MCG CAPITAL CORP
EXHIBIT 10.36
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>22
<FILENAME>dex1036.txt
<DESCRIPTION>EXHIBIT 10.36
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.36

                Employees with Employment or Severance Agreements
                -------------------------------------------------
                 PARTIALLY NON-RECOURSE SECURED PROMISSORY NOTE
                 ----------------------------------------------
                                    ("Note")
                                      ----
                                Due May 28, 2006


$1,055,027                                                    November 28, 2001


         FOR VALUE RECEIVED, the undersigned (the "Borrower") hereby promises to
                                                   --------
pay to the order of MCG Capital Corporation, a Delaware corporation, or its
successor (the "Lender") the principal sum of $1,055,027 as such amount may be
                ------
adjusted below in Section 7 herein (as adjusted, the "Principal Amount") in
lawful money of the United States of America on May 28, 2006 (the "Maturity
Date"), and to pay interest at a rate per annum equal to 4.13% (computed on the
basis of a 360 day year of twelve 30 day months) (the "Interest Rate") on the
                                                       -------------
unpaid principal amount hereof from time to time outstanding from and after the
date of this Note until the entire principal amount hereof has been paid in
full, payable annually in arrears on each anniversary of the date hereof (each
an "Interest Payment Date").
    ---------------------

         This Note is being delivered as payment for the purchase by the
Borrower of certain shares of Common Stock, par value $.01 per share, of the
Lender (the "Common Stock"), pursuant to the Restricted Stock Agreement, dated
             ------------
as of the date hereof (the "Restricted Stock Agreement). Payment of the
principal of and interest on this Note is secured pursuant to the terms of the
Stock Pledge Agreement, dated as of the date hereof, between the Borrower and
the Lender (the "Pledge Agreement"), pursuant to which the Borrower has pledged
                 ----------------
certain securities (the "Pledged Shares") to the Lender, reference to which is
                         --------------
made for a description of the entire collateral provided thereby (the "Pledged
Collateral") and the rights of the Lender in respect of the Pledged Collateral.

         Notwithstanding anything herein or in any other agreement, instrument
or other document to the contrary, the Borrower shall (i) have personal
liability for the repayment of the interest evidenced by this note and for any
claim of any kind based thereon or relating thereto; and the Lender shall be
entitled, among other things, to look to the Pledged Collateral as its remedy
for the repayment of the interest evidenced by this Note and any other claim of
any kind relating thereto or to the Pledge Agreement or arising hereunder or
thereunder, and (ii) not have any personal liability of any kind for the
repayment of the Principal Amount evidenced by this Note or for any claim of any
kind based thereon or relating thereto, and the Lender shall be entitled to and
shall look solely to the Pledged Collateral as its sole and exclusive remedy for
the repayment of the Principal Amount evidenced by this Note and any other claim
of any kind relating thereto or to the Pledge Agreement or arising hereunder or
thereunder.

<PAGE>

         This Note is subject to the following further terms and conditions:

         1. Mandatory Prepayments. (a) The outstanding Principal Amount shall be
            ---------------------
mandatorily prepaid, together with accrued interest thereon, upon the sale of
any of the Pledged Shares, to the extent of the Net Proceeds of such sale. "Net
Proceeds" shall mean the proceeds of the sale of any of the Pledged Shares after
deduction for (i) all expenses paid or payable in connection with such sale, and
(ii) any payment in respect of any personal taxes or other taxes on the proceeds
of such sale.

                  (b) Any repayments made under this Section 1 shall be first
applied to the payment of any unpaid and accrued interest and then to the
payment of the Principal Amount outstanding hereunder.

                  (c) Concurrently with any repayment of any portion of the
Principal Amount pursuant to this Section 1 hereof, the Lender shall make a
notation of such payment on the Loan and Repayment Schedule (as defined in
Section 6 hereof).

                  (d) Upon repayment of this Note in full, together with accrued
interest thereon, this Note shall be cancelled by the Lender. Notwithstanding
the foregoing, any Principal Amount which remains outstanding hereunder upon the
sale of all of the Pledged Shares (and upon prepayment of this Note as set forth
in paragraph (a)) shall be cancelled, any remaining Principal Amount shall be
forgiven, by the Lender and no interest on any such forgiven Principal Amount
shall continue to accrue, but only to the extent that such sales were either in
the pursuit of remedies or in a bona fide arm's length transaction with third
parties other than family members or Affiliates (as defined in the Pledge
Agreement) and effected with the objective of maximizing the price obtained for
the Pledged Shares sold.

         2. Termination of Employment. Notwithstanding any other provision of
            -------------------------
this Note, the entire Principal Amount outstanding, and any accrued interest,
shall be due and payable on the earlier of (a) the Maturity Date, or (b) three
months following (i) the Lender's termination of the Borrower's employment with
the Lender for Cause (as defined in the Borrower's Restricted Stock Agreement)
or (ii) the Borrower's termination of its employment with the Lender other than
for Good Reason or death or Disability (as defined in the Borrower's Restricted
Stock Agreement).

         3. Payment and Prepayment. All payments and prepayments of the
            ----------------------
Principal Amount and interest on this Note shall be made to the Lender in lawful
money of the United States of America at the principal offices of the Lender.
Any prepayments of any portion of the Principal Amount shall be accompanied by
payment of all interest accrued but unpaid on the Principal Amount being
prepaid.

         4. Events of Default. (x) Upon the failure of the Borrower to pay (a)
            -----------------
the Principal Amount when and as the same becomes due and payable, whether at
maturity thereof, upon the occurrence of an event requiring mandatory prepayment
under Section 1(a) hereof, or upon the Borrower's termination of employment
requiring payment in full under Section 2 hereof, or (b) the interest on the
Note when and as the same becomes due and payable, and such failure to pay the
Principal Amount or interest continues for ten (10) days, or (y) if the Borrower
shall file a petition in bankruptcy or for an arrangement or any similar relief

<PAGE>

pursuant to Title 11 of the United States Code or under any similar present or
future federal law or the law of any other jurisdiction or shall be adjudicated
a bankrupt or insolvent, or consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of all or any substantial part of the Borrower's property, or
shall make a general assignment for the benefit of creditors, or shall admit in
writing the Borrower's inability to pay the Borrower's debts generally as they
become due, or shall take any action in furtherance of any of the foregoing and
such event is not cured within 60 days (each of the events described in clauses
(x) and (y) being referred to herein as an "Event of Default"), then, and in any
such event, the Lender may declare, by written notice of the Event of Default
given to the Borrower, the entire Principal Amount to be forthwith due and
payable, whereupon the entire Principal Amount outstanding and any accrued and
unpaid interest hereunder shall become due and payable without presentment,
demand, protest, notice of dishonor and all other demands and notices of any
kind, all of which are hereby expressly waived. If an Event of Default shall
occur hereunder, the Borrower shall pay costs of collection, including
reasonable attorneys' fees, incurred by the Lender in the enforcement hereof.

         5. Waiver. No delay or failure by the Lender in the exercise of any
            ------
right or remedy shall constitute a waiver thereof, and no single or partial
exercise by the Lender hereof of any right or remedy shall preclude other or
future exercise thereof or the exercise of any other right or remedy.

         6. Loan and Repayment Schedule. Annexed hereto and made a part hereof
            ---------------------------
is a schedule (the "Loan and Repayment Schedule") on which shall be shown all
                    ---------------------------
repayments of the Principal Amount and accrued interest made by the Borrower to
the Lender and other information provided for on such Loan and Repayment
Schedule. The Borrower hereby appoints the Lender as its agent to make an
appropriate notation on the Loan and Repayment Schedule (or on a continuation of
such Loan and Repayment Schedule) evidencing the date and the amount of any
Principal Amount repayment or interest payment made hereunder or other
information provided for on the Loan and Repayment Schedule, provided that the
Lender shall promptly provide Borrower with a copy of each such notation and an
annual statement of all such repayments. Failure to make the notation or provide
a copy of each such notation and the annual statement described herein shall not
affect the Borrower's obligations hereunder or create any liability on the part
of the Lender.

         7. Principal Amount Adjustment. The initial Principal Amount shall be
            ---------------------------
automatically increased or decreased hereunder to an amount equal to the number
of Purchased Shares as defined in the Borrower's Restricted Stock Agreement
multiplied by the price per share of Common Stock in the Initial Public Offering
(as those terms are defined in the Restricted Stock Agreement).

         8. Miscellaneous. (a) The validity, performance and enforcement of this
            -------------
Note shall be governed by the laws of the Commonwealth of Virginia, without
giving effect to the principles of the conflicts of law thereof.


<PAGE>

                  (b) If the date set for payment of the Principal Amount or
interest hereunder is a Saturday, Sunday or legal holiday, then such payment
shall be due on the next succeeding business day.

                  (c) All notices and other communications hereunder shall be in
writing and will be deemed to have been duly given if delivered or mailed in
accordance with the Stockholders' Agreement.

                  (d) The headings contained in this Note are inserted for
reference only and shall not be deemed to constitute part of this Note or to
affect the construction hereof.

                  (e) The Lender may assign its rights or obligations under this
Note without the prior written consent of the Borrower. The Borrower may not
assign its rights or obligations under this Note without the prior written
consent of the Lender.


<PAGE>

         IN WITNESS WHEREOF, this Note has been duly executed and delivered by
the Borrower on the date first above written.


                                      /s/ Steven Tunney
                                      -----------------
                                      Steven Tunney

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