THIRD AMENDMENT

TO

LOAN AGREEMENT

This THIRD AMENDMENT (this “Amendment”), dated as of June 30, 2005 (the “Third
Amendment Date”) by and among FIRST ALBANY COMPANIES INC., a New York
corporation, with its principal office and place of business as of the date
hereof at 677 Broadway, Albany, New York 12207 (the "Borrower"), and KEYBANK
NATIONAL ASSOCIATION, a national banking association organized and existing
under the laws of the United States of America, with an office for the
transaction of business as of the date hereof at 66 South Pearl Street, Albany,
New York, 12207 (“Bank”) to the Loan Agreement RE: $20,000,000.00 TERM LOAN, by
and among Borrower and Bank (the “February Credit Agreement”), as amended by
that certain First Amendment dated as of May 14, 2004 by and between the
Borrower and the Bank (the “First Amendment”) and as further amended by that
certain Second Amendment dated as of November 2, 2004 by and between the
Borrower and the Bank (the “Second Amendment”; and the February Credit Agreement
as amended by the First Amendment and the Second Amendment collectively the
“Original Agreement”).  Borrower and Bank are referred to individually in this
Amendment as a “Party” and collectively as the “Parties”.

W I T N E S S E T H:

WHEREAS, the Parties entered into the Original Agreement, pursuant to which,
among other things, the Bank agreed to provide a $20,000,000.00 Term Loan to
Borrower in order to provide financing to the Borrower for the acquisition of
all of the issued and outstanding shares of stock of Descap Securities, Inc.
(“DesCap”);

WHEREAS, the Parties desire to amend the Original Agreement as hereinafter set
forth.

NOW THEREFORE, in consideration of the premises set forth herein and for other
good and valuable consideration, the sufficiency and receipt of which is hereby
acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS

1.1

Original Agreement Definitions.  All capitalized terms used in this Amendment
but not defined herein shall have the meanings given to them in the Original
Agreement. In the event of a conflict between the definitions contained in this
Amendment and those contained in the Original Agreement, the definitions
contained herein shall prevail.

ARTICLE II

AMENDMENTS TO ORIGINAL AGREEMENT AND CONSENT

2.1

Deletion of 5.04(a). Effective as of the Third Amendment Date, Section 5.04(a)
of the Original Agreement is hereby deleted in its entirety.

2.2

Modification of 5.04(b).  Effective as of the Third Amendment Date for the
period ending June 30, 2005 and for all periods thereafter, Section 5.04(b) of
the Original Agreement is deleted in its entirety and the following inserted in
lieu thereof:

 (b)  Operating Cash-Flow to Total Fixed Charge Ratio.  Maintain a ratio of
operating cash flow to total fixed charges of not less than 1.15 to 1.00 as at
the end of each fiscal quarter based on the preceding trailing twelve month
period.  Operating Cash Flow is defined as (i) net income (ii) less investment
gains (losses) (iii) plus proceeds from the sale of Investments consistent with
GAAP, (iv) less any other non-recurring income, (v) plus interest expense
(excluding interest expense in respect of Short Term Line Financing secured by
marketable securities) (vi) plus depreciation (vii) plus amortization, (viii)
plus Lease Expense, (ix) plus charges incurred in connection with Lease and
Leasehold abandonments, (x) less Cash Dividends paid after March 31, 2005, (xi)
less Income Tax Benefit , and (xii) plus income tax expense to the extent it
does not result in a required tax payment (xiii) less results related to and
charges taken by the Borrower against income for discontinued operations of the
Borrower in the amount of $7,292,000.00 for the period ending June 30, 2005;
$2,766,000.00 for the period ending September 30, 2005; $1,500,000.00 for the
period ending December 31, 2005, and $1,500,000.00 for the period ending March
31, 2006.  Amortization is defined as (i) the amount of any expense(s) required
to be recognized by the Borrower, in accordance with GAAP for any period and
reflected in the Borrower’s financial statement for such period, for (a) the
Borrower’s Intangible Assets, (b) the Borrower’s issuance of (1) any restricted
stock, (2) notes, (3) warrants and/or (4) stock to match 401K contribution
obligations, (c) cost incurred in the issuance of any options, (ii) less charges
taken by the Borrower against income for a given period for discontinued
operation of the Borrower.  Total fixed charges are defined as Interest Expense
(excluding interest expense in respect of Short Term Line Financing secured by
marketable securities), plus Lease Expense plus current maturities on Long Term
Debt/current maturities on long term Capital Leases plus maintenance CAPEX.
 Maintenance CAPEX is defined as CAPEX without a corresponding debt or lease
financing commitment for the twelve month period under consideration.  

2.3

Modification of 5.04(c).

Effective as of the Third Amendment Date but retroactive to March 30, 2005,
Section 5.04(c) of the Original Agreement is deleted in its entirety and the
following inserted in lieu thereof:

(c)  Modified Total Funded Debt to EBITDAR Ratio.  Maintain a modified total
Funded Indebtedness to EBITDAR ratio of (i) less than 2.00 to 1.00 as of the end
of each fiscal quarter based on the preceding trailing twelve month (12) period
for the periods ending March 30, 2005, June 30, 2005, September 30,2005,December
31, 2005, and March 31, 2006 and (iii) less than 1.75 to 1.00 as at the end of
all other fiscal quarters based on the preceding trailing twelve (12) month
periods.  Modified total Funded Indebtedness is defined as Funded Indebtedness
less Short Term Line Financing secured by marketable securities. For purposes of
this subsection 5.04(c), (i) EBITDAR is defined as (i) earnings before (a)
interest,(b)  taxes (including, but not limited to, the provision for taxes
related to discontinued operations), (c) depreciation, (d) amortization, (e)
Lease Expense and (f) charges incurred in connection with Lease and Leasehold
abandonment, (ii) less investment gains (losses) , (iii) plus realized gains,
(iv) less realized losses (iv) plus (a) $7,292,000 for the period ending June
30, 2005, (b)  $2,766,000 for the period ending September 30, 2005, (c)
$1,500,000.00 for the period ending December 31, 2005 and (d) $1,500,000 for the
period ending March 31, 2006. For purposes of calculating realized gains or
losses on the Borrower’s investments, realized gains and losses are defined as
gross proceeds from the sale of the investment less the Borrower’s cash basis in
the investment.    Amortization is defined as (a) the amount of any expense(s)
required to be recognized by the Borrower, in accordance with GAAP for any
period and reflected in the Borrower’s financial statement for such period, for
(1) the Borrower’s Intangible Assets, (2) the Borrower’s issuance of (A) any
restricted stock , (B) notes, (C) warrants and/or (D) stock to match 401K
contribution obligations, (3) cost incurred in the issuance of any options, (b)
less charges taken by the Borrower against income for a given period for
discontinued operation of the Borrower.

.

2.4

Limitations on Amendment/Modification.

For avoidance of doubt, the final two paragraphs, set forth in Article V, being
the paragraphs commencing, respectively, with the phrases “Notwithstanding
anything to the contrary.” and “The Borrower’s compliance” are not modified
and/or amended by the amendments/modifications set forth in this Amendment.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to and agrees with the Bank as follows:

3.1

Representations and Warranties in the Original Agreement.  The representations
and warranties of the Borrower contained in the Original Agreement are true,
correct and complete in all material respects as of the Third Amendment Date, as
if made on the Third Amendment Date (unless stated to relate solely to an
earlier date, in which case such representations and warranties shall be true
and correct in all material respects as of such earlier date) provided, however,
that the representations and warranties contained in Sections 4.01(k), (m), (n)
and (p) are true, correct and complete to the best of Borrower’s knowledge as of
the Third Amendment Date; and provided further, that Exhibits 1, 2 and 3
attached hereto shall be deemed for all purposes of this Amendment and of the
Original Agreement as amended hereby to have modified and supplemented Exhibits
B, C and D, respectively, of the Original Agreement.

3.2

Authority, Etc.  The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of all of its agreements and obligations
under this Amendment and the Original Agreement (i) are within the corporate
authority of the Borrower, (ii) have been duly authorized by all necessary
corporate proceedings by the Borrower, (iii) do not conflict with or result in
any breach or contravention of any provision of law, statute, rule or regulation
to which the Borrower is subject or any judgment, order, writ, injunction,
license or permit applicable to the Borrower, and (iv) do not conflict with any
provision of the corporate charter or by-laws of, or any agreement or other
instrument binding upon, the Borrower.

3.3

Enforceability of Obligations.  This Amendment and the Original Agreement
constitute the legal, valid and binding obligations of the Borrower, enforceable
against it in accordance with their respective terms, except as enforcement of
the same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting enforcing of creditors’ rights
generally.

3.4

No Default.  After giving effect to this Amendment, no condition or event has
occurred or exists which constitutes or which, after notice or lapse of time, or
both, would constitute under the Original Agreement or the Note.

3.5

Control.  This Amendment is not the result of any advice from or by the Bank or
the attorneys for the Bank and the attorneys for the Bank will not be
responsible for any acts, omissions or decision of the Borrower.

3.6

No Offsets or Counterclaims.  The Borrower, as of the date hereof, has no
defenses, counterclaims, offsets, cross complaints, claims or demands of any
nature whatsoever which can be asserted to reduce or eliminate all or any part
of the Borrower’s liability to repay the amount due with respect to the Term
Loan, the Original Agreement and/or any of the other Loan Documents, or to seek
relief for damages of any type from the Bank.

3.7

Ratification.  Except as otherwise provided herein, all of the terms, covenants,
conditions and provisions contained in the Original Agreement and in all other
Loan Documents are hereby ratified, confirmed and restated in all respects and
shall remain in full force and effect.

ARTICLE IV

CONDITIONS TO EFFECTIVENESS

The effectiveness of this Amendment is conditioned upon satisfaction or waiver
of the following conditions precedent on or before the Third Amendment Date:

4.1

Amendment. The Bank shall have received this Amendment, executed and delivered
by all the Parties.

4.2

Certificate(s).  The Bank shall have received, a Borrower Closing Date
Certificate, dated as of the Third Amendment Date and duly executed and
delivered by an authorized officer of the Borrower, in which certificate the
Borrower shall represent and warrant as of the Third Amendment Date to such
matters as the Bank may request.

4.3

Fees, Expenses, etc.  The Bank shall have received all fees and expenses
incurred by the Bank in connection herewith and/or otherwise incurred in
connection with the Term Loan.

ARTICLE V

MISCELLANEOUS

5.1

Continued Effectiveness.  Notwithstanding anything contained herein, the terms
of this Amendment are not intended to and do not serve to effect a novation as
to the Original Agreement.  The Parties expressly do not intend to extinguish
the Original Agreement. Instead, it is the express intention of the Parties to
reaffirm the indebtedness created under the Original Agreement (including,
without limitation, the Note) and the other documents contemplated thereby and
to reaffirm the rights and obligations contained therein. The Original Agreement
as amended hereby and each of the other documents contemplated thereby shall
remain in full force and effect. Except as herein amended, the Original
Agreement shall remain unchanged and in full force and effect, and is hereby
ratified in all respects. All of the representations, warranties and covenants
contained in the Original Agreement and in this Amendment shall survive the
execution and delivery of this Amendment.

5.2

References.  Any reference to the Original Agreement contained in any notice,
certificate, or other document executed concurrently with or after the execution
and delivery of this Amendment shall be deemed to include the amendments
contained in this Amendment unless the context shall otherwise require.

5.3

Headings/Counterparts.  The headings in this Amendment are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
  This Amendment may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed shall be an original, but all the counterparts shall together
constitute one and the same instrument.

5.4

GOVERNING LAW.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THEREAUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.  

5.5

Acknowledgments.  The Borrower hereby acknowledges that:

(a)

it has been advised by counsel in the negotiation, execution and delivery of
this Amendment and the other Loan Documents;

(b)

the Bank has no fiduciary relationship with or duty to the Borrower arising out
of or in connection with this Amendment or any of the other Loan Documents, and
the relationship between the Bank, on one hand, and the Borrower, on the other
hand, in connection herewith or therewith is solely that of debtor and creditor;
and

(c)

no joint venture is created hereby or by the other Loan Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Banks or
among the Borrower and the Banks.

5.6

Severability.  Any provision of this Amendment that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

5.7

Expenses.  Upon the execution hereof the Borrower will pay to or as directed by
the Bank the fees and disbursements of their respective counsel in connection
with this Amendment.  

5.8

Loan Document.  This Amendment shall constitute one of the Loan Document(s)
under the Original Agreement.

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed and
delivered by their respective officers hereunto duly authorized as of the date
first above written.

FIRST ALBANY COMPANIES INC.

By: /S/STEVEN R. JENKINS

Name:  Steven R. Jenkins

Title:    Chief Financial Officer

KEY BANK NATIONAL ASSOCIATION

By: /S/RICHARD C. VanAUKEN

Name:  Richard C. VanAuken

Title:    Senior Vice President – Commercial Banking

0243.277\ThirdAmendment.080805

EXHIBIT 1

SUBSIDIARIES

AND OWNERSHIP OF SUBSIDIARY STOCK

Company Name

State of Incorporation

Capital Stock Authorized

Shares Outstanding

Percentage of Outstanding Shares

Shares Covered by Options

First Albany Capital Inc.

New York

5,000,000

100

.002%

0

FA Asset Management

New York

20,000

20,000

100%

0

First Albany Enterprise Funding Inc.

Delaware

1,000

0

0

0

FA Technology Ventures Corporation

Delaware

1,000

0

0

0

FAC Management Corporation

New York

1,000

0

0

0

Descap Securities Inc.

New York

1,000,000

0

0

0

EXHIBIT 2

UNIFORM SUBMISSION AGREEMENT

NASD Dispute Resolution

In the Matter of the Arbitration Between

Claimant seeks $8,000,000

plus certain fees.

Name of Claimant(s)

Arthur Thomas Murphy, Jr.

05-02173

Name of Respondent(s)

First Albany Capital, Inc.

Alan Paul Goldberg

George Cooley McNamee

EXHIBIT 3

INDEBTEDNESS

              

Maximum

 

Outstanding at

  

Amount

 

June 30, 2005

Debt

          

Short-term secured credit facilities

 

$300,000,000

 

$149,150,000

     

Due from Clearing Broker (ST secured credit facilities - Descap)

  

                26,781,436

     

M&T Bank

   

                     475,000

     

Senior Notes

   

                  9,402,350

     

KeyBank

   

                18,095,238

     

Other Note Payable

   

                        66,022

     

Capital lease obligations (Present Value)

   

                  4,473,472

     

Subordinated Debt

   

                  5,307,000

     

Letter of Credit Commitments

   

                  2,100,000

                 

Existing Capital Commitments

          

Capital Commitments as of June 30, 2005:

          

FA Technology Ventures L.P.

   

$9,900,000

     

Parallel investments with FA Technology Ventures, L.P.

   

                  7,300,000