**Exhibit 10.63**

 

**2006 EMPLOYEE RESTRICTED STOCK PLAN**

 

**1. PURPOSE OF THE PLAN**

 

The purpose of this MCG Capital Corporation 2006 Employee Restricted Stock Plan (this “Plan”) is to advance the interests of MCG CapitalCorporation (the “Company”) and its consolidated subsidiaries by providing to employees of the Company and its consolidated subsidiaries additional incentives, to the extent permitted by law, to exert their best efforts on behalf of theCompany, to increase their proprietary interest in the success of the Company, to reward outstanding performance and to provide a means to attract and retain persons of outstanding ability to the service of the Company. It is recognized that theCompany’s efforts to attract or retain these individuals will be facilitated with this additional form of compensation. 

 

**2. ADMINISTRATION**

 

This Plan shall be administered by the Compensation Committee (the “Committee”) of the Company’s Board of Directors (“Board”),which Committee is comprised solely of directors who are not interested persons of the Company within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “Act”). The Committee shall interpret thisPlan and, to the extent and in the manner contemplated herein, shall exercise the discretion reserved to it hereunder. The Committee from time to time may prescribe, amend and rescind rules and regulations relating to this Plan and may make andapprove all other determinations necessary for its administration. The decision of the Committee on any interpretation of this Plan or administration hereof, if in compliance with the provisions of the Act and regulations promulgated thereunder,shall be final and binding with respect to the Company. 

 

**3. SHARES SUBJECTTO THE PLAN**

 

The shares subject to this Plan shall beshares of the Company’s common stock, par value $0.01 per share (“Shares”). Subject to the provisions hereof concerning adjustment, the total number of shares that may be awarded as restricted shares under this Plan shall not exceed3,500,000 Shares. Any Shares that are granted pursuant to an award of restricted stock under this Plan but that are subsequently forfeited pursuant to the terms of the Plan or an award agreement shall again be available for granting under this Plan.Shares may be made available under this Plan from authorized, un-issued, forfeited or reacquired stock or partly from each. 

 

**4. PARTICIPANTS**

 

(A) Employees. The Committee shall determine and designate from time to time those employees of the Company and its consolidated subsidiaries who shall beeligible to participate in this Plan (the “Participants”). The Committee shall also determine the number of Shares to be offered from time to time to the Participants. In making these determinations, the Committee may take into account,among other things, the past service of such Participants on behalf of the Company and its consolidated subsidiaries, the present and potential contributions of such Participants to the success of the Company and its consolidated subsidiaries andsuch other factors as the Committee from time to time shall deem relevant in connection with accomplishing the purposes of this Plan. 

 

(B) Award Agreements. All Shares of restricted stock granted to Participants under the Plan will be governed by an agreement. The agreement documentingthe award of any restricted stock granted pursuant to this Plan shall contain such terms and conditions as the Committee from time to time shall deem advisable, including but not limited to the lapsing of forfeiture restrictions, only in suchinstallments as the Committee may determine or otherwise prescribe. Agreements governing awards made to different Participants or at different times need not contain similar provisions. In the case of any discrepancy between the terms of the Planand the terms of any award agreement, the Plan provisions shall control. 

 

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**5. RESTRICTED STOCK**

 

Each agreement governing an award of restricted stock shall state the number of Shares subject to the award, the terms and conditions pursuant to whichsuch Participant shall acquire a non-forfeitable right to the Shares awarded as restricted stock through the lapsing of forfeiture provisions and the timing of the lapsing of forfeiture provisions, all as from time to time determined or otherwiseprescribed by the Committee. Shares awarded as restricted stock to some or all of the Participants, as determined from time to time by the Committee, may be subject to forfeiture provisions relating to continued employment during stated periods oftime and/or may include for key employees and other Participants forfeiture provisions relating to the achievement of one or more objective performance goals based upon attainment of specified levels of any one or more of the following businesscriteria: dividend coverage, operating income, growth in operating income, capital gains, asset quality, levels of non-accrual or other challenged investments, and/or investment charge-offs, and/or may also include any one or more of the followingadditional business criteria: asset growth, revenue, revenue growth, operating efficiency, division, group or corporate financial goals, total shareholder return, attainment of strategic and operational initiatives, appreciation in and/ormaintenance of the price of the Shares or any other publicly-traded securities of the Company, and/or comparisons with various stock market indices. The Committee shall have the power to impose such other conditions or restrictions on Awards subjectto this Section as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code. 

 

**6. LIMITATIONS ON RESTRICTED STOCK AWARDS**

 

Grants of restricted stock awards shall be subject to the followinglimitations: 

 

(A) No one Participant shall be granted awardsof restricted stock relating to more than 25% of the Shares available for issuance under this Plan. 

 

(B) In any fiscal year, no Participant may be granted awards under this Plan related to more than 500,000 Shares. 

 

(C) The total number of shares that may be outstanding as restricted sharesunder all of the Company’s compensation plans shall not exceed ten (10) percent of the total number of Shares authorized and outstanding at any time. 

 

(D) The amount of voting securities that would result from the exercise of all of the Company’s outstanding warrants, options, and rights,together with any restricted stock issued pursuant to this Plan and any other compensation plan of the Company, at the time of issuance shall not exceed 25% of the outstanding voting securities of the Company, *provided, however,* that if theamount of voting securities that would result from the exercise of all of the Company’s outstanding warrants, options, and rights issued to the Company’s directors, officers, and employees, together with any restricted stock issuedpursuant to this Plan and any other compensation plan of the Company, would exceed 15% of the outstanding voting securities of the Company, then the total amount of voting securities that would result from the exercise of all outstanding warrants,options, and rights, together with any restricted stock issued pursuant to this Plan, at the time of issuance shall not exceed 20% of the outstanding voting securities. 

 

(E) Shares of restricted stock will not be granted under this Plan at any time when the Shares are trading at a price belownet asset value. 

 

**7. TRANSFERABILITY OF RESTRICTED STOCK**

 

While subject to forfeiture provisions, Shares of restricted stock grantedunder this Plan shall not be transferable other than to the spouse or lineal descendants (including adopted children) of the Participant, any trust for the benefit of the Participant or the benefit of the spouse or lineal descendants (includingadopted children) of the Participant, or the guardian or conservator of the Participant (“Permitted Transferees”). 

 

**8. TERMINATION OF RESTRICTED STOCK AWARDS**

 

A Participant’s rights to Shares awarded as restricted stock under this Plan shall, under all circumstances, be set forth in the agreement governingthe award of such Shares of restricted stock. 

 

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**9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN**

 

Subject to any required action by the shareholders of the Company and the provisions of applicable corporate law, the numberof Shares that has been authorized or reserved for issuance, grant or award under this Plan and the number of Shares covered by any applicable vesting or forfeiture schedule hereunder, shall be proportionately adjusted for (a) a division,combination or reclassification of any of the Shares or (b) a dividend payable in Shares. 

 

**10. MISCELLANEOUS PROVISIONS**

 

(A) The Board will review the Plan at least annually. In addition, the Committee will review periodically the potential impact that issuances of awards under this Plan could have on the Company’s earnings and net asset value per Share,such review to take place prior to any decisions to grant awards under this Plan, but in no event less frequently than annually. 

 

(B) The Committee is authorized to take appropriate steps to ensure that neither the grant of nor the lapsing of the forfeiture restrictions on awardsunder this Plan would have an effect contrary to the interests of the Company’s stockholders. This authority includes the authority to prevent or limit the granting of additional awards under this Plan. 

 

(C) The granting of any award under the Plan shall not impose upon theCompany any obligation to employ or continue to employ any Participant, and the right of the Company and its subsidiaries to terminate the employment of any Participant or other employee shall not be diminished or affected by reason of the fact thatan award has been made under the Plan to such Participant. 

 

(D)All awards under this Plan shall be made within ten years from the earlier of the date of adoption of this Plan (or any amendment thereto requiring shareholder approval pursuant to the Code) or the date this Plan (or any amendment thereto requiringshareholder approval pursuant to the Code) is approved by the stockholders of the Company. 

 

(E) A leave of absence granted to an employee does not constitute an interruption in continuous employment for purposes of this Plan as long as the leave of absence does not extend beyond 12 complete calendar months.

 

(F) Any notices given in writing shall be deemed given ifdelivered in person or by certified mail; if given to the Company addressed to its Corporate Secretary at MCG Capital Corporation, 1100 Wilson Boulevard, Suite 3000, Arlington, VA 22209. 

 

(E) This Plan and all actions taken by those acting under this Plan shall be governed by the substantive laws of Delawarewithout regard to any rules regarding conflict-of-law or choice-of-law. 

 

(F) All costs and expenses incurred in the operation and administration of this Plan shall be borne by the Company. 

 

**11. AMENDMENT AND TERMINATION**

 

The Board may modify, revise or terminate this Plan at any time and from time to time, subject to applicable requirements in (a) the Company’sarticles of incorporation or by-laws and (b) applicable law and orders. The Board shall seek stockholder approval of any action modifying a provision of the Plan where it is determined that such stockholder approval is approprite under theprovisions of (a) applicable law or orders, or (b) the Company’s articles of incorporation or by-laws. This Plan shall terminate when all Shares reserved for issuance 

 

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hereunder have been issued and the forfeiture restrictions on all restricted stock awards have lapsed, or by action of the Board pursuant to this paragraph,whichever shall first occur. 

 

**12. EFFECTIVE DATE OF THE PLAN**

 

The Plan shall become effective upon the latest to occur of(1) adoption by the Board, and (2) approval of this Plan by the shareholders of the Company. 

 

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