<PAGE>


                                                                   Exhibit 10.46


                              EMPLOYMENT AGREEMENT
                              --------------------

     THIS EMPLOYMENT AGREEMENT entered into as of the 28th day of November,
2001, by and between MCG Capital Corporation (the "Company"), a Delaware
corporation, and Bryan J. Mitchell, an individual (the "Executive") (hereinafter
collectively referred to as the "parties").

      WHEREAS, the Executive has heretofore been employed by the Company as its
Chief Executive Officer and is experienced in all phases of the business of the
Company and the Company desires to retain the services and employment of the
Executive on the terms set forth herein;

      WHEREAS, the Company recognizes the Executive's extraordinary experience
and relationships in the Company's industry, and the Company desires to retain
the services and employment of the Executive;

      WHEREAS, the Executive and the Company have entered into an Employment
Agreement dated June 24, 1998 (the "Prior Agreement"); and
                                    ---------------    ---

      WHEREAS, the Company and the Executive desire to enter into this Agreement
which will replace the Prior Agreement and will provide for the continued
employment of the Executive by the Company upon the terms and subject to the
conditions set forth herein.

      NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:

      1. Term. The initial term of employment (the "Term") under this Agreement
         ----
shall be for the period commencing on the date hereof, and shall continue in
effect until the fourth anniversary hereof, provided, however, that (a) if the
                                            --------  -------
consummation of the first public offering of the Common Stock of the Company
pursuant to a registration statement (other than on Form S-8 or Form S-4 or a
successor form thereto) filed with, and declared effective by, the Securities
and Exchange Commission does not occur by the earlier of (1) the 20th day
following the effective date of the filing of the Form N-8A with the Securities
and Exchange Commission pursuant to which the Company will register under the
Investment Company Act of 1940, as amended as a closed-end investment company or
                                                                              --
(2) December 31, 2001, then the Prior Agreement shall be automatically
                       ----
re-instated and this Agreement shall be automatically terminated and superceded
            ---
by the Prior Agreement, and (b) if the Term would otherwise expire prior to the
                        ---
expiration of twelve (12) months after the occurrence of a Change in Control (as
defined below), then the Term shall not expire prior to the expiration of twelve
                ----
months after such Change in Control so long as either the Executive consents to
                                               ------
such extension of this Agreement or the Company causes all of the Executive's
                                 --
Tier 1, Tier 2 and Tier 3 Shares that are still Forfeitable to thereupon become
Non-Forfeitable.

      2. Employment. (a) The Executive shall be employed as the Chief Executive
         ----------
Officer of the Company or such other position(s) as may be mutually agreed upon
in writing by the parties. The Executive shall perform the duties, undertake the
responsibilities and exercise the authority customarily performed, undertaken
and exercised by persons situated in a similar executive capacity.


                                     - 1 -

<PAGE>


            (b) The Executive shall devote his full working time attention and
skill to the performance of such duties, services and responsibilities, and will
                                                  ---
use his best efforts to promote the interests of the Company. The Executive will
not, without prior written approval of the Board of Directors of the Company
(the "Board"), engage in any other activities that would interfere with the
performance of his duties as an employee of the Company, are in violation of
written policies of the Company, are in violation of applicable law, or would
create a conflict of interest with respect to the Executive's obligations as an
employee of the Company. The Executive may (1) serve on corporate, civil or
charitable boards or committees, (2) deliver lectures and teach at educational
institutions, (3) serve as a personal representative or trustee, (4) manage his
personal, financial and legal affairs, and (5) invest personally in any business
                                       ---
where no conflict of interest exists between such investment and the business of
the Company, as long as the foregoing activities do not require a material time
commitment by the Executive.

      3. Base Salary. The Company agrees to pay or cause to be paid to the
         -----------
Executive during the term of this Agreement a base salary at the rate of
$290,000 per annum (such base salary, as may be adjusted from time to time in
accordance with this Section, the "Base Salary"). Such Base Salary shall be
payable in accordance with the Company's customary practices applicable to its
executives. Such Base Salary shall be reviewed (and may be adjusted) at least
annually by the Board or an authorized committee of the Board. Such Base Salary
may be reduced only if such reduction is implemented by the Company as part of
an overall general salary reduction plan among all of its employees and such
                                                                    ---
reduction to the Base Salary on a percentage basis is equal to or less than the
percentage reduction otherwise implemented under such plan.

      4. Employee Benefits. The Executive shall be entitled to participate in
         -----------------
all employee benefit plans, practices and programs maintained by the Company and
made available to employees generally including, without limitation, all
pension, retirement, profit sharing, savings, medical, hospitalization,
disability, dental, life or travel accident insurance benefit plans, vacation
and sick leave. The Executive's participation in such plans, practices and
programs shall be on the same basis and terms as are applicable to employees of
the Company generally.

      5. Executive Benefits. The Executive shall be entitled to participate in
         ------------------
all executive benefit or incentive compensation plans now maintained or
hereafter established by the Company for the purpose of providing compensation
and/or benefits to executives of the Company. Unless otherwise provided herein,
the Executive's participation in such plans shall be on the same basis and terms
as other similarly situated executives of the Company. No additional
compensation provided under any of such plans shall be deemed to modify or
otherwise affect the terms of this Agreement or any of the Executive's
entitlements hereunder.

      6. Other Benefits.
         --------------

            (a) Fringe Benefits and Perquisites. The Executive shall be entitled
                -------------------------------
to all fringe benefits and perquisites generally made available by the Company
to its executives.

            (b) Expenses. The Company agrees to pay all reasonable expenses,
                --------
subject to reasonable documentation, incurred by the Executive in furtherance of
the Company's business, including, without limitation, traveling and
entertainment expenses, and to reimburse the


                                     - 2 -

<PAGE>

Executive for all such reasonable expenses advanced by him and not reimbursed
prior to the date of this Agreement.

      7. Termination. The Executive's employment hereunder may be terminated
         -----------
under the following circumstances:

            (a) Disability. The Company may terminate the Executive's employment
                ----------
after having established the Executive's Disability or the Executive can
terminate if he has established his Disability. For purposes of this Agreement,
"Disability" means a physical or mental infirmity which impairs the Executive's
ability to substantially perform his duties under this Agreement for at least
one hundred eighty (180) days during any 365-consecutive-day period. The
Executive shall be entitled to the compensation and benefits provided for under
this Agreement for any period during the term of this Agreement and prior to the
establishment of the Executive's Disability during which the Executive is unable
to work due to a physical or mental infirmity. Notwithstanding anything
contained in this Agreement to the contrary, until the Termination Date
specified in a Notice of Termination (as each term is hereinafter defined)
relating to the Executive's Disability, the Executive shall be entitled to
return to his position with the Company as set forth in this Agreement in which
event no Disability of the Executive will be deemed to have occurred.

            (b) Cause. The Company may terminate the Executive's employment for
                -----
"Cause". A termination for Cause shall mean (1) if the Executive has been
 -----
convicted of a felony (other than a traffic offense) or (2) a termination
                                                     --
evidenced by a resolution adopted in good faith by two-thirds (2/3) of the Board
that the Executive (i) failed to substantially perform his duties and
obligations with the Company (other than a failure resulting from the
Executive's incapacity due to physical or mental illness) which, if it is the
first instance of such conduct, is not cured within thirty (30) days after a
written notice of demand for substantial performance has been delivered to the
Executive specifying the manner in which the Executive has failed to
substantially perform (and, if it is any instance of such conduct after the
                       ---
first instance thereof and opportunity to cure, then no such opportunity to cure
need be provided with respect to such conduct), or (ii) willfully engaged in
                                                --
conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise; provided, however, that no termination of the
                         --------  -------
Executive's employment shall be for Cause as set forth in clause (ii) above
until (y) there shall have been delivered to the Executive a copy of a written
notice setting forth that the Executive was guilty of the conduct set forth in
clause (ii) and specifying the particulars thereof in detail, and (z) the
                                                              ---
Executive shall have been provided an opportunity to be heard by the Board (with
the assistance of the Executive's counsel if the Executive so desires). No act,
nor failure to act, on the Executive's part, shall be considered "willful"
                                                                  -------
unless he has acted or failed to act, with an absence of good faith and without
a reasonable belief that his action or failure to act was in the best interest
of the Company. Notwithstanding anything contained in this Agreement to the
contrary, no failure to perform by the Executive after Notice of Termination is
given by the Executive shall constitute Cause for purposes of this Agreement.

            (c) Good Reason. The Executive may terminate his employment for
                -----------
"Good Reason" at any time within three (3) months of his knowledge of its
occurrence. For purposes of this Agreement, "Good Reason" shall mean the
                                             -----------
occurrence of any of the events or conditions described in the following
Subsections hereof:


                                     - 3 -

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                  (i) a change in the Executive's status, title, position or
            responsibilities (including reporting responsibilities) that
            represents a demotion from his status, title, position or
            responsibilities as in effect immediately prior thereto; the
            assignment to the Executive of any material duties or
            responsibilities that are inconsistent with such status, title,
            position or responsibilities; or any removal of the Executive from
            or failure to reappoint or reelect him to any of such positions (or
            positions of substantially similar status, title or responsibility),
            except in connection with the termination of his employment for
            ------
            Disability, Cause, as a result of his death or by the Executive
            other than for Good Reason;

                  (ii) a reduction in the Executive's Base Salary from the Base
            Salary in effect in the prior year (unless such reduction is
                                                ------
            implemented in accordance with Section 3);
                                                   -

                  (iii) the Company's requiring the Executive to be based at any
            place outside a 50-mile radius from the office in which the
            Executive is employed on the date hereof, except for reasonably
            required travel on the Company's business;

                  (iv) the failure by the Company to (A) continue in effect any
            material compensation or benefit plan, or (B) provide the Executive
                                                   --
            with compensation and benefits at least equal (in terms of benefit
            levels and/or reward opportunities) to those provided for under each
            employee benefit plan, program and practice; provided, however, if
                                                         --------  -------
            the Executive's participation in (A) or (B) above shall be reduced
            or altered on the same basis and terms as other similarly situated
            executives of the Company, it shall not be Good Reason;

                  (v) any material breach by the Company of any provision of
            this Agreement, including failure to pay Base Salary; and
                            ---------                             ---

                  (vi) the Executive not being re-elected as a member of the
            Board of Directors of the Company upon expiration of his term of
            service as a director.

Notwithstanding the foregoing, the occurrence of any conduct or circumstance
--------------- --- ---------
covered under Clauses (i), (iv) or (v) shall not constitute Good Reason if (Y)
                                                                        --
such particular conduct or circumstance has not previously occurred during the
Term of this Agreement and (Z) such conduct or circumstance is cured by the
                       ---
Company within thirty (30) days after written notice thereof has been delivered
to the Company by the Executive specifying the nature of such Good Reason,
provided, however, that such cure period shall be limited to five (5) business
--------  -------
days in the instance of a failure by the Company to pay Base Salary under Clause
(v).

            (d) Change in Control. For purposes of this Agreement, "Change in
                -----------------                                   ---------
Control" means the occurrence of any of the following events:
-------

                  (1) An acquisition in one or more transactions (other than
      directly from the Company) of any voting securities of the Company by any
      Person (as defined below) immediately after which such Person has
      Beneficial Ownership (as defined below) of fifty percent (50%) or more of
      the combined voting power of the Company's then outstanding voting
      securities; provided, however, in determining whether a Change in Control
                  --------  -------
      has


                                     - 4 -

<PAGE>

      occurred, voting securities which are acquired in a "Non-Control
      Acquisition" (as hereinafter defined) shall not constitute an acquisition
      which would cause a Change in Control. A "Non-Control Acquisition" shall
                                                -----------------------
      mean an acquisition by (i) an employee benefit plan (or a trust forming a
      part thereof) maintained by (A) the Company or (B) any corporation or
      other Person of which a majority of its voting power or its voting equity
      securities or equity interest is owned, directly or indirectly, by the
      Company (for purposes of this definition, a "Subsidiary"), (ii) the
      Company or its Subsidiaries, or (iii) any Person in connection with a
                                   --
      "Non-Control Transaction" (as hereinafter defined);

                  (2) The individuals who, as of the date hereof are members of
      the Board (the "Incumbent Board"), cease for any reason to constitute at
      least a majority of the members of the Board or, following a Merger (as
      defined below), the board of directors of the ultimate Parent Corporation
      (as defined below); provided, however, that if the election, or nomination
                          --------  -------
      for election by the Company's common stockholders, of any new director was
      approved by a vote of at least a majority of the Incumbent Board (or, with
      respect to the directors who are not "interested persons" as defined in
      the Investment Company Act of 1940, by a majority of the directors who are
      not "interested persons" serving on the Incumbent Board), such new
      director shall, for purposes of this Agreement, be considered as a member
      of the Incumbent Board; provided further, however, that no individual
                              -------- -------  -------
      shall be considered a member of the Incumbent Board if such individual
      initially assumed office as a result of an actual or threatened
      solicitation of proxies or consents by or on behalf of a Person other than
      the Board (a "Proxy Contest") including by reason of any agreement
      intended to avoid or settle any Proxy Contest; or

                  (3) The consummation of:

                        (i) A merger, consolidation or reorganization involving
            the Company (a "Merger") or an indirect or direct subsidiary of the
            Company, or to which securities of the Company are issued, unless:
                                                                       ------

                              (A) the stockholders of the Company, immediately
            before a Merger, own, directly or indirectly immediately following
            the Merger, more than fifty percent (50%) of the combined voting
            power of the outstanding voting securities of (x) the corporation
            resulting from the Merger (the "Surviving Corporation") if fifty
            percent (50%) or more of the combined voting power of the then
            outstanding voting securities of the Surviving Corporation is not
            Beneficially Owned, directly or indirectly, by another Person or
            group of Persons (a "Parent Corporation"), or (y) if there is one or
                                                       --
            more Parent Corporations, the ultimate Parent Corporation,

                              (B) the individuals who were members of the
            Incumbent Board immediately prior to the execution of the agreement
            providing for a Merger constitute at least a majority of the members
            of the board of directors of (x) the Surviving Corporation or (y)
                                                                       --
            the ultimate Parent Corporation, if the ultimate Parent Corporation,
            directly or indirectly, owns fifty percent (50%) or more of the
            combined voting power of the then outstanding voting securities of
            the Surviving Corporation, and


                                     - 5 -

<PAGE>

                              (C) no Person other than (1) the Company, (2) any
            Subsidiary, (3) any employee benefit plan (or any trust forming a
            part thereof) maintained by the Company, the Surviving Corporation,
            any Subsidiary, or the ultimate Parent Corporation, or (4) any
                                                                --
            Person who, together with its Affiliates (as defined below),
            immediately prior to a Merger had Beneficial Ownership of fifty
            percent (50%) or more of the then outstanding voting securities,
            owns, together with its Affiliates, Beneficial Ownership of fifty
            percent (50%) or more of the combined voting power of the then
            outstanding voting securities of (x) the Surviving Corporation or
                                                                           --
            (y) the ultimate Parent Corporation.

            Each transaction described in clauses (A) through (C) above shall
            herein be referred to as a "Non-Control Transaction".

                        (ii) A complete liquidation or dissolution of the
            Company (other than where assets of the Company are transferred to
            or remain with a Subsidiary or Subsidiaries of the Company).

                        (iii) The direct or indirect sale or other disposition
            of all or substantially all of the assets of the Company to any
            Person (other than (A) a transfer to a Subsidiary, (B) under
            conditions that would constitute a Non-Control Transaction with the
            disposition of assets being regarded as a Merger for this purpose,
            or (C) the distribution to the Company's stockholders of the stock
            --
            of a Subsidiary or any other assets).

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the then outstanding voting securities as a
result of the acquisition of voting securities by the Company which, by reducing
the number of voting securities then outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Persons, provided that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of voting securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional voting securities which increases the percentage of the
then outstanding voting securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur. "Affiliate" means, with respect to any
                                       ---------
Person, any other Person that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such Person. "Beneficial Ownership" means ownership within the meaning of Rule
13d-3 promulgated under the Exchange Act. "Person" means "person" as such term
is used for purposes of Section 13(d) or 14(d) of the Exchange Act, including
without limitation, any individual, corporation, limited liability company,
partnership, trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity or any group of Persons.

            (e) Notice of Termination. Any purported termination by the Company
                ---------------------
or by the Executive shall be communicated by written Notice of Termination to
the other. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice which indicates the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment


                                     - 6 -

<PAGE>

under the provision so indicated. For purposes of this Agreement, no such
purported termination of employment shall be effective without such Notice of
Termination. For the purposes of this Agreement, after a Notice of Termination
has been delivered to the Executive by the Company, he may not terminate his
employment for Good Reason or otherwise. After the Executive has terminated his
employment for Good Reason or otherwise, the Company may not deliver a Notice of
Termination to the Executive terminating his employment.

            (f) Termination Date, Etc. "Termination Date" shall mean (1) in the
                ----------------------  ----------------
case of the Executive's Death, the Executive's date of Death, (2) if the
Executive's employment is terminated for Disability, the date on which the
Notice of Termination is given, (3) if the Executive terminates his employment,
on the date such termination is announced by the Executive, and (4) if the
                                                            ---
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination, which shall not be longer than seven (7) days after
the Notice of Termination.

      8. Compensation Upon Termination. Upon termination of the Executive's
         -----------------------------
employment during the term of this Agreement (including any extensions thereof),
the Executive shall be entitled to the following benefits:

            (a) If the Executive's employment is terminated by the Company for
Cause or by the Executive (other than for Good Reason), then the Company shall
                                                        ----
pay the Executive all amounts earned or accrued hereunder through the
Termination Date but not paid as of the Termination Date, including (i) Base
Salary, (ii) reimbursement for any and all monies advanced or expenses incurred
in connection with the Executive's employment for reasonable and necessary
expenses incurred by the Executive on behalf of the Company for the period
ending on the Termination Date, (iii) vacation pay, (iv) any bonuses or
incentive compensation with respect to the fiscal year ended prior to the fiscal
year in which the Termination Date occurs that was earned and unpaid and (v) any
                                                                     ---
previous compensation which the Executive has previously deferred (including any
interest earned or credited thereon) (collectively, "Accrued Compensation"). The
                                                     --------------------
Executive will forfeit any Tier 1, Tier 2 and Tier 3 Shares (as defined in the
Restricted Stock Agreement between the Executive and the Company (the "RSA"))
that are Forfeitable Shares (as defined in the RSA) as to which the forfeiture
restrictions have not lapsed as of the Termination Date.

            (b) If the Executive's employment terminates for Disability or for
reason of the Executive's death, then the Executive shall be entitled to the
                                 ----
benefits provided below:

                  (i) the Company shall pay the Executive or his beneficiaries
            all Accrued Compensation;

                  (ii) the Company shall pay to the Executive or his
            beneficiaries an amount equal to the bonus or incentive award
            (which, for this purpose, shall not include the restricted stock
            under the RSA) that the Executive would have been entitled to
            receive in respect of the fiscal year in which the Executive's
            Termination Date occurs had he continued in employment until the end
            of such fiscal year, calculated as if all performance targets and
            goals (if applicable) had been fully met by the Company and by the
            Executive, as applicable, for such year, multiplied by a


                                     - 7 -

<PAGE>

            fraction the numerator of which is the number of days in such fiscal
            year through the Termination Date and the denominator of which is
            365 (a "Pro Rata Bonus"); and

                  (iii) With respect to the Tier 1, Tier 2 and Tier 3 Shares,
            forfeiture restrictions will lapse on the Termination Date and such
            shares shall become Non-Forfeitable Shares (as defined in the RSA)
            on such date.

            (c) If the Executive's employment with the Company shall be
terminated (1) by the Company other than for Cause, death, Disability or as
                              ----- ----
provided in Section 8(d), or (2) by the Executive for Good Reason, then the
                    ----  --                                       ----
Executive shall be entitled to the benefits provided below:

                  (i) the Company shall pay the Executive all Accrued
            Compensation and a Pro Rata Bonus (which Pro Rata Bonus shall be
            calculated based upon actual performance by the Company during such
            fiscal year rather than assuming all applicable performance targets
                        ------ ----
            and goals had been fully met by the Company);

                  (ii) the Company shall pay the Executive as severance pay and
            in lieu of any further salary for periods subsequent to the
            Termination Date, in twenty-four (24) equal monthly installments on
            the first business day of each month, an amount in cash equal to
            1/24th of two (2) times the sum of (A) the Executive's Base Salary
            at the highest rate in effect at any time within the current or the
            prior three (3) fiscal year periods preceding the Termination Date
            (or if the Executive's employment is terminated after a Change in
            Control, the Executive's Base Salary immediately prior to the Change
            in Control, if greater) and (B) the "Bonus Amount" (as defined
                                    ---          ------------
            below). The term "Bonus Amount" shall mean the total amount of all
            cash bonus or incentive compensation received or earned by the
            Executive (which, for this purpose, shall not include the restricted
            stock under the RSA) during the three (3) fiscal year periods
            immediately preceding the Termination Date divided by three (3);
                                                       ------- --

                  (iii) for twenty-four (24) months following the Termination
            Date, the Company shall at its expense continue on behalf of the
            Executive and his dependents and beneficiaries the life insurance,
            disability, medical, dental and hospitalization benefits which were
            being provided to the Executive at the time Notice of Termination is
            given (or, if the Executive is terminated following a Change in
            Control, the benefits provided to the Executive at the time of the
            Change in Control, if greater). The benefits provided in this
            Section 8(c)(iii) shall be no less favorable to the Executive, in
                    ---------
            terms of amounts and deductibles and costs to him, than the coverage
            provided the Executive under the plans providing such benefits at
            the time Notice of Termination is given (or, if the Executive is
            terminated following a Change in Control, at the time of the Change
            in Control if more favorable to the Executive). The Company's
            obligation hereunder with respect to the foregoing benefits shall be
            limited to the extent that the Executive obtains any such benefits
            pursuant to a subsequent employer's benefit plans, in which case the
            Company may reduce the coverage of any benefits it is required to


                                     - 8 -

<PAGE>

            provide the Executive hereunder as long as the aggregate coverage of
            the combined benefit plans is no less favorable to the Executive, in
            terms of amounts and deductibles and costs to him, than the coverage
            required to be provided hereunder. This Subsection (iii) shall not
            be interpreted so as to limit any benefits to which the Executive or
            his dependents may be entitled under any of the Company's employee
            benefit plans, programs or practices following the Executive's
            termination of employment, including without limitation, retiree
            medical and life insurance benefits;

                  (iv) With respect to the Tier 1, Tier 2 and Tier 3 Shares, the
            forfeiture restrictions will lapse on the Termination Date and such
                                                                       ---
            shares shall become Non-Forfeitable Shares (as defined in the RSA)
            on such date.

            (d) If the Executive's employment with the Company shall be
terminated by the Company (other than for Cause, death or Disability) by an
                           ----- ----
affirmative vote of more than 50% of the number of directors constituting the
entire Board, then the Executive shall be entitled to the benefits provided
              ----
below:

                  (i) the Company shall pay the Executive all Accrued
            Compensation and a Pro Rata Bonus (which Pro Rata Bonus shall be
            calculated based upon actual performance by the Company during such
            fiscal year rather than assuming all applicable performance targets
                        ------ ----
            and goals had been fully met by the Company);

                  (ii) the Company shall pay the Executive as severance pay and
            in lieu of any further salary for periods subsequent to the
            Termination Date, in twenty-four (24) equal monthly installments on
            the first business day of each month, an amount in cash equal to
            1/24th of two (2) times the sum of (A) the Executive's Base Salary
            at the highest rate in effect at any time within the current or the
            prior three (3) fiscal year periods preceding the Termination Date
            (or if the Executive's employment is terminated after a Change in
            Control, the Executive's Base Salary immediately prior to the Change
            in Control, if greater) and (B) the "Bonus Amount" (as defined
                                    ---          ------------
            Section 8(c)(ii));
                    --------

                  (iii) for twenty-four (24) months following the Termination
            Date, the Company shall at its expense continue on behalf of the
            Executive and his dependents and beneficiaries the life insurance,
            disability, medical, dental and hospitalization benefits which were
            being provided to the Executive at the time Notice of Termination is
            given (or, if the Executive is terminated following a Change in
            Control, the benefits provided to the Executive at the time of the
            Change in Control, if greater). The benefits provided in this
            Section 8(d)(iii) shall be no less favorable to the Executive, in
                    ---------
            terms of amounts and deductibles and costs to him, than the coverage
            provided the Executive under the plans providing such benefits at
            the time Notice of Termination is given (or, if the Executive is
            terminated following a Change in Control, at the time of the Change
            in Control if more favorable to the Executive). The Company's
            obligation hereunder with respect to the foregoing benefits shall be
            limited to the extent that the Executive obtains any such benefits
            pursuant to a subsequent employer's benefit plans, in

                                     - 9 -

<PAGE>

            which case the Company may reduce the coverage of any benefits it is
            required to provide the Executive hereunder as long as the aggregate
            coverage of the combined benefit plans is no less favorable to the
            Executive, in terms of amounts and deductibles and costs to him,
            than the coverage required to be provided hereunder. This Subsection
            (iii) shall not be interpreted so as to limit any benefits to which
            the Executive or his dependents may be entitled under any of the
            Company's employee benefit plans, programs or practices following
            the Executive's termination of employment, including without
            limitation, retiree medical and life insurance benefits;

                  (iv) On the Termination Date: (a) with respect to the
            Executive's Tier 1 Shares that are still Forfeitable Shares, the
            forfeiture restrictions will lapse with respect to all such Tier 1
            Shares, and (b) with respect to the Executive's Tier 2 Shares that
                    ---
            are still Forfeitable Shares, the forfeiture restrictions will lapse
            with respect to all such Tier 2 Shares that are otherwise scheduled
            to become Non-Forfeitable during the current quarter and during the
            immediately succeeding quarter, and (c) with respect to the
                                            ---
            Executive's Tier 3 Shares, the forfeiture restrictions will lapse
            with respect to all Tier 3 Shares for which a Performance Based
            Criteria Test (as defined in the RSA) has been satisfied on or prior
            to the Termination Date. On the Termination Date, all such shares as
            to which the forfeiture restrictions lapse shall become
            Non-Forfeitable Shares (as defined in the RSA).

            (e) The amounts provided for in Sections 8(a), 8(b)(i), (ii),
                                                     ----  -------  ----
8(c)(i) (with respect to Accrued Compensation only) and 8(d)(i) (with respect to
-------                                             ----------
Accrued Compensation only) shall be paid within ten (10) business days after the
Executive's Termination Date, and the amounts provided for in Sections 8(c)(i)
                              ---                                      -------
and 8(d)(i) with respect to Pro Rata Bonus shall be paid to the Executive in
    -------
accordance with the Company's customary timing for paying such bonuses or
incentive awards.

            (f) The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any subsequent employment
other than as provided under Section 8(c)(iii) and 8(d)(iii).
                                     ---------     ---------

            (g) Executive's entitlement to any other compensation or benefits
shall be determined in accordance with the Company's employee benefit plans and
other applicable programs and practices then in effect.

            (h) Vesting and Severance Rights Upon a Change of Control. The RSA
                -----------------------------------------------------
will govern the applicability of forfeiture restrictions relating to Tier 1,
Tier 2 and Tier 3 Shares upon a Change in Control. Upon a Change of Control, if
the Executive enters into a new or amended employment agreement with the
acquiring or surviving entity, then such new or amended agreement shall
                               ----
supercede this Agreement and govern the extent to which the Executive is
thereafter entitled to severance. Alternatively, upon a Change of Control, if
the Executive does not enter into a new or amended employment agreement with the
acquiring or surviving entity and


                                     - 10 -

<PAGE>

the Term is not extended pursuant to Section 1(b), then the Term of this
                                             ---   ----
Agreement shall terminate and the Executive shall thereupon be entitled to the
severance set forth in Section 8(c)(i), (ii) and (iii).
                               ----------------------

      9. Employee Covenants.
         ------------------

            (a) Confidentiality. The Executive shall not, without the prior
                ---------------
express written consent of the Company, directly or indirectly, use for any
purpose any Confidential Information (as defined below) in any way, or divulge,
disclose or make available or accessible any Confidential Information to any
person, firm, partnership, corporation, trust or any other entity or third party
unless (i) such disclosure is reasonably necessary or appropriate in connection
------
with the performance by the Executive of his duties as an executive of the
Company or (ii) such disclosure is required by applicable law or (iii) the
        --                                                    --
Executive is requested or required by a judicial or arbitration body or
governmental agency (by oral question, interrogatories, requests for information
or documents, subpoena, civil investigative demand or similar process) to
disclose any such information, in which case the Executive will (A) promptly
notify the Company of such request or requirement, so that the Company may seek
an appropriate protective order and (B) cooperate with the Company, at its
                                ---
expense, in seeking such an order. "Confidential Information" means all
                                    ------------------------
information respecting the business and activities of the Company and any of its
Subsidiaries, including, without limitation, respecting the clients, customers,
suppliers, employees, consultants, prospects, computer or other files, projects,
products, computer disks or other media, computer hardware or computer software
programs, underwriting, lending or investment standards, marketing plans,
financial information, methodologies, know-how, processes, trade secrets,
policies, practices, projections, forecasts, formats, operational methods,
product development techniques, research, strategies or information agreed to
with third-parties to be kept confidential by the Company and any of its
Subsidiaries. Notwithstanding the immediately preceding sentence, Confidential
Information shall not include any information that is, or becomes, a part of the
public domain or generally available to the public (unless such availability
occurs as a result of any breach by the Executive of this Agreement) or any
business knowledge and experience of the type usually acquired by persons
engaged in positions similar to the Executive's position with the Company, to
the extent such knowledge and experience is non-Company specific and not
proprietary to the Company or any of its Subsidiaries.

            (b) Non-Competition. During the period commencing on the date hereof
                ---------------
and ending two (2) years after the Termination Date (the "Applicable Period"),
                                                          -----------------
and provided the Company complies with all of its obligations set forth in
Section 8 hereof, the Executive shall not, without the prior written consent of
the Company, engage in any business or activity, whether as an employee,
consultant, partner, principal, agent, representative, stockholder (other than
as the holder of an interest of two percent (2%) or less in the equity of a
publicly traded corporation) or other individual, corporate or representative
capacity, or render any services or provide any advice or assistance to any
business, person or entity, if such business, activity, person or entity
competes anywhere in the United States with the Company or any of its
Subsidiaries in respect of (i) any then current product, service or business of
the Company or any of its Subsidiaries on the Termination Date or (ii) any
                                                               --
product, service or business as to which the Company or any of its Subsidiaries
has begun preparing to develop or offer as of the Termination Date. Nothing
herein shall be construed to prevent the Executive from being employed by any
person or entity in a line of business or activity that does not compete with
(i) products, services or businesses offered or


                                     - 11 -

<PAGE>

conducted by the Company or its Subsidiaries as of the Termination Date, or (ii)
products, services or business which the Company or any of its Subsidiaries has
begun preparing to develop or offer as of the Termination Date. A product,
service or business shall not be deemed to compete with the Company or its
Subsidiaries if it is offered in any industry or market sector in which the
Company and its Subsidiaries do not compete nor have begun preparing to compete
as of the Termination Date. If termination of employment is due to the
expiration of the Term, this Section 9(b) shall not be applicable.
                                     ----

            (c) Non-Solicitation. During the period commencing on the date
                ----------------
hereof and ending two (2) years after the Termination Date (the
"Non-Solicitation Period"), the Executive shall not divert, solicit or lure away
 -----------------------
the patronage of (1) any client or business of the Company or any of its
Subsidiaries as of or within the two (2) year period prior to the Termination
Date or (2) any prospective client or business of the Company or any of its
     --
Subsidiaries. As used herein, "prospective client" means any client that the
Company or any of its Subsidiaries (i) has solicited within the two (2) year
period prior to the Termination Date, (ii) is soliciting as of the Termination
Date, or (iii) as of the Termination Date, is maintained in the Company's data
      --
base of prospective clients. Nothing herein shall be construed to prevent the
Executive from soliciting clients or prospective clients of the Company or its
Subsidiaries with respect to products, services or businesses which the Company
and its Subsidiaries neither offer or conduct, nor have begun preparing to
develop or offer, as of the Termination Date. The Executive shall not, during
the Non-Solicitation Period, directly or indirectly, recruit, hire or assist
others in recruiting or hiring, or otherwise solicit for employment, any
employees of the Company or any of its Subsidiaries. The provisions of this
Section 9(c) shall not be deemed to limit in any way the provisions of any other
        ----
Section of this Agreement.

            (d) Interpretation. The parties hereto recognize that the laws and
                --------------
public policies of the various states of the United States may differ as to the
validity and enforceability of covenants similar to those set forth in Sections
9(b) and (c). It is the intention of the parties that the potential restrictions
------------
on the Executive's activities imposed by Sections 9(b) and (c) be reasonable in
                                                  ------------
both duration and geographic scope and in all other respects, it being
understood that the business conducted by the Company and its Subsidiaries is
nationwide in scope. It is also the intention of the parties that the provisions
of Sections 9(b) and (c) be enforced to the fullest extent permissible under the
            ------------
laws and policies of each jurisdiction in which enforcement may be sought, and
that in the event that any provision of Sections 9(b) and (c) shall, for any
                                                 ------------
reason, be held invalid or unenforceable in any respect, it shall not
invalidate, render unenforceable or otherwise affect any other provision hereof,
and such invalid or unenforceable provision shall be construed by limiting it so
as to be valid and enforceable to the fullest extent permissible under
applicable law. If applicable law does not permit an invalid or unenforceable
provision to be so construed, then the invalid or unenforceable provision shall
be stricken and the remaining portions of Sections 9(b) and (c) shall be
                                                   ------------
enforced to the fullest extent permitted by law. In addition, if any provision
of Sections 9(b) and (c) shall be determined to be invalid or unenforceable,
            ------------
such invalidity or unenforceability shall be deemed to apply only with respect
to the operation of such provision in the particular jurisdiction in which such
determination is made and not with respect to any other provision or
jurisdiction.

            (e) Remedies. The Executive agrees that any breach of the terms of
                --------
this Section 9 would result in irreparable injury and damage to the Company for
             -
which the Company


                                     - 12 -

<PAGE>

would have no adequate remedy at law; the Executive therefore also agrees that
in the event of said breach or any threat of breach, the Company shall be
entitled to an immediate injunction and restraining order from a court of
competent jurisdiction to prevent such breach and/or threatened breach and/or
continued breach by the Executive and/or any and all persons and/or entities
acting for and/or with the Executive, without having to prove damages. The
availability of injunctive relief shall be in addition to any other remedies to
which the Company may be entitled at law or in equity but remedies other than
injunctive relief may only be pursued in an arbitration brought in accordance
with Section 13 of this Agreement. The terms of this paragraph shall not prevent
the Company from pursuing in an arbitration any other available remedies for any
breach or threatened breach of this Section 9, including but not limited to the
recovery of damages from the Executive.

            The provisions of this Section 9 shall survive any termination of
this Agreement, and the existence of any claim or cause of action by the
Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements of this Section 9; provided, however, that this
                                             -  --------  -------
paragraph shall not, in and of itself, preclude the Executive from defending
himself against the enforceability of the covenants and agreements of this
Section 9.
        -

            (f) Return of Materials. Upon the request of the Company and, in any
                -------------------
event, upon termination of employment, the Executive will leave with the Company
all memoranda, notes, records, manuals, or other documents and media (in
whatever form maintained, whether documentary, computer storage or otherwise)
pertaining to the Company's business, including all copies thereof; other than
such documents and items that are personal to the employee (e.g., pay stubs,
personal tax documentation and other compensation or employment related
materials).

            (g) Ownership of Executive Developments. All copyrights, patents,
                -----------------------------------
trade secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed or
created by the Executive during the course of performing work for the Company,
or its clients, including, but not limited to, software programs, manuals,
publications and reports (collectively, the "Work Product") belongs and shall
                                             ------------
belong exclusively to the Company and shall, to the extent possible, be
considered a work made by the Executive for hire for the Company within the
meaning of Title 17 of the United States Code. To the extent the Work Product
may not be considered work made by the Executive for hire for the Company, the
Executive agrees to assign, and automatically assign at the time of creation of
the Work Product, without any requirement of further consideration, any right,
title, or interest he may have in such Work Product. Upon request of the
Company, the Executive shall take such further actions, including execution and
delivery of instruments of conveyance, as may be appropriate to give full and
proper effect to such assignment. Notwithstanding anything else in this
Agreement, any ideas, concepts, techniques, inventions, processes or works of
authorship developed or created by the Executive on the Executive's own time,
and which have no application in the business of the Company ("Executive Work
Product"), shall not be considered Work Product, and the Company shall have no
interest in any such Executive Work Product.

            (h) Consequences of Challenging Enforceability of Non-Compete. If at
                ---------------------------------------------------------
any time the Executive or his subsequent employer successfully challenges the
enforceability of the Non-compete and/or Non-solicitation provisions of Sections
9(b) and 9(c), then (1) all references
----    -----  ----


                                     - 13 -

<PAGE>

to 2 years and/or 24 months in Sections 8(c)(ii), 8(c)(iii), 8(d)(ii),
                                        --------  ---------  --------
8(d)(iii), 9(b) and 9(c) shall instead be references to the time period that
---------  ----     ----
such non-compete and non-solicitation restrictions actually remain in effect,
and (2) the amount of Base Salary and Bonus Amount that the Executive may
---
receive as severance under Sections 8(c)(ii) and/or 8(d)(ii) shall automatically
                                    --------        --------
be reduced proportionately.

      10. Treatment of Section 280G.
          -------------------------

            (a) Tax Payment. In the event it shall be determined that any
                -----------
payment (other than the payment provided for in this Section 10(a)) or
                                                             -----
distribution of any type to or for the benefit of the Executive, by the Company,
any Affiliate of the Company, any Person who acquires ownership or effective
control of the Company or ownership of a substantial portion of the Company's
assets (within the meaning of Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations thereunder) or any Affiliate of
such Person, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (the "Total Payments"), is or will be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive a payment in an amount equal to
the Excise Tax imposed upon the Total Payments; provided, however that the Total
                                                --------  -------
Payments shall be reduced (but not below zero) if and to the extent that a
reduction in the Total Payments would result in the Executive retaining a larger
amount, on an after-tax basis (taking into account federal, state and local
income taxes and the Excise Tax) than if the Executive received the entire
amount of such Total Payments and the amount equal to the Excise Tax. Unless the
Executive shall have given prior written notice specifying a different order to
the Company to effectuate the foregoing, the Company shall reduce or eliminate
the Total Payments by first reducing or eliminating the portion of the Total
Payments which are not payable in cash and then by reducing or eliminating cash
payments, in each case in reverse order beginning with payments or benefits
which are to be paid the farthest in time from the Determination (as hereinafter
defined). Any notice given by the Executive pursuant to the preceding sentence
shall take precedence over the provisions of any other plan, arrangement or
agreement governing the Executive's rights and entitlements to any benefits or
compensation.

            (b) Determination By Accountant. All mathematical determinations,
                ---------------------------
and all determinations as to whether any of the Total Payments are "parachute
payments" (within the meaning of Section 280G of the Code), that are required to
be made under this Section 10(a), including determinations as to whether a
                           -----
Excise Tax is required, the amount of such Excise Tax and amounts relevant to
the last sentence of this Section 10(b) or whether the Total Payment should be
                                  -----
reduced, shall be made by an independent accounting firm selected by the
Executive from among the five (5) largest accounting firms in the United States
(the "Accounting Firm"), which shall provide its determination (the
"Determination"), together with detailed supporting calculations regarding the
amount of any Excise Tax and any other relevant matter, both to the Company and
the Executive by no later than ten (10) days following the Termination Date, if
applicable, or such earlier time as is requested by the Company or the Executive
(if the Executive reasonably believes that any of the Total Payments may be
subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall furnish the Executive and the Company with
an opinion reasonably acceptable to the Executive and the Company that no Excise
Tax is payable (including the reasons therefor) and that the Executive has


                                     - 14 -

<PAGE>

substantial authority not to report any Excise Tax on his federal income tax
return. If an Excise Tax is determined to be payable, it shall be paid to the
Executive within ten (10) days after the Determination (and all accompanying
calculations and other material supporting the Determination) is delivered to
the Company by the Accounting Firm. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive, absent manifest error. As a
result of uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Excise Tax payments not made by the Company should have been made
("Underpayment"), or that Excise Tax payments will have been made by the Company
which should not have been made ("Overpayments"). In either such event, the
Accounting Firm shall determine the amount of the Underpayment or Overpayment
that has occurred. In the case of an Underpayment, the amount of such
Underpayment (together with any interest and penalties payable by the Executive
as a result of such Underpayment) shall be promptly paid by the Company to or
for the benefit of the Executive. In the case of an Overpayment, the Executive
shall, at the direction and expense of the Company, take such steps as are
reasonably necessary (including, if reasonable, the filing of returns and claims
for refund), and otherwise reasonably cooperate with the Company to correct such
Overpayment, provided, however, that (1) the Executive shall not in any event be
             --------  -------
obligated to return to the Company an amount greater than the net after-tax
portion of the Overpayment that he has retained or has recovered as a refund
from the applicable taxing authorities and (2) this provision shall be
                                       ---
interpreted in a manner consistent with the intent of Section 10(a), it being
                                                              -----
understood that the correction of an Overpayment may result in the Executive
repaying to the Company an amount which is less than the Overpayment. The fees
and expenses of the Accounting Firm shall be paid by the Company.

      11. Successors and Assigns.
          ----------------------

            (a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns. The term "Company" as used
                                                              -------
herein shall include such successors and assigns. The term "successors and
assigns" as used herein shall mean a corporation or other entity acquiring all
or substantially all the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.

            (b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.

      12. Fees and Expenses. The Company shall pay all legal fees and related
          -----------------
expenses (including the costs of experts, evidence and counsel) in excess of
$50,000 incurred by the Executive as they become due as a result of (i) the
Executive's termination of employment (including all such fees and expenses, if
any, incurred in contesting or disputing any such termination of employment),
(ii) the Executive's hearing before the Board as contemplated in Section 7(b) of
                                                                         ----
this Agreement, or (iii) the Executive's seeking to obtain or enforce any right
                --
or benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company under which the Executive is or may be entitled to
receive benefits; provided, however, that if the Executive is successful in
                  --------  -------
enforcing any such rights or benefits provided under this


                                     - 15 -

<PAGE>

Agreement, then the Company shall reimburse the Executive for the first $50,000
           ----
of such fees and expenses incurred by the Executive.

      13. Arbitration. Except as set forth in Section 9(e) hereof, any and all
          -----------                                 ----
disputes, claims and controversies between the Company or any of its Affiliates
and the Executive arising out of or relating to this Agreement, or the breach
thereof, or otherwise arising out of or relating to the Executive's employment
or the termination thereof shall be resolved by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration shall take place in the Washington, D.C.
metropolitan area. The arbitrator shall have no authority to award punitive
damages. The award of the arbitrator shall be final and judgment thereon may be
entered in any court having jurisdiction. The parties shall share the costs of
the arbitration equally, unless otherwise ordered by the arbitrator. Judgment
upon the arbitration award may be entered in any federal or state court having
jurisdiction.

      14. Notice. For the purposes of this Agreement, notices and all other
          ------
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.

      15. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
          -------------------------
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
subsidiaries and for which the Executive may qualify, nor shall anything herein
limit or reduce such rights as the Executive may have under any other agreements
with the Company or any of its subsidiaries. Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan or
program of the Company or any of its subsidiaries shall be payable in accordance
with such plan or program, except as explicitly modified by this Agreement.

      16. Miscellaneous. No provision of this Agreement may be modified, waived
          -------------
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.

      17. Governing Law. This Agreement shall be governed by and construed and
          -------------
enforced in accordance with the laws of the Commonwealth of Virginia without
giving effect to the conflict of law principles thereof.


                                     - 16 -

<PAGE>

      18. Severability. The provisions of this Agreement shall be deemed
          ------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

      19. Entire Agreement. This Agreement constitutes the entire agreement
          ----------------
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.

                      [Balance of Page Intentionally Blank]


                                     - 17 -

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.

                                           MCG Capital Corporation

                                            /s/ Samuel G. Rubenstein
                                           ---------------------------------
                                           Name: Samuel G. Rubenstein
                                           Title: Executive Vice President
                                                  and General Counsel

                                           Executive: Bryan J. Mitchell

                                           /s/ Bryan J. Mitchell
                                           ---------------------------------


                                     - 18 -