Exhibit 10.5
May 3, 2012
Mr. Stephen J. Bacica

Dear Steve:
The Board of Directors (the “Board”) of MCG Capital Corporation (the
“Corporation”) appreciates your efforts and contributions as Chief Financial
Officer of the Corporation during the past three years. This letter memorializes
the terms of your termination of employment with the Corporation and its
affiliated companies. All capitalized but undefined terms used in this letter
shall have the meanings set forth in the employment agreement between you and
the Corporation, dated October 28, 2008, as amended effective December 23, 2008
(the “Employment Agreement”).
Separation from Employment. By execution of this letter, you acknowledge and
agree that you will separate from employment with the Corporation effective as
of May 15, 2012, (the “Separation Date”). Your separation from employment will
be treated for purposes of the Employment Agreement and, to the extent
beneficial to you, your outstanding equity-based awards, as a termination by the
Corporation other than for Cause, effective on Separation Date, subject to the
terms and conditions of this letter. This letter will serve as an acceptance of
your resignation as an officer and director of the Corporation and as an officer
and/or director of any of its affiliated entities, including any portfolio
companies, effective as of the Separation Date.
No Disputes. You understand that the Corporation will be required to file a
Quarterly Report on Form 10-Q or similar disclosure in a periodic filing with
the SEC relating to your departure, and you hereby confirm that your separation
of employment is not in any way related to a disagreement with the Corporation
on any matter relating to the Corporation’s operations, policies or practices.
Separation Payments and Benefits. Subject to your signing and delivering to the
Corporation (no later than 30 days following the Separation Date) and not
revoking the release of claims attached hereto as Exhibit A (the “Release”) and
your continued compliance with the covenants set forth in Section 7 of the
Employment Agreement, you shall be entitled to the payments and benefits set
forth on the attached Schedule I. You hereby acknowledge that Schedule II
accurately reflects all outstanding restricted shares of common stock of the
Corporation (“Restricted Shares”) held by you as of the Separation Date, and
agree that any such awards held by you as of the Separation Date shall be
treated under their respective terms (as set forth on Schedule II), subject to
your timely execution and non-revocation of the Release. Except as described in
this letter, including Schedules I and II hereto, you

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hereby acknowledge that you have no further rights to any compensation or
benefits under your Employment Agreement or any incentive, equity or benefit
plan, program or agreement of or with the Corporation or any of its affiliated
entities, including any portfolio companies. The Release must be signed and
delivered to the Corporation no later than 30 days following the Separation
Date. If you do not timely sign and deliver the Release to the Corporation, or
if you revoke the Release during the statutory seven (7)-day revocation period,
you shall forfeit any rights to the amounts and benefits provided under this
letter. If you die prior to the Separation Date, then your beneficiary
designated on file with the Corporation under your life insurance policy shall
be entitled to receive the payments set forth on the attached Schedule I (other
than benefits due under plans of the Corporation which will be paid or provided
in accordance with the terms of the applicable plan), provided that the
Corporation has received a signed release from such beneficiary substantially in
the form of the Release.
Reimbursement of Legal Fees. On the Separation Date, the Corporation shall pay
directly on your behalf $5,000 to the attorney that you retained to advise you
in connection with the negotiation and execution of this letter.
Restrictive Covenants. You acknowledge and agree that both the Non-Competition
Period and the Applicable Period begin on the Separation Date and end 24 months
after the Separation Date, and that Section 7(d)(iii) of the Employment
Agreement does not apply in connection with your termination of employment
pursuant to this letter. The Corporation shall have the remedies provided under
Section 7(f) of the Employment Agreement available to it, in addition to its
right to cease to pay or provide the payments and benefits set forth in this
letter.
Miscellaneous. This letter and the attachments hereto constitute the entire
agreement between you and the Corporation regarding your rights upon termination
and supersede any earlier agreement, written or oral, with respect thereto. This
letter will be governed by and construed in accordance with the laws of the
Commonwealth of Virginia without reference to the principles of conflict of law.
The terms of Section 7 (except for Section 7(d)(iii)) and Section 9 of the
Employment Agreement shall survive and be enforceable by the parties pursuant to
their terms and as if set forth herein. In addition, any rights to
indemnification under the Corporation’s charter, bylaws and director’s and
officer’s liability insurance policy (which for the avoidance of doubt, apply
with respect to your service to the Corporation and its affiliated entities,
including any portfolio companies), shall survive your termination of service.
The “Successors and Assigns” provision of Section 8 of the Employment Agreement
shall apply to this letter as if set forth herein, with references to the
“Company” referring to the “Corporation,” to this “Agreement” referring to this
“letter” and to the “Executive” referring to “you.” You and the Corporation
agree that any disputes relating to any matters under the terms of this letter
shall be resolved in accordance with Sections 7(f) and 9 of the Employment
Agreement, as applicable.

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To indicate your agreement with the foregoing, please sign and return this
letter, which will become a binding agreement on our receipt.
Very truly yours,
MCG Capital Corporation

By:  /s/ Richard W. Neu    
Name: Richard W. Neu
Title: Chief Executive Officer

Accepted and Agreed as of May 3, 2012:
/s/  Stephen J. Bacica    
Stephen J. Bacica

[Signature Page to Stephen J. Bacica Termination Letter dated May 3, 2012]

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Schedule I

Employment Agreement Section Reference
Description of Payment
Amount of Payment
Payment Date(s)
5(c)(i)
(1) Unpaid Base Salary through the Separation Date, (2) unreimbursed business
expenses incurred through the Separation Date and (3) accrued and unused
vacation pay through the Separation Date
Base Salary of $16,479.17 through the Separation Date plus any outstanding,
unreimbursed business expenses incurred through the Separation Date payable on
the Company's next regular payroll distribution date. All accrued and unused
vacation was previously paid to you under the Corporation’s revised PTO Policy.
May 15, 2012

5(c)(ii)
A payment equal to two times the sum of your Base Salary and Target Annual Bonus
Aggregate amount of $1,582,000
$395,500 to be paid on the Corporation’s first payroll pay date occurring on or
after the first day following the six-month anniversary of the Separation Date
(the “First Payment Date”) and $1,186,500 to be paid in 18 equal monthly
installments thereafter commencing on the Corporation’s first customary payroll
date of each calendar month following the First Payment Date.
5(e)
Compensation or Benefits under other Corporation plans, programs and practices
Your vested account balance under the Corporation’s tax qualified 401(k) plan.
In accordance with the terms of the plan and any elections thereunder.

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Schedule II

Restricted Shares

Award and Grant Date
# of Shares
Treatment/Vesting Date
Restricted Stock Award granted July 1, 2008
305
Vest on Separation Date
Restricted Stock Award granted March 1, 2011
23,375
Vest on Separation Date

               
Minimum statutory withholding to be satisfied through net share settlement.

               

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Exhibit A

For and in consideration of the payments and other benefits due to Stephen J.
Bacica (the “Executive”) pursuant to the termination letter dated as of May 3,
2012, by and between MCG Capital Corporation (the “Corporation”) and the
Executive (the “Termination Letter”), and for other good and valuable
consideration, the Executive hereby agrees, for the Executive, the Executive’s
spouse and child or children (if any), the Executive’s heirs, beneficiaries,
devisees, executors, administrators, attorneys, personal representatives,
successors and assigns, to forever release, discharge and covenant not to sue
the Corporation or any of its divisions, affiliates, subsidiaries, parents,
branches, predecessors, successors, assigns, and, with respect to such entities,
their officers, directors, trustees, employees, agents, shareholders,
administrators, general or limited partners, representatives, attorneys,
insurers and fiduciaries, past, present and future (the “Released Parties”) from
any and all claims of any kind arising out of, or related to, his employment
with the Corporation, its affiliates and subsidiaries, including any portfolio
companies (collectively, with the Corporation, the “Affiliated Entities”), the
Executive’s separation from employment with the Affiliated Entities, which the
Executive now has or may have against the Released Parties, whether known or
unknown to the Executive, by reason of facts which have occurred on or prior to
the date that the Executive has signed this Release. Such released claims
include, without limitation, any and all claims relating to the foregoing under
federal, state or local laws pertaining to employment, including, without
limitation, the Age Discrimination in Employment Act, Title VII of the Civil
Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et. seq., the Fair Labor
Standards Act, as amended, 29 U.S.C. Section 201 et. seq., the Americans with
Disabilities Act, as amended, 42 U.S.C. Section 12101 et. seq. the
Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et.
seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et.
seq., the Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601 et. seq.,
and any and all state or local laws regarding employment discrimination and/or
federal, state or local laws of any type or description regarding employment,
including but not limited to any claims arising from or derivative of the
Executive’s employment with the Affiliated Entities, as well as any and all such
claims under state contract or tort law.
The Executive has read this Release carefully, acknowledges that the Executive
has been given at least 21 days to consider all of its terms and has been
advised to consult with an attorney and any other advisors of the Executive’s
choice prior to executing this Release, and the Executive fully understands that
by signing below the Executive is voluntarily giving up any right which the
Executive may have to sue or bring any other claims against the Released
Parties, including any rights and claims under the Age Discrimination in
Employment Act. The Executive also understands that the Executive has a period
of seven days after signing this Release within which to revoke his agreement,
and that, except as provided otherwise in the section of the Termination Letter
entitled “Separation Payments and Benefits,” neither the Corporation nor any
other person is obligated to make any payments or provide any other benefits to
the Executive pursuant to the Termination Letter until no less than eight days
have passed since the Executive’s signing of this Release without

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the Executive’s signature having been revoked. Finally, the Executive has not
been forced or pressured in any manner whatsoever to sign this Release, and the
Executive agrees to all of its terms voluntarily.
Notwithstanding anything else herein to the contrary, this Release shall not
affect: (i) the Corporation’s obligations to the Executive as set forth in the
Termination Letter; or (ii) rights to indemnification the Executive may have
under the Corporation’s bylaws or charter or as an insured under any director’s
and officer’s liability insurance policy now or previously in force.
This Release is final and binding and may not be changed or modified except in a
writing signed by both parties.

IN WITNESS WHEREOF, Executive has signed this Release on this        day of
       , 2012.

                
Stephen J. Bacica

Accepted and Agreed as of this        day of       , 2012:

MCG Capital Corporation

By:                     
Name: Richard W. Neu
Title: Chief Executive Officer

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[Signature Page to Stephen J. Bacica Release
(Attached to Separation Letter dated May 3, 2012)]