigns his employment with Company, his position as Chairman of the
Board and his positions with each of Minera, Oro de Altar and Caborca and
relinquishes the Caborca Shares.  Pursuant to such resignation, the
Employment Agreement will terminate, Employee’s employment with the Company will
end, and his position as Chairman of the Board will terminate on and as of March
18, 2010 (the “Termination Date”); provided, however, Employee shall have access
to the Company’s office located at 76 Beaver Street, 14th Floor
through April 30, 2010.  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 7(h) below.








2.           Severance
Payments.





(a)           Subsequent
to the Effective Date, and on the express condition that Employee has not
revoked this Agreement, the Company will provide Employee with the following
severance (the “Severance Payment”):  (i) a lump sum payment of
$184,198.07 paid so as to be received on September 18, 2010; (ii) a second lump
sum payment of $191,666.64 to be received on September 18, 2010 (representing
payment on eight monthly payments of $23,958.33 per month), (iii) payment of
$23,958.33 per month over a twelve-month period (in the aggregate amount of
$287,499.96), commencing on January 1, 2011, which monthly payments will be
mailed to Employee or direct deposited to an account designated by Employee; and
(iv) such number of shares of the Company’s common stock equal to $100,000
divided by the volume weighted average closing sales price within the 10
trading days prior to September 18, 2010, such shares to be received on
September 18, 2010.




(b)           At
such time as Employee is eligible to sell the shares referred to in Section 2(a)
above pursuant to an exemption under Rule 144, (either as an affiliate under
Rule 144(b)(ii) or as a non-affiliated under Rule 144(b)(i)) the Company shall
authorize and pay its legal counsel to issue a written opinion to such effect
(the “Rule 144 Opinion”), addressed and reasonably acceptable to the Company’s
transfer agent. If for any reason the Company’s counsel does not issue such Rule
144 Opinion within 10 business days following a request for the Rule 144
Opinion, Employee may obtain a legal opinion from qualified legal counsel
of its own choosing, the Company shall pay such counsel’s reasonable fees, and
the Company shall authorize its transfer agent to rely on such legal
opinion.





(c)           The
Company shall issue an IRS Form 1099 to Employee reflecting the Severance
Payments made pursuant to paragraphs (a)(i) and (2).  The Employee
shall be solely responsible for payment of taxes as required by local, state and
federal law.  If a claim is made against the Company for any tax or
withholding in connection with or arising out of the Severance Payments pursuant
to Section 2, 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.





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(d)           Employee
understands and agrees that the Company would not receive the monies and/or
benefits specified in this Section 2, except for Employee’s execution of this
Agreement and General Release and the fulfillment of the promises contained
herein.





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”).





(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.           Non-Competition;
Non-Solicitation; Anti-Raiding;.  Without the prior written
approval of the President or Chief Executive Officer of the Company, Employee
shall not, directly or indirectly, commencing upon the date hereof and
terminating upon the date he receives the final Severance Payment, anywhere in
the world





(a)           Engage
in a “Competing Business’’ as such term is 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 Employee 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 (defined below), as conducted
or under development at any time during the term of
employment.  “Affiliates” shall mean any entity controlled by or under
common control with Employer or any joint venture, partnership or other similar
entity to which the Company is a party.





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(b)           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 as 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;





(c)           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;





(d)           (i) 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 Employee was an employee of 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 (ii) 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;





(e)           (i) Solicit,
offer employment to, otherwise attempt to hire, or assist in the hiring of any
employee or officer of the Company or any of its Affiliates;
(ii) encourage, induce, assist or assist others in inducing any such person
to terminate his or her employment with the Company or any of its Affiliates; or
(iii) in any way interfere with the relationship between the Company or any
of its Affiliates and their employees; or





5.         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.





6.         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.





7.         Warranties.  Employee
warrants and represents as follows:





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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.





d.         The
Company is not now, nor has it been in the past, in breach of the Employment
Agreement, and no Good Reason exists for Employee’s resignation.





e.         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.





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





g.         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.





h.         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.





i.          He
admits, acknowledges, and agrees that, as of the Termination Date, he is not
entitled to any additional payments, severance, options, benefits or
reimbursement under Sections 3 and 4 of the Employment Agreement, and that the
payment required by Section 2 of this Agreement 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 up through the date of
this Agreement.





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





8.           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, members of Employee’s
immediate family, and his legal and financial advisors.  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.





9.           Non-Disparagement.  Employee
agrees that, as of and after the Termination Date, he will not 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.  Similarly, the Company shall not make any statement that
disparages Employee or reflects negatively on him.





10.           Return of Company Property
and Information.  Employee represents and warrants that, on or
before the Termination Date, 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.  On or after the
Termination Date, Employee shall have no right to enter the Company’s offices,
wherever located, for any purpose, absent the advanced written consent of the
Company.  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.





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11.       Surviving Provisions of
Employment Agreement.  Following the Termination Date, Employee
shall remain bound by Sections 5, and 7 through 12 of the Employment
Agreement.  With respect to Section 9 of the Employment Agreement,
Employee agrees and acknowledges that the Severance Payments due hereunder shall
substitute and act in stead of the “severance payments” referred to therein.
Following the Termination Date, the Company shall remain bound by Section
4(i).





12.       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 affect 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.





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





14.       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. In the event that Employee must engage legal counsel and/or take
legal action to enforce the terms of this Agreement and the Employee prevails in
his allegations that the Company has not performed its obligations pursuant to
the terms of this Agreement, Employee shall be entitled to recover from the
Company all associated costs and expenses, including, without limitation,
reasonable attorneys’ fees.





16.       Entire
Agreement.  This Agreement, and the surviving provisions of the
Employment Agreements, constitutes 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.





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17.       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.





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





19.       Stock
Options.  Employee currently owns the following options for the
Company’s shares:





a)  125,000
options at $2.52 USD post-split, issued on December 20, 2007 (75,000 of which
have vested as of the date hereof at $2.52 per share; 50,000 of which shall
terminate on the date hereof);





b)
125,000 options at $1.96 USD post-split, issued on January 29, 2009 (83,325 of
which have vested as of the date hereof at $1.96 per share; 41,675 of which
shall terminate on the date hereof); and





c) 62,500
shares at $2.52 USD post-split, issued on December 20, 2007 (41,667 of which
have vested as of the date hereof at $2.52 per share; 41,667 of which shall
terminate on the date hereof).





Employee
will have 90 days from the date of his termination to exercise the options that
have vested as set forth in this Section 19 of this Agreement. Employee shall be
permitted to exercise such options via cashless exercise pursuant to the terms
of the amended 2006 Stock Equity Plan.





20.           IRC Section
409A.





a.           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 Employee the economic benefits described
herein in a manner that does not result in such tax being imposed.





b.           In
the event that a payment or benefit payable under this Agreement is subject to
the additional tax imposed by Section 409A of the Code, the Company shall (at
Employee’s option) pay directly, or reimburse Employee for such additional tax
and any interest and penalty related thereto (the “409A Amounts”) within 10 days
of Employee’s submission to the Company of the taxing authority’s determination
of amounts due (which determination must be submitted by Employee to the Company
within 30 days of receipt by Employee), and in the case of Employee’s payment,
evidence of such payment.  At the same time as the Company’s payment
or reimbursement, the Company shall pay Employee 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, the Employee 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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EMPLOYEE
IS ADVISED THAT HE HAS UP TO TWENTY-ONE (21) CALENDAR DAYS TO CONSIDER THIS
AGEEMENT AND GENERAL RELEASE. EMPLOYEE IS ALSO ADVISED TO CONSULT WITH AN
ATTORNEY PRIOR TO SIGNING THIS AGREEMENT AND GENERAL RELEASE.





EMPLOYEE
MAY REVOKE THIS AGREEMENT AND GENERAL RELEASE FOR A PERIOD OF SEVEN (7) CALENDAR
DAYS FOLLOWNG THE DAY EMPLOYEE SIGNS THIS AGREEMENT AND GENERAL
RELEASE.  ANY REVOCATION WITHIN THIS PERIOD MUST BE SUBMITTED, IN
WRITING, TO THE COMPANY, C/O SARAH WILLIAMS, ESQ., ELLENOFF GROSSMAN &
SCHOLE LLP, 150 EAST 42ND STREET,
NEW YORK, NEW YORK 10017, AND STATE, “I HEREBY REVOKE MY ACCEPTANCE OF OUR
AGREEMENT AND GENERAL RELEASE.”  THE REVOCATION MUST BE MAILED TO MS.
WILLIAMS AND POSTMARKED WITHIN SEVEN (7) CALENDAR DAYS AFTER EMPLOYEE SIGNS THIS
AGEREMENT AND GENERAL RELEASE.





EMPLOYEE
AGREES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT AND
GENERAL RELEASE, DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL UP TO
TWENTY-ONE (21) CALENDAR DAY CONSIDERATION PERIOD.





EMPLOYEE
FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT
AND GENERAL RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS EMPLOYEE
HAS OR MIGHT HAVE AGAINST THE RELEASEES AS DETAILED HEREIN.




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





EMPLOYEE:/s/ Gifford DieterleName:
      Gifford Dieterle
            
            Date:
      March 11, 2010THE
      COMPANY:CAPITAL
      GOLD CORPORATIONBy:
            /s/
      John BrownlieName:
      John Brownlie
            
            Date:
      March 11, 2010Title:
      President