Exhibit 10.1

MCG CAPITAL CORPORATION

2009 Annual Incentive Cash Bonus Plan

On June 17, 2009, the Compensation Committee (the “Committee”) of the Board of
Directors (the “Board”) of MCG Capital Corporation (the “Company”) recommended
that the Board approve, and on July 23, 2009, the Board approved, this 2009
Annual Incentive Cash Bonus Plan (the “Plan”).

 

  1. Purpose of the Plan.

The Plan is intended to increase stockholder value and the success of the
Company 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 the Company’s labor markets; and

 

  •  

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

 

  2. Eligibility.

All of the Company’s executive officers, within the meaning of Rule 3b-7 under
the Securities Exchange Act of 1934, as amended, and key, non-executive
employees designated by the Committee (the “Participants”) are eligible to
receive cash bonus payments under this Plan. If additional individuals become
executive officers of the Company during the fiscal year ending December 31,
2009 (“Fiscal 2009”), they may be added as Participants in this Plan, at the
discretion of the Committee.

 

  3. Effective Date; Period Covered by Plan.

The Plan is effective as of January 1, 2009 and covers Fiscal 2009.

 

  4. Administration.

This Plan will be administered by the Committee. The Committee shall have
authority to adopt, amend and repeal such administrative rules, guidelines and
practices relating to this Plan as it deems advisable. All decisions by the
Committee shall be made in the Committee’s sole discretion and shall be final
and binding on all Participants and all persons having or claiming any interest
in this Plan. No member of the Committee shall be liable for any action or
determination relating to or under this Plan.

 

  5. Determinations.

The criteria and goals discussed below are guidelines. The Committee shall have
broad discretion to construe and interpret the terms of this Plan, to make
adjustments or amendments to this Plan, 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 such
bonus payments. The Company has no obligation to make any payments until such
time as the Committee makes such determination, in its sole discretion,
regardless of whether the criteria and goals discussed below have been
satisfied.

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  6. Target Bonus.

Each Participant has been designated by the Company as being eligible to earn a
target bonus amount equal to a percentage of the Participant’s base salary (the
“Target Bonus Percentage”).

Each Participant’s “Target Bonus Amount” for Fiscal 2009 is his or her Target
Bonus Percentage multiplied by the base salary paid to him or her in Fiscal
2009, subject to any adjustments thereto pursuant to Section 9.

Any awards will be made based on the sole discretion of the Committee.

 

  7. Plan Metrics and Scoring.

Individual Performance Adjustment

Based upon the recommendations of the Chief Executive Officer, the Committee has
discretion to adjust the bonus payout to each Participant based on individual
performance ratings formulated through the Company’s annual review process.

Metrics

Bonus payouts will be determined, in part, for each Participant by measuring
selected financial and key Company strategic performance goals (each a “Plan
Metric”), with each Plan Metric assigned a weight as set forth on Exhibit A
attached hereto.

Scoring

For each Plan Metric, the Committee will establish minimum, target and maximum
performance levels scaled from 50% to 125%, such that achievement of the 100%
level within each of the five Plan Metrics could result in full payment of the
Target Bonus Amount for each Participant. Performance below the minimum
threshold for a Plan Metric may result in a score of zero for that Plan Metric,
and performance above the maximum threshold for a Plan Metric may result in a
score of 125% for such Plan Metric. Performance levels that fall in between the
denoted scale levels will be linearly interpolated.

The score assigned to each Plan Metric will be multiplied by the relevant Plan
Metric weight to determine the weighted score for that Plan Metric. The sum
total of these weighted scores is the “Overall Company Score.”

 

  8. Bonus Calculations.

Any bonus payouts under the Plan for Fiscal 2009 performance are expected to be
calculated using the following guidelines:

 

Annual Salary    X    Target Bonus Percentage    X    Overall Company Score    X
   Individual
Performance
Adjustment    =    Bonus Payout

Notwithstanding the foregoing, payments made to the Participants under the Plan
are conditioned upon a minimum Company unrestricted cash balance established by
the Committee at the time this Plan is adopted. The Company’s “unrestricted cash
balance” shall be determined in the same manner and using the same methods and
assumptions as the “cash and cash equivalents” line item in the Company’s
balance sheet as reflected in the Company’s public securities filings for its
fiscal 2008 year. In the event that bonuses are earned under the Plan, but the
unrestricted cash balance of the Company is below the established threshold on
the Bonus Payout Dates (as defined below), bonus payouts will not be paid until
such time as the specified level of unrestricted cash is met for 30 consecutive
calendar days thereafter, and the bonus payouts will be made within 30 days of
such level being met.

 

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  9. Changes to Base Salary.

Each Participant’s Target Bonus Amount is based upon their respective Fiscal
2009 base salary. Any adjustments to the rate or payment of a Participant’s 2009
base salary will be incorporated into that Participant’s bonus payout
calculation, including, without limitation, in the event of any increase or
diminution in base salary.

 

  10. Timing of Bonuses.

Payment of actual bonuses, if any, to the Participants in the Plan, will be made
in two equal installments on each of March 31, 2010 and September 30, 2010,
subject to the conditions set forth in Section 8 (the “Bonus Payout Dates”) and,
except as provided in this Section 10, subject to the continued employment of
each individual Participant by the Company on each such Bonus Payout Date. If a
Participant terminates employment with the Company for any reason in Fiscal
2009, such Participant shall not be entitled to any bonus payments under this
Plan. If a Participant terminates employment with the Company, other than as a
result of termination by the Company for cause or as a result of a voluntary
termination by the Participant, (i) after December 31, 2009 and prior to
March 31, 2010, the Participant will be entitled to receive their entire bonus
in a single payment on March 31, 2010; or (ii) on or after March 31, 2010 and
prior to the September 30, 2010, the Participant will be entitled to receive
their second installment bonus payment in accordance with the Company’s regular
payroll practices immediately following their date of separation from the
Company. Notwithstanding the foregoing, with respect to (i) any Participant on
an approved leave of absence on the Bonus Payout Dates; and (ii) any Participant
who in Fiscal 2009 becomes disabled and qualifies for benefits under the
Company’s long-term disability plan, the Committee may, in its sole discretion
and without any obligation to do so, determine to pay a bonus to such a
Participant under this Plan.

 

  11. Other Bonuses and Incentives.

Nothing in this Plan shall limit the discretionary authority of the Board or the
Committee to approve and pay out additional or alternative bonuses to
Participants or provide Participants additional or alternative incentives
outside of the terms of this Plan.

 

  12. Acquisition of the Company.

This Plan shall terminate effective immediately prior to the closing of an
Acquisition (as defined below) of the Company. Notwithstanding the foregoing,
(i) if the closing of an Acquisition occurs in fiscal 2010 before one or both
Bonus Payout Dates, any bonus payouts due with respect to Fiscal 2009 prior to
such closing of an Acquisition shall be paid to Participants in the manner and
at the time provided for in this Plan, but no later than the closing of the
Acquisition and (ii) if an Acquisition occurs prior to the end of Fiscal 2009,
the Committee shall prepare an analysis of partial year performance achievements
in relation to established annual performance levels and authorize pro-rata
bonus payouts, if any, on or prior to the closing of the Acquisition.

“Acquisition” means (i) any merger or consolidation in which (A) the Company is
a constituent party or (B) a subsidiary of the Company is a constituent party,
and the Company issues shares of its capital stock pursuant to such merger or
consolidation (except, in the case of both clauses (A) and (B) above, any such
merger or consolidation involving the Company or a subsidiary in which the
holders of capital stock of the Company immediately prior to such merger or
consolidation

 

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continue to hold immediately following such merger or consolidation at least 51%
by voting power of the capital stock of (x) the surviving or resulting
corporation or (y) if the surviving or resulting corporation is a wholly owned
subsidiary of another corporation immediately following such merger or
consolidation, of the parent corporation of such surviving or resulting
corporation) or (ii) the sale or transfer, in a single transaction or series of
transactions, of capital stock representing at least 51% of the voting power of
the outstanding capital stock of the Company immediately following such
transaction or (iii) the sale of all or substantially all of the assets of the
Company, as defined under Section 271 of the Delaware General Corporation Law.

 

  13. Withholding Taxes.

The Company may deduct from any payment otherwise due to Participants under this
Plan any amount required to be withheld by the Company under applicable federal,
state, and local or other income and employment tax withholding laws and
regulations. If the Company elects not to or cannot withhold such amounts from
payments due to a Participant, each Participant must pay the Company the full
amount, if any, required for withholding.

 

  14. Miscellaneous Provisions.

Non-Transferability of Rights

The Plan is not intended to create a right to a payment. The rights to a payment
of a bonus under this Plan may not be sold, transferred, pledged, hypothecated
or otherwise disposed of.

No Right to Continued Employment

The opportunity to receive a bonus under this Plan shall not be construed as
giving a Participant the right to continued employment or any other relationship
with the Company. The Company expressly reserves the right at any time to
dismiss or otherwise terminate its relationship with a Participant free from any
liability or claim under this Plan.

Severability

The invalidity or unenforceability of any provision of this Plan shall not
affect the validity or enforceability of any other provision of this Plan, and
each other provision of this Plan shall be severable and enforceable to the
extent permitted by law.

Amendment and Termination

The Committee may amend or terminate this Plan or any portion thereof at any
time.

Compliance with Internal Revenue Code Section 409A

This Plan and the payments hereunder are not intended to be subject to
Section 409 of the Internal Revenue Code, because all payments hereunder will be
made within the “short-term deferral” period as described in the regulations
under Section 409A. The Plan shall be interpreted and operated in a manner
consistent with such intent. The Company shall have no liability to a
Participant, or any other party, for any liability under Section 409A,
regardless of whether the Plan is determined to be subject to Section 409A.

Compliance with the Investment Company Act of 1940

Notwithstanding the foregoing, no provision of the Plan shall contravene any
portion of the Investment Company Act of 1940 (the “1940 Act”), and in the event
of any conflict between a provision of the Plan and the 1940 Act, the applicable
section of the 1940 Act shall control.

 

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Governing Law

This Plan shall be construed, interpreted and enforced in accordance with the
internal laws of the Commonwealth of Virginia without regard to any applicable
conflicts of laws.

*****

 

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EXHIBIT A

 

Plan Metric

   Weight  

Equity Portfolio Monetizations

   20 % 

BDC Asset Coverage Ratio

   20 % 

Cash Earnings from the Portfolio

   20 % 

Earnings Per Share

   20 % 

Successful Renegotiation of the Company’s Credit Facilities

   20 %