SEC Info - MCG Capital Corp - ‘DEFC14A’ on 5/2/11 re: MCG Capital Corp

MCG Capital Corp – ‘DEFC14A’ on 5/2/11 re: MCG Capital Corp

On: Monday, 5/2/11, at 1:03pm ET · Effective: 5/2/11 · Accession #: 1193125-11-120850 · File #: 814-00239

Definitive Proxy Solicitation Material — Contested Solicitation — Schedule 14A
Filing Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

SEC Info℠

Home

Help

Please Sign In

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/02/11  MCG Capital Corp                  DEFC14A     5/02/11    1:1.0M MCG Capital Corp                  RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: DEFC14A     Definitive Proxy Solicitation Material --           HTML    703K 
                          Contested Solicitation

Director Since

Principal Occupation, Other Business Experience During the

Past Five Years and Other Directorships

Kenneth J. O’Keefe(2)(3)

Mr. O’Keefe served as the Chairman of our board from February 2005 to March 2007. He is currently a Managing Director of Vestar Capital Partners, a private equity firm. From July 2003 until June 2006, he was Chief Executive Officer of NewVen Partners, LLC, a private investment firm, which he founded. Prior to July 2003, Mr. O’Keefe held executive positions with several large media companies over an 18-year career, including Pyramid Communications, Inc., where he served as Executive Vice President, Chief Financial Officer and a board member, Evergreen Media Corporation as Executive Vice President of Operations and a board member, Chancellor Media Corporation as Executive Vice President of Operations, AMFM, Inc. as Chief Executive Officer, President and Chief Operating Officer, Clear Channel Communications, Inc. as President and Chief Operating Officer of its radio division and Infinity Broadcasting as Executive Vice President. Mr. O’Keefe is a graduate of Brown University and currently serves as a Trustee Emeriti of the Corporation of Brown University. Mr. O’Keefe’s term as a Class II director will expire in 2012.

Mr. O’Keefe brings to the board his finance and investment experience as well as business development skills acquired through his work managing private equity investments. Mr. O’Keefe’s extensive background as an executive officer and board member of several large media issuers demonstrates his leadership capability and business acumen. This expertise enables Mr. O’Keefe to provide useful insights to management in connection with all of our portfolio companies, and especially with regard to our media and communications investments. With his knowledge of the complex issues facing companies today and his understanding of what makes businesses work effectively and efficiently, Mr. O’Keefe provides a unique perspective to our board. Mr. O’Keefe’s background has enabled him to cultivate an enhanced understanding of operations and strategy with an added layer of risk management experience that is an important aspect of the composition of our board of directors.

Gavin Saitowitz(1)(2)(3)(4)

Mr. Saitowitz is a Managing Member of Springbok Capital Management, LLC, a New York-based investment management firm. Prior to co-founding Springbok Capital, from 2002 through 2004 Mr. Saitowitz served as an Investment Analyst at Highfields Capital Management LP, a Boston-based investment firm specializing in long-term capital appreciation. From 1998 to 2000, Mr. Saitowitz was an Analyst at Kohlberg Kravis Roberts & Co., a private equity firm. From 1996 to 1998, Mr. Saitowitz was an Analyst in the Investment Banking Division of Goldman, Sachs & Co. From 1994 to 1996, Mr. Saitowitz was a valuation consultant for Arthur Andersen LLP. Mr. Saitowitz received a B.S. from the University of Colorado, Boulder and an M.B.A. from Harvard Business School. Mr. Saitowitz’s term as a Class II director will expire in 2012.

Mr. Saitowitz has substantial experience analyzing and evaluating companies through his work as a valuation consultant, investment banker, private equity investor and hedge fund manager. Through his research knowledge and experience supervising the investment management process, including asset management, improving operations, the rollout of new products and the advancement of technology, Mr. Saitowitz brings valuable financial, operational and strategic expertise to our board. The breadth of his background and experience enables Mr. Saitowitz to provide unique insight into our strategic process and into the management of our investment portfolio.

DEFC14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

Filed by the Registrant x

Filed by a Party other than the Registrant ¨

Check the appropriate box:


¨	Preliminary proxy statement
¨	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x	Definitive Proxy Statement
¨	Definitive Additional Materials
¨	Soliciting Material Pursuant to §240.14a-12

MCG Capital Corporation
(Name of Registrant as Specified in its Charter)


(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x	No fee required.

¨	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)	Title of each class of securities to which transaction applies:


	(2)	Aggregate number of securities to which transaction applies:


	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):


	(4)	Proposed maximum aggregate value of transaction:


	(5)	Total fee paid:



¨	Fee paid previously with preliminary materials.

¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)	Amount Previously Paid:


	(2)	Form, Schedule or Registration Statement No.:


	(3)	Filing Party:


	(4)	Date Filed:

LOGO

MCG CAPITAL CORPORATION

1100 Wilson Boulevard, Suite 3000

Arlington, Virginia 22209

(703) 247-7500

May 2, 2011

To Our Stockholders:

You are cordially invited to attend the 2011 Annual Meeting of Stockholders of MCG Capital Corporation to be held on Wednesday, June 1, 2011 at 9:00 a.m., local time, at The Latham Hotel, 3000 M Street, NW, Washington, DC 20007.

The Notice of Annual Meeting and Proxy Statement on the following pages describe the matters to be presented at the 2011 Annual Meeting.

It is important that your shares be represented at this meeting to assure the presence of a quorum. Whether or not you plan to attend the 2011 Annual Meeting, we hope that you will have your stock represented by voting your shares over the Internet or by telephone as provided in the instructions set forth on the enclosed WHITE proxy card, or by completing, signing, dating and returning your proxy in the enclosed envelope, as soon as possible. Your stock will be voted in accordance with the instructions you have given in your proxy.

Please note that certain persons affiliated with a hedge fund complex have provided notice that they intend to propose a slate of alternative director nominees for election at the 2011 Annual Meeting in opposition to the nominees recommended by our board of directors. These alternative nominees have not been endorsed by our board of directors.

Our board of directors unanimously recommends a vote for the election of all of the board of directors’ nominees on the enclosed WHITE proxy card, and urges you not to sign any other proxy cards that you may receive. If you have previously signed any COLOR proxy card, you have the right to change your vote by using the enclosed WHITE proxy card to vote over the Internet, by telephone or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. Only the latest dated proxy you submit will be counted — any proxy may be revoked at any time prior to its exercise at the 2011 Annual Meeting as described in the proxy statement.

Thank you for your continued support.


		Sincerely,


		Steven F. Tunney, Sr.
		President and Chief Executive Officer

LOGO

MCG CAPITAL CORPORATION

1100 Wilson Boulevard, Suite 3000

Arlington, Virginia 22209

(703) 247-7500

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On June 1, 2011

To Our Stockholders:

NOTICE IS HEREBY GIVEN that the 2011 Annual Meeting of Stockholders of MCG Capital Corporation, or the Annual Meeting, will be held on Wednesday, June 1, 2011 at 9:00 a.m., local time, at The Latham Hotel, 3000 M Street, NW, Washington, DC 20007. The purposes of the Annual Meeting are as follows:

To elect three (3) members to our board of directors to serve as Class I directors, each for a term of three years, or until their successors are elected and qualified;

To ratify the selection by the Audit Committee of our board of directors of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2011;

To consider an advisory vote on the compensation of our named executive officers;

To consider an advisory vote on the frequency of the advisory vote on the compensation of our named executive officers; and

To transact such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof.

Stockholders of record at the close of business on Thursday, April 7, 2011 are entitled to notice of, and to vote at, the Annual Meeting or any adjournment thereof. A complete list of such stockholders will be open to the examination of any stockholder at our principal executive offices at 1100 Wilson Boulevard, Suite 3000, Arlington, Virginia 22209, during ordinary business hours, for a period of ten days prior to the Annual Meeting as well as at the Annual Meeting. The Annual Meeting may be adjourned from time to time without notice other than by announcement at the Annual Meeting.

Your vote is important regardless of the number of shares you own. We hope that all stockholders will be able to attend the Annual Meeting in person. However, to ensure that a quorum is present at the Annual Meeting, please vote your shares over the Internet or by telephone as provided in the instructions set forth on the enclosed WHITE proxy card, or complete, date, sign and promptly return the enclosed WHITE proxy card whether or not you expect to attend the Annual Meeting. A postage-paid envelope has been enclosed for your convenience. If you attend the Annual Meeting and vote in person, any proxies you previously submitted will be revoked.

All stockholders are cordially invited to attend the Annual Meeting.


		By Order of the Board of Directors,


		Tod K. Reichert
		Corporate Secretary

Arlington, Virginia

May 2, 2011

Your Vote Is Important, No Matter How Many Or How Few Shares You Own.

If you have questions about how to vote your shares, or need additional assistance, please contact the

firm assisting us in the solicitation of proxies:

LOGO

105 Madison Avenue

New York, NY 10016

proxy@mackenziepartners.com

(212) 929-5500 (Call Collect)

TOLL-FREE (800) 322-2885

IMPORTANT

We urge you NOT to sign any COLOR proxy card you may receive.

If you have already done so, you have every legal right to change your vote by using the enclosed

WHITE proxy card to vote TODAY — by telephone,

by Internet, or by signing, dating and returning the enclosed WHITE proxy card

in the postage-paid envelope provided.

MCG CAPITAL CORPORATION

1100 WILSON BOULEVARD, SUITE 3000

ARLINGTON, VIRGINIA 22209

PROXY STATEMENT

for the 2011 Annual Meeting of Stockholders

to be held on Wednesday, June 1, 2011

This proxy statement and the enclosed WHITE proxy card are being furnished in connection with the solicitation of proxies by the board of directors of MCG Capital Corporation, also referred to in this proxy statement as the “Company,” “MCG,” “we” or “us,” for use at our 2011 Annual Meeting of Stockholders, or the Annual Meeting, to be held on Wednesday, June 1, 2011 at 9:00 a.m., local time, at The Latham Hotel, 3000 M Street, NW, Washington, DC 20007, and at any adjournment or postponement thereof. You may obtain directions to the location of the Annual Meeting by contacting Tod K. Reichert, Corporate Secretary, MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, Virginia 22209; telephone: (703) 247-7552.

All proxies will be voted in accordance with the instructions contained in those proxies. If no choice is specified, the proxies will be voted for the election of the director nominees of our board of directors, for the ratification of our independent public accounting firm, for the approval of the compensation of our named executive officers and for “one year” on the Proposal recommending the frequency of future non-binding stockholder advisory votes on the compensation of our named executive officers. Any proxy may be revoked by a stockholder at any time before it is exercised by delivery of written revocation to our corporate secretary, by submission of a new, later-dated proxy or by appearing at the Annual Meeting and voting in person, See “ — Changing Your Vote; Revocation of Proxy” below.

Our 2010 Annual Report to Stockholders for the fiscal year ended December 31, 2010 is being mailed to stockholders with the mailing of these proxy materials on or about May 2, 2011.

Important Notice Regarding the Availability of Proxy Materials for the Annual

Meeting of Stockholders to be Held on June 1, 2011:

This proxy statement and the 2010 Annual Report to Stockholders are available for viewing, printing and downloading at http://investor.mcgcapital.com/2011AnnualMeeting.cfm.

A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, as filed with the Securities and Exchange Commission, except for exhibits, will be furnished without charge to any stockholder upon written request to MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, Virginia 22209, Attention: Tod K. Reichert, Corporate Secretary, telephone: (703) 247-7552.

Voting Securities

Stockholders of record at the close of business on Thursday, April 7, 2011 will be entitled to notice of, and to vote at, the Annual Meeting. On that date, 77,064,693 shares of our common stock were issued and outstanding. Each share of common stock entitles the holder thereof to one vote with respect to all matters submitted to stockholders at the Annual Meeting. We have no other securities entitled to vote at the Annual Meeting.

Quorum and Vote Required

The presence in person or representation by proxy of the holders of a majority of the shares of common stock issued and outstanding and entitled to vote at the Annual Meeting is necessary to establish a quorum for the transaction of business. If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained. Abstentions are included in the shares present at the Annual Meeting for purposes of determining whether a quorum is present.

Broker non-votes (when shares are represented at the Annual Meeting by a proxy specifically conferring only limited authority to vote on certain matters and no authority to vote on other matters) are included in the determination of the number of shares represented at the Annual Meeting for purposes of determining whether a quorum is present but are not counted for purposes of determining whether a proposal has been approved and thus, have no effect on the outcome. There have been important changes regarding broker non-votes and director elections. See below for information about the change.

Proposal No. 1, the vote for the election of our directors, Proposal No. 3, regarding an advisory vote on the compensation of our named executive officers, and Proposal No. 4, regarding an advisory vote on the frequency of the advisory vote on the compensation of our named executive officers, are proposals on which your broker does not have discretionary authority to vote. Thus, if your shares are held in street name and you do not provide instructions as to how your shares should be voted on such discretionary proposals, your broker or other nominee may not vote

your shares with respect to such proposals. We urge you to provide instructions to your broker or nominee so that your votes may be considered on these important matters.

Important Change: A recent NYSE rule change prevents brokers from voting in the election of directors if the holder of record has not received instructions from the beneficial owner. This represents a historical change from past years, when brokers had discretionary voting authority in the uncontested election of directors. Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares. Your broker will not be able to vote your shares for the election of directors without your specific instructions, whether or not the proposed alternative nominees are withdrawn.

The votes will be counted, tabulated and certified by a representative of IVS Associates, Inc., who will serve as the inspector of elections at the Annual Meeting.

The table below sets forth the quorum requirements and votes required for each of the proposals to be presented at Annual Meeting:


Proposal	Description	Quorum Requirement	Vote Required
No. 1	Election of three Class I directors.	The presence, in person or by proxy, of holders of a majority in voting power of the outstanding shares of common stock entitled to vote at the Annual Meeting.	The affirmative vote of the holders of a plurality of the shares of common stock represented at the Annual Meeting, provided a quorum is present in person or by proxy.
No. 2	Ratify the selection by the Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2011.	The presence, in person or by proxy, of holders of a majority in voting power of the outstanding shares of common stock entitled to vote at the Annual Meeting.	The affirmative vote of the holders of a majority in voting power of the outstanding shares of common stock represented at the Annual Meeting and voting on this proposal, provided a quorum is present in person or by proxy.
No. 3	Consider an advisory vote on the compensation of our named executive officers.	The presence, in person or by proxy, of holders of a majority in voting power of the outstanding shares of common stock entitled to vote at the Annual Meeting.	The affirmative vote of the holders of a majority in voting power of the outstanding shares of common stock represented at the Annual Meeting and voting on this proposal, provided a quorum is present in person or by proxy. Because your vote is advisory, it will not be binding on our board of directors. However, our board of directors will review the voting results and take them into consideration when making future decisions regarding executive compensation.
No. 4	Consider an advisory vote on the frequency of the advisory vote on the compensation of our named executive officers.	The presence, in person or by proxy, of holders of a majority in voting power of the outstanding shares of common stock entitled to vote at the Annual Meeting.	The frequency of the advisory vote on the compensation of our named executive officers receiving the greatest number of votes — every one year, every two years or every three years — will be considered the frequency that stockholders approve, provided a quorum is present in person or by proxy. Because your vote is advisory, it will not be binding on our board of directors. However, in its adopting release, the SEC counseled that a stockholder proposal for a binding stockholder vote adopting a different frequency could be excluded from the Company’s proxy statement in the future under the SEC regulations only if, in the most recent stockholder vote on the frequency of “say-on-pay votes,” a single frequency (i.e., one, two or three years) received the support of a majority of the votes cast, not simply the most votes cast, and the Company adopted a policy on the frequency of say-on-pay votes consistent with that choice.

Election of Class I Directors. The affirmative vote of a plurality of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote at the Annual Meeting is required to elect each of the three nominees as Class I directors. Stockholders may not cumulate their votes. If you vote “withhold authority” with respect to one or more nominees, your shares will not be voted with respect to the person or persons indicated. Because directors are elected by a plurality of the votes, an abstention will have no effect on the outcome of the vote and, therefore, is not offered as a voting option for this proposal.

Ratification of Our Independent Registered Public Accounting Firm. The affirmative vote of a majority in voting power of the outstanding shares of common stock present in person or represented by proxy at the Annual

-2-

Meeting and voting on this proposal is required to approve this proposal. An abstention from voting on this proposal will have no effect on the outcome of this proposal.

Consideration of an Advisory Vote on the Compensation of Our Named Executive Officers. The affirmative vote of a majority in voting power of the outstanding shares of common stock present in person or represented by proxy at the Annual Meeting and voting on this proposal is required to approve this proposal. Because your vote is advisory, it will not be binding on our board of directors. However, our board of directors will review the voting results and take them into consideration when making future decisions regarding executive compensation. Broker non-votes and abstentions from voting on this proposal will have no effect on the outcome of this proposal.

Consideration of an Advisory Vote on the Frequency of the Advisory Vote on the Compensation of Our Named Executive Officers. The frequency of the advisory vote on compensation of our named executive officers receiving the greatest number of votes — every one year, every two years or every three years — will be considered the frequency that stockholders approve. Because your vote is advisory, it will not be binding on our board of directors. However, in its adopting release, the SEC counseled that a stockholder proposal for a binding stockholder vote adopting a different frequency could be excluded from the Company’s proxy statement in the future under the SEC regulations only if, in the most recent stockholder vote on the frequency of say-on-pay votes, a single frequency (i.e., one, two or three years) received the support of a majority of the votes cast, not simply the most votes cast, and the Company adopted a policy on the frequency of “say-on-pay votes” consistent with that choice. Broker non-votes and abstentions from voting on this proposal will have no effect on the outcome of this proposal.

Voting Your Shares

If you are the record holder of your shares, you may vote in one of four ways. You may vote by submitting your proxy by telephone, over the Internet, by mail or you may vote in person at the Annual Meeting.

You may vote by telephone. You may vote your shares by following the “Vote by Telephone” instructions set forth on the enclosed WHITE proxy card.

You may vote over the Internet. If you have Internet access, you may vote your shares from any location in the world by following the “Vote by Internet” instructions set forth on the enclosed WHITE proxy card.

You may vote by mail. You may vote by completing, dating and signing the WHITE proxy card that accompanies this proxy statement and promptly mailing it in the enclosed postage-paid envelope. You do not need to put a stamp on the enclosed envelope if you mail it in the United States. The shares you own will be voted according to the instructions on the WHITE proxy card you mail. If you return the WHITE proxy card, but do not give any instructions on a particular matter described in this proxy statement, the shares you own will be voted in accordance with the recommendations of our board of directors. Our board of directors recommends that you vote FOR the director nominees of our board of directors, FOR the ratification of our independent public accounting firm, FOR the approval of the compensation of our named executive officers and select “one year” on the Proposal recommending the frequency of future non-binding stockholder advisory votes on the compensation of our named executive officers.

You may vote in person. If you attend the Annual Meeting and are a registered stockholder, you may vote by delivering your completed WHITE proxy card in person or you may vote by completing a ballot. Ballots will be available at the Annual Meeting. If you hold your shares through a bank or broker, you must obtain a legal proxy from your bank or broker in order to vote at the Annual Meeting.

Western Investment LLC, or Western Investment, has stated its intention to nominate three candidates for election to our board of directors. You may receive proxy solicitation materials from Western Investment, including an opposition proxy statement and proxy card. Our board of directors has not endorsed the nomination of the nominees proposed by Western Investment, and therefore urges you not to sign or return any proxy card sent to you by Western Investment.

Changing Your Vote; Revocation of Proxy

Voting by telephone, over the Internet or execution of a proxy will not in any way affect a stockholder’s right to attend the Annual Meeting and vote in person. A proxy may be revoked before it is used to cast a vote. To revoke a proxy, a stockholder must:

•

file with our corporate secretary, at or before the taking of the vote, a written notice of revocation bearing a later date than the proxy;

•

duly execute a later dated proxy relating to the same shares and deliver it to our corporate secretary before the taking of the vote; or

•

attend the Annual Meeting and vote in person.

If Western Investment solicits proxies for the Annual Meeting and you have previously signed a proxy card sent to you by Western Investment, you may change your vote by marking, signing, dating and returning the

-3-

enclosed WHITE proxy card in the accompanying postage-paid envelope or by voting by telephone or over the Internet by following the instructions above. Only the latest dated proxy you submit will be counted.

Attendance at the Annual Meeting, if a stockholder does not vote at the Annual Meeting, will not be sufficient to revoke a proxy.

Any written notice of revocation or subsequent proxy should be sent to us at the following address: MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, Virginia 22209, Attention: Tod K. Reichert, Corporate Secretary. The shares represented by all properly executed proxies received in time for the Annual Meeting will be voted as specified in those proxies.

If the shares you own are held in your name and you do not specify on the WHITE proxy card how your shares are to be voted, they will be voted in favor of (i) the election of the directors named in this proxy statement and recommended by our board of directors, (ii) the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm, (iii) the compensation paid to our named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion contained in this proxy statement, (iv) “one year” on the Proposal recommending the frequency of future non-binding stockholder advisory votes on the compensation of our named executive officers and (v) in the discretion of the persons appointed as proxies, on any other items that may properly come before the Annual Meeting.

If the shares you own are held in “street name,” the bank or brokerage firm, as the record holder of your shares, is required to vote your shares in accordance with your instructions. To vote your shares held in “street name,” you will need to follow the directions provided to you by your bank or brokerage firm.

Information Regarding This Solicitation

The accompanying proxy is solicited by and on behalf of our board of directors, and we will bear the expense of the solicitation of proxies for the Annual Meeting, including the cost of preparing, printing and mailing this proxy statement, the accompanying Notice of Annual Meeting of Stockholders and WHITE proxy card.

We have also retained MacKenzie Partners, Inc., or MacKenzie Partners, to assist in the solicitation of proxies from brokers, nominees, institutions and individuals. We have agreed to pay MacKenzie Partners customary fees, plus reimbursement of out-of-pocket expenses and have agreed to customary indemnification provisions. MacKenzie Partners expects to use approximately 25 of its employees to assist in the solicitations.

In addition to the use of the mails, proxies may be solicited by personal interview, telephone and facsimile transmission by directors, officers and other employees of MCG who will not be specially compensated for these services. We have requested that brokers, nominees, fiduciaries and other persons holding shares in their names, or in the name of their nominees, that are beneficially owned by others, forward the proxy materials to, and obtain proxies from, such beneficial owners. We will reimburse such persons for their reasonable expenses in so doing.

We estimate that total costs relating to the solicitation of proxies (in excess of those normally spent for an annual meeting with an uncontested director election and excluding salaries and wages of our regular employees and officers) are currently expected to be approximately $650,000. Actual expenditures may vary materially from this estimate, however, as many of the expenditures cannot be readily predicted.

Appendix A to this proxy statement sets forth information relating to our directors, director nominees, officers and employees who are considered “participants” in the solicitation under the rules of the Securities and Exchange Commission, or SEC, by reason of their position as directors or director nominees or because they may be soliciting proxies on our behalf

If you have any questions, or need assistance in voting your shares, please contact:

LOGO

105 MADISON AVENUE

NEW YORK, NY 10016

(212) 929-5500 (Call Collect)

TOLL-FREE (800) 322-2885

-4-

PROPOSAL ONE

ELECTION OF DIRECTORS

Board Recommendation

Our board of directors recommends a vote “FOR” the election of each of Messrs. Millner, Neu and Saville as Class I directors.

We have three classes of directors, currently consisting of three Class I directors, three Class II directors and two Class III directors. At each annual meeting of stockholders, directors are elected for a full term of three years to succeed those whose terms are expiring. The terms of the three classes are staggered in a manner so that only one class is elected by stockholders annually. Wallace B. Millner, III, Richard W. Neu and B. Hagen Saville are currently serving as Class I directors. A. Hugh Ewing, III, Kenneth J. O’Keefe and Gavin Saitowitz are currently serving as Class II directors, whose terms expire in 2012. Steven F. Tunney, Sr. and Kim D. Kelly are currently serving as Class III directors, whose terms expire in 2013. The Class I directors elected this year will serve as members of our board of directors until the 2014 annual meeting of stockholders, or until their respective successors are elected and qualified.

The persons named in the enclosed proxy card will vote to elect Messrs. Millner, Neu and Saville as Class I directors unless you withhold authority to vote for the election of any or all nominees by marking the proxy card (whether executed by you or through the Internet or telephonic voting). Messrs. Millner, Neu and Saville currently serve on our board of directors, have indicated their willingness to continue to serve if elected and have consented to be named as nominees. However, if any director nominee should be unable to serve, the shares of common stock represented by proxies may be voted for a substitute nominee designated by our board of directors. Our board of directors has no reason to believe that the nominees will be unable to serve if elected.

On April 24, 2009, we and Springbok Capital Management, LLC, Springbok Capital Onshore, LLC, Gavin Saitowitz, Soundpost Partners, LP, Jaime Lester, Lyrical Partners, L.P., Jeffrey Keswin, Robert S. Everett and Edward Gage, collectively referred to as the Springbok Group, entered into a settlement agreement to settle matters pertaining to the contested election of directors at our 2009 Annual Meeting. Pursuant to the terms of the settlement agreement, the Springbok Group agreed to withdraw its nominees, cease its solicitation efforts in support thereof and vote its shares in support of all of our board of directors’ nominees through the 2010 Annual Meeting and any proposals submitted by us for consideration at the 2009 Annual Meeting.

Under the settlement agreement, our board of directors appointed Mr. Saitowitz to our board of directors to serve as a Class II director effective as of April 30, 2009 and nominated Mr. Saitowitz for re-election as a Class II director with a term expiring at our 2012 annual meeting of stockholders. In addition, under the settlement agreement, we agreed that we would reduce our board of directors to eight directors prior to August 31, 2009, provided that the size of our board of directors may be increased in connection with a merger, share exchange or other business combination in which we are the surviving entity and which is approved by our stockholders. On April 27, 2009, Jeffrey M. Bucher submitted his resignation effective as of April 30, 2009, which had the effect of reducing the board to nine members. On June 17, 2009, Robert J. Merrick tendered his resignation as a member of the board of directors, which reduced our board from nine directors to eight.

On February 25, 2011, we received notice that Western Investment sought to propose three candidates for nomination for election to our board of directors. The nomination of the candidates proposed by Western Investment has not been endorsed by our board of directors.

Director Qualifications

In considering whether to recommend any particular candidate for inclusion in the board’s slate of recommended director nominees, the nominating and corporate governance committee applies the criteria attached to its charter. These criteria include the candidate’s integrity, business acumen, knowledge of our business and industry, experience, diligence, conflicts of interest and the ability to act in the interests of all stockholders. The nominating and corporate governance committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee.

We believe that our directors and nominees have an appropriate balance of knowledge, experience, attributes, skills and expertise required for our board as a whole and that we have sufficient independent directors to comply with applicable law and regulations. We believe that our directors have a broad range of personal and professional characteristics, including: leadership; management ability; financial experience; the ability to act with integrity and sound judgment; the capacity to demonstrate innovative thinking, consider strategic proposals, assist with the development of our strategic plan and oversee its implementation; the ability to oversee our risk management efforts and executive compensation programs; and the commitment to preparation for, and attendance at, board and committee meetings.

-5-

Our board of directors does not have a specific diversity policy, but considers diversity of race, religion, national origin, gender, sexual orientation, disability, cultural background and professional experiences in evaluating candidates for board membership. We believe diversity is important because a variety of viewpoints contribute to an effective decision-making process.

Set forth below for each of our directors, including the Class I director nominees, is information as of April 1, 2011 with respect to each director’s (a) name and age, (b) positions and offices with us, (c) principal occupation and business experience during at least the past five years, (d) directorships, if any, of other publicly held companies held during the past five years and (e) the year such person became a member of our board of directors. Following each director’s biographical information, we have provided information concerning the particular experience, qualifications, attributes and/or skills that led our nominating and corporate governance committee and board of directors to determine that each individual should serve as a director.

Our Director Nominees


Independent Directors
Messrs. Millner and Neu are considered independent for purposes of the 1940 Act.
Class I directors, nominees to be elected at the 2011 Annual Meeting of Stockholders (if elected, terms to expire in 2014)
Name	Age	Director Since	Principal Occupation, Other Business Experience During the Past Five Years and Other Directorships

Wallace B. Millner, III(3)(4)	71	1998	Mr. Millner served as the Chairman of our board from November 2002 to February 2005 and from 1998 through May 2001. From 1973 until his retirement in 1997, Mr. Millner served in various executive positions at Signet Banking Corporation, a bank holding company, including Vice Chairman and Chief Financial Officer, where he was responsible for the capital markets function. Mr. Millner received an M.B.A. from the University of North Carolina and a B.A. from Davidson College. Mr. Millner is an experienced financial leader with the skills necessary to lead our investment and valuation committee. His service as Vice Chairman and Chief Financial Officer of Signet Banking Corporation and as a former director of another business development company make him a valuable asset on our board of directors. Mr. Millner’s positions have provided him with a wealth of knowledge in dealing with financial and accounting matters. The depth and breadth of his exposure to complex financial issues makes him a skilled advisor to MCG.
Richard W. Neu(1)(3)(4)	55	2007	Mr. Neu became the Chairman of our board in April 2009. Mr. Neu currently serves on the board of directors and audit committee of Huntington Bancshares Incorporated and is the chairman of the board of directors and serves on the audit committee of Dollar Thrifty Automotive Group, Inc. Mr. Neu was the Chief Financial Officer and Treasurer of Charter One Financial, Inc. from December 1985 to August 2004, and was a director of Charter One Financial, Inc. from 1992 to August 2004. Mr. Neu previously worked for KPMG as a Senior Audit Manager. Mr. Neu received a B.B.A. from Eastern Michigan University with a major in accounting. Mr. Neu’s public company board experience along with his proven success as an executive officer of a large public company demonstrates his leadership capability and extensive knowledge of complex financial and operational issues that public companies face. Mr. Neu brings years of experience in public accounting with KPMG and as a chief financial officer of two publicly held financial institutions that is critical to our board of directors. Mr. Neu’s knowledge of accounting principles, financial reporting rules and regulations, the evaluation of financial results and the oversight of the financial reporting process of large public companies from the perspective of an independent auditor, a board member and an audit committee member of other public companies makes him an ideal chairman and asset to our board of directors.

-6-

Our Director Nominees (Continued)


Interested Director
Mr. Saville is an interested person, as defined in the 1940 Act, due to his position as an officer of MCG.
Class I director, nominee to be elected at the 2011 Annual Meeting of Stockholders (if elected, term to expire in 2014)
Name	Age	Director Since	Principal Occupation, Other Business Experience During the Past Five Years and Other Directorships

B. Hagen Saville(4)	49	2006	Mr. Saville has served as our Executive Vice President of Business Development since March 1998. From 1997 to March 1998, Mr. Saville was employed at First Union National Bank, which acquired Signet Bank in 1997. From 1994 to 1997, Mr. Saville was employed at Signet Bank where he served as vice president. Mr. Saville received a B.A. from Washington College, an M.B.A. from The College of William and Mary and an M.S. from New York University. Through his 17-plus years of experience at our Company and its predecessor, as a member of Signet Bank and First Union National Bank and through his background in commercial and investment banking, Mr. Saville has developed a deep knowledge and understanding of the financial services industry, the restructuring of troubled investments, public and private capital raising, asset management activities for debt and equity investments, the valuation of private debt and equity investments, various industry sectors, MCG, our business and the companies in which we invest. Through this time, Mr. Saville has demonstrated his leadership abilities and his commitment to our Company. The board also believes that Mr. Saville’s integrity, values and good judgment make him well suited to serve on our board.

Our Current Directors
Interested Director
Mr. Tunney is an interested person, as defined in the 1940 Act, due to his position as an officer of MCG.
Name	Age	Director Since	Principal Occupation, Other Business Experience During the Past Five Years and Other Directorships

Steven F. Tunney, Sr.(4)	50	1999	Mr. Tunney, one of MCG’s co-founders, has served as our President since May 2001, and as our Chief Executive Officer since August 2006. Previously, he served as our Chief Operating Officer from March 1998 to August 2006, as our Chief Financial Officer and Secretary from March 1998 to February 2000 and as our Treasurer from March 1998 to July 2002. From 1997 to February 1998, Mr. Tunney was employed at First Union National Bank, which acquired Signet Bank in 1997. From 1996 to 1997, Mr. Tunney was employed at Signet Bank where he served as a vice president. Previously, Mr. Tunney served as the chief financial officer of MCG’s first customer, oversaw financial reporting at an international software development firm and worked for PricewaterhouseCoopers, LLP as an auditor. While at MCG, Mr. Tunney has been responsible for raising $222.0 million of equity capital and $3.1 billion of debt capital and has overseen $4.8 billion of investments to middle market companies. Mr. Tunney received a B.S. from Towson State University and was licensed as a CPA in 1985. Mr. Tunney’s term as a Class III director will expire in 2013. With over 14 years of experience at almost every executive level of our Company, prior experience as an auditor and as a financial officer for middle market companies and as an officer of Signet Bank and First Union National Bank, Mr. Tunney is well positioned to lead our management team and provide essential insight and guidance to our board of directors regarding our day-to-day operations, the middle market companies in which we make debt and equity investments and the capital markets for which we rely on to provide our funding.

-7-

Our Director Nominees (Continued)


Independent Directors
Messrs. Ewing, O’Keefe and Saitowitz and Ms. Kelly are considered independent for purposes of the 1940 Act.
Name	Age	Director Since	Principal Occupation, Other Business Experience During the Past Five Years and Other Directorships

A. Hugh Ewing, III(1)(2)(3)(4)	67	2007	From January 1992 to May 2009, Mr. Ewing served as President and Managing Director, and continues to serve as a Managing Director, of Ewing Bemiss & Co., an independent investment bank providing investment banking services to middle market companies across the United States based in Richmond, Virginia. Prior to founding Ewing Bemiss & Co. in 1992, he was a partner in Galleher & Company where he was active in private placements, leveraged buyouts, and mergers and acquisitions, and as a principal in leveraged buyouts and venture capital. Prior to that, he was vice president, corporate finance of Wheat, First Securities, Inc., where he headed the mergers and acquisitions group. Mr. Ewing was also a general partner of Hillcrest Group, which managed venture capital funds, and is a past chairman of the National Association of Small Business Investment Companies. Mr. Ewing received his M.B.A. from the University of Virginia, Darden School of Business and his B.S. in civil engineering from the Virginia Military Institute. Mr. Ewing’s term as a Class II director will expire in 2012. Mr. Ewing possesses a vast amount of knowledge regarding the financial services industry acquired through his 35 years of experience with several banking organizations. He has gained valuable insight by overseeing many aspects of the banking field, including his work in mergers and acquisitions, leveraged buyouts, financial modeling and valuations. He also brings significant middle market company experience to his position, having worked extensively in venture capital financing and private placements and through his involvement with the Small Business Investment Company (SBIC) industry.
Kim D. Kelly(1)(2)(3)(4)	54	2004	Since June 2005, Ms. Kelly has served as a consultant, primarily to private equity firms, in the media and restructuring fields. Most recently, from December 2008 to July 2010, Ms. Kelly served as Chief Restructuring Officer for Equity Media Holdings Corporation, a former NASDAQ issuer. Previously, Ms. Kelly held executive positions with a number of large media companies. From May 2004 until April 2005, Ms. Kelly served as the President and Chief Executive Officer, and from April 2004 until April 2006 as a director, of Arroyo Video Solutions, Inc., a software company serving video service providers. From 1990 to August 2003, Ms. Kelly was employed by Insight Communications Company, Inc., where she was President from January 2002 to August 2003, Chief Operating Officer from January 1998 to August 2003 and Executive Vice President and Chief Financial Officer from 1990 to January 2002. Ms. Kelly also served as a director at Insight Communications from July 1999 to August 2003. From July 1999 to 2003, she also served as Chief Executive Officer of Insight Midwest, L.P. Ms. Kelly currently serves as a trustee of BNY Mellon Funds Trust. Ms. Kelly is a graduate of George Washington University. Ms. Kelly’s term as a Class III director will expire in 2013. Ms. Kelly, the chair of our audit committee, has vast experience in the financial and operational restructuring of complex businesses, and her skills gained through service as a chief executive officer, chief financial officer, chief operating officer and chief restructuring officer of various public and private companies is essential to our board of directors. Her experience on the board of directors of other public companies and her insight on financial and operational issues are particularly valuable to our board of directors during this period of challenging economic conditions.

-8-

Our Director Nominees (Continued)

(1)	Member of the Audit Committee.

(2)	Member of the Compensation Committee.

(3)	Member of the Nominating and Corporate Governance Committee.

(4)	Member of the Investment and Valuation Committee.

-9-

No director or executive officer is related by blood, marriage or adoption to any other director or executive officer. Other than Mr. Saitowitz’s appointment to our board of directors as a Class II director with a term expiring at our 2012 annual meeting pursuant to the settlement agreement with the Springbok Group described above, no arrangements or understandings exist between any director or person nominated for election as a director and any other person pursuant to which such person is to be selected as a director or nominee for election as a director.

For information relating to shares of our common stock owned by and restricted stock awarded to each of our directors, see the disclosure set forth under the headings “Executive Compensation — Fiscal 2010 Director Compensation” and “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

-10-

CORPORATE GOVERNANCE

General

We believe that good corporate governance is important to ensure that MCG is managed for the long-term benefit of our stockholders. During the past year, we have continued to review our corporate governance policies and practices and to compare them to those suggested by various authorities in corporate governance and the practices of other public companies. We have also continued to review the provisions of the Sarbanes-Oxley Act of 2002, the new and proposed rules of the SEC and the listing standards of the NASDAQ Global Select Market.

This section describes key corporate governance practices that we have adopted. Complete copies of our corporate governance guidelines, committee charters and code of business conduct and ethics described below are available on the “Corporate Governance” section of our website at www.mcgcapital.com. Alternatively, you may request a copy of any of these documents by writing to MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, Virginia 22209, attention: Tod K. Reichert, Senior Vice President, Chief Compliance Officer and Corporate Secretary, telephone: (703) 247-7552.

Corporate Governance Guidelines

Our board of directors has adopted corporate governance guidelines to assist our board of directors in the exercise of its duties and responsibilities and to serve the best interests of MCG and its stockholders. These guidelines, which provide a framework for the conduct of the board of directors’ business, provide that:

•

the principal responsibility of the directors is to oversee the management of MCG;

•

a majority of the members of the board of directors shall be independent directors;

•

the independent directors shall meet periodically in executive session;

•

directors shall have full and free access to management and, as necessary and appropriate, independent advisors;

•

new directors shall participate in an orientation program and all directors are expected to participate in continuing director education on an ongoing basis; and

•

at least annually the board of directors and its committees will conduct self-evaluations to determine whether they are functioning effectively.

Board Determination of Independence

Under applicable NASDAQ rules, a director will only qualify as an “independent director” if, in the opinion of our board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ Marketplace Rules provide that a director of a business development company, or BDC, shall be considered to be independent if he or she is not an “interested person” of the Company, as defined in Section 2(a)(19) of the Investment Company Act of 1940 Act, as amended, or the 1940 Act. Section 2(a)(19) of the 1940 Act defines an “interested person” to include, among other things, any person who has, or within the past two years had, a material business or professional relationship with us.

Our board of directors has determined that none of A. Hugh Ewing, III, Kim D. Kelly, Wallace B. Millner, III, Richard W. Neu, Kenneth J. O’Keefe or Gavin Saitowitz, who currently comprise our audit, compensation and nominating and corporate governance committees (and five of whom serve on our investment and valuation committee), have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under NASDAQ Marketplace Rules.

In determining the independence of the directors listed above, our board of directors also considered each of the statutory requirements, codes and polices discussed in “Certain Relationships and Related Transactions; Policies and Procedures For Related Person Transactions.”

Board Meetings and Attendance

Our board of directors met fourteen times during the fiscal year ended December 31, 2010, or Fiscal 2010, either in person or by teleconference. Richard W. Neu has served as chairman of our board of directors since April 2009. During Fiscal 2010, each director attended at least 75% of the aggregate of the total number of board meetings and the total number of meetings held by all committees on which he or she then served.

Director Attendance at Annual Meetings of Stockholders

Our corporate governance guidelines provide that directors are responsible for attending the annual meeting of stockholders. All of our directors attended the 2010 Annual Meeting and are expected to attend the 2011 Annual Meeting.

-11-

Board Leadership Structure

Our board of directors recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. Our board of directors understands that there is no single, generally accepted approach to providing board leadership and that given the dynamic and competitive environment in which we operate, the right board leadership structure may vary as circumstances warrant. Consistent with this understanding, the independent directors consider the board’s leadership structure on an annual basis. This consideration includes the pros and cons of alternative leadership structures in light of our operating and governance environment at the time, with the goal of achieving the optimal model for effective oversight of management by the board.

The chairman of our board presides at all meetings of the board of directors. The chairman is appointed on an annual basis by at least a majority vote of the remaining directors. Currently, the offices of chairman of the board and chief executive officer are separated. We have no fixed policy with respect to the separation of the offices of the chairman of the board and chief executive officer; however, the board believes that the separation of the offices of the chairman of the board and chief executive officer is an integral part of good corporate governance and the succession planning process and that it is in the best interests of the Company to make this determination from time to time. Richard W. Neu has served as chairman of our board of directors since April 2009 and is not considered an “interested person” of the Company, as defined in Section 2(a)(19) of the 1940 Act.

Board Committees

Our board of directors has established four standing committees — audit, compensation, nominating and corporate governance and investment and valuation. Our audit, compensation and nominating and corporate governance committees each operate under a charter that has been approved by our board of directors. Current copies of the audit, compensation and nominating and corporate governance committee charters are posted in the Corporate Governance section of our website located at www.mcgcapital.com.

Our board of directors has determined that all of the members of each of the board of directors’ standing committees (except the investment and valuation committee) are independent as defined under the rules of the NASDAQ Stock Market, Inc. including, in the case of all members of the audit committee, the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Audit Committee

The audit committee currently consists of Kim D. Kelly, A. Hugh Ewing, III, Richard W. Neu and Gavin Saitowitz. Ms. Kelly chaired the audit committee during Fiscal 2010 and continues to do so currently. The audit committee currently acts under a charter that was amended and restated in March 2009. The audit committee held eight meetings in Fiscal 2010. It is anticipated that Mr. Neu, if re-elected to the board of directors by our stockholders, Ms. Kelly and Messrs. Ewing and Saitowitz will continue to serve on the audit committee in 2011. No member of the audit committee is an “interested person” of the Company, as defined in Section 2(a)(19) of the 1940 Act. Our audit committee’s responsibilities include:

•

appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm;

•

overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of certain reports from such firm;

•

reviewing and discussing with management our annual and quarterly financial statements and related disclosures;

•

monitoring our internal control over financial reporting and disclosure controls and procedures;

•

discussing our risk management policies and overseeing our Compliance and Risk Committee, as discussed below under the heading “Board of Directors Role in Risk Oversight”;

•

establishing policies regarding hiring employees from the independent registered public accounting firm and procedures for the receipt and retention of accounting related complaints and concerns;

•

meeting independently with our independent registered public accounting firm and management;

•

reviewing and approving or ratifying any related person transactions; and

•

preparing the audit committee report required by SEC rules (which is included on page 50 of this proxy statement).

Our board of directors has determined that each of Ms. Kelly and Messrs. Ewing and Neu is an “audit committee financial expert” as defined by applicable SEC rules.

Compensation Committee

The compensation committee currently consists of Kenneth J. O’Keefe, A. Hugh Ewing, III, Kim D. Kelly and Gavin Saitowitz. Mr. O’Keefe chaired the compensation committee during Fiscal 2010 and continues to do so

-12-

currently. The compensation committee currently acts under a charter that was amended and restated in February 2010. The compensation committee held nine meetings in Fiscal 2010. It is anticipated that Ms. Kelly and Messrs. O’Keefe, Ewing and Saitowitz will continue to serve on the compensation committee in 2011. No member of the compensation committee is an “interested person” of the Company, as defined in Section 2(a)(19) of the 1940 Act. Our compensation committee’s responsibilities include:

•

annually reviewing and approving corporate goals and objectives relevant to compensation of our chief executive officer;

•

determining the chief executive officer’s compensation;

•

reviewing and approving, or making recommendations to the board of directors with respect to, the compensation of our other executive officers;

•

overseeing an evaluation of our senior executives;

•

overseeing and administering our equity incentive plans;

•

reviewing and making recommendations to the board of directors with respect to director compensation;

•

reviewing and discussing annually with management our “Compensation Discussion and Analysis,” which is included beginning on page 18 of this proxy statement; and

•

preparing the compensation committee report required by SEC rules, which is included on page 43 of this proxy statement.

The processes and procedures followed by our compensation committee in considering and determining executive and director compensation are described below under the heading “Executive and Director Compensation Processes.”

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee currently consists of Richard W. Neu, A. Hugh Ewing, III, Kim D. Kelly, Wallace B. Millner, III, Kenneth J. O’Keefe and Gavin Saitowitz. Mr. Neu chaired the nominating and corporate governance committee during Fiscal 2010 and continues to do so currently. The nominating and corporate governance committee currently acts under a charter that was amended and restated in March 2009. The nominating and corporate governance committee held three meetings in Fiscal 2010. It is anticipated that Messrs. Millner and Neu, if re-elected to the board of directors by our stockholders, Ms. Kelly and Messrs. Ewing, O’Keefe and Saitowitz will continue to serve on the nominating and corporate governance committee in 2011. No member of the nominating and corporate governance committee is an “interested person” of the Company, as defined in Section 2(a)(19) of the 1940 Act. Our nominating and corporate governance committee’s responsibilities include:

•

identifying individuals qualified to become board members;

•

recommending to the board of directors the persons to be nominated for election as directors and to each of the board’s committees;

•

reviewing and making recommendations to the board of directors with respect to management succession planning;

•

reviewing and assessing our code of business conduct and ethics;

•

developing and recommending to the board of directors corporate governance principles; and

•

overseeing an annual evaluation of the board of directors.

The processes and procedures followed by our nominating and corporate governance committee in identifying and evaluating director candidates are described below under the heading “Director Nomination Process, Including Diversity Considerations.”

Investment and Valuation Committee

Our investment and valuation committee currently consists of Wallace B. Millner, III, A. Hugh Ewing, III, Kim D. Kelly, Richard W. Neu, Gavin Saitowitz, B. Hagen Saville and Steven F. Tunney, Sr. Mr. Millner chaired the investment and valuation committee during Fiscal 2010, and continues to do so currently. The investment and valuation committee approves certain significant investments, as determined, from time to time, by our board of directors, and establishes guidelines, and makes recommendations quarterly to our board of directors, regarding the valuation of our loans and investments. The investment and valuation committee held thirteen meetings in Fiscal 2010. It is anticipated that Messrs. Millner, Neu and Saville, if re-elected to the board of directors by our stockholders, and Ms. Kelly and Messrs. Ewing, Saitowitz and Tunney will continue to serve on the investment and valuation committee in 2011.

-13-

Board of Directors Role in Risk Oversight

Our management team has the primary responsibility for risk management and must develop appropriate processes and procedures to identify, manage and mitigate risks. Our board, through its oversight role, supervises our risk management activities to ensure that the risk management processes designed and implemented by our executives are adapted to and integrated with the board’s corporate strategy, designed to support the achievement of organizational objectives, functioning as directed and that necessary steps are taken to foster a culture of risk-adjusted decision-making throughout the enterprise.

A fundamental part of risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the company. The involvement of the full board of directors in setting our business strategy is a key part of its assessment of management’s appetite for risk and also a determination of what constitutes an appropriate level of risk for us. Through dedicated sessions focusing entirely on corporate strategy, the full board reviews in detail the company’s short- and long-term strategies, including consideration of significant risks facing the Company and their potential impact.

While the board of directors has the ultimate oversight responsibility for the risk management process, various committees of the board of directors also have responsibility for risk management. In particular, the audit committee has oversight responsibility not only as it relates to our financial reporting and the steps management has taken to monitor and control exposures with respect to such reporting, but also for the effectiveness of management’s enterprise risk management process that monitors and manages key business risks facing the Company. The audit committee performs this role, in part, through its oversight of our Compliance and Risk Committee, which is a committee composed of six members of senior management from various functions and disciplines, each of whom supervises day-to-day risk management in their roles with us. The Compliance and Risk Committee ensures that we identify all potential material risks and implements appropriate mitigation measures. Our risk identification is effected through a semi-annual enterprise risk assessment, through which risk is assessed throughout the business. The Compliance and Risk Committee reports directly to the chief executive officer, the audit committee and the full board of directors, and periodically presents reports as to its enterprise risk management efforts. The audit committee also oversees the delegation of specific risk areas among the various other board committees, consistent with the committees’ charters and responsibilities. In addition, in setting compensation, the compensation committee also strives to create incentives that encourage a level of risk-taking behavior consistent with our business strategy.

We believe that our approach to risk oversight, as described above, optimizes our ability to assess inter-relationships among the various risks, make informed cost-benefit decisions and approach emerging risks in a proactive manner for the Company. We also believe that our risk structure complements our current board leadership structure, as it allows our independent directors, through the three fully independent board committees and otherwise, to exercise oversight of the actions of management, in identifying risks and implementing risk management policies and controls.

Executive and Director Compensation Processes

Our chief executive officer’s role in the compensation process begins with the establishment of corporate and business performance objectives against which annual incentive cash bonus awards will be measured. Our chief executive officer, together with our executive team, discusses and formulates for consideration annual corporate and business goals. These goals are presented to our compensation committee, who reviews and refines the goals, which are set at their discretion, and recommends them for approval by our board of directors. The chief executive officer’s role in the compensation process continues with his review of our named executive officers, other than our managing directors who are reviewed by our executive vice president of business development. Our chief executive officer first elicits self evaluations from each of our named executive officers, other than our managing directors. The chief executive officer then assimilates the content from these evaluations and prepares formal written evaluations of each of these named executive officers, documenting each such named executive officer’s performance during the year, detailing accomplishments, an assessment of qualitative performance attributes, areas of strength and areas for development. The chief executive officer then meets with each named executive officer, other than our managing directors, and reviews their respective evaluations. The chief executive officer presents to the compensation committee the comprehensive recommendations related to proposed salary increases, if any, and individual ratings that affect the calculation of annual incentive cash bonus awards for each of our named executive officers, after receiving input on our managing directors from our executive vice president of business development. These recommendations are reviewed, and ultimately approved, by our compensation committee and our board of directors.

At the request of the compensation committee, our chief executive officer attends all or portions of periodic meetings of the compensation committee, but does not attend portions of any meeting in which the compensation committee discusses his compensation or performance. In addition, our compensation committee reviews the recommendations from our chief executive officer with respect to executive compensation trends among financial

-14-

services companies, including the overall blend of salary, bonus and equity compensation within such group and his recommendations pertaining to our executive compensation program.

The compensation committee, in accordance with its written charter, oversees all aspects of our director, officer and other executive compensation policies. As described above, the chief executive officer makes a recommendation to the compensation committee with respect to each named executive officer’s compensation. After careful deliberation, the compensation committee makes formal recommendations to our board of directors regarding the compensation of each of these named executive officers. The compensation committee also evaluates the chief executive officer’s performance and determines the chief executive officer’s compensation, utilizing input from our board of directors. With regard to director compensation, our compensation committee periodically reviews and makes recommendations to our board of directors regarding such compensation.

The compensation committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. To assist the compensation committee in discharging its responsibilities, during Fiscal 2010, our compensation committee retained an independent compensation consultant, Frederic W. Cook & Co., Inc., or Frederic Cook, to review and make recommendations regarding our executive compensation program. Frederic Cook provided research regarding best practices, advice on appropriate executive performance goals and metrics and on the appropriate long-term incentives to best align executive performance with stockholder interests. As part of this process, members of the compensation committee reviewed materials provided by, and had the opportunity to meet independently with, Frederic Cook at anytime throughout the year to discuss our executive compensation and to receive input and advice.

Director Nomination Process, Including Diversity Considerations

The process followed by our nominating and corporate governance committee to identify and evaluate director candidates includes requests to board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the nominating and corporate governance committee and other members of the board of directors, as applicable.

Stockholders may recommend individuals to the nominating and corporate governance committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to the nominating and corporate governance committee, c/o Tod K. Reichert, Corporate Secretary, MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, Virginia 22209. Assuming that appropriate biographical and background material has been provided on a timely basis, the nominating and corporate governance committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.

Stockholders also have the right under our bylaws to directly nominate director candidates, without any action or recommendation on the part of the nominating and corporate governance committee or our board of directors, by following the procedures set forth under Article II, Section 11, “Advance Notice Provisions for Election of Directors,” in our amended and restated bylaws and that are described in this proxy statement under the heading “Stockholder Proposals.”

-15-

At the Annual Meeting, stockholders will be asked to consider the election of two non-employee directors, Wallace B. Millner, III and Richard W. Neu. Mr. Millner was recommended as a candidate for our board of directors in 1998 by one of our independent, non-management directors and Mr. Neu was recommended as a candidate for our board of directors in November 2007 after an independent board search.

Communicating with the Independent Directors

Our board of directors will give appropriate attention to written communications that are submitted by stockholders, and will respond if and as appropriate. The chairman of the board of directors (if an independent director), or the lead director (if one is appointed), or otherwise the chairperson of the nominating and corporate governance committee, with advice and assistance from the chief compliance officer and, if requested, outside legal counsel, is primarily responsible for monitoring communications from stockholders and for providing copies of summaries of such communications to the other directors as he or she considers appropriate.

Under procedures approved by a majority of the independent directors, communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the chairman of the board considers to be important for the directors to know. In general, communications relating to corporate governance and corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we tend to receive repetitive or duplicative communications.

Stockholders who wish to send communications on any topic to the board of directors should address such communications to the MCG board of directors, c/o Tod K. Reichert, Corporate Secretary, MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, Virginia 22209.

Code of Business Conduct and Ethics

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of the code of business conduct and ethics on our website, which is located at www.mcgcapital.com. In addition, we intend to post on our website all disclosures that are required by law or NASDAQ Global Select Market listing standards concerning any amendments to, or waivers from, any provision of the code.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and the holders of more than 10% of our common stock to file with the SEC initial reports of ownership of our common stock and other equity securities on a Form 3 and reports of changes in such ownership on a Form 4 or Form 5. Officers, directors and 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of copies of Section 16(a) reports furnished to us and representations made to us, we believe that, except as set forth below, during Fiscal 2010 our officers, directors and holders of more than 10% of our common stock complied with all Section 16(a) filing requirements:

•

a late Form 4 report was filed for Kim D. Kelly on May 24, 2010 to report the purchase of 2,000 shares of common stock on May 19, 2010.

-16-

Our Executive Officers

The following table sets forth the names, ages and positions of our current executive officers as of April 1, 2011:


Name	Age	Position	Held Position Since
Steven F. Tunney, Sr.	50	President and Chief Executive Officer	President May 2001; Chief Executive Officer August 2006
B. Hagen Saville	49	Executive Vice President, Business Development	June 1998
Stephen J. Bacica(1)	40	Executive Vice President and CFO	November 2008 (Senior Vice President and Chief Accounting Officer May 2008–November 2008)
Robert L. Marcotte(2)	52	Senior Vice President and Managing Director	Senior Vice President March 2006; Managing Director August 2002
Tod K. Reichert(3)	49	Senior Vice President, Chief Compliance Officer and Corporate Secretary	June 2008
Samuel G. Rubenstein(4)	49	Executive Vice President, General Counsel and Assistant Corporate Secretary	February 2000 (Corporate Secretary February 2000–June 2008 and Chief Compliance Officer February 2000–September 2006 and February 2008–June 2008); Assistant Corporate Secretary June 2008
Derek R. Thomas(5)	43	Executive Vice President, Risk Management and Underwriting	August 2006 (Director of Sponsorship and Underwriting November 2001–August 2006)

(1)

Stephen J. Bacica has served as our Executive Vice President and Chief Financial Officer since November 2008. From May 2008 until November 2008, he served as Senior Vice President and Chief Accounting Officer. Prior to joining us in May 2008, Mr. Bacica served as Vice President, Accounting Policy of Marriott International, Inc., or Marriott, from April 2006 to May 2008. Mr. Bacica also served as Senior Director, Accounting Policy of Marriott from July 2004 to April 2006 and as Director, Accounting Policy of Marriott from May 2002 to July 2004. Prior to his employment with Marriott, Mr. Bacica was employed by PricewaterhouseCoopers LLP, where he served in the positions of Audit Manager, Senior Associate and Associate, and by the SEC, where he served in the positions of Senior Staff Accountant and Staff Accountant. Mr. Bacica is a Certified Public Accountant and holds a B.S. in Accounting from Saint Joseph’s University.

(2)

Robert L. Marcotte has served as a Managing Director since August 2002. He has been a Senior Vice President since March 2006 and served as a Vice President from August 2002 until March 2006. Prior to joining MCG in 2002, Mr. Marcotte was Chief Financial Officer for Aleron, Inc., a wholesale internet access and network services provider. Formerly, he served as vice president in the corporate finance department of the investment banking division of Goldman, Sachs & Co. Mr. Marcotte received his B.S.B.A. from Georgetown University.

(3)

Tod K. Reichert has served as our Senior Vice President, Chief Compliance Officer and Corporate Secretary since June 2008. Prior to joining us, from January 2001 to June 2008, Mr. Reichert served as counsel in the Corporate Practice Group at WilmerHale where he practiced general corporate and securities law, with an emphasis on public offerings, venture capital transactions and mergers and acquisitions for clients in various industries and sectors, including biotechnology, pharmaceutical, software, emerging technologies and financial services. Prior to joining WilmerHale, Mr. Reichert was associated with Buchanan Ingersoll from September 1997 to December 2000. Mr. Reichert received his J.D. from the Rutgers University School of Law — Newark and his B.F.A. from the University of North Carolina.

(4)

Samuel G. Rubenstein has served as our Executive Vice President, General Counsel since February 2000. He has also served as our Corporate Secretary from February 2000 until June 2008 and our Chief Compliance Officer February 2000 until September 2006 and from February 2008 until June 2008. From 1993 to 2000, Mr. Rubenstein was employed at Bryan Cave, LLP, a law firm, where he was a partner since 1996. Mr. Rubenstein received his J.D. from the National Law Center at George Washington University and his B.B.A. from the University of Texas.

(5)

Derek R. Thomas has served as our Executive Vice President, Risk Management and Underwriting since August 2006 and as Director of Sponsorship and Underwriting from November 2001 until August 2006. From March 2006 until August 2006, Mr. Thomas was one of our Senior Vice Presidents, and he was one of our Vice Presidents from November 2001 until March 2006. Mr. Thomas has been employed by us since 1998. Mr. Thomas received his M.B.A. from Georgetown University and his B.S. from Cornell University.

-17-

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Introduction

The following compensation discussion and analysis includes our compensation philosophy, a description of our compensation program and the program’s objectives, the elements of compensation used to pay our executives and the compensation-related decisions made with respect to our Chief Executive Officer, or CEO, Chief Financial Officer, or CFO, and our three most highly compensated executive officers for Fiscal 2010 as set forth below:

•

Steven F. Tunney, Sr., President and CEO;

•

Stephen J. Bacica, Executive Vice President and CFO;

•

B. Hagen Saville, Executive Vice President, Business Development;

•

Samuel G. Rubenstein, Executive Vice President and General Counsel; and

•

Robert L. Marcotte, Senior Vice President and Managing Director.

These employees are referred to in this proxy statement as our “Named Executive Officers” or “NEOs” for Fiscal 2010. We have included detailed compensation information relating to these individuals in the Executive Compensation Tables below. As used in this “Compensation Discussion and Analysis” section, the term “Committee” or “Compensation Committee” means the Compensation Committee of the MCG board of directors.

Although the compensation discussion and analysis contained in this section is framed in terms of “our” (i.e., management’s) approach to compensation and also refers to actions taken by the Compensation Committee, it should be noted that our compensation program is a cooperative effort among management, the Compensation Committee and the full board of directors, with advice from an outside, independent compensation consultant, and the Compensation Discussion and Analysis is a reflection of that cooperative effort.

Executive Summary

Market and Business Conditions; 2010 Company Performance

During 2010, the United States economy continued to recover from the effects of the recent recession. Leading economic indicators, coupled with recent tax-related legislation enacted by Congress in late 2010, are indicative that the economic recovery may continue into 2011. Although the economy has not yet recovered to pre-recession levels, we are cautiously optimistic of the potential for future economic growth.

In the event of renewed financial turmoil affecting the banking system and financial markets, additional consolidation of the financial services industry or significant financial service institution failures, there could be a new or incremental tightening in the credit markets, low liquidity and extreme volatility in fixed-income, credit, currency and equity markets. European credit issues and recent events in Japan have destabilized the global markets, government-sponsored stimulus measures, such as the tax credit for first-time home buyers, have expired and the fear of increased regulations and municipal fiscal crises have contributed to a high unemployment rate. In addition, the risk remains that there could be a number of follow-on effects from the credit crisis on our business.

During 2009 and continuing into 2010, we began to implement a strategic plan designed to establish a foundation for us to reposition our company to close the gap between share price and net asset value, or NAV, and to enhance stockholder value. Initially, in late 2009 and early 2010, we focused our strategic plan on capital preservation, monetizing lower-yielding investments and deleveraging our balance sheet. As the economy began to stabilize during the second half of 2010 and early 2011, and as we transitioned into the next phase of our strategic plan, we:

•

originated 25 new investments totaling $254.9 million;

•

increased our net operating income during the twelve months ended December 31, 2010 by 6% over the same period in 2009;

•

reinstated dividends in 2010 and increased the dividends from $0.11 for our first quarter results to $0.15 for our fourth quarter results; and

•

expanded our portfolio to include higher-yielding debt investments.

The market price of our common stock increased by 61% from $4.32 at December 31, 2009 to $6.97 at December 31, 2010, resulting in a 66.67% total return for our stockholders.

As we move into 2011, we believe that MCG is positioned to grow operating income and stockholder dividends without accessing new sources of incremental equity or debt capital by deploying our restricted cash balances, accessing incremental debt capacity in our CLO and our SBIC and by generating additional investment capacity through the continued strategic, monetization of equity investments. We expect our investment focus will remain principally on originating current-yielding debt investments in portfolio companies that meet our risk and underwriting standards. We also intend to reduce our equity investments to no more than 10% to 20% of the fair value of our portfolio over the next few years. As of December 31, 2010, we had $116.6 million of cash and cash

-18-

equivalents and cash in secured and restricted accounts available to fund our new investments, operating requirements and dividend distributions. As of December 31, 2010, we also had access to $121.1 million of unused borrowing capacity from our collateralized loan obligation facility, our SunTrust warehouse facility and commitments from the United States Small Business Administration. In January 2011, we obtained a liquidity renewal from SunTrust Bank for our SunTrust Warehouse, and extended the final maturity date of this facility to January 2014. Additionally, we submitted an application to the SBA for a second SBIC license, which, if approved, would increase our total SBIC borrowing capacity from $150.0 million to $225.0 million. We are also well matched from an asset and liability perspective.

2010 Compensation Decisions

The following highlights the Committee’s key compensation decisions for 2010, as reported in the Summary Compensation Table. These decisions were made in consultation with the Committee’s independent consultant, Frederic W. Cook & Co., or Frederic Cook, and are discussed in greater detail elsewhere in this Compensation Discussion and Analysis. Based on the market conditions and results discussed above, the Committee took the following key compensation actions in connection with our 2010 compensation program:

•

implemented a freeze on base salaries for all senior executives for the third consecutive year;

•

made no new equity awards to any senior executives;

•

maintained reduced targeted base cash bonuses of executive management equaling 50% of the target bonuses specified in their respective employment agreements;

•

placed emphasis on aligning short-term incentive awards with our annual operating financial objectives by establishing an annual incentive cash bonus plan, or the 2010 Annual Incentive Cash Bonus Plan, that provided for the potential payment of cash bonuses upon the achievement of six key financial metrics and strategic goals. We believe that these metrics provide for a balanced approach to measuring annual Company performance. The Company’s performance with respect to certain of these metrics was below target, and therefore resulted in the payment of annual incentive cash bonus awards at below the reduced target levels for our Named Executive Officers;

•

continued to monitor the goal of absolute and relative performance in total stockholder return related to our long-term incentive program, or the 2009 Long-Term Incentive Program, which has a three-year duration ending July 22, 2012 and under which participants may receive, upon the achievement of specified Company share price thresholds, (i) an award of shares of restricted common stock and (ii) a bonus payable in cash;

•

in the spirit of a pay-for-performance structure, allocated approximately 55% to 77% of total target compensation as “at-risk” compensation for the Named Executive Officers during 2010;

•

determined total annual cash compensation under the 2010 compensation program (described below), which placed us below the 25th percentile of our peer group;

•

assessed our recoupment policy of incentive compensation (clawback policy), seeking to ensure that the policy maximizes the ability of the Company to recoup compensation obtained through actions on the part of management which may ultimately prove detrimental to the Company and our stockholders. Based on the Committee’s recommendation, our board of directors has adopted a recoupment policy that provides for the recovery of any annual cash and equity-based awards, performance-based compensation and other forms of cash or equity compensation made to certain of our executive officers and that was provided to any such officers on the basis of the Company having met or exceeded specific performance targets during a performance period that is subject to a material restatement of Company financial results. The recoupment policy of incentive compensation is intended to reduce potential risks associated with our compensation plans, and thus better align the long-term interests of our executive officers and our stockholders; and

•

implemented mandatory stock ownership guidelines for our CEO.

The changes that were made to our compensation program in connection with our 2010 compensation program build upon the Company’s compensation governance framework and our overall pay-for-performance philosophy, which are demonstrated by:

•

our policy that prohibits our directors, Named Executive Officers, and other key executive officers from effecting any short sales of our securities or purchases or sales of puts, calls or other derivative securities, including hedges, based on our securities that limit or eliminate the economic risk to owning our stock;

•

the Committee’s consideration of internal pay equity considerations when making compensation determinations with regard to the Named Executive Officers;

•

the Committee’s use of “walk away numbers” that provide information as to all compensation that is potentially available to our Named Executive Officers, as well as the amount of wealth that our Named Executive Officers have accumulated under our compensation programs;

•

the Committee’s engagement of an independent compensation consultant that does not provide any services to management and that had no prior relationship with management prior to the engagement; and

-19-

•

our strong risk management program, which includes the Committee’s significant oversight of the ongoing evaluation of the relationship between our compensation programs and risk.

We encourage you to read this Compensation Discussion and Analysis section for a detailed discussion and analysis of our executive compensation program, including information about the Fiscal 2010 compensation of our Named Executive Officers.

Philosophy and Objectives of Our Executive Compensation Program

Our executive compensation philosophy, which is determined by the Committee and approved by our board of directors, is designed to motivate and reward employees for performance that will result in strong financial results and create long-term value for our stockholders. In that regard, MCG’s compensation programs are structured to:

•

focus management behavior and decision-making on goals that are consistent with the overall strategy of the business;

•

reinforce a pay-for-performance culture through a balance of fixed and incentive pay opportunities, while not incentivizing excessive risk taking; and

•

retain our management team and other employees with the skills critical to MCG’s long-term success.

The following key objectives guided the design and administration of our compensation program in 2010:

•

clearly communicate the desired behavior and utilize incentive pay programs to reward the achievement of performance goals;

•

reward teamwork and integrity;

•

recognize the new business environment in which MCG operates; and

•

design pay programs that control costs, promote understanding and enable employees to make informed decisions.

In the spirit of a pay-for-performance structure, the Committee believes that as employees achieve greater levels of responsibility in the organization, an increasing percentage of their target total direct compensation should be based upon our future performance. If earned, incentive compensation, which in 2010 consisted of annual incentive cash bonus awards and three-year performance share and cash awards, should make up a significant portion of our Named Executive Officers’ total compensation. The Committee believes that incentive compensation, which comprised approximately 55% to 77% of total target compensation for the Named Executive Officers during 2010, was appropriate because:

•

our Named Executive Officers are in positions to affect our corporate performance, and, therefore, should bear high levels of responsibility for such performance;

•

incentive compensation is more variable than base salary and dependent upon our performance;

•

variable compensation helps ensure focus on the goals that are aligned with our overall strategy; and

•

the interests of our Named Executive Officers will be closely aligned with those of our stockholders by making a majority of the NEOs’ target compensation contingent upon results that are beneficial to our stockholders.

The following table shows the allocation of total target compensation for Fiscal 2010 among the individual components of base salary, annual incentive compensation and long-term incentive compensation. The percentage set forth in the far right column below is calculated by dividing (i) the at risk compensation amount by (ii) the target total direct compensation, which includes the at risk compensation amount plus Fiscal 2010 base salary.

-20-


		At Risk Compensation
Name	2010 Base Salary ($)	Target Annual Incentive Cash Bonus(1) ($)	Long-Term Incentive Compensation(2) ($)	At Risk Compensation (as a % of Target Total Direct Compensation)
Steven F. Tunney, Sr. President and CEO	522,000	261,000	1,405,418	76%
Stephen J. Bacica Executive Vice President and CFO	350,000	175,000	527,532	67%
B. Hagen Saville Executive Vice President, Business Development	445,000	222,500	1,230,241	77%
Samuel G. Rubenstein Executive Vice President and General Counsel	386,000	193,000	456,461	63%
Robert L. Marcotte Senior Vice President and Managing Director	350,000	140,000	281,284	55%

(1)

Each participant in the 2010 Annual Incentive Cash Bonus Plan was assigned a potential target cash bonus amount expressed as a percentage of his or her 2010 annual base salary. For the Named Executive Officers, the approved percentages for 2010 were as follows: Mr. Tunney (50%); Mr. Bacica (50%); Mr. Saville (50%); Mr. Rubenstein (50%); and Mr. Marcotte (40%). Additionally, Messrs. Tunney, Bacica, Saville and Rubenstein were given the opportunity to earn the target bonuses specified in their respective employment agreements, or an additional 50% of their base salaries, upon the achievement of specified earnings per share and share price stretch goals. These milestones were designed to meet certain requirements set forth in these employment agreements. The Company did not anticipate any payment under this portion of the program and, consequently, they have not been included in the calculation above.

(2)

Represents the grant date fair value determined under Accounting Standard Codification Topic 718—Compensation—Stock Compensation, or ASC 718, with respect to the LTIP Restricted Stock Awards and LTIP Cash Awards related to the $5, $6, $7 and $8 share-price thresholds under the 2009 Long-Term Incentive Program.

Determining Executive Compensation (Roles and Process)

Utilizing the philosophy outlined above, our Compensation Committee determines the parameters of the executive compensation program, including appropriate target levels and performance measures, and administers our executive compensation program. This section discusses, in greater detail, the roles and processes underlying the application of our executive compensation philosophy.

Role of CEO in Compensation Decisions

The CEO’s role in the compensation process begins with the establishment of proposed corporate and business performance objectives against which annual incentive cash bonus awards will be measured. Our CEO, together with our executive team, discusses and formulates for consideration annual corporate and business goals. These goals are presented to our Compensation Committee, who reviews and refines the goals, which are set at their discretion, and recommends them for approval by our board of directors. The CEO’s role in the compensation process continues with his review of our Named Executive Officers, other than our managing directors who are reviewed by our executive vice president of business development. Our CEO first elicits self evaluations from each of our Named Executive Officers, other than our managing directors. The CEO then assimilates the content from these evaluations and prepares formal written evaluations of each of these Named Executive Officers, documenting each such Named Executive Officer’s performance during the year, detailing accomplishments, an assessment of qualitative performance attributes, areas of strength and areas for development. Individual performance ratings are then formulated through the annual review process, are calculated numerically on a scale from 1 to 5 and then expressed as a percentage. A score of 4 or greater results in eligibility for 100% of the individual’s target bonus, a score of 3 results in eligibility for 50% of the individual’s target bonus, a score of 2 results in eligibility for 10% of the individual’s target bonus and a score of 1 results in no eligibility for the individual’s target bonus. Scores that fall between the performance scores are linearly interpolated. The CEO then meets with each Named Executive Officer, other than our managing directors, and reviews their respective evaluations. The CEO presents to the Compensation Committee comprehensive recommendations related to proposed salary increases, if any, and individual ratings that affect the calculation of annual incentive cash bonus awards for each of our Named Executive Officers, after receiving input on our managing directors from our executive vice president of business development. These recommendations are reviewed, and ultimately approved, by our Compensation Committee and our board of directors.

At the request of the Compensation Committee, our CEO attends all or portions of periodic meetings of the Compensation Committee, but does not attend portions of any meeting in which the Compensation Committee discusses his compensation or performance. In addition, our Compensation Committee reviews the recommendations from our CEO and compares them to executive compensation trends among financial services companies, including the overall blend of salary, bonus and equity compensation within such group and his recommendations pertaining to our executive compensation program.

-21-

Role of the Compensation Committee

Our Compensation Committee recognizes the importance of maintaining sound principles for the development and administration of our compensation program which is intended to strengthen the link between executive pay and performance. The Compensation Committee, in accordance with its written charter, oversees all aspects of our director, officer and other executive compensation policies. Based on the process described in “Role of CEO in Compensation Decisions,” the CEO makes a recommendation to the Compensation Committee with respect to each Named Executive Officer’s compensation. After careful deliberation, the Compensation Committee makes formal recommendations to our board of directors regarding the compensation of each of these Named Executive Officers. The Compensation Committee also evaluates the CEO’s performance and determines the CEO’s compensation utilizing input from our board of directors.

Role of Compensation Consultant

To assist the Compensation Committee in discharging its responsibilities, the Committee engaged Frederic Cook, as the Committee’s independent compensation consultant, to fulfill the following responsibilities:

•

undertake special projects at the request of the Committee;

•

review the Company’s executive compensation program and advise the Committee of plans or practices that might be changed to improve effectiveness;

•

proactively advise the Committee on governance best-practices related to executive compensation, as well as areas of concern and risk in the Company’s program;

•

advise the Committee on the appropriate long-term incentives to best align executive performance with stockholder interests;

•

advise on appropriate executive performance goals and metrics;

•

advise on the fair value transfer of equity programs, dilution overhang and comparison to peer group data;

•

advise on proxy recommendations relating to executive pay from stockholder groups; and

•

advise the Committee on market trends and developments.

As part of this process, members of the Compensation Committee reviewed materials provided by, and had the opportunity to meet independently with, Frederic Cook at anytime throughout the year to discuss our executive compensation and to receive input and advice. As compensation for services in 2010, Frederic Cook billed us a total of $28,440. Frederic Cook reported directly to the Compensation Committee and did not provide any other services to us other than those described in this section.

We did not retain any other compensation consultant to review our policies and procedures relating to executive compensation during 2010. We expect that from time to time our Compensation Committee will engage one or more consultants to provide advice and resources.

Competitive Benchmarking

The Committee believes benchmarking is useful as a method to gauge the compensation level for executive talent within competitive job markets that are germane to us based upon both financial and non-financial characteristics. The Committee utilizes data gathered from our Peer Group (described below); however, the Peer Group data is not used in isolation. NEO compensation is reviewed in comparison to our financial performance and the financial performance of the Peer Group. This information is then used to analyze each NEO’s individual performance and tenure in his current position. After a review of the benchmarking data and the other factors mentioned, the Committee determines any changes to the NEO compensation positioning, target total direct compensation structures, variable compensation program design and/or benefit offerings, if necessary. Target total direct compensation is the sum of current base salary plus any target annual cash incentive opportunity. The Committee considers each element of compensation individually and also considers the total direct compensation, as well as the mix of compensation paid to the NEOs when making compensation decisions. Data from proxy statements filed with the SEC provide specific Peer Group named executive officer information concerning base salaries, bonuses earned, long-term incentives granted, types of long-term incentive vehicles used and benefit prevalence.

During 2010, in order to assess the competitiveness of our executive compensation levels, the Committee retained Frederic Cook to develop a comparative group of publicly traded companies and to perform analyses of competitive performance and compensation levels. This comparative group included five other BDCs, four real estate investment trusts, or REITs, one commercial lender, one bank holding company and one specialty finance company. Mortgage REITs were included because they are a form of specialty finance company and they have similar distribution requirements to BDCs, that impact their pay models, particularly with regard to equity compensation. The Committee believed that these companies provided a good representation of competitive compensation levels for our executives and were the most relevant companies with publicly available executive compensation data.

-22-

For 2010, our Peer Group consisted of the following twelve organizations:


BDCs	REITs	Commercial Lenders, Bank Holding and Specialty Finance Companies
American Capital Strategies, Ltd.	Capital Trust, Inc.	CapitalSource Inc.
Hercules Technology Growth Capital, Inc.	iStar Financial, Inc.	NewStar Financial
Kohlberg Capital Corporation	RAIT Financial Trust	PacWest Bancorp
Medallion Financial Corp.	Redwood Trust, Inc.
Triangle Capital Corporation

Our financial performance was evaluated relative to Peer Group performance for the trailing four quarters or the last completed quarter, as applicable, prior to Frederic Cook’s analysis in October 2010 with respect to revenue, net income and total assets, and as of September 30, 2010 with regard to market cap, enterprise value, employee headcount and annualized total stockholder return (TSR). The following table details our performance in comparison to our Peer Group:


*$ in thousands*	Trailing Four Quarters		Most Recent Quarter	As of 9/30/10			Annualized TSR as of 9/30/10
	Revenue	Net Income	Total Assets	Market Cap	Enterprise Value	Employees	1-Year	3-Year
75th Percentile	$413	$32	$5,470	$787	$4,560	280	34%	-7%
50th Percentile	$199	$4	$3,783	$325	$1,771	96	7%	-21%
25th Percentile	$57	$(163)	$537	$150	$486	41	0%	-37%
MCG Capital	$91	$11	$1,170	$447	$829	64	45%	-21%
Percentile Rank	31%	57%	31%	66%	38%	40%	80%	51%

At the time the analysis was conducted, MCG ranked just above the lower quartile in revenue, total assets, enterprise value and employee headcount, at or just above the median in net income, market cap and three-year annualized total stockholder return and in the upper quartile in one-year annualized total stockholder return. MCG’s percentile rank of 80% and 51% for one and three -year annualized total stockholder returns, respectively, were achieved through our continuing efforts to reposition lower-yielding equity assets into higher-yielding, current-pay debt investments, increase net operating income and grow our dividends and despite the fact that the companies in our portfolio, which are small businesses, were still impacted by a weak liquidity environment and a post-recession economy.

Based on a review of a blend of market data and proxy data from a positional perspective, Frederic Cook concluded that, in the aggregate, the base salaries of our NEOs approximated the median, with Mr. Tunney’s salary being slightly above the 25th percentile and the actual total annual cash compensation for fiscal 2009 was below the 25th percentile. In addition, total annual cash compensation under the 2010 program (described below) was also projected to fall below the 25th percentile, with Mr. Tunney’s total annual cash compensation falling in approximately the 5th percentile.

Elements of Compensation and 2010 Compensation Decisions

The compensation package offered to each Named Executive Officer is composed of a combination of:

•

base salary;

•

a potential annual incentive cash bonus award under our 2010 Annual Incentive Cash Bonus Plan;

•

a potential award of shares of restricted common stock and cash under our 2009 Long-Term Incentive Program;

•

other benefits, such as health, dental, disability and life insurance; and

•

severance and change of control payments.

We maintain broad-based benefits that are provided or offered to eligible employees, including comprehensive medical, dental and vision insurance, group term life insurance, business travel accident insurance, short term disability insurance, long term disability insurance, flexible spending reimbursement accounts and a 401(k) plan. Our Named Executive Officers are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees.

-23-

Base Salary

Base salaries are established for our Named Executive Officers at levels that are intended to reflect the scope of each Named Executive Officer’s industry experience, knowledge and qualifications, salary levels in effect for comparable positions within peer companies in our industry and internal comparability considerations. We believe that base salaries are a fundamental element of our executive compensation program. Base salaries are reviewed at least annually by our Compensation Committee and are adjusted from time to time to ensure that our executive compensation structure remains aligned with our compensation objectives.

When considering adjustment of a senior executive’s base salary, the Compensation Committee reviews survey data and evaluates the senior executive’s level of responsibility and experience, as well as our performance. The Compensation Committee also considers the senior executive’s success in achieving business results, demonstrating leadership and promoting our keys to success. We believe the Company’s keys to success are (i) people contributing at their full potential, (ii) being cost efficient and (iii) employing our resources effectively.

The Compensation Committee does not rely solely on predetermined formulas or a limited set of criteria when it evaluates the performance of the senior executives and typically adjusts base salaries for senior executives when:

•

their current compensation significantly deviates from survey data;

•

recognizing outstanding individual performance; or

•

acknowledging an increase in responsibility.

During early 2010, the Compensation Committee reviewed the salaries of each of the NEOs and determined that, in light of our strategic objectives and as part of our cost control measures, the NEOs would not receive salary increases.

Short-Term Incentives

Annual Incentive Cash Bonus

The Compensation Committee designed the annual incentive cash component of our compensation program to increase stockholder value and our success by:

•

aligning the compensation of executive management to key strategic measures and goals of the Company;

•

providing variable pay opportunities and targeted total cash compensation that is competitive within our labor markets; and

•

increasing the competitiveness of executive pay without increasing fixed costs, and making bonus payments contingent upon organizational and individual success.

Each participant in the 2010 Annual Incentive Cash Bonus Plan was assigned a potential target cash bonus amount expressed as a percentage of his or her 2010 annual base salary. For the Named Executive Officers, the approved percentages for 2010 were as follows: Mr. Tunney (50%); Mr. Bacica (50%); Mr. Saville (50%); Mr. Rubenstein (50%); and Mr. Marcotte (40%). Additionally, Messrs. Tunney, Bacica, Saville and Rubenstein were given the opportunity to earn the target bonuses specified in their respective employment agreements, or an additional 50% of their base salaries, upon the achievement of specified earnings per share and share price stretch goals. However, these milestones were designed to meet certain requirements set forth in these employment agreements; we did not anticipate any payment under this portion of the program and no payments were made.

The six selected financial metrics and key strategic performance goals, each a “Plan Metric,” under the 2010 Annual Incentive Cash Bonus Plan were weighted between 10% and 25% and milestones within each specified Plan Metric were scaled from 50% to 125%, such that achievement of the 100% level within each of the six Plan Metrics could result in full payment of the specified target bonus for each individual. Performance below the minimum threshold for a Plan Metric could result in a zero payment for that Plan Metric and performance above the maximum threshold for a Plan Metric could result in a score of no more than 125% for such Plan Metric. In all cases, the Committee had broad discretion to make determinations regarding the payment of any bonus under the 2010 Annual Incentive Cash Bonus Plan.

-24-

The following Plan Metrics and thresholds were established for Fiscal 2010:


		Performance Range(1)(2)
		Minimum Threshold	Target	Target	Target
Plan Metric	Weighting	50%	75%	100%	125%
Unencumbered Asset Monetizations	15%	$80.0 million	$93.0 million	$100.0 million	$107.0 million

BDC Asset Coverage Ratio	10%	215%	225%	230%	240%

Adjusted Cash NOI	20%	$39.0 million	$41.0 million	$43.0 million	$45.0 million

Originations	25%	$187.5 million	$212.5 million	$250.0 million	$287.5 million

NOI Per Share	15%	$0.47	$0.53	$0.62	$0.71

EPS	15%	$0.69	$0.78	$0.91	$1.04

(1)	Performance levels that fell in between the denoted scale levels were linearly interpolated.

(2)

In the event that Net Operating Income Per Share fell below $0.30, bonus payments, if any, under the 2010 Annual Incentive Cash Bonus Plan would be set entirely at the discretion of the Committee without any requirement to make any payment whatsoever to any individual or the group as a whole, regardless of the achievement of the Plan Metrics (i.e., Unencumbered Asset Monetizations, BDC Asset Coverage Ratio, Adjusted Cash NOI, Originations, NOI Per Share and/or EPS Per Share); provided, however, that in such event, individual 2010 Annual Incentive Cash Bonus Plan participant bonus payouts could not exceed the respective target bonus amounts established for each participant for Fiscal 2010 under the 2010 Annual Incentive Cash Bonus Plan.

Performance targets for all Plan Metrics were established at levels that were considered achievable but represented a significant challenge to the individual executives to perform at a high level, given the constraints on debt and equity capital and adverse global economic conditions. Targets were set such that only exceptional performance would result in payouts above the 100% target amount and poor performance would result in no incentive payment. Scenarios were developed based upon a range of assumptions used to build our annual budget. We did not perform specific analysis on the probability of the achievement of the Plan Metrics given that the difficulties associated with predicting the market. Rather, we relied upon our collective experience in establishing these goals, guided by our objective of setting motivationally meaningful goals.

In light of our focus during 2010 on expanding our portfolio to include higher-yielding investments, originating new investments, increasing our net operating income and growing our dividends, we chose the 2010 Plan Metrics for the following reasons:

•

Unencumbered Asset Monetizations — We believed that monetizing certain low-yielding equity assets and redeploying those funds into higher-yielding, current-pay debt instruments would strategically enable us to increase our net operating income and grow our stockholder distributions.

•

BDC Asset Coverage Ratio — As a business development company, we are not permitted to incur indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings (excluding borrowings made by our SBIC facility) of at least 200%. In addition, we may not be permitted to declare any cash dividend or other distribution on our outstanding common stock, or purchase any such shares, unless, at the time of such declaration or purchase, we have an asset coverage of at least 200% after deducting the amount of such dividend, distribution, or purchase price. As part of our initiatives during 2010, the percentage increase in the ratio of our assets to total borrowings became an important element of our strategy, specifically deleveraging the business to newly targeted levels.

•

Adjusted Cash NOI — To provide a metric of the cash from MCG operations, we used adjusted cash NOI because it is a measure of ongoing cash flow from our performance and our ability to continue to pay cash dividends to our stockholders.

•

Originations — We believed that effective deployment of our origination capacity into new investments would drive portfolio growth to increase earnings and ultimately dividends.

•

NOI Per Share — To provide a meaningful benchmark of our performance related to the long-term growth of dividends, we chose NOI per share because it is a measure of ongoing operating income (before portfolio mark-to-market fair value adjustments) that supports dividends.

•

Earnings Per Share — To ensure that compensation was tied to improved performance, specifically a reduction in unrealized and realized losses, we used Earnings (Loss) per Share, or EPS, as a metric for senior executives in the 2010 Annual Incentive Cash Bonus Plan. EPS is generally defined as our net income (loss) divided by the weighted-average number of shares outstanding during that period.

As set forth below, the final level of achievement within the performance range established for each Plan Metric was expressed as a percentage, or an Individual Plan Metric Indicator, which was then multiplied by the relevant Plan Metric weight (i.e., 10% to 25% for each Plan Metric) to determine that portion of the Overall Company Score assigned to that Plan Metric. The sum total of these weighted scores was the “Overall Company Score.”

-25-


Plan Metric	2010 Actual Result		Individual Plan Metric Indicator (%)		Overall Company Score (%)

Unencumbered Asset Monetizations		$60.9 million		0.00	0.00

BDC Asset Coverage Ratio		231%		102.50	10.25

Adjusted Cash NOI		$47.9 million		125.00	25.00

Originations		$296.5 million		125.00	31.25

NOI Per Share		$0.54		77.78	11.67

EPS		$(0.17)		0.00	0.00

TOTAL					78.17

After calculating the achievement of the Plan Metrics in the 2010 Annual Incentive Cash Bonus Plan and arriving at an Overall Company Score of 78.17, the Committee, in its discretion, adjusted the Overall Company Score for 2010 downward to 60.089 after considering the diminution in NAV and levels of achievement with respect to unencumbered asset monetizations, NOI per share and EPS, as well as higher than expected losses on the portfolio and non-accrual assets running higher than plan. In connection with this adjustment, the Committee reduced the overall amount available for payouts under the 2010 Annual Incentive Cash Bonus Plan by 25%, or $600,000.

The payouts under the 2010 Annual Incentive Cash Bonus Plan for Fiscal 2010 performance were then calculated using the following formula:

Annual Salary

Target Bonus Percentage

Overall

Company

Score

Individual Performance Adjustment

Bonus
Payout

Individual performance adjustments were based upon the evaluations of each of our Named Executive Officers and could result in an adjustment downward, but not upward, in the bonus payout.

The Committee made the following determinations regarding the individual performance of each of the NEOs during Fiscal 2010 in analyzing and making their recommendations for awards under the 2010 Annual Incentive Cash Bonus Plan:

The Committee determined that the major accomplishments for Mr. Tunney in Fiscal 2010 included: exceeding expectations with respect to originations, adjusted cash net operating income, BDC asset coverage ratio targets and liquidity objectives; placing in the top four for total returns to stockholders in the BDC peer group; successful amendment and extension of the Company’s SunTrust credit facilities, which improved the Company’s balance sheet flexibility; effective communications; and tone at the top. Critical objectives not realized included: asset monetization objectives; and net operating income per share and EPS objectives.

The Committee determined that the major accomplishments for Mr. Bacica in Fiscal 2010 included: an improved budgeting and reporting process; meeting cost reduction targets; successful amendment and extension of the Company’s SunTrust credit facilities, which improved the Company’s balance sheet flexibility; and effective communications. Critical objectives not realized included: the timing of the completion of the ACBS transition; asset monetization objectives; and net operating income per share and EPS objectives.

The Committee determined that the major accomplishments for Mr. Saville in Fiscal 2010 included: exceeding the Company’s origination goals, adjusted cash net operating income, BDC asset coverage ratio targets and liquidity objectives; and completion of targeted control company monetizations and execution of the Company’s asset repositioning strategy. Critical objectives not realized included: failure to achieve operating performance objectives at several control company investments; and higher than expected non-accruals, resulting in missed net operating income objectives, asset monetization objectives and net operating income per share and EPS objectives.

The Committee determined that the major accomplishments for Mr. Rubenstein in Fiscal 2010 included: exceptional performance in assisting in the Company’s control company sales processes and distressed workout transactions; optimizing structures to enhance the Company’s net after tax returns; and negotiating the documentation related to the Company’s funding facilities. Critical objectives not realized included: missing the Company’s net operating income, asset monetization and EPS objectives.

The Committee determined that the major accomplishments for Mr. Marcotte in Fiscal 2010 included: exceeding the Company’s and individual origination goals; and completion of targeted control company monetizations, execution of the Company’s asset repositioning strategy and a successful full recovery on a troubled asset. Critical objectives not realized included: failure to achieve operating performance objectives at two control company investments, targeted asset monetizations, net operating income per share and EPS objectives.

Payment of bonuses to the participants in the 2010 Annual Incentive Cash Bonus Plan, generally will be made in two equal installments in each of March 2011 and September 2011, subject to continued employment of each individual participant by us on each bonus payout date.

-26-

The table below lists each Named Executive Officer’s base salary, their annual incentive target bonus percentage, the Overall Company Score under the 2010 Annual Incentive Cash Bonus Plan, the individual performance adjustment for each Named Executive Officer and their final respective 2010 Annual Incentive Cash Bonus:


Name	2010 Base Salary ($)	Incentive Target Bonus Percentage (%)	Overall Company Score (%)	Individual Performance Adjustment(1) (%)	2010 Annual Incentive Cash Bonus ($)
Steven F. Tunney, Sr. President and CEO	522,000	50	60.089	90	141,149

Stephen J. Bacica Executive Vice President and CFO	350,000	50	60.089	100	105,155

B. Hagen Saville Executive Vice President, Business Development	445,000	50	60.089	90.5	120,996

Samuel G. Rubenstein Executive Vice President and General Counsel	386,000	50	60.089	100	115,971

Robert L. Marcotte Senior Vice President and Managing Director	350,000	40	60.089	100	84,124

(1)	Individual performance adjustments are formulated through the annual review process, calculated numerically on a scale from 1 to 5 and then expressed as a percentage.

Discretionary Bonuses

The Compensation Committee has the authority to award annual bonuses to executive officers on a discretionary basis. The Committee typically awards discretionary bonuses for undertaking additional duties, accomplishing specific projects or achieving specific benefits for us, such as special efforts in connection with a transaction, the disposition on favorable terms of corporate assets and special efforts in connection with corporate initiatives. The Committee may also award discretionary bonuses based on other factors. Mr. Bacica received a discretionary bonus in the amount of $13,933 based on cost reduction efforts, financial forecasting, developing and implementing internal controls and processes and building financial community relationships during 2010. Mr. Marcotte received a discretionary bonus in the amount of $10,907 based on his relative portfolio performance during 2010.

Long-Term Incentives

Equity Awards

Compensation for employees, including executive officers, also includes awards of restricted stock. We believe that the particular characteristics of our business, our dependence on key personnel to conduct our business effectively and the highly competitive environment in which we operate require the use of equity-based compensation for our personnel.

Relative to other forms of equity-based compensation, we believe restricted stock allows us to:

•

align our business plan, stockholder interests and employee concerns;

•

manage dilution associated with equity-based compensation; and

•

match the return expectations of the business more closely with our equity-based compensation plan.

We believe restricted stock motivates performance that is more consistent with the type of return expectations that we have established for our stockholders. Shares of restricted stock that are subject to forfeiture provisions allow us to set objectives and provide meaningful rewards over time to employees.

Executives who join us are typically awarded shares of restricted stock. The size of an initial award is generally intended to reflect the level of the employee’s position with us. The forfeiture restrictions governing initial restricted stock awards usually lapse on a quarterly basis over a four-year period. Annual performance awards have historically been made pursuant to a pre-set range approved by our board of directors and set forth on a matrix that is generally intended to reflect the level of the employee’s position with us as well as an individual’s performance relative to his or her goals and other employees at the same performance and position level. These restricted stock awards have generally been made annually in conjunction with the review of individual performance. Forfeiture restrictions governing performance awards have typically lapsed quarterly over a four-year period. Despite receiving approval from our stockholders in May 2010 for an amendment to our Second Amended and Restated 2006 Employee Restricted Stock Plan, which we refer to as the 2006 Employee Restricted Stock Plan, to increase the maximum aggregate number of shares of our common stock available for issuance thereunder from 3,500,000 to 6,050,000 shares, we made no annual awards to any employees during 2010.

-27-

We provide long-term incentive compensation to our NEOs and other employees through the 2006 Employee Restricted Stock Plan. As a business development company, we must comply with the requirements of the 1940 Act, which imposes certain requirements on the structure of our compensation programs, including limitations on our ability to issue equity-based compensation to our employees and directors. Our stockholders approved the 2006 Employee Restricted Stock Plan at our 2006 Annual Meeting and amendments to such plan at our 2008 Annual Meeting and our 2010 Annual Meeting. On April 4, 2006, the SEC granted us an order authorizing the issuance of restricted stock to our employees. Awards under the 2006 Employee Restricted Stock Plan will comply with all aspects of the SEC’s order, including the following:

•

no one person may be granted awards totaling more than 25% of the shares available;

•

in any fiscal year, no person may be granted awards in excess of 500,000 shares of our common stock; and

•

the total number of shares that may be outstanding as restricted shares under all of our compensation plans may not exceed 10% of the total number of our shares of common stock authorized and outstanding at any time.

The restricted stock awarded under the 2006 Employee Restricted Stock Plan is subject to restrictions on transferability and other restrictions as required by the Compensation Committee from time to time. Except to the extent restricted under the terms of the 2006 Employee Restricted Stock Plan, a participant granted an award will have all the rights of any other stockholder, including the right to vote the restricted stock and the right to receive dividends. During the restriction period prior to the lapse of applicable forfeiture provisions, the restricted stock generally may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the participant. Except as our board of directors or the Compensation Committee otherwise determines, if we terminate a 2006 Employee Restricted Stock Plan participant’s employment during the restriction period, he or she will forfeit any restricted stock for which forfeiture provisions had not yet lapsed as of the date terminated.

Our board of directors may modify, revise or terminate the 2006 Employee Restricted Stock Plan at any time and from time to time, subject to the terms of:

•

the SEC’s order;

•

our certificate of incorporation and bylaws; and

•

applicable law.

Our board of directors will seek stockholder approval of any action modifying a provision of the 2006 Employee Restricted Stock Plan when it determines that such stockholder approval is appropriate under the provisions of applicable law, our certificate of incorporation or bylaws, or the SEC order.

2006 Executive Performance-Based Shares

In September 2006, we executed Executive Employment Agreements with Messrs. Tunney and Saville that provided for an award of 225,000 shares of restricted stock to Mr. Tunney and 200,000 shares of restricted stock to Mr. Saville. With regard to these initial awards, the forfeiture restrictions with respect to (i) 60% of the shares were time-based and lapsed on a quarterly basis beginning on December 31, 2006 and ending on December 31, 2009 and (ii) 40% of the shares were performance-based and lapsed on an annual basis beginning February 28, 2007 and ending on February 28, 2010, subject to the achievement of performance milestones determined by our board of directors. The performance criteria adopted by our board of directors for the performance-based shares were the same corporate governance and financial performance goals adopted with respect to annual incentive cash bonus awards. Forfeiture provisions lapsed with respect to the percentage of performance-based shares equal to that percentage of the executive’s base salary paid to him as a bonus award, not to exceed 100% of the shares subject to the applicable tranche of the performance-based shares. Dividends were paid on a current basis in cash on the non-forfeited time-based shares. Dividends accrued on the performance-based shares while such shares were forfeitable but still held by the executive; however, the executive was not entitled to receive dividends on the performance-based shares if the performance-based forfeiture conditions were not met, unless and until the performance-based shares became non-forfeitable by action of our board or the compensation committee. 22,500, 15,255, none and 22,500 of Mr. Tunney’s performance-based shares became free from forfeiture in February 2007, 2008, 2009 and 2010, respectively, and 20,000, 18,071, none and 20,000 of Mr. Saville’s performance-based shares became free from forfeiture in February 2007, 2008, 2009 and 2010, respectively. Upon management’s recommendation, the Compensation Committee permitted the unearned portion of the performance-based restricted stock previously awarded in 2006 to Messrs. Tunney (29,745 shares) and Saville (21,929 shares) to be forfeited as of February 28, 2010.

Long-Term Incentive Plan

We use our 2009 Long-Term Incentive Program for long-term incentive compensation. Under the 2009 Long-Term Incentive Program, all of our executive officers and key, non-executive employees designated by the Committee may receive (i) an award of shares of restricted common stock, to be issued under the 2006 Employee Restricted Stock Plan, for which forfeiture restrictions lapse upon the achievement of specified Company share price thresholds, each, a “LTIP Restricted Stock Award” and (ii) a bonus payable in cash upon the achievement of

-28-

specified Company share price thresholds, each, an “LTIP Cash Bonus.” The 2009 Long-Term Incentive Program is intended to motivate executive management to provide superior performance over an extended period and to build long-term stockholder value.

The performance measure is the level of our stock price over a three-year measurement period ending July 22, 2012. The Committee selected this goal because it believes executive pay under a long-term, capital accumulation program, such as this, should mirror our long-term performance. The Committee has broad discretion to construe and interpret the terms of 2009 Long-Term Incentive Program, to make adjustments or amendments to the program, to make determinations regarding the weighting or impact of any particular set of criteria or goals that have been satisfied, and to ultimately make determinations as to whether to award LTIP Restricted Stock Awards or LTIP Cash Bonuses.

Share price thresholds must be achieved within the plan period and each share price threshold must be maintained for twenty consecutive trading days. Two thirds of the shares of common stock subject to each LTIP Restricted Stock Award will become free from forfeiture, and two thirds of the amount of each LTIP Cash Bonus earned will be awarded, upon achievement of the applicable milestone, a “Share-Price Satisfaction Date,” with the forfeiture restrictions applicable to the remaining one third of the shares of common stock subject to each LTIP Restricted Stock Award lapsing and the remaining one third of the amount of each LTIP Cash Bonus earned, to be awarded one year after the achievement of the applicable milestone, a “Final Satisfaction Date,” in each case subject to the participant’s continued employment with us.

The forfeiture restrictions applicable to the shares of restricted common stock subject to each LTIP Restricted Stock Award shall lapse according to the following schedule:


Share Price	Percentage of Shares of		% of Restricted Stock for which Forfeiture Provisions Lapse
Share Price	Restricted Common Stock Issued		On Share-Price Satisfaction Date		12 Months after Share-Price Satisfaction Date
$3		25%		16.67%		8.33%
$4		50%		33.33%		16.67%
$5		75%		50.00%		25.00%
$6		90%		60.00%		30.00%
$7		100%		66.67%		33.33%

In the event that our share price reaches predetermined price thresholds, participants may be eligible to receive their respective pro-rata portion of the aggregate dollar amount reserved by us for LTIP Cash Bonuses. LTIP Cash Bonuses are not earned until such time as our share price reaches $5.00, and the maximum payout is not earned until such time as our share price reaches $8.00. The table below sets forth the aggregate LTIP Cash Bonus dollar amounts available for distribution to participants at various share price thresholds:


Share Price	Aggregate Dollar Amount for Each Share Price Achieved
$3.00		$0
$4.00		$0
$5.00		$1,000,000
$6.00		$996,000
$7.00		$1,006,000
$8.00		$2,209,000

Awards Under 2009 Long-Term Incentive Program

On June 17, 2009, the Committee recommended and, on July 23, 2009, our board of directors approved, LTIP Restricted Stock Awards under the 2009 Long-Term Incentive Program to our Named Executive Officers. The table below illustrates the potential cumulative number of shares of common stock for which forfeiture restrictions could lapse with respect to LTIP Restricted Stock Awards to our Named Executive Officers upon the achievement of various share price guidelines:


	Share Price Achieved
	$3.00	$4.00	$5.00	$6.00	$7.00	$8.00
Name	Cumulative Shares for which Forfeiture Restrictions could Lapse	Cumulative Shares for which Forfeiture Restrictions could Lapse	Cumulative Shares for which Forfeiture Restrictions could Lapse	Cumulative Shares for which Forfeiture Restrictions could Lapse	Cumulative Shares for which Forfeiture Restrictions could Lapse	Cumulative Shares for which Forfeiture Restrictions could Lapse
Steven F. Tunney, Sr.	50,000	100,000	150,000	180,000	200,000	200,000
Stephen J. Bacica	18,750	37,500	56,250	67,500	75,000	75,000
B. Hagen Saville	43,750	87,500	131,250	157,500	175,000	175,000
Samuel G. Rubenstein	16,250	32,500	48,750	58,500	65,000	65,000
Robert L. Marcotte	10,000	20,000	30,000	36,000	40,000	40,000

-29-

The table below illustrates the potential cumulative LTIP Cash Bonuses payable to the Named Executive Officers upon the achievement of various share price guidelines:


	Share Price Achieved
	$3.00	$4.00	$5.00	$6.00	$7.00	$8.00
Name	Cumulative Bonus Earned	Cumulative Bonus Earned	Cumulative Bonus Earned	Cumulative Bonus Earned	Cumulative Bonus Earned	Cumulative Bonus Earned
Steven F. Tunney, Sr.	—	—	231,000	462,000	694,000		1,204,000
Stephen J. Bacica	—	—	87,000	173,000	260,000		452,000
B. Hagen Saville	—	—	202,000	405,000	607,000		1,054,000
Samuel G. Rubenstein	—	—	75,000	150,000	225,000		391,000
Robert L. Marcotte	—	—	46,000	92,000	139,000		241,000

On each of October 6, 2009, October 27, 2009, April 19, 2010, November 1, 2010 and February 28, 2011 the $3, $4, $5, $6 and $7 share-price thresholds, respectively, were satisfied and the Committee recommended and our board of directors approved, LTIP Restricted Stock Awards and, where applicable, LTIP Cash Bonuses, under the 2009 Long-Term Incentive Program with respect to each such threshold to the Named Executive Officers.

Timing of Restricted Stock Awards

We will not time or select the dates of any stock award in coordination with our release of material non-public information, nor will we have any program, plan or practice to do so. The Compensation Committee has adopted the following specific policies regarding stock-based awards for our executive officers and employees:

New Hire Awards

The date of all awards to newly hired executive officers and employees is the first day of the calendar quarter after the date on which the individual commences employment with us (or the next succeeding business day that the NASDAQ Stock Market is open).

Annual Awards

In 2010, we did not make any annual equity awards to employees. In the past, and should the Committee elect to resume such awards in the future, the annual equity award date for all eligible employees, including the Named Executive Officers, has typically fallen on a date that follows the regularly scheduled meeting of the Compensation Committee following completion of Company-wide performance reviews. The award date timing has been driven by the fact that it coincides with our calendar-year-based performance management cycle, allowing us to deliver the equity awards close in time to performance appraisals, which increases the impact of the awards by strengthening the link between pay and performance. The annual equity award to non-employee members of our board of directors who are eligible for such awards, is the date of our annual general meeting of stockholders each calendar year.

Other Awards

All other awards to executive officers and employees throughout the year, referred to as “off-cycle awards,” are made outside of the quarterly and annual blackout periods under our insider trading policy.

Other Elements of Compensation and Perquisites

In order to attract, retain and pay market levels of compensation, we provide our executive officers and other employees the following benefits and perquisites:

Medical Insurance

We offer to each Named Executive Officer, their spouses, domestic partners and children, health, dental and vision insurance coverage that we make available to our other employees. We pay a portion of the premiums for this insurance for all employees.

Life, Disability and Other Insurance

We provide each Named Executive Officer group term life insurance, business travel accident insurance, short term disability insurance and long term disability insurance that we make available to our other employees. We pay a portion of the premiums for this insurance for all employees, except long term disability insurance, which is paid by our employees.

Defined Contribution Plan

We offer a Section 401(k) Savings/Retirement Plan, or the 401(k) Plan, a tax-qualified retirement plan, to eligible employees. The 401(k) Plan permits eligible employees to defer between 1% and 60% of their annual eligible compensation, subject to certain limitations imposed by the Internal Revenue Code. The employees’ elective deferrals are immediately vested and non-forfeitable in the 401(k) Plan. In any plan year, we will contribute

-30-

to each participant who is considered a non-highly compensated employee under the Internal Revenue Code, a matching contribution equal to 100% of the first 3% and 50% of the next 2% of the participant’s compensation that he or she has contributed to the plan. Company contributions to participants who are considered highly compensated employees under the Internal Revenue Code equal 100% of the first 1% and 50% of the next 4% of the participant’s compensation that he or she has contributed to the plan. Company contributions to non-highly compensated employees vest immediately and contributions to highly compensated employees vest annually on a straight line basis over the employee’s first five years of employment. With the exception of B. Hagen Saville, all of our Named Executive Officers participated in the 401(k) Plan during Fiscal 2010 and received matching contributions.

Non-Qualified Deferred Compensation Plan

We also maintain a non-qualified deferred compensation plan that allows eligible employees classified as a principal, managing director, senior vice president, executive vice president, president or chief executive officer, to defer payment of up to 50% of their base salary and up to 100% of cash bonus into an interest-bearing account. Interest is compounded quarterly at our cost of funds rate plus 200 basis points. No employer contributions are provided. For 2010, Mr. Rubenstein opted to defer a portion of his compensation under the non-qualified deferred compensation plan.

Other

We make available certain other perquisites or fringe benefits to all eligible employees, including the Named Executive Officers, such as parking fees, transit fees, professional society dues and participation in official company functions.

MCG Recoupment Policy of Incentive Compensation (Clawback Policy)

The Committee has always supported governance and compliance practices that are transparent and protect the interests of the Company’s stockholders. To strengthen the Company’s practices in these areas, the Company has adopted a policy on the recoupment of incentive compensation in the event of a material restatement. The recoupment policy requires our board of directors to review any annual cash and equity-based awards, performance-based compensation and other forms of cash or equity compensation made under the 2006 Employee Restricted Stock Plan, as may be amended from time to time, or any other incentive compensation plan of the Company, excluding time-based awards of restricted stock, made to a Senior Officer after January 1, 2011 and that was provided to any Senior Officer on the basis of the Company having met or exceeded specific performance targets during a performance period that is subject to a material restatement of Company financial results. If: (1) the payment was predicated upon achieving certain financial results that were subsequently the subject of a material restatement of Company financial statements filed with the Securities and Exchange Commission; (2) the board determines the Senior Officer engaged in the willful commission of an act of fraud, dishonesty, recklessness or other intentional misconduct that caused or substantially caused the need for the material restatement; and (3) a lower payment would have been made to the Senior Officer based upon the restated financial results, then our board of directors is required, to the extent practicable, to seek to recover for the benefit of the Company the portion of such compensation that would not have been earned had the incentive compensation been based on the financial results as restated. For purposes of this policy, the term “Senior Officer” means the Company’s Chief Executive Officer, Chief Financial Officer, Executive Vice President, Business Development and Executive Vice President and General Counsel.

Commitment Not to Enter into any Future Gross-Up Agreements, with Limited Exceptions

On March 31, 2010, our board of directors adopted the following policy concerning “gross ups” for excise taxes payable by executives: the Company shall not enter into future agreements with its employees that, in the event of a change of control, obligate the Company to provide for excise tax “gross ups” (i.e., if the executive receives payments in the event of a change in control and such payments become subject to excise tax under Section 4999 of the Internal Revenue Code, then the executive will be entitled to receive a payment in an amount equal to the excise tax imposed upon such payment(s)); however, in unusual circumstances where the board believes that accommodations have to be made to recruit a new executive to the Company, limited reimbursement for taxes payable may be included in executives’ contracts, provided that the excise tax “gross ups” will be limited to payments triggered by both a change in control and a termination of employment and will be subject to a three-year sunset provision.

Minimum Stock Ownership Requirements

To further align the interests of the chief executive officer with Company stockholders, our board of directors has established minimum stock ownership guidelines under which the chief executive officer is required to own Company stock equal in value to three times his or her annual salary. The Committee develops and reviews from time to time the stock ownership guidelines set forth above and recommends any changes for approval by our board of directors. With the exception of our chief executive officer, there are no minimum stock ownership guidelines for our other Named Executive Officers or employees, although our senior management team members

- 31 -

are encouraged and expected to have a significant direct interest in the value of our common stock through open market purchases and/or receipt of equity awards.

Prohibition on Speculation in MCG Stock; Oversight of Employee Equity Ownership

Our insider trading policy prohibits any short sales of our securities or purchases or sales of puts, calls or other derivative securities, including hedges, based on our securities that limit or eliminate the economic risk to our executives and directors of owning our stock. We have not included in our insider trading policy a formal prohibition against purchasing our securities on margin, borrowing against our securities held in a margin account or pledging our securities as collateral for a loan; however, we have advised our employees and members of our board of the risks and consequences of such activities and encourage them to be judicious when considering such actions. Trading in our securities by our employees and the employee’s immediate family members who reside with the employee or whose transactions are subject to the employee’s influence or control, is limited to open window trading periods designated by the chief compliance officer. In addition, all transactions by any employee involving Company securities must be pre-cleared by the chief compliance officer.

Internal Equity Considerations

In making compensation decisions, the Committee seeks to promote teamwork among, and high morale within, our senior management team, including the Named Executive Officers. While the Committee does not use any quantitative formula or multiple for comparing or establishing compensation for the senior management team, it is mindful of internal pay equity considerations, and assesses the relationship of the compensation of each executive to other members of the senior management team. The Committee also considers the relative portion of equity awards made to the senior management team in a fiscal year to awards made to non-executive employees eligible for such awards.

Severance and Change of Control Benefits

Pursuant to employment agreements we entered into with Messrs. Tunney, Saville, Rubenstein and Bacica, these Named Executive Officers are entitled to certain benefits in the event of the termination of their employment under specified circumstances, including termination without cause and for good reason and following a change of control of MCG. We have no agreement in place with Mr. Marcotte.

We believe that severance protections, particularly in the context of a change of control transaction, can play a valuable role in attracting and retaining executive officers, are an important part of an executive’s compensation and are consistent with competitive practices. Accordingly, we provide such protections for our Named Executive Officers and certain other executive officers. We believe that the occurrence, or potential occurrence, of a change of control will create uncertainty regarding the continued employment of our Named Executive Officers. This uncertainty results from the fact that many change of control transactions result in significant organizational changes, particularly at the senior executive level. We have provided more detailed information about these benefits, along with estimates of their value under various circumstances, under the captions “ — Employment, Severance and Change of Control Arrangements” and “ — Potential Termination and Change of Control Payments for Messrs. Tunney, Bacica, Saville, Rubenstein and Marcotte” below.

Tax and Accounting Considerations

It is generally our policy to qualify compensation paid to executive officers for deductibility under section 162(m) of the Internal Revenue Code. Section 162(m) generally prohibits us from deducting the compensation of certain executive officers that exceeds $1,000,000 unless that compensation is based on the satisfaction of objective performance goals. Although we generally are not subject to corporate income taxes, because we have elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, Section 162(m) impacts the calculation of taxable income, 90% of which we are required to distribute through dividends. Generally, however, we do not believe Section 162(m) deductibility has a material impact on stockholder value. The Compensation Committee will try to preserve the deductibility of compensation, to the extent reasonably practical and to the extent consistent with its other compensation objectives, but in some cases may make performance-based awards not exempt from these limits where such awards are appropriate and will not have a material impact on stockholder value.

We account for equity compensation paid to our employees under the rules of ASC 718, which requires us to measure and recognize compensation expense in our financial statements for all share-based payments based upon an estimate of their fair value over the service period of the award. We record cash compensation as an expense at the time the obligation is accrued.

Non-Employee Director Compensation

Non-employee director compensation is set by our board of directors at the recommendation of the Compensation Committee. In developing its recommendations, the Compensation Committee was guided by the following goals: compensation should fairly pay directors for work required in a company of our size and scope; and the structure of the compensation should be simple, transparent and easy for stockholders to understand. Our board

-32-

of directors has determined that each non-employee director should receive an annual retainer and a fee for each committee on which the non-employee director served. Our chairman and the chairs of each of the committees of our board of directors also receive a fee for serving in such positions. Our board of directors also approved reimbursement to directors for reasonable and necessary expenses incurred in connection with attendance at meetings of the board of directors and other Company business during 2010.

Upon re-election at our Annual Meetings of Stockholders, each re-elected non-employee director is awarded shares of our restricted common stock.

For a further description of the compensation paid to non-management directors for 2010, see “ — Compensation of Directors.”

-33-

SUMMARY COMPENSATION TABLE

The following table sets forth information regarding compensation earned by our Chief Executive Officer, our Chief Financial Officer and each of our three other most highly compensated executive officers during the fiscal years ended December 31, 2008, December 31, 2009 and December 31, 2010, or Fiscal 2008, Fiscal 2009 and Fiscal 2010. We refer to these executive officers as our “Named Executive Officers” or “NEOs” elsewhere in this proxy statement.


Name and Principal Positions(1)	Year	Salary ($)		Bonus ($)		Stock Awards(2) ($)		Non-Equity Incentive Plan Compensation(3) ($)		Change in Pension Value and Non-qualified Deferred Compensation Earnings ($)		All Other Compensation(16) ($)		Total ($)
Steven F. Tunney, Sr. President and Chief Executive Officer	2010 2009 2008		522,000 522,000 518,333		— — —		(140,336)(4) 513,141 229,800		603,149(11) 275,696 —		562 2,267 2,571		11,028 10,860 10,290		996,403 1,323,964 760,994

Stephen J. Bacica Executive Vice President and Chief Financial Officer	2010 2009 2008		350,000 350,000 149,405(5)		13,933(6) 102,500(7) 25,000(8)		— 167,706 226,700		278,155(12) 184,854 —		— — —		11,028 10,674 5,444		653,116 815,734 406,549

B. Hagen Saville Executive Vice President, Business Development	2010 2009 2008		445,000 445,000 441,667		— — —		(37,365)(4) 449,914 153,200		525,996(13) 235,028 —		259 1,047 1,496		4,638 8,364 11,370		938,528 1,139,353 607,733

Samuel G. Rubenstein Executive Vice President and General Counsel	2010 2009 2008		386,000 386,000 384,167		— — —		— 145,345 95,750		265,971(14) 203,867 —		1,028 3,750 4,992		11,954 11,790 11,253		664,953 750,752 496,162

Robert L. Marcotte Senior Vice President and Managing Director	2010 2009		350,000 350,000		10,907(9) 160,000(7)(10)		— 89,443		176,124(15) 147,883		— —		11,028 10,779		548,059 758,105

(1)	The titles noted in this table are each officer’s title as of December 31, 2010. Mr. Bacica became our Executive Vice President and CFO on November 7, 2008.

(2)

The amounts shown reflect the aggregate grant date value of the stock awards during Fiscal 2008, Fiscal 2009 and Fiscal 2010 computed in accordance with ASC Topic 718—Compensation—Stock Compensation (formerly Statement of Financial Accounting Standards No. 123(R)—Share-Based Payment). These amounts reflect the total grant date expense for these awards and do not correspond to the actual cash value that will be recognized by each of the Named Executive Officers when received. The Named Executive Officers were not awarded any shares of restricted stock during Fiscal 2010. The Fiscal 2009 grant date value reflects the LTIP Restricted Stock Awards made to each of the Named Executive Officers under our 2009 Long-Term Incentive Program, which have a three-year duration ending on July 22, 2012. Each Named Executive Officer must be employed by us on the date that our share price has reached each requisite milestone for the required period of time and the date that is twelve months following each share price satisfaction date in order to receive without restriction, the full number of shares of common stock subject to the relevant portion of their respective LTIP Restricted Stock Awards. A detailed description of the 2009 Long-Term Incentive Program has been included in our Compensation Discussion and Analysis. Executives are not entitled to receive dividends on performance-based shares until such time as the applicable performance conditions are met and the shares are earned. The assumptions used by us with respect to the valuation of restricted stock awards are set forth in Note 9—Share-based Compensation to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2010. The individual awards reflected in the summary compensation table are summarized below:


Name	Date of Award	Number of Shares Subject to Award (#)	Aggregate Grant-Date Fair Value Computed in Accordance with ASC 718 for Stock Awards Granted in Fiscal Year

			2008 ($)	2009 ($)	2010 ($)

Steven F. Tunney, Sr.	2/28/08 7/23/09	30,000 222,500	229,800 —	— 513,141	— —

TOTAL			229,800	513,141	—


Stephen J. Bacica	7/1/08 8/6/08 11/7/08 7/23/09	5,000 25,000 100,000 75,000	19,950 119,750 87,000 —	— — — 167,706	— — — —

TOTAL			226,700	167,706	—


B. Hagen Saville	2/28/08 7/23/09	20,000 195,000	153,200 —	— 449,914	— —

TOTAL			153,200	449,914	—

-34-


Name	Date of Award	Number of Shares Subject to Award (#)	Aggregate Grant-Date Fair Value Computed in Accordance with ASC 718 for Stock Awards Granted in Fiscal Year

			2008 ($)	2009 ($)	2010 ($)
Samuel G. Rubenstein	4/30/08 7/23/09	12,500 65,000	95,750 —	— 145,345	— —

TOTAL			95,750	145,345	—

Robert L. Marcotte	7/23/09	40,000	—	89,443

TOTAL			—	89,443

(3)

The amounts shown for Fiscal 2010 represent (i) annual incentive cash bonus awards paid to each applicable Named Executive Officer during March 2011 (and to be paid in September 2011) for the achievement of specified performance objectives during Fiscal 2010 and (ii) LTIP Cash Bonus payments in connection with the achievement of the $5.00 and $6.00 share price thresholds under our 2009 Long-Term Incentive Program. The amounts shown for Fiscal 2009 represent annual incentive cash bonus awards paid to each applicable Named Executive Officer during March and September of Fiscal 2010 for the achievement of specified performance objectives for such year. As a result of our Fiscal 2008 performance, none of our Named Executive Officers received a bonus payout under our annual incentive cash bonus program for such year and only Messrs. Bacica and Marcotte received bonus awards under our 2008 Retention Program, which were paid during Fiscal 2009 (see footnote 7 below).

(4)	The amount shown reflects the reversal of stock-based compensation expense in connection with the forfeiture on February 28, 2010 of 29,745 and 21,929 performance-based restricted shares awarded in 2006 to Messrs. Tunney and Saville, respectively.

(5)

Represents the sum of the pro-rated portion of Mr. Bacica’s annual base salary of $205,000 for his service as Chief Accounting Officer from May 19, 2008 through November 7, 2008 and the pro-rated portion of his annual base salary of $350,000 for his service as Chief Financial Officer from November 8, 2008 through year-end.

(6)	Represents a discretionary bonus of $13,933 paid to Mr. Bacica for 2010 performance.

(7)

Pursuant to the terms and conditions of our 2008 Retention Program, on August 6, 2008, our Compensation Committee awarded (i) Mr. Bacica a cash payment of $102,500, which was paid in three equal installments on each of March 31, 2009, June 30, 2009 and September 30, 2009 and (ii) Mr. Marcotte a cash payment of $140,000, which was paid in three equal installments on each of March 31, 2009, June 30, 2009 and September 30, 2009.

(8)	Represents a sign-on bonus of $25,000 paid to Mr. Bacica in connection with the commencement of his employment in May 2008.

(9)	Represents a discretionary bonus of $10,907 paid to Mr. Marcotte for 2010 performance.

(10)	Includes a discretionary bonus of $20,000 paid to Mr. Marcotte for 2009 performance.

(11)	Includes $141,149 earned by Mr. Tunney under the 2010 Annual Incentive Cash Bonus Plan and $462,000 in LTIP Cash Bonus payments awarded to Mr. Tunney in connection with the achievement of the $5.00 and $6.00 share price thresholds under our 2009 Long-Term Incentive Program.

(12)	Includes $105,155 earned by Mr. Bacica under the 2010 Annual Incentive Cash Bonus Plan and $173,000 in LTIP Cash Bonus payments awarded to Mr. Bacica in connection with the achievement of the $5.00 and $6.00 share price thresholds under our 2009 Long-Term Incentive Program.

(13)	Includes $120,996 earned by Mr. Saville under the 2010 Annual Incentive Cash Bonus Plan and $405,000 in LTIP Cash Bonus payments awarded to Mr. Saville in connection with the achievement of the $5.00 and $6.00 share price thresholds under our 2009 Long-Term Incentive Program.

(14)	Includes $115,971 earned by Mr. Rubenstein under the 2010 Annual Incentive Cash Bonus Plan and $150,000 in LTIP Cash Bonus payments awarded to Mr. Rubenstein in connection with the achievement of the $5.00 and $6.00 share price thresholds under our 2009 Long-Term Incentive Program.

(15)	Includes $84,124 earned by Mr. Marcotte under the 2010 Annual Incentive Cash Bonus Plan and $92,000 in LTIP Cash Bonus payments awarded to Mr. Marcotte in connection with the achievement of the $5.00 and $6.00 share price thresholds under our 2009 Long-Term Incentive Program.

(16)	“All Other Compensation” for Fiscal 2008, Fiscal 2009 and Fiscal 2010 includes the following:


Name	Year	401(k) Employer Matching Contributions ($)	Life Insurance Premiums ($)	Other ($)	Total ($)
Steven F. Tunney, Sr.	2010 2009 2008	7,350 7,350 6,900	1,428 1,260 1,140	2,250 2,250 2,250	11,028 10,860 10,290

Stephen J. Bacica	2010 2009 2008	7,350 7,300 3,733	1,428 1,124 398	2,250 2,250 1,313	11,028 10,674 5,444

B. Hagen Saville	2010 2009 2008	— 3,894 6,900	1,428 1,260 1,140	3,210 3,210 3,330	4,638 8,364 11,370

Samuel G. Rubenstein	2010 2009 2008	7,350 7,350 6,900	1,394 1,230 1,113	3,210 3,210 3,240	11,954 11,790 11,253
Robert L. Marcotte	2010 2009	7,350 7,350	1,428 1,179	2,250 2,250	11,028 10,779

-35-

FISCAL 2010 GRANTS OF PLAN-BASED AWARDS

The following table sets forth information regarding awards made to our Named Executive Officers during the year ended December 31, 2010:


			Estimated Future Payouts Under Non-Equity Incentive Plan Awards
Name	Type of Award (1)	Award Date	Threshold ($)	Target ($)		Maximum ($)
Steven F. Tunney, Sr.	AIBP	11/2/10(2)	0		261,000		326,250
Stephen J. Bacica	AIBP	11/2/10(2)	0		175,000		218,750
B. Hagen Saville	AIBP	11/2/10(2)	0		222,500		278,125
Samuel G. Rubenstein	AIBP	11/2/10(2)	0		193,000		241,250
Robert L. Marcotte	AIBP	11/2/10(2)	0		140,000		175,000

(1)	Type of Award:

AIBP = Annual Incentive Cash Bonus Plan

(2)

The 2010 Annual Incentive Cash Bonus Plan provided for the potential payment of cash bonuses, upon the attainment of certain strategic goals, to each of the Named Executive Officers, the remaining executive officers of the Company and key, non-executive employees. Each participant in the 2010 Annual Incentive Cash Bonus Plan was assigned a potential target cash bonus amount expressed as a percentage of his or her 2010 annual base salary. For the Named Executive Officers, the approved percentages for 2010 were as follows: Mr. Tunney (50%); Mr. Bacica (50%); Mr. Saville (50%); Mr. Rubenstein (50%); and Mr. Marcotte (40%). Additionally, Messrs. Tunney, Bacica, Saville and Rubenstein were given the opportunity to earn the target bonuses specified in their respective employment agreements, or an additional 50% of their base salaries, upon the achievement of specified earnings per share and share price stretch goals. However, these milestones were designed to meet certain requirements set forth in these employment agreements; we did not anticipate any payment under this portion of the program and, therefore, those figures are not included in the table above. The six selected financial metrics and key strategic performance goals, each a “Plan Metric,” under the 2010 Annual Incentive Cash Bonus Plan were weighted between 10% and 25% and milestones within each specified Plan Metric were scaled from 50% to 125%, such that achievement of the 100% level within each of the six Plan Metrics could result in full payment of the specified target bonus for each individual. Performance below the minimum threshold for a Plan Metric could result in a zero payment for that Plan Metric and performance above the maximum threshold for a Plan Metric could result in a score of no more than 125% for such Plan Metric. See “Executive Compensation — Compensation Discussion and Analysis — Elements of Compensation and 2010 Compensation Decisions — Annual Incentive Cash Bonus” for a discussion of this program.

-36-

OUTSTANDING EQUITY AWARDS AT FISCAL 2010 YEAR-END

The following table sets forth information regarding outstanding awards of restricted stock held by our Named Executive Officers as of December 31, 2010:


	Stock Awards
Name	Number of Shares of Stock That Have Not Vested(1) (#)	Market Value of Shares of Stock That Have Not Vested(2) ($)	Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested(2) ($)
Steven F. Tunney, Sr.	9,375(3)	65,344	46,667(8)	325,269
Stephen J. Bacica	51,864(4)	361,492	17,500(9)	121,975
B. Hagen Saville	6,250(5)	43,563	40,833(10)	284,606
Samuel G. Rubenstein	3,898(6)	27,169	15,167(11)	105,714
Robert L. Marcotte	57,807(7)	402,915	9,333(12)	65,051

(1)	No restricted stock awards have been transferred.

(2)	The market value of shares of stock for which forfeiture restrictions had not lapsed was determined based on the closing price of our common stock on the NASDAQ Global Select Market on December 31, 2010, which was $6.97.

(3)

9,375 of these shares of common stock are subject to a restricted stock agreement dated April 30, 2008, pursuant to which the forfeiture restrictions lapsed as to 6.25% of the aggregate number of shares subject to this award on June 30, 2008 and as to an additional 6.25% of the shares at the end of each successive three-month period thereafter.

(4)

1,870 of these shares of common stock are subject to a restricted stock agreement dated July 1, 2008, pursuant to which the forfeiture restrictions lapsed as to 6.25% of the aggregate number of shares subject to this award on September 30, 2008 and as to an additional 6.25% of the shares at the end of each successive three-month period thereafter, 25,000 of these shares of common stock are subject to a restricted stock agreement dated August 6, 2008, pursuant to which the forfeiture restrictions lapse as to 100% of the shares on March 31, 2011 and 24,994 of these shares of common stock are subject to a restricted stock agreement dated November 7, 2008, pursuant to which the forfeiture restrictions lapse as to 8.33% of the aggregate number of shares subject to this award at the end of each three-month period beginning on December 31, 2008.

(5)

6,250 of these shares of common stock are subject to a restricted stock agreement dated April 30, 2008, pursuant to which the forfeiture restrictions lapsed as to 6.25% of the aggregate number of shares subject to this award on June 30, 2008 and as to an additional 6.25% of the shares at the end of each successive three-month period thereafter.

(6)

3,898 of these shares of common stock are subject to a restricted stock agreement dated April 30, 2008, pursuant to which the forfeiture restrictions lapsed as to 6.25% of the aggregate number of shares subject to this award on June 30, 2008 and as to an additional 6.25% of the shares at the end of each successive three-month period thereafter.

(7)

7,807 of these shares of common stock are subject to a restricted stock agreement dated April 30, 2008, pursuant to which the forfeiture restrictions lapsed as to 6.25% of the aggregate number of shares subject to this award on June 30, 2008 and as to an additional 6.25% of the shares at the end of each successive three-month period thereafter and 50,000 of these shares of common stock are subject to a restricted stock agreement dated August 6, 2008, pursuant to which the forfeiture restrictions lapse as to 100% of the shares on March 31, 2011.

(8)

Includes (i) 26,667 shares that were issued under the 2009 Long-Term Incentive Program, 16,667 shares of which the forfeiture restrictions lapse on April 19, 2011 and 10,000 shares of which the forfeiture restrictions lapse on November 1, 2011, in each case subject to Mr. Tunney’s continued employment with us and (ii) 20,000 shares that are issuable under the 2009 Long-Term Incentive Program in connection with the achievement of the $7.00 Company share price threshold set forth in such program, with the forfeiture restrictions applicable to one third of the shares of common stock subject to such milestone lapsing one year after the achievement of such milestone, subject to Mr. Tunney’s continued employment with us.

(9)

Includes (i) 10,000 shares that were issued under the 2009 Long-Term Incentive Program, 6,250 shares of which the forfeiture restrictions lapse on April 19, 2011 and 3,750 shares of which the forfeiture restrictions lapse on November 1, 2011, in each case subject to Mr. Bacica’s continued employment with us and (ii) 7,500 shares that are issuable under the 2009 Long-Term Incentive Program in connection with the achievement of the $7.00 Company share price threshold set forth in such program, with the forfeiture restrictions applicable to one third of the shares of common stock subject to such milestone lapsing one year after the achievement of such milestone, subject to Mr. Bacica’s continued employment with us.

(10)

Includes (i) 23,333 shares that were issued under the 2009 Long-Term Incentive Program, 14,583 shares of which the forfeiture restrictions lapse on April 19, 2011 and 8,750 shares of which the forfeiture restrictions lapse on November 1, 2011, in each case subject to Mr. Saville’s continued employment with us and (ii) 17,500 shares that are issuable under the 2009 Long-Term Incentive Program in connection with the achievement of the $7.00 Company share price threshold set forth in such program, with the forfeiture restrictions applicable to one third of the shares of common stock subject to such milestone lapsing one year after the achievement of such milestone, subject to Mr. Saville’s continued employment with us.

(11)

Includes (i) 8,667 shares that were issued under the 2009 Long-Term Incentive Program, 5,417 shares of which the forfeiture restrictions lapse on April 19, 2011 and 3,250 shares of which the forfeiture restrictions lapse on November 1, 2011, in each case subject to Mr. Rubenstein’s continued employment with us and (ii) 6,500 shares that are issuable under the 2009 Long-Term Incentive Program in connection with the achievement of the $7.00 Company share price threshold set forth in such program, with the forfeiture restrictions applicable to one third of the shares of common stock subject to such milestone lapsing one year after the achievement of such milestone, subject to Mr. Rubenstein’s continued employment with us.

(12)

Includes (i) 5,333 shares that were issued under the 2009 Long-Term Incentive Program, 3,333 shares of which the forfeiture restrictions lapse on April 19, 2011 and 2,000 shares of which the forfeiture restrictions lapse on November 1, 2011, in each case subject to Mr. Marcotte’s continued employment with us and (ii) 4,000 shares that are issuable under the 2009 Long-Term Incentive Program in connection with the achievement of the $7.00 Company share price threshold set forth in such program, with the forfeiture restrictions applicable to one third of the shares of common stock subject to such milestone lapsing one year after the achievement of such milestone, subject to Mr. Marcotte’s continued employment with us.

-37-

FISCAL 2010 STOCK VESTED

The following table sets forth information regarding shares of restricted stock held by our Named Executive Officers for which forfeiture restrictions lapsed during the fiscal year ended December 31, 2010:


	Stock Awards
Name	Number of Shares Acquired on Vesting (#)	Value Realized on Vesting(1) ($)
Steven F. Tunney, Sr.	117,417	722,000
Stephen J. Bacica	67,088	407,009
B. Hagen Saville	101,505	623,253
Samuel G. Rubenstein	31,967	203,206
Robert L. Marcotte	33,095	201,724

(1)

Value realized upon vesting is based on the closing sale price of our common stock on each applicable vesting date.

FISCAL 2010 NONQUALIFIED DEFERRED COMPENSATION

During 2000, we created a deferred compensation plan for key executives that enables eligible employees to defer a portion of their salary and bonus to an unfunded deferred compensation plan that we manage. Our managing directors and executive officers are eligible to participate in the deferred compensation plan. Contributions to the deferred compensation plan earn interest at a rate of 2.0% over our internal cost of funds rate, as defined by the plan. The plan became effective on October 1, 2000.


Name	Executive Contributions in Last FY(1) ($)	Aggregate Earnings in Last FY ($)	Aggregate Balance at Last FYE ($)
Steven F. Tunney, Sr.	—	10,037(2)	195,709
Stephen J. Bacica	—	—	—
B. Hagen Saville	—	4,635(3)	90,377
Samuel G. Rubenstein	29,493	18,044(4)	361,144
Robert L. Marcotte	—	—	—

(1)

The executive contributions are also reflected in the Summary Compensation Table.

(2)

Includes $562 reported as compensation in the Summary Compensation Table. The $562 represents the above-market earnings on compensation that is deferred, which is the portion of the interest that exceeds 120% of the applicable federal long-term rate, with compounding.

(3)

Includes $259 reported as compensation in the Summary Compensation Table. The $259 represents the above-market earnings on compensation that is deferred, which is the portion of the interest that exceeds 120% of the applicable federal long-term rate, with compounding.

(4)

Includes $1,028 reported as compensation in the Summary Compensation Table. The $1,028 represents the above-market earnings on compensation that is deferred, which is the portion of the interest that exceeds 120% of the applicable federal long-term rate, with compounding.

Employment, Severance and Change of Control Arrangements

Executive Employment Agreements with Steven F. Tunney, Sr., Stephen J. Bacica, B. Hagen Saville and Samuel G. Rubenstein

We entered into executive employment agreements, or the Executive Employment Agreements, with each of Steven F. Tunney, Sr. (September 18, 2006), Stephen J. Bacica (October 28, 2008), B. Hagen Saville (September 18, 2006) and Samuel G. Rubenstein (March 1, 2007). Each of the Executive Employment Agreements was amended in December 2008 to comply with Section 409A of the Internal Revenue Code and the final Section 409A regulations. We have no agreement with Mr. Marcotte.

Term

The initial term of the Executive Employment Agreements with each of Messrs. Tunney, Saville and Rubenstein continued in effect through February 28, 2010, were automatically extended on that date and will automatically be extended for successive one-year periods unless either we or the executive provides notice of non-extension no later than sixty days prior to the expiration of the then-applicable term. The Executive Employment Agreement with Mr. Bacica will continue in effect until November 6, 2011 and will automatically be extended for successive one-year periods unless either we or Mr. Bacica provides notice of non-extension no later than sixty days prior to the expiration of the then-applicable term.

Salary, Bonus and Benefits

Under the terms of the Executive Employment Agreements, Messrs. Tunney, Bacica, Saville and Rubenstein receive an annual base salary, subject to review and adjustment at least annually by our board of directors or Compensation Committee. For Fiscal 2010, Messrs. Tunney, Bacica, Saville and Rubenstein received

-38-

annual base salaries of $522,000, $350,000, $445,000 and $386,000, respectively. Each executive is eligible to receive an annual bonus determined by our board of directors or compensation committee within the range of 0% to 200% of his respective annualized base salary, with a target bonus of 100% of base salary.

Each participant in our 2010 Annual Incentive Cash Bonus Plan was assigned a potential target cash bonus amount expressed as a percentage of his or her 2010 annual base salary. For each of Messrs. Tunney, Bacica, Saville and Rubenstein, the approved percentages for 2010 were as follows: Mr. Tunney (50%); Mr. Bacica (50%); Mr. Saville (50%); and Mr. Rubenstein (50%). Additionally, Messrs. Tunney, Bacica, Saville and Rubenstein were given the opportunity to earn the target bonuses specified in the Executive Employment Agreements, or an additional 50% of their base salaries, upon the achievement of specified earnings per share and share price stretch goals. These milestones were designed to meet certain requirements set forth in these agreements and no payments were made.

Each executive is entitled to participate in all benefit plans and programs that we establish and make available to our employees to the extent that he is eligible under, and subject to the provisions of, the plan documents governing those programs.

Stock-Based Awards

The Executive Employment Agreements with Messrs. Tunney and Saville provided for an award of 225,000 shares of restricted stock to Mr. Tunney and 200,000 shares of restricted stock to Mr. Saville. With regard to these initial awards, the forfeiture restrictions with respect to (i) 60% of the shares were time-based and lapsed on a quarterly basis beginning on December 31, 2006 and ending on December 31, 2009 and (ii) 40% of the shares were performance-based and lapsed on an annual basis beginning February 28, 2007 and ending on February 28, 2010, subject to the achievement of performance milestones determined by our board of directors. The performance criteria adopted by our board of directors for the performance-based shares were the same corporate governance and financial performance goals adopted with respect to annual incentive cash bonus awards. Forfeiture provisions lapsed with respect to the percentage of performance-based shares equal to that percentage of the executive’s base salary paid to him as a bonus award, not to exceed 100% of the shares subject to the applicable tranche of the performance-based shares. Dividends were paid on a current basis in cash on the non-forfeited time-based shares. Dividends accrued on the performance-based shares while such shares were forfeitable but still held by the executive; however, the executive was not entitled to receive dividends on the performance-based shares if the performance-based forfeiture conditions were not met, unless and until the performance-based shares became non-forfeitable by action of our board or the compensation committee. 22,500, 15,255, none and 22,500 of Mr. Tunney’s performance-based shares became free from forfeiture in February 2007, 2008, 2009 and 2010, respectively, and 20,000, 18,071, none and 20,000 of Mr. Saville’s performance-based shares became free from forfeiture in February 2007, 2008, 2009 and 2010, respectively. Upon management’s recommendation, the Compensation Committee permitted the unearned portion of the performance-based restricted stock previously awarded in 2006 to Messrs. Tunney (29,745 shares) and Saville (21,929 shares) to be forfeited as of February 28, 2010.

Pursuant to Mr. Bacica’s Executive Employment Agreement, in November 2008, he was awarded 100,000 shares of restricted stock. Beginning with December 31, 2008, 8.33% of the shares of restricted stock subject to such award shall become free of forfeiture restrictions in equal quarterly installments over a three-year period, subject to his continued employment with us.

Pursuant to Mr. Rubenstein’s Executive Employment Agreement, in March 2007, he was awarded 150,000 shares of restricted stock, which became free of forfeiture restrictions in equal quarterly installments over a three-year period ending on December 31, 2009.

Payments Upon Resignation by the Executive Without Good Reason or Termination by Us for Cause

Under the Executive Employment Agreements, if the employment of any of Messrs. Tunney, Bacica, Saville or Rubenstein is terminated by us for cause or by the executive other than for good reason (each as defined in Executive Employment Agreements), the terminated executive will receive all amounts of compensation accrued under the applicable Executive Employment Agreement but unpaid as of the termination date, including base salary, bonuses or incentive compensation for the previous fiscal year, vacation pay, reimbursable expenses and any previously deferred compensation. In addition, each executive will forfeit any shares of restricted stock as to which the forfeiture restrictions have not lapsed.

Payments Upon Termination by Reason of Death or Disability

If the employment of any of Messrs. Tunney, Bacica, Saville or Rubenstein is terminated due to death or disability, the terminated executive will receive his accrued compensation and an amount equal to the annual bonus he would have been entitled to receive for the fiscal year in which his termination of employment occurs, pro-rated and calculated at target. In addition, with respect to Messrs. Tunney, Saville and Rubenstein, (i) that portion of the executive’s time-based shares initially issued under their respective Executive Employment Agreements that was scheduled to become non-forfeitable through January 1 of the calendar year following the calendar year in which the executive’s termination date occurs would immediately become non-forfeitable upon the executive’s termination, all

-39-

of which are currently non-forfeitable, and (ii) any other grants of restricted stock to the executive that become non-forfeitable based solely on the executive’s continued employment with us and that were scheduled to become non-forfeitable through January 1 of the calendar year following the calendar year in which the executive’s termination date occurs, would also immediately and fully become non-forfeitable upon the executive’s termination. With respect to Mr. Bacica, 33,333 of the 100,000 shares of restricted Common Stock awarded to Mr. Bacica pursuant to his Executive Employment Agreement, that would have become non-forfeitable twelve months following his termination, would become immediately non-forfeitable, or a lesser number of shares if less than 33,333 shares of restricted common stock remain non-forfeitable at such time.

Payments Upon Termination Without Cause or Resignation for Good Reason

If the employment of any of Messrs. Tunney, Bacica, Saville or Rubenstein is terminated by us other than for cause, death or disability, or if any of Messrs. Tunney, Bacica, Saville or Rubenstein terminates his employment with us for good reason, then the terminated executive will receive all of his accrued compensation, severance pay equal to two times his then-current base salary and two times his target annual bonus, full and immediate lapsing of forfeiture restrictions with respect to all of his shares of restricted stock (other than shares of restricted stock for which forfeiture restrictions lapse based on the achievement of performance milestones), and a continuation of the then-current health coverage for himself and any eligible dependents for a maximum of 24 months from his date of termination.

Payments Upon Termination in Connection with a Change of Control

In the event that we experience a change of control (as defined in Executive Employment Agreements), each of Messrs. Tunney, Bacica, Saville and Rubenstein is entitled to full and immediate lapsing of forfeiture restrictions with respect to all of their shares of restricted stock and an amount equal to each executive’s then-current base salary in addition to any other severance that each executive is entitled to receive under the applicable Executive Employment Agreement.

If Messrs. Tunney, Bacica, Saville or Rubenstein receive payments in the event of a change in control and such payments become subject to excise tax under Section 4999 of the Internal Revenue Code, then the Executive Employment Agreements provide that the executive either will be entitled to receive a payment in an amount equal to the excise tax imposed upon the payments, excepting any excise tax imposed on such additional payment, or will permit us to reduce the payments that the executive receives to avoid the imposition of such excise tax, if certain conditions are satisfied.

Non-Competition, Non-Solicitation and Proprietary Information

Under the terms of the Executive Employment Agreements, during the term of employment of Messrs. Tunney, Bacica, Saville and Rubenstein with us and for two years thereafter, each executive has agreed not to (i) engage in any business or activity that competes with products, services or businesses of the Company or which the Company has begun, as of the termination date, to prepare to develop or offer, or (ii) recruit or hire any of the Company’s employees, and solicit the Company’s clients and certain prospective clients. Each Executive Employment Agreement requires that each executive protect our confidential information both during and after the term of his employment with us.

Potential Termination and Change of Control Payments for Messrs. Tunney, Bacica, Saville, Rubenstein and Marcotte

The following table describes the potential payments, benefits and lapsing of forfeiture restrictions applicable to restricted stock awards under our Executive Employment Agreements with each of Messrs. Tunney, Bacica, Saville and Rubenstein. We have no agreement in place with Mr. Marcotte. The amounts shown below assume that the termination of each executive is effective as of December 31, 2010. Actual amounts payable to each Named Executive listed below upon his termination can only be determined definitively at the time of each Named Executive’s actual departure.

-40-


Name	Benefit	Voluntary Termination or Termination for Cause ($)		Termination for Death or Disability ($)		Termination Without Cause or Resignation for Good Reason Other Than in Connection with a Change of Control ($)		Change of Control ($)
Steven F. Tunney, Sr.	Accrued Obligations
	Vacation		3,011		3,011		3,011		3,011
	Deferred Compensation		195,709		195,709		195,709		195,709
	Severance Benefits
	Salary		—		—		1,044,000		1,566,000
	Bonus		—		295,149(2)		1,339,149(9)		1,339,149(9)
	Insurance/Healthcare Benefits		—		—		32,164(5)		32,164
	Excise Tax Payment(8)		—		—		—		—
	Accelerated Equity Awards
	Vesting on Termination(1)		—		238,145(3)		251,214(4)		251,214(6)

	TOTAL		198,720		732,014		2,865,247		3,387,247

Stephen J. Bacica	Accrued Obligations
	Vacation		6,730		6,730		6,730		6,730
	Deferred Compensation		—		—		—		—
	Severance Benefits
	Salary		—		—		700,000		1,050,000
	Bonus		—		176,755(2)		876,755(9)		876,755(9)
	Insurance/Healthcare Benefits		—		—		—(5)		—
	Excise Tax Payment(8)		—		—		—		297,416
	Accelerated Equity Awards
	Vesting on Termination(1)		—		426,887(3)		431,195(4)		431,195(6)

	TOTAL		6,730		610,372		2,014,680		2,662,096

B. Hagen Saville	Accrued Obligations
	Vacation		8,557		8,557		8,557		8,557
	Deferred Compensation		90,377		90,377		90,377		90,377
	Severance Benefits
	Salary		—		—		890,000		1,335,000
	Bonus		—		255,996(2)		1,145,996(9)		1,145,996(9)
	Insurance/Healthcare Benefits		—		—		32,164(5)		32,164
	Excise Tax Payment(8)		—		—		—		—
	Accelerated Equity Awards
	Vesting on Termination(1)		—		197,484(3)		206,197(4)		206,197(6)

	TOTAL		98,934		552,414		2,373,291		2,818,291

Samuel G. Rubenstein	Accrued Obligations
	Vacation		7,423		7,423		7,423		7,423
	Deferred Compensation		367,144		367,144		367,144		367,144
	Severance Benefits
	Salary		—		—		772,000		1,158,000
	Bonus		—		165,971(2)		937,971(9)		937,971(9)
	Insurance/Healthcare Benefits		—		—		32,164(5)		32,164
	Excise Tax Payment(8)		—		—		—		—
	Accelerated Equity Awards
	Vesting on Termination(1)		—		82,213(3)		87,580(4)		87,580(6)

	TOTAL		374,567		622,751		2,204,282		2,590,282

Robert L. Marcotte	Accrued Obligations
	Vacation		6,731		6,731		6,731		6,731
	Deferred Compensation		—		—		—		—
	Severance Benefits
	Salary		—		—		—		—
	Bonus		—		—		125,697(10)		125,697(10)
	Insurance/Healthcare Benefits		—		—		—		—
	Excise Tax Payment(8)		—		—		—		—
	Accelerated Equity Awards
	Vesting on Termination(1)		—		—		—		440,085(7)

	TOTAL		6,731		6,731		132,428		572,513

(1)	Based on the last sale price of MCG common stock on December 31, 2010, or $6.97 per share.

(2)

Represents an amount equal to the Named Executive Officer’s annual bonus for the fiscal year in which his termination of employment occurs, pro-rated and calculated at target and acceleration of the remaining one-third of the cash awards associated with the $5 and $6 tranches under the 2009 Long-Term Incentive Program. For more information relating to compensation earned by our Named Executive Officers, see the section of this proxy statement entitled “Executive Compensation — Summary Compensation Table.”

(3)

Represents full and immediate lapsing of forfeiture restrictions with respect (i) that portion of the Named Executive’ Officer’s time-based shares initially issued under his Executive Employment Agreement that was scheduled to become non-forfeitable through January 1 of the calendar year following the calendar year in which the executive’s termination date occurs, which, with the exception of Mr. Bacica, had all become non-forfeitable as of December 31, 2010 and (ii) any other grants of restricted stock to the Named Executive Officer that become non-forfeitable based solely on the executive’s continued employment with us and that were scheduled to become non-forfeitable through January 1 of the calendar year following the calendar year in which the executive’s termination date occurs. With respect to Mr. Bacica, includes 24,994 of the 100,000 shares of restricted common stock awarded to Mr. Bacica pursuant to his Executive Employment Agreement that would have become non-forfeitable twelve months following his termination. For more information concerning restricted stock awards held by our Named Executive Officers, see the section of this proxy statement entitled “Executive Compensation — Outstanding Equity Awards at Fiscal 2010 Year-End.”

(4)

Represents full and immediate lapsing of forfeiture restrictions with respect to all of the Named Executive Officer’s shares of restricted stock (other than shares of restricted stock for which forfeiture restrictions lapse based on the achievement of performance milestones). For more information concerning restricted stock awards held by our Named Executive Officers, see the section of this proxy statement entitled “Executive Compensation — Outstanding Equity Awards at Fiscal 2010 Year-End.”

-41-

(5)

Represents amounts payable over 24 months for continuation of coverage for medical, dental and hospitalization benefits for each Named Executive Officer and his family members subject to the Named Executive’s reemployment with comparable healthcare benefits. The value is based upon the type of insurance coverage we carried for each Named Executive officer as of December 31, 2010 and is valued at the premiums in effect on December 31, 2010.

(6)

Represents full and immediate lapsing of forfeiture restrictions with respect to all of the Named Executive Officer’s shares of restricted stock. For more information concerning restricted stock awards held by our Named Executive Officers, see the section of this proxy statement entitled “Executive Compensation — Outstanding Equity Awards at Fiscal 2010 Year-End.”

(7)

Assumes that Mr. Marcotte is immediately terminated in connection with the change of control. Pursuant to the terms of our restricted stock agreements with Mr. Marcotte, the forfeiture restrictions lapse with respect to the shares of common stock subject to such agreements if, within 365 calendar days after the date of a change of control, Mr. Marcotte’s employment with the acquiring company is terminated (i) by the acquiring company for any reason other than for cause or (ii) by Mr. Marcotte for good reason.

(8)

In the event that any payment or distribution to a Named Executive Officer (other than Mr. Marcotte) became subject to the 20% excise tax on excess parachute payments (as defined in Section 280G of the Internal Revenue Code) imposed by Code Section 4999, MCG would pay the executive, pursuant to his Executive Employment Agreement, an amount equal to the excise tax obligation plus any interest or penalties related to the excise tax. We call this payment the Excise Tax Payment. The Excise Tax Payment does not include a tax gross-up, even though the payment by MCG of the Excise Tax Payment to the Named Executive Officer would constitute an additional excess parachute payment that is subject to the 20% excise tax imposed under Code Section 4999.

(9)

Includes bonuses to be paid to Messrs. Tunney, Bacica, Saville and Rubenstein under the terms of their respective Executive Employment Agreements, amounts earned under the 2010 Annual incentive Cash Bonus Plan and acceleration of the remaining one-third of the cash awards associated with the $5 and $6 tranches under the 2009 Long-Term Incentive Program.

(10)	Represents amounts earned by Mr. Marcotte under the 2010 Annual Incentive Cash Bonus Plan of $84,124, a discretionary bonus of $10,907 and acceleration of the remaining one-third of the cash awards associated with the $5 and $6 tranches under the 2009 Long-Term Incentive Program totaling $30,666.

Compensation of Directors

2010 Director Compensation

Our board of directors approved the following compensation structure for our non-employee directors during the year ended December 31, 2010:

Payment of Retainer Fee; Reimbursement of Travel and Other Expenses. During the year ended December 31, 2010, each non-employee director received an annual retainer of $85,000 for his or her service on our board of directors. Additional amounts were paid as follows:


Position		Additional Fees
Non-Employee Chairman of the Board		$15,000
Audit Committee and Investment and Valuation Committee Chairs		$15,000
Compensation Committee and Nominating and Corporate Governance Committee Chairs		$10,000
Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Investment and Valuation Committee Members (in addition to fees paid for service as Non-Employee Chairman of the Board and for service as Committee chairs)		$10,000/Committee

All retainer amounts were paid quarterly during Fiscal 2010 in arrears. Non-employee directors also received reimbursement for reasonable travel and other expenses in connection with attending meetings of our board of directors during Fiscal 2010.

Award of Restricted Stock Upon Appointment or Election. The SEC has granted an order authorizing us to award restricted shares of our common stock to our non-employee directors. Under the Amended and Restated 2006 Non-Employee Director Restricted Stock Plan, which we refer to as the 2006 Director Plan, non-employee directors each receive an award of 7,500 shares of restricted stock at the beginning of each three-year term of service on our board of directors. Forfeiture provisions lapse as to one-third of the shares awarded each year over the three-year term. Awards of restricted stock under the 2006 Director Plan are automatic and may not be changed without further approval from the SEC.

Compensation of Employee Directors. No director who is also an employee receives separate compensation for services rendered as a director. Messrs. Tunney and Saville are the only directors who are also employees of ours. The compensation of Messrs. Tunney and Saville is set forth under the headings “Executive Compensation” and “Employment, Severance and Change of Control Arrangements.”

-42-

FISCAL 2010 DIRECTOR COMPENSATION

The following table sets forth the compensation paid to our non-employee directors for the year ended December 31, 2010:


Name	Fees Earned or Paid in Cash(1) ($)	Stock Awards (4) ($)	Total ($)

A. Hugh Ewing, III	125,000	—	125,000

Kim D. Kelly	140,000	39,300(2)(3)	179,300

Wallace B. Millner, III	125,000	—	125,000

Richard W. Neu	142,500	—	142,500

Kenneth J. O’Keefe	120,000	—	120,000

Gavin Saitowitz	125,000	—	125,000

(1)

The fees earned by the non-employee directors in Fiscal 2010 consist of the following: (i) an annual retainer; (ii) a fee to the non-employee chairman of the board; (iii) an annual fee for chairing each of the committees of the board of directors; and (iv) an annual fee for being a member of each of the audit committee, compensation committee, nominating and corporate governance committee and investment and valuation committee.

(2)

On May 26, 2010, the date of our 2010 annual meeting of stockholders, we awarded 7,500 shares of our restricted common stock to Ms. Kelly. The restrictions with respect to such shares shall lapse in three equal annual installments commencing on March 31, 2011, provided Ms. Kelley is a member of the board on the date on which the forfeiture provisions are scheduled to lapse. During Fiscal 2010, we recognized $9,284 of compensation expense for the restricted common stock awarded to Ms. Kelly, calculated in accordance with ASC 718.

(3)

Amount reflects the aggregate grant date fair value of the stock awarded during Fiscal 2010, in accordance with ASC 718. This amount reflects the total grant date expense for this award and does not correspond to the actual cash value that will be recognized by Ms. Kelly when received. The assumptions used by us with respect to the valuation of restricted stock awards are set forth in Note 9 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2010.

(4)	The following table shows the aggregate number of shares of restricted stock for which forfeiture restrictions had not yet lapsed for each non-employee director as of December 31, 2010:


Name		Aggregate Number of Shares Subject to Outstanding Restricted Stock Awards (#)
A. Hugh Ewing, III		5,000
Kim D. Kelly		7,500
Wallace B. Millner, III		2,500
Richard W. Neu		2,500
Kenneth J. O’Keefe		5,000
Gavin Saitowitz		5,000

Compensation Committee Report

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with the Company’s management. Based on this review and discussion, the compensation committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

By the Compensation Committee of the Board of Directors of MCG Capital Corporation:

Kenneth J. O’Keefe (Chairperson)

A. Hugh Ewing, III

Kim D. Kelly

Gavin Saitowitz

Compensation Committee Interlocks and Insider Participation

During the year ended December 31, 2010, the compensation committee consisted of Kenneth J. O’Keefe, who served as chairman, A. Hugh Ewing, III, Kim D. Kelly and Gavin Saitowitz. No member of our compensation committee had any relationship with us during Fiscal 2010 requiring disclosure under Item 404 of Regulation S-K under the Exchange Act.

During Fiscal 2010, none of our executive officers served as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that had one or more of its executive officers serving as a member of our board of directors or compensation committee. None of the current members of our compensation committee have ever been an employee of MCG.

Narrative Disclosure of Our Compensation Policies and Practices as They Relate to Risk Management

We believe that risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company.

In view of the current economic and financial environment, the Compensation Committee and our board of directors undertook to review our compensation programs to assess whether any aspect of the programs would encourage any of our employees to take any unnecessary or inappropriate risks that could threaten the value of the

-43-

Company. We have designed our compensation programs to reward our employees for achieving annual and long-term financial and business results.

We recognize that the pursuit of these objectives could lead to behaviors that could weaken the link between pay and performance, and, therefore, the correlation between the compensation delivered to our employees and the return realized by our stockholders. Accordingly, we have designed our executive compensation program to mitigate these possibilities and to ensure that our compensation practices and decisions are consistent with our risk profile. These features include the following:

•

the financial performance objectives of our annual cash incentive program are consistent with budgeted objectives that are reviewed and approved by the board of directors;

•

bonus payouts are not based solely on corporate performance, but also require achievement of individual performance objectives;

•

the maximum bonus payout for any employee is capped at a specified percentage of each employee’s annual base salary, regardless of actual performance results;

•

the financial opportunity in our long-term incentive program is best realized through long-term appreciation of our stock price, which mitigates excessive short-term risk-taking;

•

annual cash bonuses are paid in two equal installments after the end of the fiscal year to which the bonus payout relates and a third of each long-term stock and cash bonus payout is not payable until one year after the date that triggers the bonus payout so that the impact of the employee’s performance on the Company’s long-term business results can be established;

•

the Company has adopted a policy on the recoupment of incentive compensation (clawback policy) in the event of a material restatement; and

•

awards are not contractual entitlements; the awards are reviewed by the Compensation Committee and the board of directors and can be modified at their discretion.

-44-

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding beneficial ownership of our common stock as of April 1, 2011 by:

•

each person, or group of affiliated persons, known to us to be the beneficial owner of more than 5% of the outstanding shares of our common stock as of such date, based on currently available Schedules 13D and 13G filed with the SEC;

•

each of our directors (which includes all nominees);

•

our chief executive officer, our principal financial officer and our three other most highly compensated executive officers who were serving as executive officers as of December 31, 2010, who we refer to in this proxy statement as our Named Executive Officers; and

•

all of our directors and executive officers as a group.

The number of shares of common stock beneficially owned by each person or entity is determined in accordance with the applicable rules of the SEC and includes voting or investment power with respect to shares of our common stock. The information is not necessarily indicative of beneficial ownership for any other purpose. Unless otherwise indicated, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under community property laws. Unless otherwise indicated, the address of all directors and executive officers is c/o MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, Virginia 22209. The inclusion of any shares deemed beneficially owned in this table does not constitute an admission of beneficial ownership of those shares.

There were, as of April 1, 2011, approximately 145 holders of record and 20,438 beneficial holders of our common stock.

Name and Address of Beneficial Owner

Total
Number of
Shares
Beneficially
Owned

Percentage
of Common
Stock
Beneficially
Owned(1)

Dollar Range of
Equity Securities
Beneficially
Owned by
Directors(2)(3)

Holders of more than 5% of our Common Stock:

Dimensional Fund Advisors LP(4)

Palisades West, Building One

6300 Bee Cave Road

Austin, Texas 78746

6,281,091

8.2%

N/A

Springbok Capital Management, LLC(5)

Springbok Capital Onshore, LLC

Gavin Saitowitz

Soundpost Partners, LP

Lyrical Partners, L.P.

437 Madison Avenue, 33rd Floor

New York, New York 10022

4,474,251

5.8%

N/A

Interested Directors (which includes a nominee):

Steven F. Tunney, Sr.(6)

849,388

1.1%

over $100,000

B. Hagen Saville(7)

759,294

over $100,000

Independent Directors (which includes two nominees):

A. Hugh Ewing, III(8)

48,415

over $100,000

Kim D. Kelly(9)

94,561

over $100,000

Wallace B. Millner, III

202,317

over $100,000

Richard W. Neu

83,750

over $100,000

Kenneth J. O’Keefe(10)

33,698

over $100,000

Gavin Saitowitz(5)

4,474,251

5.8%

over $100,000

Other Named Executive Officers:

Stephen J. Bacica(11)

246,989

N/A

Robert L. Marcotte(12)

219,300

N/A

Samuel G. Rubenstein(13)

329,543

N/A

All Directors and executive officers as a group (13 persons)(14)

7,603,961

9.9%

*	Less than 1% of our outstanding common stock.

(1)	Applicable percentage of ownership for each holder is based on 77,064,693 shares of common stock outstanding on April 1, 2011.

(2)	Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Exchange Act.

(3)	The dollar range of our equity securities beneficially owned is calculated by multiplying the closing price of our common stock as reported on The NASDAQ Global Select Market on April 1, 2011, times the number of shares beneficially owned.

(4)

Information is based on a Schedule 13G/A filed with the SEC on February 11, 2011, and is as of December 31, 2010. Dimensional Fund Advisors LP, an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, as amended, and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are referred to as the Funds. In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, neither Dimensional Fund Advisors LP or its subsidiaries, collectively, “Dimensional,” possess voting and/or investment power over the securities of MCG that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of MCG held by the Funds. However, all securities reported in the Schedule 13G/A are owned by the Funds. Dimensional disclaims beneficial ownership of such securities.

-45-

(5)

Information is based on a Schedule 13D filed with the SEC on November 20, 2008, as amended and supplemented by Amendment No. 7 to Schedule 13D filed on March 3, 2010 by (i) Springbok Capital Management, LLC, a Delaware limited liability company, or Springbok, the investment manager of Springbok Capital Offshore, Ltd., a Cayman exempted company, or Springbok Offshore, and Springbok Capital Investors, LP, a Delaware limited partnership, or Springbok Onshore; (ii) Springbok Capital Onshore, LLC, a Delaware limited liability company, or Springbok LLC, and together with Springbok, the Springbok Entities; (iii) Mr. Gavin Saitowitz, a principal of Springbok, with respect to the shares of MCG’s common stock owned by the Springbok Entities and with respect to shares of MCG’s common stock owned individually by Mr. Saitowitz; (iv) Soundpost Partners, LP, a Delaware limited partnership, or Soundpost, the investment manager of Soundpost Capital, LP, a Delaware limited partnership, or Soundpost Onshore, and Soundpost Capital Offshore, Ltd., a Cayman exempted company, or Soundpost Offshore; (v) Mr. Jaime Lester, a principal of Soundpost, with respect to shares of MCG’s common stock owned by Soundpost; (vi) Lyrical Partners, L.P., a Delaware limited partnership, or Lyrical, the investment manager of Lyrical Opportunity Partners II, L.P., a Delaware limited partnership, or Lyrical Onshore, and Lyrical Opportunity Partners II, Ltd., a Cayman exempted company, or Lyrical Offshore; and (vii) Mr. Jeffrey Keswin, a principal of Lyrical, with respect to shares of MCG’s common stock owned by Lyrical (the persons mentioned in (i)-(vii) are referred to herein as the Reporting Persons). Mr. Saitowitz is the sole managing member of Springbok. Mr. Lester is the sole managing member of Soundpost. Mr. Keswin is the sole managing partner of Lyrical.

As of the close of business on October 8, 2009, the Springbok Entities, together with Gavin Saitowitz, beneficially owned an aggregate of 1,438,263 shares of common stock (consisting of (i) 418,212 shares of common stock deemed beneficially owned by Springbok, as the investment manager of Springbok Onshore, the beneficial owner of 94,414 shares, and Springbok Offshore, the beneficial owner of 323,788 shares, (ii) 1,011,551 shares of common stock beneficially owned by Springbok LLC and (iii) 8,500 shares of common stock beneficially owned by Gavin Saitowitz individually, including 7,500 restricted shares of common stock awarded to Mr. Saitowitz by us in connection with his role as a non-employee director, 1,011,551 shares of which are pledged as collateral in a margin account), Soundpost, together with Jaime Lester, beneficially owned an aggregate of 196,637 shares of common stock (consisting of (i) 137,698 shares beneficially owned by Soundpost Onshore and (ii) 58,939 shares beneficially owned by Soundpost Offshore), and Lyrical, together with Jeffrey Keswin, beneficially owned an aggregate of 2,839,351 shares of common stock (consisting of (i) 1,386,600 shares beneficially owned by Lyrical Onshore and (ii) 1,452,751 shares beneficially owned by Lyrical Offshore). The Reporting Persons have shared voting and dispositive power over the 1,429,763 shares of common stock deemed beneficially owned by the Springbok Entities (excluding the 8,500 shares held individually by Gavin Saitowitz), the 196,637 shares of common stock deemed beneficially owned by Soundpost and the 2,839,351 shares of common stock deemed beneficially owned by Lyrical. Gavin Saitowitz has sole voting and dispositive power over the 8,500 shares of common stock he beneficially owns individually.

(6)	Includes 94,740 shares of restricted common stock that are subject to forfeiture provisions.

(7)	Includes 75,416 shares of restricted common stock that are subject to forfeiture provisions.

(8)	Includes 2,500 shares of restricted common stock that are subject to forfeiture provisions.

(9)	Includes 5,000 shares of restricted common stock that are subject to forfeiture provisions.

(10)	Includes 2,500 shares of restricted common stock that are subject to forfeiture provisions.

(11)	Includes 62,592 shares of restricted common stock that are subject to forfeiture provisions.

(12)	Includes 45,722 shares of restricted common stock that are subject to forfeiture provisions.

(13)	Includes (i) 47,700 shares of restricted common stock that are subject to forfeiture provisions and (ii) 173,477 shares pledged as collateral in a margin account.

(14)	See footnotes 5 through 13 above. Includes 165,455 shares of common stock beneficially owned by Derek R. Thomas and 97,000 shares of common stock beneficially owned by Tod K. Reichert.

-46-

Equity Compensation Plan Information

The following table provides information about the securities authorized for issuance under our equity compensation plans as of December 31, 2010:


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	932,198	N/A	2,867,590
Equity compensation plans not approved by security holders	—	—	—

Total	932,198	$3.92	2,867,590

(1)

Includes restricted stock awarded in connection with the termination of our stock option plan in 2001 and restricted stock awards pursuant to our Amended and Restated 2006 Employee Restricted Stock Plan and the Amended and Restated 2006 Non-Employee Director Restricted Stock Plan for which forfeiture provisions had not lapsed as of December 31, 2010. Holders of these restricted shares have all the rights of common stockholders in connection with these shares of restricted stock, including the right to vote the shares and to receive dividends.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS;

POLICIES AND PROCEDURES FOR RELATED PERSON TRANSACTIONS

1940 Act Compliance

We have procedures in place for the review, approval and monitoring of transactions involving us and certain persons related to us. As a BDC, the 1940 Act restricts us from participating in transactions with any persons affiliated with us, including our officers, directors, and employees and any person controlling or under common control with us.

In the ordinary course of business, we enter into transactions with portfolio companies that may be considered related party transactions. In order to ensure that we do not engage in any prohibited transactions with any persons affiliated with us, we have implemented policies and procedures whereby our officers screen each of our transactions for any possible affiliations, close or remote, between the proposed portfolio investment, us, companies controlled by us and our employees and directors.

We will not enter into any agreements unless and until we are satisfied that no affiliations prohibited by the 1940 Act exist or, if such affiliations exist, we have taken appropriate actions to seek board review and approval or exemptive relief for such transaction. Our board of directors reviews these procedures on an annual basis.

Code of Business Conduct and Ethics

In addition, our code of business conduct and ethics, which is signed by all employees and directors, requires that all employees and directors must act in the best interests of MCG and refrain from engaging in any activity or having a personal interest that presents a conflict of interest, which occurs when a personal interest interferes, or appears to interfere, with the interests of MCG or prevents one from performing their Company duties and responsibilities honestly, objectively and effectively.

Pursuant to the code of business conduct and ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our chief compliance officer or general counsel. Our nominating and corporate governance committee is charged with periodically reviewing and monitoring compliance with our code of business conduct and ethics.

We have posted a current copy of our code of business conduct and ethics on our website, which is located at www.mcgcapital.com. In addition, we intend to post on our website all disclosures that are required by law or NASDAQ Global Select Market listing standards concerning any amendments to, or waivers from, any provision of the code.

Related Person Transaction Policy

In March 2009, our board of directors adopted written policies and procedures for the review of any transaction, arrangement or relationship in which we are a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of whom we refer to as a “related person,” has a direct or indirect material interest.

If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our chief compliance officer and general counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by our audit committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the audit committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the

-47-

chairman of the audit committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the audit committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.

A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the audit committee will review and consider:

•

the related person’s interest in the related person transaction;

•

the approximate dollar value of the amount involved in the related person transaction;

•

the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

•

whether the transaction was undertaken in the ordinary course of our business;

•

whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;

•

the purpose of, and the potential benefits to us of, the transaction; and

•

any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

Our audit committee may approve or ratify the transaction only if the audit committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, our best interests. Our audit committee may impose any conditions on the related person transaction that it deems appropriate.

In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, our board of directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:

•

interests arising solely from the related person’s position as an executive officer of another entity (whether or not the person is also a director of such entity), that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction and (c) the amount involved in the transaction equals less than the greater of $200,000 or 5% of the annual gross revenues of the company receiving payment under the transaction; and

•

a transaction that is specifically contemplated by provisions of our charter or bylaws.

The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by our compensation committee in the manner specified in its charter.

We will disclose the terms of related person transactions in our filings with the SEC to the extent required. Since January 1, 2010, we have not been a party to, and we have no plans to be a party to, any transaction or series of similar transactions in which the amount involved exceeded or will exceed $120,000 and in which any current director, executive officer, holder of more than 5% of our capital stock, or any member of the immediate family of any of the foregoing, had or will have a direct or indirect material interest, other than in connection with the transactions described above.

-48-

PROPOSAL TWO

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board Recommendation

Our board of directors recommends a vote “FOR” the ratification of the selection by the Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2011.

The audit committee of our board of directors has selected the firm of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011. Although stockholder approval of the board of directors’ selection of Ernst & Young LLP is not required by law, our board of directors believes that it is advisable to give stockholders an opportunity to ratify this selection. If this proposal is not approved at the Annual Meeting, our board of directors will reconsider its appointment of Ernst & Young LLP. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have the opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions from our stockholders.

Ernst & Young LLP has advised us that neither the firm nor any present member or associate of it has any material financial interest, direct or indirect, in us or our subsidiaries.

Auditors’ Fees

The following table summarizes the fees of Ernst & Young LLP, our independent registered public accounting firm, billed for each of the last two fiscal years:


Fee Category	Fiscal Year Ended December 31, 2010 ($)		Fiscal Year Ended December 31, 2009 ($)
Audit Fees(1)		832,694		898,641
Audit-Related Fees(2)		96,500		96,500
Tax Fees(3)		—		—
All Other Fees(4)		—		—
Total Fees(5)		929,194		995,141

(1)

Audit fees include fees for services that normally would be provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements and that generally only the independent registered public accounting firm can provide. In addition to fees for the audit of our annual financial statements, the audit of the effectiveness of our internal control over financial reporting and the review of our quarterly financial statements in accordance with generally accepted auditing standards, this category contains fees for comfort letters, statutory audits, consents, and assistance with and review of documents filed with the SEC.

(2)

Audit-related fees are assurance related services that traditionally are performed by the independent registered public accounting firm, such as attest services that are not required by statute or regulation, and which are not reported under “Audit Fees.”

(3)

Tax fees include corporate and subsidiary compliance and consulting.

(4)

Fees for other services would include fees for products and services other than the services reported above.

(5)

All fees set forth above were approved by our audit committee.

Pre-Approval Policies and Procedures

Our audit committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by our audit committee or the engagement is entered into pursuant to one of the pre-approval procedures described below.

Any requests for audit, audit-related, tax and other services that have not received general pre-approval must be submitted to the audit committee for specific pre-approval, irrespective of the amount, and cannot commence until such approval has been granted. Normally, pre-approval is provided at regularly scheduled meetings of the audit committee. However, in urgent cases, the audit committee chair may pre-approve audit and non-audit services (other than prohibited non-audit services), provided that the audit committee chair reports any pre-approval decisions to the audit committee at its next scheduled meeting. The audit committee does not delegate its responsibilities to pre-approve services performed by the independent registered accounting firm to management.

The audit committee has determined that the rendering of the services other than audit services currently being provided by Ernst & Young LLP is compatible with maintaining the independent registered public accounting firm’s independence.

-49-

Report of the Audit Committee

The audit committee has reviewed our audited consolidated financial statements for the fiscal year ended December 31, 2010 and has discussed these consolidated financial statements with our management and our independent registered public accounting firm. Management is responsible for the preparation of our consolidated financial statements and for maintaining an adequate system of disclosure controls and procedures and internal control over financial reporting for that purpose. Our independent registered public accounting firm is responsible for conducting an independent audit of our annual consolidated financial statements in accordance with generally accepted auditing standards and issuing a report on the results of their audit. The audit committee is responsible for providing independent, objective oversight of these processes.

The audit committee has also received from, and discussed with, our independent registered public accounting firm various communications that they are required to provide to the audit committee, including the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. SAS No. 61, as amended, requires our independent registered public accounting firm to discuss with our audit committee, among other things, the following:

•

methods used to account for significant unusual transactions;

•

the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus;

•

the process used by management in formulating particularly sensitive accounting estimates and the basis for the auditors’ conclusions regarding the reasonableness of those estimates; and

•

disagreements with management over the application of accounting principles, the basis for management’s accounting estimates and the disclosures in the consolidated financial statements.

Our independent registered public accounting firm also provided the audit committee with written disclosures and a letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communication with the audit committee concerning independence and has discussed with the independent auditor the independent auditor’s independence.

Based on the review and discussions referred to above, the audit committee recommended to our board of directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2010.

By the Audit Committee of the Board of Directors of MCG Capital Corporation:

Kim D. Kelly (Chairperson)

A. Hugh Ewing, III

Richard W. Neu

Gavin Saitowitz

-50-

PROPOSAL THREE

AN ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Board Recommendation

Our board of directors recommends a vote “FOR” the compensation paid to our Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion contained in this proxy statement.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, or the “Dodd-Frank Act,” requires that stockholders have the opportunity to cast an advisory (non-binding) vote on executive compensation commencing with the Annual Meeting (a so-called “say-on-pay” vote), as well as an advisory vote with respect to whether future say-on-pay votes will be held every one, two or three years, which is the subject of Proposal No. 4.

The advisory vote on executive compensation is a non-binding vote on the compensation of our “Named Executive Officers,” as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion contained in this proxy statement. The advisory vote on executive compensation is not a vote on our general compensation policies, compensation of our board of directors, or our compensation policies as they relate to risk management. The Dodd-Frank Act requires us to hold the advisory vote on executive compensation at least once every three years.

Our philosophy in setting compensation policies for executive officers has two fundamental objectives: (1) to attract and retain a highly skilled team of executives; and (2) to align our executives’ interests with those of our stockholders by rewarding short-term and long-term performance and tying compensation to increases in stockholder value. The Compensation Committee believes that executive compensation should be directly linked both to continuous improvements in corporate performance (so-called “pay for performance”) and accomplishments that are expected to increase stockholder value.

The Compensation Committee took the following key compensation actions in connection with our 2010 compensation program:

•

implemented a freeze on base salaries for all senior executives for the third consecutive year;

•

made no new equity awards to any senior executives;

•

maintained reduced targeted base cash bonuses of executive management equaling 50% of the target bonuses specified in their respective employment agreements;

•

placed emphasis on aligning short-term incentive awards with our annual operating financial objectives by establishing an annual incentive cash bonus plan, the 2010 Annual Incentive Cash Bonus Plan, that provided for the potential payment of cash bonuses upon the achievement of six key financial metrics and strategic goals. We believe that these metrics provide for a balanced approach to measuring annual Company performance. The Company’s performance with respect to certain of these metrics was below target, and therefore resulted in the payment of annual incentive cash bonus awards at below the reduced target levels for our Named Executive Officers;

•

continued to monitor the goal of absolute and relative performance in total stockholder return related to our long-term incentive program, the 2009 Long-Term Incentive Program, which has a three-year duration ending July 22, 2012 and under which participants may receive, upon the achievement of specified Company share price thresholds, (i) an award of shares of restricted common stock and (ii) a bonus payable in cash;

•

in the spirit of a pay-for-performance structure, allocated approximately 55% to 77% of total target compensation as “at-risk” compensation for the Named Executive Officers during 2010;

•

determined total annual cash compensation under the 2010 compensation program, which placed us below the 25th percentile of our peer group;

•

implemented mandatory stock ownership guidelines for our CEO.

-51-

The Compensation Discussion and Analysis section starting on page 18 provides a more detailed discussion of our executive compensation program and compensation philosophy.

The vote under this Proposal No. 3 is advisory, and therefore not binding on us, our board of directors or our Compensation Committee. However, our board, including our Compensation Committee, values the opinions of our stockholders and, to the extent there is any significant vote against the executive officer compensation as disclosed in this proxy statement, we will consider our stockholders’ concerns and evaluate what actions may be appropriate to address those concerns.

Stockholders will be asked at the Annual Meeting to approve the following resolution pursuant to this Proposal No. 3:

RESOLVED, that the stockholders of MCG Capital Corporation approve, on an advisory basis, the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion contained in this proxy statement.

Vote Required

The affirmative vote of the holders of a majority in voting power of the outstanding shares of common stock represented at the Annual Meeting and voting on this proposal is required to approve this proposal, provided a quorum is present in person or by proxy. Because your vote is advisory, it will not be binding on our board of directors. However, our board of directors will review the voting results and take them into consideration when making future decisions regarding executive compensation.

-52-

PROPOSAL FOUR

AN ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Board Recommendation

Our board of directors recommends a vote for the option of once every year as the frequency of the advisory vote on the compensation of our Named Executive Officers.

Section 951 of the Dodd-Frank Act also requires us at the Annual Meeting to provide our stockholders with a separate advisory vote on the frequency of the advisory vote set forth in Proposal No. 3 above. By voting on this Proposal No. 4, stockholders may indicate whether they would prefer an advisory vote on our Named Executive Officer compensation annually, every two years or every three years. Stockholders also have the option to abstain from voting on this matter.

After careful consideration of this Proposal, our board of directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for MCG. Therefore, our board of directors recommends that you vote for a one-year interval for the advisory vote on executive compensation.

In formulating its recommendation, our board of directors considered that an annual advisory vote on executive compensation will allow our stockholders to provide us every year with their views on our compensation philosophy, policies and practices as disclosed in the proxy statement. Additionally, an annual advisory vote on executive compensation is consistent with our policy of seeking the views of, and engaging in discussions with, our stockholders on corporate governance matters and our executive compensation philosophy, policies and practices. We understand that our stockholders may have different views as to what is the best approach to soliciting views on the Company’s executive compensation programs and practices, and we look forward to hearing from our stockholders on this Proposal.

Accordingly, our board of directors recommends that you mark ONE YEAR on the proxy card for Proposal No. 4 for an annual vote, on an advisory basis, on the Company’s executive compensation.

You may vote for your preferred voting frequency by choosing the option of one year, two years, three years or abstain from voting when you vote in response to the resolution set forth below.

RESOLVED, that the option of once every one year, two years, or three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which the Company is to hold a stockholder vote to approve the compensation of the Named Executive Officers, as disclosed pursuant to the Securities and Exchange Commission’s compensation disclosure rules (which disclosure will include the Compensation Discussion and Analysis, the Summary Compensation Table, and the other related tables and disclosure).

Vote Required

The frequency of the advisory vote on the compensation of our Named Executive Officers receiving the greatest number of votes — every one year, every two years or every three years — will be considered the frequency that stockholders approve, provided a quorum is present in person or by proxy. However, because this vote is advisory and not binding on the board of directors or the Company in any way, our board may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders.

STOCKHOLDER PROPOSALS

In order to be included in the proxy materials for our 2012 annual meeting of stockholders pursuant to Rule 14a-8 under the Exchange Act, stockholders’ proposals must be received by us at our principal executive offices no later than January 3, 2012.

Stockholders who intend to present a proposal at such meeting without inclusion of such proposal in our proxy materials pursuant to Rule 14a-8 under the Exchange Act are required to provide advanced notice of such proposal to us not later than March 2, 2012.

In addition, our by-laws require that we be given advance notice of stockholder nominations for election to the board of directors and of other matters which stockholders wish to present for action at an annual meeting of stockholders, other than matters included in our proxy statement. The required notice must be in writing and received by our corporate secretary at our principal executive offices not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the previous year’s annual meeting. However, in the event the 2012 annual meeting of stockholders is scheduled to be held on a date more than thirty days prior to or delayed by more than sixty days after such anniversary date, in order to be timely, notice by the stockholder must be so received not earlier than the close of business on the 120th day prior to the date

-53-

of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or if the first public announcement of the date of such annual meeting is less than one hundred days prior to the date of such annual meeting, the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made. Our by-laws also specify requirements relating to the content of the notice that stockholders must provide, including a stockholder nomination for election to the board of directors, to be properly presented at the 2012 annual meeting of stockholders.

Notices of intention to present proposals at the 2012 annual meeting should be addressed to Tod K. Reichert, our Corporate Secretary, MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, Virginia 22209. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement and annual report to stockholders may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of either document to you upon written or oral request to MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, Virginia 22209, Attention: Tod K. Reichert, Corporate Secretary, telephone: (703) 247-7552. In the future, if you want to receive separate copies of the proxy statement or annual report to stockholders, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker or other nominee record holder, or you may contact us at the above address and phone number.

OTHER MATTERS

Our board of directors is not aware of any matter to be presented for action at the Annual Meeting other than the matters referred to above and does not intend to bring any other matters before the Annual Meeting. However, if other matters should properly come before the Annual Meeting, it is intended that holders of the proxies will vote thereon in their discretion.

GENERAL

Certain information contained in this proxy statement relating to the occupations and security holdings of our directors and officers is based upon information received from the individual directors and officers.

WE WILL FURNISH, WITHOUT CHARGE, A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2010, INCLUDING CONSOLIDATED FINANCIAL STATEMENTS, BUT NOT INCLUDING EXHIBITS, TO EACH OF OUR STOCKHOLDERS OF RECORD ON APRIL 7, 2011, AND TO EACH BENEFICIAL STOCKHOLDER ON THAT DATE UPON WRITTEN REQUEST MADE TO TOD K. REICHERT, CORPORATE SECRETARY, MCG CAPITAL CORPORATION, 1100 WILSON BOULEVARD, SUITE 3000, ARLINGTON, VIRGINIA 22209. A REASONABLE FEE WILL BE CHARGED FOR COPIES OF REQUESTED EXHIBITS.

PLEASE VOTE YOUR SHARES OVER THE INTERNET OR BY TELEPHONE AS PROVIDED IN THE INSTRUCTIONS SET FORTH ON THE ENCLOSED WHITE PROXY CARD, OR COMPLETE, DATE, SIGN AND RETURN THE WHITE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.


		By Order of the Board of Directors,

		Tod K. Reichert
		Corporate Secretary
		Arlington, Virginia
		May 2, 2011

-54-

Appendix A

INFORMATION CONCERNING PARTICIPANTS

IN THE COMPANY’S SOLICITATION OF PROXIES

The following tables (“Directors and Nominees” and “Officers and Employees”) set forth the name and business address of our directors and nominees, and the name, present principal occupation and business address of our officers and employees who, under the rules of the Securities and Exchange Commission, are considered to be “participants” in our solicitation of proxies from our stockholders in connection with our 2011 annual meeting of stockholders.

Directors and Nominees

The principal occupations of our directors and nominees who are considered “participants” in our solicitation are set forth under the heading “Proposal One - Election of Directors” of this proxy statement. The name and address of the organization of employment of our directors and nominees are as follows:


Name		Address
A. Hugh Ewing, III		Ewing Bemiss & Co., Riverfront Plaza West Tower, 901 E Byrd St., Ste. 1500, Richmond, VA 23219
Kim D. Kelly		c/o MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, VA 22209
Wallace B. Millner, III		c/o MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, VA 22209
Richard W. Neu		c/o MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, VA 22209
Kenneth J. O’Keefe		Vestar Capital Partners, 500 Boylston Street, 17th. Fl., Boston, MA 02116
Gavin Saitowitz		c/o Springbok Capital Management, LLC, 437 Madison Avenue, 33rd Floor, New York, NY 10022
B. Hagen Saville		c/o MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, VA 22209
Steven F. Tunney, Sr.		c/o MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, VA 22209

Officers and Employees

The principal occupations of our executive officers and employees who are considered “participants” in our solicitation of proxies are set forth below. The principal occupation refers to such person’s position with MCG Capital Corporation and the business address for each person is MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, VA 22209.


Name		Principal Occupation
Stephen J. Bacica		Executive Vice President and Chief Financial Officer
Robert L. Marcotte		Senior Vice President and Managing Director
Marshall Murphy		Senior Vice President, Corporate Finance
Tod K. Reichert		Senior Vice President, Chief Compliance Officer and Corporate Secretary
Samuel G. Rubenstein		Executive Vice President and General Counsel
B. Hagen Saville		Executive Vice President, Business Development
Derek R. Thomas		Executive Vice President, Risk Management and Underwriting
Steven F. Tunney, Sr.		President and Chief Executive Officer

Information Regarding Ownership of MCG Securities by Participants

The number of shares of our common stock held by our directors and named executive officers as of April 1, 2011 is set forth under the heading “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” section of this proxy statement. The following table sets forth the number of shares held as of April 1, 2011 by our other employees who are “participants.”


Name		Shares of Common Stock Beneficially Owned
Marshall G. Murphy		67,668 shares
Tod K. Reichert		97,000 shares
Derek R. Thomas		165,455 shares

Shares of our common stock owned of record by each of our directors, named executive officers and other participants are beneficially owned by such person.

Information Regarding Transactions in MCG Securities by Participants

The following table sets forth information regarding purchases and sales of our securities by each of the participants listed above under “Directors and Nominees” and “Officers and Employees” during the past two years. Unless otherwise indicated, all transactions were in the public market or pursuant to our equity compensation plans and none of the purchase price or market value of those shares is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such securities.


Shares of Common Stock Purchased or Sold (4/1/2009 through 4/1/2011)
Name	Date	# of Shares	Transaction Description
Stephen J. Bacica	8/27/09 10/7/09 10/28/09 4/20/10 9/30/10 10/6/10 10/27/10 11/2/10 11/2/10 12/31/10 3/1/11 3/1/11	5,000 18,750 18,750 18,750 2,785 2,013 2,013 11,250 2,415 2,785 7,500 34,000	Acquisition – Open Market Purchase Acquisition – Award of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock
A. Hugh Ewing, III	6/17/09	7,500	Acquisition – Award of restricted stock
Kim D. Kelly	3/9/10 3/10/10 5/10/10 5/19/10 5/26/10	2,379 621 2,000 2,000 7,500	Acquisition – Open Market Purchase Acquisition – Open Market Purchase Acquisition – Open Market Purchase Acquisition – Open Market Purchase Acquisition – Award of restricted stock
Robert L. Marcotte	10/7/09 10/28/09 3/10/10 4/20/10 9/7/10 9/30/10 10/6/10 10/27/10 11/2/10 11/2/10 12/31/10 3/1/11 3/1/11 3/1/11 3/31/11	10,000 10,000 8,500 10,000 23,000 1,271 1,074 1,074 6,000 1,288 1,269 4,000 910 35,000 17,309	Acquisition – Award of restricted stock Acquisition – Award of restricted stock Disposition – Open Market Sale Acquisition – Award of restricted stock Disposition – Open Market Sale Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock
Wallace B. Millner, III	N/A	N/A	N/A
Marshall G. Murphy	10/7/09 10/28/09 4/20/10 10/6/10 10/27/10 11/2/10 11/2/10 3/1/11 3/1/11	6,250 6,250 6,250 729 729 3,750 874 2,500 5,000	Acquisition – Award of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock
Richard W. Neu	N/A	N/A	N/A
Kenneth J. O’Keefe	5/14/09 5/15/09 6/17/09	2,500 2,500 7,500	Acquisition – Open Market Purchase Acquisition – Open Market Purchase Acquisition – Award of restricted stock
Tod K. Reichert	10/7/09 10/28/09 4/20/10 11/2/10 3/1/11 3/1/11	10,000 10,000 10,000 6,000 4,000 15,000	Acquisition – Award of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock
Samuel G. Rubenstein	10/7/09 10/13/09 10/28/09 3/16/10 4/20/10 9/30/10 10/6/10 10/27/10 11/2/10 11/2/10 12/31/10 3/1/11 3/1/11	16,250 60,000 16,250 25,000 16,250 342 1,945 1,945 9,750 2,334 341 6,500 36,000	Acquisition – Award of restricted stock Disposition – Sales pursuant to 10b5-1 Trading Plan Acquisition – Award of restricted stock Disposition – Open Market Sale Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock
Gavin Saitowitz Springbok Capital Management, LLC Springbok Capital Onshore, LLC Soundpost Partners, LP Lyrical Partners, L.P.	See Attached Schedule A


Shares of Common Stock Purchased or Sold (4/1/2009 through 4/1/2011)
Name	Date	# of Shares	Transaction Description
B. Hagen Saville	10/7/09 10/28/09 2/28/10 4/20/10 9/30/10 10/6/10 10/27/10 11/2/10 11/2/10 12/31/10 3/1/11 3/1/11	43,750 43,750 21,929 43,750 497 5,097 5,097 26,250 6,117 637 17,500 44,000	Acquisition – Award of restricted stock Acquisition – Award of restricted stock Disposition – Forfeiture of Shares Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock
Derek R. Thomas	10/7/09 10/28/09 4/20/10 11/2/10 3/1/11 3/1/11	10,000 10,000 10,000 6,000 4,000 16,000	Acquisition – Award of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock
Steven F. Tunney, Sr.	10/7/09 10/28/09 12/10/09 2/16/09 2/28/10 3/22/10 4/20/10 9/30/10 10/6/10 10/27/10 11/2/10 11/2/10 12/31/10 3/1/11 3/1/11	50,000 50,000 10,385 30,000 29,745 15,100 50,000 685 5,367 5,587 30,000 8,440 898 20,000 57,500	Acquisition – Award of restricted stock Acquisition – Award of restricted stock Disposition – Gift of Shares Disposition – Sales pursuant to 10b5-1 Trading Plan Disposition – Forfeiture of Shares Disposition – Sales pursuant to 10b5-1 Trading Plan Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Disposition – Shares withheld to pay taxes applicable to the vesting of restricted stock Acquisition – Award of restricted stock Acquisition – Award of restricted stock

-2-

Schedule A


Shares of Common Stock Purchased or Sold 4/1/2009 through 4/1/2011)
Name	Date	# of Shares	Transaction Description
Gavin Saitowitz	6/17/09	7,500	Acquisition – Award of Restricted Stock
Springbok Capital Management, LLC and affiliates and Springbok Capital Onshore, LLC	9/15/09	300,000	Acquisition – Open Market Purchase

Soundpost Partners, LP, and affiliates	4/1/09 5/8/09 5/8/09 5/8/09 5/11/09 5/12/09 5/13/09 5/14/09 5/14/09 5/15/09 5/18/09 5/19/09 5/20/09 5/21/09 5/22/09 5/26/09 5/27/09 5/28/09 5/29/09 6/1/09 6/2/09 6/3/09 6/4/09 6/5/09 6/8/09 6/9/09 6/10/09 6/11/09 6/12/09 6/15/09 6/16/09 6/17/09 6/18/09 6/19/09 6/22/09 6/23/09 6/25/09 6/26/09 6/29/09 7/1/09 7/2/09 7/6/09 7/7/09 7/8/09 7/9/09 7/10/09 7/13/09 7/21/09 7/23/09 7/24/09 7/27/09 7/28/09 7/29/09 7/30/09 7/31/09 8/3/09 8/4/09 8/6/09 8/7/09 8/10/09 8/11/09 8/12/09 8/13/09 8/13/09 8/14/09 8/17/09 8/18/09 8/19/09 8/20/09 8/21/09 8/24/09 9/1/09 9/15/09	192,483 148 13,177 148 9,656 20,488 14,664 14,840 18,550 7,081 7,153 16,724 16,398 12,317 8,902 11,501 14,172 7,272 9,792 15,777 12,296 8,740 10,952 7,326 5,162 5,407 6,525 7,200 1,500 13,838 9,860 8,362 8,232 4,712 4,218 10,888 5,500 89,773 5,926 8,046 7,917 4,204 7,539 2,247 2,880 652 18,000 33,624 27,909 12,488 10,729 29,500 13,737 52,889 44,186 27,606 44,622 5,994 23,522 21.328 10,589 21,253 26,515 18,500 18,001 9,908 12,252 14,240 18,908 27,303 14,143 17,535 114,000	Acquisition – Open Market Purchase Acquisition – Open Market Purchase Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Acquisition – Open Market Purchase Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Disposition – Open Market Sale Acquisition – Open Market Purchase Disposition – Open Market Sale

9/17/09
9/30/09
10/1/09
10/6/09
10/6/09
10/7/09
10/7/09
10/7/09
10/8/09
10/8/09
10/8/09
10/9/09
10/9/09
10/14/09
10/15/09
10/16/09
10/21/09
10/28/09
10/29/09
11/2/09
11/3/09
11/4/09
11/16/09
12/1/09
12/16/09
1/4/10
1/4/10
1/5/10
1/6/10
1/7/10
1/08/10
1/11/10
1/12/10
1/13/10
1/14/10
1/15/10
1/19/10
1/20/10
1/21/10
2/1/10
2/26/10
3/1/10
3/1/10
3/2/10
3/3/10
3/4/10
3/5/10
3/8/10
3/9/10
6/8/10
6/8/10
6/9/10
6/9/10
6/10/10
6/10/10
6/14/10
6/14/10
6/15/10
6/15/10
6/17/10
6/17/10
6/18/10
6/18/10
4/1/09
5/8/09
5/8/09
5/8/09
5/11/09
5/12/09
5/13/09
5/14/09
5/14/09
5/15/09
5/18/09
5/19/09
5/20/09
5/21/09
5/22/09
5/26/09
5/27/09

1,224
300
8,434
24,105
21,560
19,250
1,001
56,510
25,323
50,512
38,500
21,462
26,873
19,250
11,704
14,322
27,181
18,451
12,553
31,803
11,142
4,260
3,864
2,676
3,580
34,035
26,361
71,748
36,131
35,191
36,000
18,598
25,797
32,301
30,422
17,712
21,390
21,678
1,301
2,876
88,488
9,199
43,946
90,247
69,022
51,042
58,641
23,264
4,751
3,280
14,432
6,631
27,986
141
622
2,006
8,824
2,827
12,441
891
3,919
4,058
17,856
192,483
52
4,623
52
3,358
7,124
5,099
5,160
6,450
2,462
2,487
5,876
5,702
4,283
3,098
3,999
4,928