This Severance Agreement and Release ("Agreement") dated as of August 24, 2006 is made by and between Bryan J. Mitchell ("Employee") and MCG Capital Corporation ("Company") (collectively referred to as the "Parties"):

WHEREAS, Employee has been the Chief Executive Officer of the Company, a member of the Board of Directors of the Company and a director of certain of the Company's portfolio companies and the Company's affiliates;

WHEREAS, the Company and Employee entered into an Amended and Restated Employment Agreement, dated as of November 3, 2002 (the "Employment Agreement");

WHEREAS, Employee and the Company desire to terminate Employee's employment with the Company, the Employee's service as a member of the Board of Directors of the Company and the Employee's service on the board of directors of, and the board of managers of, the Company's portfolio companies and the Company's affiliates on August 24, 2006; and

WHEREAS, the Parties, and each of them, wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions and demands that the Employee may have against the Company as defined herein, including, but not limited to, any and all claims arising or in any way related to Employee's employment with, or separation from, the Company.

NOW THEREFORE, in consideration of the promises made herein, the Parties hereby agree as follows. Capitalized terms used herein and not otherwise defined shall have the meaning given to such terms in the Employment Agreement.

1. Termination of Employment and Board Membership. The Employee's last day of employment with the Company, the Employee's last day of service as a member of the Board of Directors of the Company and the Employee's last day of service as a member of the board of directors and as a member of the board of managers of any portfolio company or affiliate of the Company shall be August 24, 2006 (the "Termination Date").
2. Consideration.
   1. Cash and Benefits. Subject to the effectiveness of this Agreement and Employee's continued compliance with his obligations under this Agreement, the Company agrees to provide Employee with the following:
      1. Accrued Compensation. On or promptly following the Termination Date, the Company shall make a lump-sum payment to the Employee equal to (A) all accrued but unpaid salary of the Employee through the Termination Date, (B) all accrued but unpaid vacation pay of the Employee through the Termination Date, plus (C) any compensation which the Employee had previously deferred (including any interest earned or credited thereon) under the Company's deferred compensation plan, subject to (1) the terms of such plan and (2) any delay in payment of such deferred compensation to the extent necessary to avoid adverse tax consequences to the Employee under Section 409A of the Internal Revenue Code of 1986, as amended (the "Accrued Compensation").
      2. Severance Benefits. In addition to the Accrued Compensation, the Company shall pay to the Employee the following severance benefits:
         1. On the date that is six months plus one day after the Termination Date (the "First Payment Date"), the Company shall make a lump-sum payment to the Employee equal to: (A) $750,000, plus (B) the interest accrued on $750,000 during the period beginning on the Termination Date and ending on the First Payment Date, using an annual interest rate of 6.00% for purposes of the calculation.
         2. The Company shall also pay to the Employee $250,000 on the nine month anniversary of the Termination Date, $250,000 on the twelve month anniversary of the Termination Date, and $250,000 on the eighteen month anniversary of the Termination Date (together with the payments contemplated in Section 2(a)(ii)(A), the "Severance Payments").
         3. Beginning on the Termination Date, the Company shall provide the Employee and any of his eligible dependents with continued coverage, at the Company's expense, under the Company's group medical, dental, hospitalization, and disability benefit plans, as such plans may exist from time to time and to the extent permitted under such plans, until the earlier of (1) eighteen (18) months after the Termination Date, or (2) the date Employee becomes eligible to participate in any other plan that provides similar medical, dental, hospitalization, or disability benefits. As of the date that the Employee ceases to receive coverage under any of the Company's group medical, dental, hospitalization, and disability benefit plans pursuant to this Section 2(a)(ii)(C), the Employee shall be eligible to elect to receive "COBRA" continuation coverage to the extent permitted by Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as amended.
         4. Beginning on the Termination Date and ending no later than eighteen (18) months after the Termination Date, the Company shall permit the Employee to continue participating in the Company's group life insurance plan, as such plan may exist from time to time and to the extent permitted under such plan, provided that prior to the First Payment Date, the Employee shall be solely responsible for paying all premiums required under the group life insurance plan to maintain coverage (the "Employee Premium Amount"). To the extent the Employee continues participating in such plan by paying the Employee Premium Amount, on the First Payment Date, the Company shall make a lump-sum payment to the Employee equal to the Employee Premium Amount, less any taxes that are required to be withheld (the "Lump Sum Premium Payment"). In addition to the Lump Sum Premium Payment, during the period beginning on the First Payment Date and ending on the earlier of (1) twelve (12) months after the First Payment Date, or (2) the date Employee becomes eligible to participate in any other plan or program that provides life insurance benefits (the "Severance Period"), the Company shall make monthly payments, on behalf of the Employee, to the applicable life insurance carrier, equal to the monthly premium in effect for the Employee's life insurance policy on the Termination Date (the "Premium Payment Amount"). The Company will withhold from the Severance Payments any tax payments that are required to be withheld and such additional amounts as are necessary to pay the Employee's monthly life insurance premium in full, should the Employee's monthly life insurance premium exceed the Premium Payment Amount during the Severance Period. The Company is not responsible for any loss of the Employee's coverage under the group life insurance plan due to the Employee's failure to pay any premiums required by the group life insurance plan to maintain coverage (x) during the period beginning on the Termination Date and ending on the First Payment Date, and (y) after the end of the Severance Period.
      
       

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