THIS
PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THIS PROMISSORY NOTE MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID
ACT.

     

    DESERT
HAWK GOLD CORP.

    PROMISSORY NOTE DUE JULY 14,
2012

     

    
      	
              No.
      R-DH-1

            	
              Dated:  July
      14, 2010

            


    

    


    FOR VALUE
RECEIVED, the undersigned, DESERT HAWK GOLD CORP., a Nevada corporation (the
“Company”),
HEREBY UNCONDITIONALLY PROMISES TO PAY to DMRJ GROUP I, LLC (the “Investor”)
or its registered assignee the principal amount equal to the lesser of
(i) Six Million Five Hundred Thousand and No/100 Dollars ($6,500,000) and
(ii) the aggregate principal amount of all Term Loan Advances (as defined
below) owing to the Investor by the Company pursuant to the Investment Agreement
dated as of July 14, 2010 (as amended, amended and restated, supplemented
or otherwise modified from time to time, the “Investment
Agreement”; terms defined therein, unless otherwise defined herein, being
used herein as therein defined) among the Company and the Investor on the dates
provided in the Investment Agreement.

     

    The
Company promises to pay interest (including all Prepaid Interest, Monthly
Interest and Payment Date Interest) on the unpaid principal amount of each Term
Loan Advance, from the date of such Term Loan Advance, until such principal
amount is paid in full, at such interest rates, and payable at such times
(including, in the case of Prepaid Interest with respect to a Term Loan Advance,
on the date of the Borrowing thereof), as are specified in the Investment
Agreement.

     

    Both
principal and interest are payable to the Investor in lawful money of the United
States of America to the Investor Payment Account in same day funds.  Each
Term Loan Advance owing to the Investor by the Company and the maturity thereof,
and all payments made on account of principal thereof, shall be recorded by the
Investor and, prior to any transfer hereof, endorsed on the grid attached
hereto, which is part of this Promissory Note; provided, however, that the failure of
the Investor to make any such recordation or endorsement shall not affect the
Obligations of the Company under this Promissory Note.

     

    This
Promissory Note is the “Note” referred to in, and is entitled to the benefits
of, the Investment Agreement and the other Transaction Documents, including the
Security Documents.  The Investment Agreement, among other things,
(i) provides for the making of Term Loan Advances by the Investor to the
Company from time to time in an aggregate amount not to exceed the U.S. dollar
amount first above mentioned, the indebtedness of the Company resulting from
each such Term Loan Advance being evidenced by this Promissory Note,
(ii) provides for the optional and mandatory prepayment of all such Term
Loan Advances prior to the Maturity Date, together with all accrued interest due
on such date of prepayment, on the dates set forth in the Investment Agreement,
and (iii) is secured by the Security Documents.  The outstanding
principal amount of this Promissory Note, together with all interest accrued
hereon and all other Obligations owing to the Investor hereunder and under the
other Transaction Documents, shall be due and payable in full on the Maturity
Date.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    If
default is made in the punctual payment of principal or any other amount under
this Promissory Note in accordance with the Investment Agreement, or if any
other Event of Default has occurred, this Promissory Note shall, at the
Investor’s option exercised at any time upon or after the occurrence of any such
payment default or other Event of Default (or in the case of an Event of Default
under Section 7.01(h) or (i) of the Investment Agreement, automatically) and in
accordance with the applicable provisions of the Investment Agreement, become
immediately due and payable.

     

    All
payments of any kind due to the Investor from the Company pursuant to this
Promissory Note shall be made in the full face amount thereof.  All such
payments will be free and clear of, and without deduction or withholding for,
any present or future taxes.  The Company shall pay all and any costs
(administrative or otherwise) imposed by banks, clearing houses, or any other
financial institution in connection with making any payments hereunder, except
for any costs imposed by the Investor’s banking institutions.

     

    The
Company shall pay all costs of collection, including, without limitation, all
reasonable, documented legal expenses and attorneys’ fees, paid or incurred by
the Investor in collecting and enforcing this Promissory Note.

     

    The
Company and every endorser of this Promissory Note, or the obligations
represented hereby, expressly waives presentment, protest, demand, notice of
dishonor or default, and notice of any kind with respect to this Promissory Note
and the Investment Agreement or the performance of the obligations under this
Promissory Note and/or the Investment Agreement.  No renewal or extension
of this Promissory Note or the Investment Agreement, no release of any Person
primarily or secondarily liable on this Promissory Note or the Investment
Agreement, including the Company and any endorser, no delay in the enforcement
of payment of this Promissory Note or the Investment Agreement, and no delay or
omission in exercising any right or power under this Promissory Note or the
Investment Agreement shall affect the liability of the Company or any endorser
of this Promissory Note.

     

    No delay
or omission by the Investor in exercising any power or right hereunder shall
impair such right or power or be construed to be a waiver of any default, nor
shall any single or partial exercise of any power or right hereunder preclude
the full exercise thereof or the exercise of any other power or right.  The
provisions of this Promissory Note may be waived or amended only in a writing
signed by the Company and the Investor.

     

    This
Promissory Note shall be governed by, and construed in accordance with, the laws
of the State of New York applicable to contracts made and to be performed in
such State, without giving effect to the conflicts of laws principles thereof
other than Sections 5-1401 and 5-1402 of the General Obligations Law of the
State of New York.


    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    In order
to qualify as a “registered note” for purposes of the Code, transfer of this
Promissory Note may be effected only by (i) surrender of this Promissory
Note to the Company and the re-issuance of this Promissory Note to the
transferee, or the Company’s issuance to the Investor of a new note in the same
form as this Promissory Note but with the transferee denoted as the Investor, or
(ii) the recording of the identity of the transferee by the Company, which
is maintaining a record ownership register of this Promissory Note.  The
terms and conditions of this Promissory Note shall be binding upon and inure to
the benefit of the Company and the Investor and their permitted assigns; provided, however, that if
any such assignment (whether by operation of law, by way of transfer or
participation, or otherwise) is to any noteholder that is not a “United States
person” within the meaning of Section 7701(a)(30) of the Code, then such
noteholder shall submit to the Company on or before the date of such assignment
an IRS Form W-8BEN (or any successor form) certifying as to such noteholder’s
status for purposes of determining exemption from United States withholding tax,
information reporting and backup withholding with respect to all payments to be
made to such noteholder under the new note (or other instrument).  Any
attempted transfer in violation of the relevant provisions of this Promissory
Note shall be void and of no force and effect.  Until there has been a
valid transfer of this Promissory Note and of all of the rights hereunder by the
Investor in accordance with this Promissory Note, the Company shall deem and
treat the Investor as the absolute beneficial owner and holder of this
Promissory Note and of all of the rights hereunder for all purposes (including,
without limitation, for the purpose of receiving all payments to be made under
this Promissory Note).

     

    [Remainder
of Page Intentionally Left Blank]


    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    It is the
intention of the Company and the Investor that this Promissory Note is to be a
registered instrument and not a bearer instrument and the provisions of this
Promissory Note are to be interpreted accordingly.  This Promissory
Note is intended to be registered as to both principal and interest and all
payments hereunder shall be made to the named Investor or, in the event of a
transfer pursuant to the Investment Agreement and this Promissory Note, to the
transferee identified in the record of ownership of this Promissory Note
maintained by the Company.  Transfer of this Promissory Note may not
be effected except in accordance with the provisions hereof.

     

    
      
        	
                DESERT
      HAWK GOLD CORP.

              
	 
      	 
      
	
                By: 

              	
                /s/ Robert E. Jorgensen

              
	 
      	
                Name:    Robert
      E. Jorgensen

              
	 
      	
                Title:      Chief
      Executive Officer

              


      

    

     

    
      [Signature
Page to Promissory Note]

        

    

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    TERM LOAN ADVANCES AND
PAYMENTS OF PRINCIPAL

     

    
      
        
          	
                  Date

                	 
      	
                  Amount of Term

                  Loan Advance

                	 
      	
                  Amount of

                  Principal Paid or

                  Prepaid

                	 
      	
                  Unpaid Principal

                  Balance

                	 
      	
                  Notation Made

                  By