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





SEVERANCE
AGREEMENT AND RELEASE





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





RECITALS





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





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





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





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





TERMS





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





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





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





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





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





2.           Severance Payments and other
matters.





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





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





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





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





3.           General
Release.





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


2


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





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





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





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





6.           Warranties.  Employee
warrants and represents as follows:





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





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





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


3


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





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





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





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





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





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





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





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


4


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





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





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





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





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





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


5


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





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





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





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





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





[SIGNATURE
PAGE FOLLOWS]


6


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





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





EMPLOYEE:





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





THE
      COMPANY:CAPITAL
      GOLD CORPORATION




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


7


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





Schedule
A





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





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





2.           $65,406,
representing the balance of the amount of Employee’s base salary under the term
of the Employment Agreement (“Balance”), payable in January 2011.




Payment
of the Lump Sum Payment, Balance and Other Payments shall be made by direct
deposit to the account on file with the Company for the Employee’s salary
payments.