NOTE PURCHASE AGREEMENT

Execution Copy

 

 

 

 

 

 

 

 

MCG Capital Corporation

$50,000,000 6.73% Senior Notes, Series 2005-A, due October 11, 2010

 

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Note Purchase Agreement

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Dated as of October 11, 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

Table of Contents

(Not a part of the Agreement)

Section                                      Heading                                                                         Page

Section 1.          Authorization of Notes   1

Section 2.          Sale and Purchase of Notes       1

Section 3.          Closing 1

Section 4.          Conditions to Closing     2

Section 4.1        Representations and Warranties             2

Section 4.2        Performance; No Default           2

Section 4.3        Compliance Certificates             2

Section 4.4        Opinions of Counsel      2

Section 4.5        Purchase Permitted by Applicable Law, Etc       3

Section 4.6        Sale of Other Notes       3

Section 4.7        Payment of Special Counsel Fees           3

Section 4.8        Private Rating    3

Section 4.9        Private Placement Number         3

Section 4.10      Credit and Collection Policy; Investment Ratings Policy    3

Section 4.11      Changes in Corporate Structure             3

Section 4.12      Funding Instructions       3

Section 4.13      Proceedings and Documents      4

Section 5.          Representations and Warranties of the Company            4

Section 5.1        Organization; Power and Authority         4

Section 5.2        Authorization, Etc          4

Section 5.3        Disclosure         4

Section 5.4        Organization and Ownership of Shares of Subsidiaries; Affiliates    5

Section 5.5        Financial Statements; Material Liabilities             5

Section 5.6        Compliance with Laws, Other Instruments, Etc   6

Section 5.7        Governmental Authorizations, Etc           6

Section 5.8        Litigation; Observance of Agreements, Statutes and Orders 6

Section 5.9        Taxes    6

Section 5.10      Title to Property; Leases            7

Section 5.11      Licenses, Permits, Etc    7

Section 5.12      Compliance with ERISA            7

Section 5.13      Private Offering by the Company           8

Section 5.14      Use of Proceeds; Margin Regulations     9

Section 5.15      Existing Debt; Future Liens        9

Section 5.16      Foreign Assets Control Regulations, Etc             10

Section 5.17      Status under Certain Statutes     10

Section 5.18      Investment Company Act           10

Section 5.19      Environmental Matters   11

Section 5.20      Notes Rank Pari Passu 11

Section 5.21      Credit and Collection Policy; Investment Ratings Policy    11

Section 6.          Representations of the Purchasers          11

Section 6.1        Purchase for Investment             11

Section 6.2        Source of Funds            12

Section 6.3        Accredited Investor       13

Section 7.          Information as to Company        13

Section 7.1        Financial and Business Information         13

Section 7.2        Officer's Certificate        17

Section 7.3        Visitation           17

Section 7.4        Limitation on Disclosure Obligation        18

Section 8.          Payment and Prepayment of the Notes   18

Section 8.1        Maturity            18

Section 8.2        Optional Prepayments with Make-Whole Amount             18

Section 8.3        Allocation of Partial Prepayments           19

Section 8.4        Maturity; Surrender, Etc            19

Section 8.5        Purchase of Notes         19

Section 8.6        Make-Whole Amount    19

Section 9.          Affirmative Covenants    21

Section 9.1        Compliance with Law    21

Section 9.2        Insurance           21

Section 9.3        Maintenance of Properties         21

Section 9.4        Payment of Taxes and Claims    22

Section 9.5        Corporate Existence, Etc           22

Section 9.6        Books and Records       22

Section 9.7        Credit and Collection Policy; Investment Ratings Policy    22

Section 10.        Negative Covenants       23

Section 10.1      Minimum Consolidated Stockholders' Equity      23

Section 10.2      Limitation on Debt         23

Section 10.3      Interest Charges Coverage Ratio            23

Section 10.4      Available Assets Coverage Ratio           23

Section 10.5      Merger, Consolidation and Sale of Assets, Etc   23

Section 10.6      Line of Business             26

Section 10.7      Transactions with Affiliates         26

Section 10.8      Terrorism Sanctions Regulations             26

Section 11.        Events of Default           27

Section 12.        Remedies on Default, Etc           29

Section 12.1      Acceleration      29

Section 12.2      Other Remedies             29

Section 12.3      Rescission         29

Section 12.4      No Waivers or Election of Remedies, Expenses, Etc             30

Section 13.        Registration; Exchange; Substitution of Notes     30

Section 13.1      Registration of Notes     30

Section 13.2      Transfer and Exchange of Notes            30

Section 13.3      Replacement of Notes   31

Section 14.        Payments on Notes        31

Section 14.1      Place of Payment           31

Section 14.2      Home Office Payment    32

Section 14.3      Paying Agent     32

Section 15.        Expenses, Etc    32

Section 15.1      Transaction Expenses    32

Section 15.2      Survival             33

Section 16.        Survival of Representations and Warranties; Entire Agreement    33

Section 17.        Amendment and Waiver            33

Section 17.1      Requirements     33

Section 17.2      Solicitation of Holders of Notes             33

Section 17.3      Binding Effect, Etc         34

Section 17.4      Notes Held by Company, Etc    34

Section 18.        Notices             34

Section 19.        Reproduction of Documents       35

Section 20.        Confidential Information             35

Section 21.        Substitution of Purchaser            36

Section 22.        Miscellaneous    36

Section 22.1      Successors and Assigns             36

Section 22.2      Payments Due on Non-Business Days    37

Section 22.3      Accounting Terms; Modifications to GAAP        37

Section 22.4      Severability        38

Section 22.5      Construction, Etc           38

Section 22.6      Counterparts     38

Section 22.7      Governing Law 38

Section 22.8      Jurisdiction and Process; Waiver of Jury Trial     38

Attachments to Note Purchase Agreement:

Schedule A        --          Information Relating to Purchasers

Schedule B        --          Defined Terms

Schedule 5.3     --          Disclosure Documents

Schedule 5.4     --          Subsidiaries of the Company and Ownership of Subsidiary Stock

Schedule 5.5     --          Financial Statements

Schedule 5.15   --          Existing Debt

Exhibit 1            --          Form of 6.73% Senior Note, Series 2005-A, due October 11, 2010

Exhibit 4.4(a)     --          Form of Opinion of Special Counsel for the Company

Exhibit 4.4(b)    --          Form of Opinion of Special Counsel for the Purchasers

MCG Capital Corporation

1100 Wilson Boulevard, Suite 3000

Arlington, Virginia 22209

6.73% Senior Notes, Series 2005-A, due October 11, 2010

Dated as of October 11, 2005

To the Purchasers listed in
the attached Schedule A :

Ladies and Gentlemen:

MCG Capital Corporation, a Delaware corporation (the "Company" ), agrees with the purchasers whose names appear at the end hereof (each, a "Purchaser" and, collectively, the "Purchasers" ) as follows:

1. Authorization of Notes.

The Company will authorize the issue and sale of $50,000,000 aggregate principal amount of its 6.73% Senior Notes, Series 2005-A, due October 11, 2010 (the "Notes" ). As used herein, the term "Notes" shall mean all notes originally delivered pursuant to this Agreement and any such notes issued in substitution therefor pursuant to Section 13 of this Agreement. The Notes shall be substantially in the form set out in Exhibit 1 . Certain capitalized and other terms used in this Agreement are defined in Schedule B ; and references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.

2. Sale and Purchase of Notes.

Subject to the terms and conditions of this Agreement, the Company will issue and sell to each Purchaser and each Purchaser will purchase from the Company, at the Closing provided for in Section 3 , Notes in the principal amount specified opposite such Purchaser's name in Schedule A at the purchase price of 100% of the principal amount thereof. Each Purchaser's obligations hereunder are several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance of any obligation by any other Purchaser hereunder.

3. Closing.

The sale and purchase of the Notes to be purchased by each Purchaser shall occur at the offices of Schiff Hardin LLP, 623 Fifth Avenue, 28th Floor, New York, New York 10022, at 11:00 a.m., New York, New York time, at a closing (the "Closing" ) on October 11, 2005. At the Closing, the Company will deliver to each Purchaser the Notes to be purchased by such Purchaser in the form of a single Note (or such greater number of Notes in denominations of at least $1,000,000 as such Purchaser may request) dated the date of the Closing and registered in such Purchaser's name (or in the name of its nominee), against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company. If at the Closing the Company shall fail to tender such Notes to any Purchaser as provided above in this Section 3 , or any of the conditions specified in Section 4 shall not have been fulfilled to such Purchaser's satisfaction, such Purchaser shall, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of such failure or such nonfulfillment.

4. Conditions to Closing .

Each Purchaser's obligation to purchase and pay for the Notes to be sold to such Purchaser at the Closing is subject to the fulfillment to such Purchaser's satisfaction, prior to or at the Closing, of the following conditions:

4. 1. Representations and Warranties. The representations and warranties of the Company in this Agreement shall be correct when made and at the time of the Closing.
   2. Performance; No Default. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing, and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.14 ), no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Section 10 had such Section applied since such date.
   3. Compliance Certificates.
   4. 1. Officer's Certificate. The Company shall have delivered to such Purchaser an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1 , 4.2 , 4.8 and 4.11 have been fulfilled.
      2. Secretary's Certificate. The Company shall have delivered to such Purchaser a certificate of its Secretary or Assistant Secretary, dated the date of the Closing, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and this Agreement.
   5. Opinions of Counsel. Such Purchaser shall have received opinions in form and substance satisfactory to such Purchaser, dated the date of the Closing (a) from Dechert LLP, special counsel for the Company, covering the matters substantially as set forth in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as such Purchaser may reasonably request (and the Company hereby instructs its special counsel to deliver such opinion to such Purchaser) and (b) from Schiff Hardin LLP, special counsel to the Purchasers in connection with such transactions, substantially in the form set forth in Exhibit 4.4(b) and covering such other matters incident to such transactions as such Purchaser may reasonably request.
   6. Purchase Permitted by Applicable Law, Etc. On the date of the Closing, such Purchaser's purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which such Purchaser is subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject such Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation. As to matters set forth in clause (a) of this Section 4.5 , if requested by any Purchaser at least five Business Days prior to the Closing, such Purchaser shall have received an Officer's Certificate certifying as to such matters of fact as such Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is so permitted.
   7. Sale of Other Notes. Contemporaneously with the Closing, the Company shall sell to each other Purchaser and each other Purchaser shall purchase the Notes to be purchased by it at the Closing as specified in Schedule A .
   8. Payment of Special Counsel Fees. Without limiting the provisions of Section 15.1 , the Company shall have paid or made arrangements to pay on or before the Closing, the reasonable fees, charges and disbursements of special counsel to the Purchasers referred to in Section 4.4(b) to the extent reflected in a statement of such counsel containing a description of services in reasonable detail rendered to the Company at least one Business Day prior to the Closing.
   9. Private Rating . On the date of the Closing, the Notes shall be rated "BBB-" or higher by The Fitch Ratings Corporates Group.
   10. Private Placement Number. A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the SVO of the NAIC) shall have been obtained for the Notes.
   11. Credit and Collection Policy; Investment Ratings Policy. The Company shall have delivered to such Purchaser an Officer's Certificate attaching a true, correct and complete copy of the Credit and Collection Policy and the Investment Ratings Policy, in each case, as in effect on the date of the Closing.
   12. Changes in Corporate Structure. The Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation or succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5 .
   13. Funding Instructions. At least three Business Days prior to the date of the Closing, each Purchaser shall have received written instructions signed by a Responsible Officer on letterhead of the Company directing the manner of the payment of funds and setting forth (a) the name and address of the transferee bank, (b) such transferee bank's ABA number, (c) the account name and number into which the purchase price for the Notes is to be deposited and (d) the name and telephone number of the account representative responsible for verifying receipt of such funds.
   14. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to such Purchaser, and such Purchaser shall have received all such counterpart originals or certified or other copies of such documents as such Purchaser may reasonably request.
5. Representations and Warranties of the Company.

The Company represents and warrants to each Purchaser that, as of the date of this Agreement:

5. 1. Organization; Power and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Notes and to perform the provisions hereof and thereof.
   2. Authorization, Etc. This Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
   3. Disclosure. The Company, through its agent, HVB Capital Markets, Inc., has delivered to each Purchaser a copy of a Private Placement Memorandum, dated August 31, 2005 (the "Memorandum" ), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. This Agreement, the Memorandum, the documents, certificates or other writings listed in Schedule 5.3 and the financial statements of the Company listed in Schedule 5.5 , in each case, delivered to the Purchasers prior to September 22, 2005 by or on behalf of the Company (this Agreement, the Memorandum and such documents, certificates or other writings and such financial statements being referred to, collectively, as the "Disclosure Documents" ), taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Disclosure Documents, since December 31, 2004, there has been no change in the financial condition, operations, business, properties or prospects of the Company and its Subsidiaries except changes that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Disclosure Documents.
   4. Organization and Ownership of Shares of Subsidiaries; Affiliates.
   5. 1. Schedule 5.4 contains (except as noted therein) complete and correct lists (1) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (2) of the Company's Affiliates, other than Undisclosed Affiliates and Subsidiaries and (3) of the Company's directors and executive officers.
      2. All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4 ).
      3. Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.
      4. No Subsidiary is a party to, or otherwise subject to any legal, regulatory, contractual or other restriction (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law or similar statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary.
   6. Financial Statements; Material Liabilities. The Company has delivered, or has otherwise made available, to each Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5 . All of said financial statements (including, in each case, the related schedules and notes thereto) fairly present, in all material respects, the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). The Company and its Subsidiaries do not have any Material liabilities that are not disclosed on such financial statements or otherwise disclosed in the Disclosure Documents.
   7. Compliance with Laws, Other Instruments, Etc. The execution, delivery and performance by the Company of this Agreement and the Notes will not (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, corporate charter or by-laws or any material lease or other material agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary.
   8. Governmental Authorizations, Etc. Subject to the accuracy of the representations made by each Purchaser in Section 6.1 , no consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in favor of or by the Company in connection with the execution, delivery or performance by the Company of this Agreement or the Notes.
   9. Litigation; Observance of Agreements, Statutes and Orders.
   10. 1. There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened, against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
       2. There are no investigations pending or, to the knowledge of the Company, threatened, against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary by any Governmental Authority that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
       3. Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including, without limitation, Environmental Laws or the USA Patriot Act) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
   11. Taxes. The Company and its Subsidiaries have filed all income tax and other material tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not, individually or in the aggregate, Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of federal, state or other taxes for all fiscal periods are adequate in accordance with GAAP. The federal income tax liabilities of the Company and its Subsidiaries have been finally determined (whether by reason of completed audits or the statute of limitations having run) for all fiscal years up to and including the fiscal year ended December 31, 2000.
   12. Title to Property; Leases. The Company and its Subsidiaries have good and sufficient title to their respective owned properties that, individually or in the aggregate, are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except for such properties as have been sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that, individually or in the aggregate, are Material are valid and subsisting and are in full force and effect in all material respects.
   13. Licenses, Permits, Etc.
   14. 1. The Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, proprietary software, service marks, trademarks, trade names and domain names or rights thereto, that, individually or in the aggregate, are Material, without known conflict with the rights of others, except for conflicts that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
       2. To the best knowledge of the Company, no product of the Company or any of its Subsidiaries infringes in any material respect any license, permit, franchise, authorization, patent, copyright, proprietary software, service mark, trademark, trade name, domain name or other right owned by any other Person.
       3. To the best knowledge of the Company, there is no violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, proprietary software, service mark, trademark, trade name, domain name or other right owned or used by the Company or any of its Subsidiaries, except for violations that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
   15. Compliance with ERISA.
   16. 1. The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code or Section 4068 of ERISA, other than such liabilities or Liens as would not be, individually or in the aggregate, Material.
       2. The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by an amount that, individually or in the aggregate for all Plans, is Material. The term "benefit liabilities" has the meaning specified in Section 4001 of ERISA and the terms "current value" and "present value" have the meanings specified in Section 3 of ERISA.
       3. The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that, individually or in the aggregate, are Material.
       4. The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by Section 4980B of the Code) of the Company and its Subsidiaries is not Material.
       5. The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder by the Company will not involve any transaction that is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation by the Company to each Purchaser in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of such Purchaser's representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by such Purchaser.
   17. Private Offering by the Company. Neither the Company nor anyone acting on its behalf has offered the Notes or, within the period of six-months prior to the Closing, any similar securities with which the Notes could be integrated for purposes of the Securities Act for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than the Purchasers and not more than 30 other Institutional Investors of the type described in clause (c) of the definition thereof, each of which has been offered the Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act or to the registration requirements of any securities or blue sky laws of any applicable jurisdiction.
   18. Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the sale of the Notes as set forth in the "Summary of Terms and Conditions" Section of the Memorandum. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 20% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 20% of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation U.
   19. Existing Debt; Future Liens.
   20. 1. Except as described therein, Schedule 5.15 sets forth, as of October 11, 2005, (1) a complete and correct list of all outstanding Debt of the Company and its Subsidiaries having an outstanding principal balance in excess of $500,000 (including a description of the obligors and obligees, principal amount outstanding and collateral therefor, if any, and Guaranty thereof, if any), since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of such Debt and (2) the aggregate principal amount of outstanding Debt of the Company and its Subsidiaries in respect of obligations that, individually, have an outstanding principal balance of $500,000 or less, since which date there has been no Material change in the aggregate amount of such Debt. Neither the Company nor any Subsidiary is in default and no forbearance or temporary waiver of default is currently in effect, in the payment of any principal or interest on any Debt of the Company or such Subsidiary and no event or condition exists with respect to any Debt of the Company or any Subsidiary the outstanding principal amount of which exceeds $500,000 that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment.
       2. Except as disclosed in Schedule 5.15 , neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.4 .
       3. Neither the Company nor any Subsidiary is a party to, or otherwise subject to any provision contained in, any instrument evidencing Debt of the Company or such Subsidiary, any agreement relating thereto or any other agreement (including, but not limited to, its charter or other organizational document) which limits the amount of, or otherwise imposes restrictions on the incurring of, Debt of the Company, except as specifically indicated in Schedule 5.15 .
   21. Foreign Assets Control Regulations, Etc.
   22. 1. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof as described in Section 5.14 will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto.
       2. Neither the Company nor any Subsidiary (1) is a Person described or designated in the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control or in Section 1 of the Anti-Terrorism Order or (2) engages in any dealings or transactions with any such Person. The Company and its Subsidiaries are in compliance, in all material respects, with the USA Patriot Act.
       3. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases that such Act applies to the Company.
   23. Status under Certain Statutes. Neither the Company nor any Subsidiary is subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act, as amended.
   24. Investment Company Act.
   25. 1. The Company is an "investment company" that has elected to be regulated as a "business development company" within the meaning of the Investment Company Act and qualifies as a RIC.
       2. The Company conducts its business and other activities in compliance in all material respects with the applicable provisions of the Investment Company Act and any applicable rules, regulations or orders issued by the SEC thereunder.
       3. The business and other activities of the Company, including, but not limited to, the issuance and sale of the Notes hereunder, the application of the proceeds and the repayment thereof by the Company and the consummation of the transactions contemplated by this Agreement and the Notes do not violate in any material respect, with respect to the Company, the provisions of the Investment Company Act or any rules, regulations or orders issued by the SEC thereunder.
       4. Immediately after giving effect to the issuance and sale of the Notes hereunder, the Asset Coverage Ratio shall not be less than 2.0 to 1.0.
   26. Environmental Matters.
   27. 1. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect.
       2. Neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect.
       3. Neither the Company nor any Subsidiary has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them or has disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect.
       4. All buildings on all real properties now owned, leased or operated by the Company or any Subsidiary are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect.
   28. Notes Rank Pari Passu. The obligations of the Company under this Agreement and the Notes rank at least pari passu in right of payment with all other unsecured Senior Debt (actual or contingent) of the Company, including, without limitation, all unsecured Senior Debt of the Company described in Schedule 5.15 .
   29. Credit and Collection Policy; Investment Ratings Policy. The copies of the Credit and Collection Policy and the Investment Ratings Policy delivered to each Purchaser pursuant to Section 4.10 are true, complete and correct copies of the Credit and Collection Policy and Investment Ratings Policy as in effect on the date of the Closing.
6. Representations of the Purchasers.
7. 1. Purchase for Investment. Each Purchaser severally represents that it is purchasing the Notes for its own account or for one or more separate accounts maintained by such Purchaser or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of such Purchaser's or such pension's or trust fund's property shall at all times be within such Purchaser's or such pension or trust fund's control. Each Purchaser understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes.
   2. Source of Funds. Each Purchaser severally represents that at least one of the following statements is an accurate representation as to each source of funds (a "Source" ) to be used by such Purchaser to pay the purchase price of the Notes to be purchased by such Purchaser hereunder:
   3. 1. the Source is an "insurance company general account" (as the term is defined in the United States Department of Labor's Prohibited Transaction Exemption ( "PTE" ) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the "NAIC Annual Statement" )) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser's state of domicile; or
      2. the Source is a separate account that is maintained solely in connection with such Purchaser's fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or
      3. the Source is either (1) an insurance company pooled separate account, within the meaning of PTE 90-1 or (2) a bank collective investment fund, within the meaning of PTE 91-38 and, except as disclosed by such Purchaser to the Company in writing pursuant to this clause (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or
      4. the Source constitutes assets of an "investment fund" (within the meaning of Part V of PTE 84-14 (the "QPAM Exemption" )) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a Person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (1) the identity of such QPAM and (2) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (d); or
      5. the Source constitutes assets of a "plan(s)" (within the meaning of Section IV of PTE 96-23 (the "INHAM Exemption" )) managed by an "in-house asset manager" or "INHAM" (within the meaning of Part IV of the INHAM exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a Person controlling or controlled by the INHAM (applying the definition of "control" in Section IV(d) of the INHAM Exemption) owns a 5% or more interest in the Company and (1) the identity of such INHAM and (2) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this clause (e); or
      6. the Source is a governmental plan; or
      7. the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA and of Section 4975 of the Code.

As used in this Section 6.2 , the terms "employee benefit plan," "governmental plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA.

6. 3. Accredited Investor. Each Purchaser represents that it is an "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others are also "accredited investors"). Each Purchaser further represents that such Purchaser has had the opportunity to ask questions of the Company and received answers concerning the terms and conditions of the sale of the Notes.
7. Information as to Company.
8. 1. Financial and Business Information . The Company shall deliver to each holder of Notes that is an Institutional Investor:
   2. 1. Quarterly Statements -- within 60 days (or such shorter period as is 15 days greater than the period applicable to the filing of the Company's Quarterly Report on Form 10-Q (the "Form 10-Q" ) with the SEC regardless of whether the Company is subject to the filing requirements thereof) after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of,
      2. 1. a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter,
         2. a consolidated schedule of investments of the Company and its Subsidiaries as at the end of such quarter (the "Quarterly Schedule of Investments" ),
         3. consolidated statements of operations of the Company and its Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, and
         4. consolidated statements of changes in net assets and cash flows of the Company and its Subsidiaries for the portion of the fiscal year ending with such quarter,

setting forth, in the case of clauses (1), (3) and (4) of this Section 7.1(a) , in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Form 10-Q prepared in compliance with the requirements therefor and filed with the SEC together with the Quarterly Schedule of Investments to the extent not included in such Form 10-Q shall be deemed to satisfy the requirements of this Section 7.1(a) , provided, further, that the Company shall be deemed to have made such delivery of such Form 10-Q if it shall have timely made such Form 10-Q available on "EDGAR" and through its home page on the worldwide web (which, at the date of this Agreement, is located at: http//www.mcgcapital.com) and shall have caused to be given timely notice thereof to each holder of the Notes, which notice may be by electronic mail to each such holder's e-mail address specified for such communications in Schedule A , or at such other e-mail address (or, if such holder is not a Purchaser, at such e-mail address) as such holder shall have specified to the Company in writing, of such availability (such availability and notice being referred to as "Electronic Delivery" ) in which event, if required hereby, the Company shall, concurrently therewith, separately deliver the Quarterly Schedule of Investments and the Company shall be deemed to have made such separate concurrent delivery of such schedule if it shall have timely given Electronic Notification thereof;

7. 1. 2. Annual Statements -- within 105 days (or such shorter period as is 15 days greater than the period applicable to the filing of the Company's Annual Report on Form 10-K (the "Form 10-K" ) with the SEC regardless of whether the Company is subject to the filing requirements thereof) after the end of each fiscal year of the Company, duplicate copies of,
      3. 1. a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year,
         2. a consolidated schedule of investments of the Company and its Subsidiaries as at the end of such year (the "Annual Schedule of Investments" ), and
         3. consolidated statements of operations, changes in net assets and cash flows of the Company and its Subsidiaries for such year,

setting forth, in the case of clauses (1) and (3) of this Section 7.1(b) , in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing or other independent certified public accountants reasonably acceptable to the Required Holders, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with the applicable standards of the Public Company Accounting Oversight Board (United States), and that such audit provides a reasonable basis for such opinion in the circumstances, provided that the delivery within the time period specified above of the Company's Form 10-K for such fiscal year prepared in accordance with the requirements therefor and filed with the SEC together with the Annual Schedule of Investments to the extent not included in such Form 10-K, shall be deemed to satisfy the requirements of this Section 7.1(b) , provided, further, that the Company shall be deemed to have made such delivery of such Form 10-K if it shall have timely made Electronic Delivery thereof, in which event, if required hereby, the Company shall, concurrently therewith, separately deliver the Annual Schedule of Investments and the Company shall be deemed to have made such separate concurrent delivery of such schedule if it shall have timely given Electronic Notification thereof;

7. 1. 3. SEC and Other Reports -- promptly upon their becoming available, one copy of (1) each financial statement, report, notice (other than notices of quarterly dividends) or proxy statement sent by the Company or any Subsidiary to its public securities holders generally and (2) each regular or periodic report, each registration statement that shall have become effective (without exhibits except as expressly requested by such holder), and each final prospectus and all amendments thereto filed by the Company or any Subsidiary with the SEC and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material, provided that the Company shall not be required to deliver, pursuant to this Section 7.1(c) , any Form 10-K or Form 10-Q delivered, or deemed delivered, by the Company pursuant to Section 7.1(a) or Section 7.1(b) and provided further that the Company shall be deemed to have made such delivery of such reports and other information if it shall have timely made Electronic Delivery thereof or made available such reports and other information on IntraLinks® or a similar service reasonably acceptable to the Required Holders and, in either case, shall have caused to be given timely notice to each such holder of the Notes, which may include notice by electronic mail to each such holder's e-mail address specified for such communications in Schedule A , or at such other e-mail address (or, if such