exhibit1038.htm


    
      

      

    

     

    
      	 	
              EXHIBIT
                10.38

            


    

     

    EMPLOYMENT
      AGREEMENT

     

        THIS
      EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the Effective Date, by and
      between FIRST ALBANY COMPANIES INC., a New York corporation (“Company”) and
      PETER McNIERNEY (“Executive”).

     

    W
      I T N E S S E T H:

     

        WHEREAS,
      Executive currently serves as the Chief Executive Officer of Company pursuant
      to
      the terms and conditions of an Employment Agreement dated June 30, 2006 between
      Company and Executive (the “Prior Agreement”); and

     

        WHEREAS,
      Company and Executive desire to terminate the Prior Agreement and enter into
      this Agreement, effective as of and contingent upon the occurrence of the
      Effective Date: and

     

        WHEREAS,
      Company desires to employ Executive as its President and Chief Operating
      Officer, and Executive desires to be employed in that position;

     

        NOW,
      THEREFORE, in consideration of the mutual covenants and promises hereinafter
      set
      forth and for other good and valuable consideration, the receipt and sufficiency
      of which are hereby acknowledged, Company and Executive hereby agree as
      follows:

     

    1.    Employment
      and Employment Period.

     

        (a)
      The
      Effective Date of this Agreement shall be the date of closing of the
      Recapitalization Transaction that has been agreed to by Company and
      MatlinPatterson Global Opportunities Partners II, L.P. and Affiliates, pursuant
      to the Investment Agreement, dated as of May 14, 2007, between First Albany
      Companies Inc. and MatlinPatterson FA Acquisition LLC (“Recapitalization
      Transaction”).

     

        (b)
      On the
      Effective Date, the Prior Agreement shall terminate. Executive shall, as of
      the
      Effective Date, forever relinquish all claims to any payment or other benefits
      under such Prior Agree­ment, except for any accrued but unpaid base salary
      or other compensation or benefits (including stock incentive rights) as of
      the
      Effective Date, and except for claims for indemnification arising prior to
      the
      Effective Date. The Company shall forever relinquish all claims and rights
      under
      the Prior Agreement, except for any claims or rights arising prior to the
      Effective Date for any breach of the restrictive covenants set forth in Section
      11 of the Prior Agreement.

     

        (c)
      Company
      agrees to employ Executive and Executive agrees to be employed by Company,
      on
      the terms and conditions set forth in this Agreement, for a period commencing
      on
      the Effective Date and continuing thereafter until the third anniversary
      thereof, unless sooner terminated pursuant to Section 5 hereof (the
“Employ­ment Period”). Following the termination of Executive’s employment
      for any reason, he shall resign any and all officerships and directorships
      he
      then holds with Company or any of its Affiliates (as defined
      below).

     

    2.     Title
      and Duties.

     

        (a)
      During
      the Employment Period, Executive shall serve as the President and Chief
      Operating Officer of Company. Executive shall have the duties, responsibilities
      and authority commensurate with such position and such other duties and
      responsibilities consistent with his position as may be reasonably assigned
      to
      Executive by Company’s Chief Executive Officer or that are otherwise set forth
      in Company’s By-Laws. Within thirty (30) days of the Effective Date, Company’s
      Board of Directors (“Board”) shall appoint Executive as a member of the Board
      and thereafter shall nominate Executive for election as a member of the Board
      when his seat on the Board is up for re-election. Executive shall report to
      Company’s Chief Executive Officer and shall perform his assigned duties and
      responsibilities at the offices of Company in New York City and other locations
      established by Company; provided, that, Executive may be required
      to travel on Company business during the Employ­ment Period.

     

        (b)
      During
      the Employment Period, Executive shall devote substantially all of his working
      time and attention during normal working hours to the performance of his duties.
      Notwithstanding the foregoing, nothing in this Agreement shall restrict
      Executive from managing his personal investments, personal business affairs
      and
      other personal matters, or serving on civic or charitable boards or committees,
      if such activities do not interfere with the performance of his duties hereunder
      or conflict with the Company’s interests.

     

    3.    Compensation
      and Benefits.

     

         For
      the
      services rendered by Executive to Company during the Employment Period, Company
      shall pay to Executive the compensation and benefits set forth in this Section
      3.

     

        (a)Base
      Salary. As compensation for services performed
      under and during the Employment Period, Company shall pay to Executive, in
      regular periodic installments as in effect immediately prior to the Effective
      Date, a base salary (the “Base Salary”) at the rate of Three Hundred Thousand
      Dollars ($300,000) per year. Executive’s Base Salary shall be reviewed by the
      Board, and the compensation committee of the Board where appropriate, each
      year
      and may be adjusted upward from time to time at the discretion of the Board
      or
      the compensation committee of the Board.

     

        (b)Annual
      Cash Bonus. Executive shall participate in
      Company’s annual bonus pool for each fiscal year of Company that ends or begins
      during the Employment Period. Executive’s annual bonus will be paid under terms
      and conditions developed by the Board after good faith consultation with
      Executive.

     

        (c)Benefits.
      At all times during the Employment Period, Executive shall be entitled
      to receive the employee benefits of Company on such basis as is comparable
      to
      those provided to other senior executives of Company, subject to the terms
      and
      conditions of the relevant benefits plans and policies. Executive shall be
      entitled to vacation and paid holidays consistent with Company’s practices as
      adopted from time to time.

     

        (d)Restricted
      Stock Units.

     

            (i)
      Company shall
      grant Restricted Stock Units (“RSUs”) to Executive with respect to the common
      stock of the Company in accordance with the following schedule
      and subject
      to (A) the terms of the First Albany Companies Inc. 2007 Incentive Compensation
      Plan and the applicable award agreement (“Incentive Compensation Plan”) and
(B)
      the
      conditions noted below:

     

    
      	
              Grant
                Dates

            	
              Vesting
                Dates

            	
              Settlement
                Dates

            
	
              Upon
                closing of the Recapitalization Transaction: 600,000
                shares

            	
              10%
                upon closing of Recapitalization Transaction

              30%
                on first anniversary of closing

              30%
                on second anniversary of closing

              30%
                on third anniversary of closing

            	
              All
                shares settle on third anniversary of closing

            
	
              June
                30, 2008: 125,000 shares

            	
              One-third
                on June 30, 2009

              One-third
                on June 30, 2010

              One-third
                on June 30, 2011

            	
              All
                shares settle on June 30, 2011

            
	
              January
                1, 2009, Based Upon Achieving Performance Targets: 125,000
                shares

            	
              One-third
                on January 1, 2010

              One-third
                on January 1, 2011

              One-third
                on January 1, 2012

            	
              All
                shares settle on January 1, 2012

            
	
              June
                9, 2009: 125,000 shares

            	
              One-third
                on June 30, 2010

              One-third
                on June 30, 2011

              One-third
                on June 30, 2012

            	
              All
                shares settle on June 30, 2012

            
	
              January
                1, 2010, Based Upon Achieving Performance Targets: 125,000
                shares

            	
              One-third
                on January 1, 2011

              One-third
                on January 1, 2012

              One-third
                on January 1, 2013

            	
              All
                shares settle on January 1, 2013

            


    

     

            (ii)
      Performance
      Targets to which reference is made in Subsection (d)(i) of this Section 3 shall
      be determined by the Board in good faith consultation with
      Executive.

     

            (iii)
      No RSUs shall
      be granted to Executive following the termination of his employment for any
      reason.

     

            (iv)
      RSUs that have
      been granted to Executive during the Employment Period but have not vested
      prior
      to the termination of Executive’s employment shall upon such
      termination
      be auto­matically forfeited and shall never vest, except to the extent that
      RSUs granted prior to or upon the termination of Executive’s employment shall
      vest in accordance
      with the provisions of Sub­section (a), (c), (d), (f), or (g) of Section 5
      of this Agreement.

     

            (v)
      All vested RSUs
      shall be payable in shares of common stock upon the earliest of (A) the third
      anniversary of the date of grant of such RSUs, (B) the six-month anniversary
      of the date of the termination of Executive’s employment, (C) the date of
      Executive’s death, or (D) the date of Executive’s disability (within the meaning
      of Section
      5(g) of this Agreement), reduced by any amount required for withholding of
      taxes. All RSUs shall be structured and paid in a manner that complies with
      the
require­ments
      of Section 409A of the Internal Revenue Code (“Section 409A”).

     

    4.    Expenses.

        

        Subject
      to
      the reasonable policies and procedures of Company, Executive shall be entitled
      to be fully reimbursed for all reasonable expenses incurred by him in the
      performance of his duties hereunder, and Company will reimburse Executive from
      time to time for all such reasonable expenses upon presentation of a written
      itemized account thereof together with such vouchers, receipts and other
      evidence of such expenses to the extent applicable as Company may reasonably
      deem to be necessary.

     

    5.    Termination
      and Termination of Benefits.

        

         Executive’s
      employment with Company shall terminate under the following
      circumstances:

     

     

        (a)Expiration
      of Employment Period Without Continued Employ­ment of Executive by
      Company. Executive’s employ­ment shall
      terminate as of the last day of the Employment Period. In such event, and
      subject to the other provisions of this Section 5, Executive shall be entitled
      only to the following payments and benefits:

     

            (i)
      Executive shall
      be entitled to receive any accrued but unpaid Base Salary through the last
      day
      of the Employment Period; any accrued benefits payable to Executive in
accordance
      with Company’s benefits policies or the provisions of any benefit plan in which
      he is then a participant to the extent provided therein; and equity incentives
      that
      have
      vested prior to the termination of Executive’s employment in accordance with the
      terms of Company’s applicable plan, other than the Incentive Compensation
Plan;

     

            (ii)
      Company shall
      pay Executive a pro-rated bonus for the fiscal year in which termination occurs,
      to be paid at the time such bonus would have been paid if Executive remained
      employed, and shall also pay Executive any bonus with respect to any completed
      fiscal year that had been earned at the time of the termination of Executive’s
employment,
      but not yet paid;

     

            (iii)
      RSUs granted to
      Executive prior to the termination of his employ­ment shall continue to vest
      in accordance with the provisions of the Incentive Compensation Plan and
the
      schedule set forth in Section 3(d) of this Agreement, on condition that
      Executive agrees to remain a member of the Board in good standing and to meet
      all obligations of
      a
      Board
      member; and

     

            (iv)
      In the event
      that Company has not, at least six months prior to expiration of the Employment
      Period, offered to enter into a new Employment Agreement with Executive
pursuant
      to which he would be employed as Company’s Chief Executive Officer following
      such expiration, Executive shall also receive upon such expiration a Severance
      Payment.
      For purposes of this Agreement, a “Severance Payment” shall be a lump-sum cash
      amount equal to One Million Eight Hundred Thousand Dollars ($1,800,000.00)
      less
      the
      publicly-traded market value, as of the date of termination of Executive’s
      employment hereunder, of one share of Company’s common stock multiplied by
the
      number of RSUs granted to Executive that have become vested (whether or not
      paid) on or before the date of termina­tion (adjusted for any splits). As a
      condition to receiving
      benefits under this Subsection (a)(iv), Executive shall execute and deliver
      to
      Company an irrevocable general release of claims against the Company, its
      Affiliates (as
      defined below) and their current and former directors, officers and employees,
      in a standard form used by Company in cases of terminations of employment
(a
      “Release”). For all purposes under this Agreement, the Severance Payment shall
      be structured and paid in a manner that complies with the requirements of
      Section 409A, including
      any requirement that the Severance Payment (or a portion thereof) be delayed
      by
      six (6) months following termi­na­tion of employment in order to comply
      with Section
      409A.

     

        (b)Termination
      By Executive Without Good Reason. Executive may
      resign from Company at any time and for any reason that does not constitute
      Good
      Reason upon sixty (60) days’ prior written notice to the Board. In the event of
      resignation by Executive under this Subsection (b), the Board may elect to
      waive
      the period of notice, or any portion thereof and thereby accelerate the date
      of
      termination. In the event of termination by Executive of his employment under
      this Subsection (b), Executive shall be entitled only to the following payments
      and benefits:

     

            (i)
      Executive shall
      be entitled to receive any accrued but unpaid Base Salary through the effective
      date of such termination as soon as practicable following the date of
termination;
      any accrued benefits payable to Executive in accordance with Company’s benefits
      policies or the provisions of any benefit plan in which he is then a
participant
      to the extent provided therein; and equity incentives that have vested prior
      to
      the termination of Executive’s employment in accordance with the terms of
Company’s
      applicable plan, other than the Incentive Compensation Plan;

     

            (ii)
      Company shall
      pay Executive any bonus with respect to any completed fiscal year that had
      been
      earned at the time of the termination of Executive’s employment, but
not
      yet
      paid; and

     

            (iii)
      Executive shall
      also receive a Severance Payment, as defined in Section 5(a)(iv) of this
      Agreement, on condition that Executive shall execute and deliver to Company
      a
Release.

     

        (c)Termination
      by Company Without Cause. Executive’s
      employ­ment under this Agreement may be terminated by Company without Cause
      (as defined in Section 5(e) of this Agreement) upon a vote of the majority
      of
      the members of the Board (excluding Executive)
      and sixty (60) days’ prior written notice to Executive. In the event of such
      termination, Executive shall be entitled only to the following payments and
      benefits:

     

            (i)
      Company shall
      continue to pay to Executive his Base Salary until the date which is twelve
      (12)
      months following the termination of his employment under this Section
      5(c)
      (the
“Severance Period’’). Company shall also pay Executive a pro-rated bonus for the
      fiscal year in which the Severance Period ends, to be paid at the time such
      bonus would
      have been paid if Executive remained employed; and Company shall pay Executive
      any bonus with respect to any completed fiscal year that had been earned at
      the  time
      of the termination of
      Executive’s employment, but not yet paid;

     

            (ii)
      Company shall
      maintain in full force and effect, for the continued benefit of Executive for
      the Severance Period, the medical, hospitalization and dental insurance plans
      and
      programs in which Executive was participating immediately prior to the date
      of
      termination at the level in effect and upon substantially the same terms and
      conditions (including,
      if applicable, contributions required by Executive for such benefits) as existed
      immediately prior to the date of termination; provided, that, if
      Executive cannot continue
      to participate in Company’s plans and programs providing such benefits, Company
      shall arrange to provide Executive with the economic equivalent of such
benefits
      which he otherwise would have been entitled to receive under such plans and
      programs (“Continued Benefits”). Such Continued Benefits shall terminate on the
date
      or
      dates Executive receives substantially similar coverage and benefits, without
      waiting period or pre-existing condition limitations, under the plans and
      programs of a subsequent
      employer; provided, that, the determination of coverage and
      benefits shall be made on a plan by plan and benefit by benefit basis and
      Company’s obligation under
      this Section 5(c) shall continue with respect to any plan or benefit that is
      not
      substantially similar to those in effect when Executive’s employment terminated.
      At the end
      of the Severance Period, Executive shall have the right to elect continuation
      coverage under COBRA to the extent still eligible under applicable
      law;

     

            (iii)
      Executive shall
      be paid or provided any accrued benefits payable to Executive in accordance
      with
      Company’s benefits policies or the provisions of any benefit plan in
which
      he
      is then a participant to the extent provided therein; and equity incentives
      that
      have vested prior to the termination of Executive’s employment in accordance
      with the
      terms of Company’s applicable plan, other than the Incentive Compensation
      Plan;

     

            (iv)
      RSUs granted to
      Executive prior to the termination of his employ­ment shall continue to vest
      under the Incentive Compensa­tion Plan in accordance with the schedule
set
      forth
      in
      Section 3(d) of this Agreement, on condition that Executive shall execute and
      deliver to Company a Release and a restrictive covenant agreement
      substan­tially as
      set
      forth
      in Section 8(a) of this Agreement, in accordance with and for a term not to
      exceed eighteen (18) months as provided by the Incentive Compensation Plan;
      and

     

            (v)
      Executive shall
      also receive a Severance Payment, as defined in Section 5(a)(iv) of this
      Agreement, on condition that Executive shall execute and deliver to Company
      a
Release.

     

        (d)Termination
      by Executive for Good Reason. Executive may
      terminate his employment hereunder for Good Reason by giving written notice
      to
      the Board within thirty (30) days after the occurrence of any one of the events
      specified in Subsection (d)(i) of this Section 5, without his prior written
      consent, specifying that such termination shall occur thirty (30) days after
      such notice has been given to the Board, provided, however, that such notice
      shall not be effective to cause termination under this Subsection (d) if the
      specified event is cured by Company within thirty (30) days of such written
      notice thereof.

     

            (i)
      Only the
      following shall constitute “Good Reason” for such termination:

     

                (A)
      Failure by
      Company to perform fully the terms of this Agreement, or any plan or agreement
      referenced in this Agreement, other than an immaterial and inadvertent
      failure not occurring in bad faith and remedied by Company promptly (but not
      later than five (5) days) after receiving notice thereof from
      Executive;

     

                (B)
      Any reduction in
      Executive’s Base Salary or failure to pay any bonuses or other material amounts
      due under this Agreement in accordance herewith;

        

                (C)
      The assignment to
      Executive of any duties inconsistent in any material respect with his position
      or with his authority, duties or responsibilities as President and Chief
      Operating Officer, or any other action by Company which results in a
      diminu­tion in such position, authority, duties or responsibilities, or
      reporting relationship,
      excluding for this purpose any immaterial and inadvertent action not taken
      in
      bad faith and remedied by Company promptly (but not later than ten (10)
days
      after receiving notice from Executive);

     

                (D)
      Any change in the
      place of Executive’s principal place of employment to a location outside New
      York City;

     

                (E)
      Any failure by
      Company to obtain an assumption and agree­ment to perform this Agreement by
      a successor.

     

            (ii)
      In the event of
      termination by Executive for Good Reason, Executive shall be entitled only
      to
      the following payments and benefits:

     

                (A)
      Executive shall
      be entitled to receive any accrued but unpaid Base Salary through the effective
      date of such termination as soon as practicable following the date of
      termination; any accrued benefits payable to Executive in accordance with
      Company’s benefits policies or the provisions of any benefit plan in which he is
      then a participant
      to the extent provided therein; and equity incentives that have vested prior
      to
      the termination of Executive’s employment in accordance with the terms of
Company’s
      applicable plan, other than the Incentive Compensation Plan;

     

                (B)
      Company shall pay
      Executive a pro-rated bonus for the fiscal year in which termination occurs,
      to
      be paid at the time such bonus would have been paid if Executive
      remained employed, and shall also pay Executive any bonus with respect to any
      completed fiscal year that had been earned at the time of the termination
of
      Executive’s
      employment, but not yet paid; and

     

                (C)
      Executive shall
      receive the benefits set forth in Section 5(c)(iv) and (c)(v) of this
      Agreement.

     

        (e)Termination
      by Company for Cause. Executive’s employment
      here­under may be terminated by Company for Cause, subject to the following
      conditions:

     

            (i)
      Only the
      following shall constitute Cause for termination:

     

                (A)
      Executive’s
      conviction of, or plea of guilty or “no contest” to, any felony;

     

                (B)
      Executive’s
      conviction of, or plea of guilty or “no contest” to, a violation of criminal law
      involving Company and its business;

     

                (C)
      Executive’s
      commission of an act of fraud or theft, or material dishonesty in connection
      with his performance of duties to Company; or

     

                (D)
      Executive’s
      willful refusal or gross neglect by Executive to perform the duties reasonably
      assigned to him and consistent with his position with Company or otherwise
      to comply with the material terms of this Agreement, which refusal or gross
      neglect continues for more than fifteen (15) days after Executive receives
      written
      notice thereof from Company providing reasonable detail of the asserted refusal
      or gross neglect (and which is not due to a physical or mental
      impairment).

     

            (ii)
      In no event
      shall Executive’s employment be considered to have been terminated for Cause
      unless and until Executive receives a copy of a resolution adopted by the
Board
      finding that, in the good faith opinion of the Board, Executive is guilty of
      acts or omissions constituting Cause, which resolution has been duly adopted
      by
      an affirmative
      vote of a majority of the Board, excluding Executive and any individual alleged
      to have participated in the acts constituting Cause. Any such vote shall be
      taken at
      a
      meeting of the Board called and held for such purpose, after reasonable written
      notice is provided to Executive setting forth in reasonable detail the facts
      and
circumstances
      claimed to provide a basis of termination for Cause and Executive is given
      an
      opportunity, together with counsel, to be heard before the Board.

     

            (iii)
      In the event
      Executive is terminated for Cause, Executive shall be entitled only to the
      payments and benefits described in Subsection (b) of this Section 5, and Company
      shall
      have no further obligations to Executive under this Agreement.

     

        (f)Death.
      Executive’s employment shall terminate upon his death. In such event, Executive
      shall be entitled only to the following payments and benefits:

     

            (i)
      Executive shall
      be entitled to receive any accrued but unpaid Base Salary through the effective
      date of such termination as soon as practicable following the date of
termination;
      any accrued benefits payable to Executive in accordance with Company’s benefits
      policies or the provisions of any benefit plan in which he is then a
participant
      to the extent provided therein; and equity incentives that have vested prior
      to
      the termination of Executive’s employment in accordance with the terms of
Company’s
      applicable plan, other than the Incentive Compensation Plan;

     

            (ii)
      Company shall
      pay Executive a pro-rated bonus for the fiscal year in which termination occurs,
      to be paid at the time such bonus would have been paid if Executive remained
      employed, and shall also pay Executive any bonus with respect to any completed
      fiscal year that had been earned at the time of the termination of Executive’s
employment,
      but not yet paid;

     

            (iii)
      RSUs granted to
      Executive prior to the termination of his employ­ment shall vest upon such
      termination in accordance with the provisions of the Incentive Compensation
      Plan; and

     

            (iv)
      Executive shall
      also receive a Severance Payment, as defined in Section 5(a)(iv) of this
      Agreement.

     

        (g)Disability.
      In the event that Executive becomes disabled, as determined under
      Company’s long-term disability income plan, and receives income replacement
      benefits under such plan or another accident and health plan covering employees
      of Company for a period of not less than three (3) months; or, in the absence
      of
      such plan or plans, by reason of Executive’s inability to engage in any
      substantial gainful activity by reason of any medically determinable physical
      or
      mental impairment that can be expected to result in death or can be expected
      to
      last for a continuous period of not less than twelve (12) months, Executive’s
      employment shall be deemed terminated by reason of disability; provided,
that, in no event shall Executive be terminated by reason of disability
      unless Executive receives written notice from Company, at least fifteen (15)
      days in advance of such termination, stating its intention to terminate
      Executive by reason of disability. In the event of termination by reason of
      disability, Executive shall be entitled only to the payments and benefits
      described in Subsection (f) of this Section 5, provided, that, as
      a condition to receipt of a Severance Payment, Executive shall execute and
      deliver to Company a Release.

     

    6.     Tax
      Indemnity.

     

        Anything
      in
      this Agreement to the contrary notwithstanding, in the event it is determined
      that any payment or distribution by Company to Executive or for his benefit,
      whether paid or payable or distributed or distributable pursuant to the terms
      of
      this Agreement or otherwise (a “Payment”) would be subject to an excise tax
      under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”)
      (or any successor provision) (such excise tax, together with any such interest
      and penalties, are hereinafter collectively referred to as the “Excise Tax”),
      Executive shall be entitled to receive an additional payment (a “Gross-Up
      Payment”) in an amount that, after payment by Executive of all taxes (including
      any interest or penalties imposed with respect to such taxes), including any
      Excise Tax, imposed upon the Gross-Up
      Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise
      Tax imposed upon the Payment. Such Gross-Up Payment shall be made to Executive
      within thirty (30) days following the date of determination that a Gross-Up
      Payment is required to be paid to Executive in accordance with the remaining
      terms of this Section 6(b). Subject to the provisions of this Section 6(b),
      all
      determinations required to be made under this Section 6, including whether
      a
      Gross-Up Payment is required and the amount of such Gross-Up Payment, shall
      be
      made by Company’s principal independent accounting firm at the time such
      determination is made (the “Accounting Firm”). Executive agrees to promptly
      furnish information requested by the Accounting Firm in connection with such
      determinations. The Accounting Firm shall provide detailed supporting
      calculations both to Company and Executive within thirty (30) days following
      the
      date an event occurs that could give rise to an excise tax on a Payment, or
      such
      earlier time as is requested by Company. Any determination by the Accounting
      Firm shall be binding upon Company and Executive except as provided elsewhere
      in
      this Section 6. As a result of the uncertainty in the application of Section
      4999 of the Code at the time of the initial determination by the Accounting
      Firm
      hereunder, it is possible that a Gross-Up Payment which will not have been
      made
      by Company should have been made (the “Underpayment”), consistent with the
      calcula­tions required to be made hereunder. In the event that Company
      exhausts its remedies pursuant to this Section 6 and Executive thereafter is
      required to make a payment of any Excise Tax, the Accounting Firm shall
      determine the amount of the Underpayment that has occurred and any such
      Underpayment, together with any penalties and interest related to such
      Underpayment, if any, shall be made promptly by Company to Executive or for
      his
      benefit. Executive shall notify Company in writing of any claim by the Internal
      Revenue Service that, if successful, would require the payment by Company of
      the
      Gross-Up Payment. Such notification shall be given as soon as practicable after
      Executive knows of such claim and shall apprise Company of the nature of the
      claim and the date on which the claim is requested to be paid. Executive shall
      not pay such claim prior to the expiration of the thirty (30) day period
      following the date on which Executive gives such notice to Company (or such
      shorter period ending on the date that any payment of taxes with respect to
      such
      claim is due). If Company notifies Executive in writing prior to the expiration
      of such period that it desires to contest such claim, Executive
      shall:

     

            (i)
      give Company any
      information reasonably requested by Company relating to such claim,

     

            (ii)
      take such action
      in connection with contesting the claim as Company reasonably requests in
      writing from time to tune, including, without limitation, accepting legal
representation
      with regard to the claim by an attorney selected by Company, and acceptable
      to
      Executive,

        

            (iii)
      cooperate with
      Company (at no cost to Executive) in good faith in order effectively to contest
      the claim, and

     

            (iv)
      permit Company
      to participate in any proceedings relating the claim;

     

    provided,
      however, that Company shall bear and pay directly all costs and expenses
      (including additional interest and penalties) incurred in connection with such
      contest and shall indemnify and hold Executive harmless, on an after-tax basis,
      from any Excise Tax or income tax, including interest
      and penalties with respect thereto, imposed as a result of such representation
      and payments of costs and expenses. Without limitation of the foregoing
      provisions of this Section 6, Company shall control all proceedings taken in
      connection with such contest and, at its sole option, may pursue or forgo any
      and all administrative appeals, proceedings, hearings and conferences with
      the
      taxing authority in respect of such claim and may, at its sole option, either
      direct Executive to pay the tax claimed and sue for a refund or contest the
      claim in any permissible manner, and Executive agrees to prosecute such contest
      to a determination before any administrative tribunal, in a court of initial
      jurisdiction and in one or more appellate courts, as Company determines;
      provided, further, however, that (A) if Company directs Executive to pay such
      claim and sue for a refund, Company shall advance the amount of such payment
      to
      Executive on an interest-free basis and shall indemnify and hold Executive
      harmless, on an after-tax basis, from any Excise Tax or income tax, including
      interest or penalties with respect thereto, imposed with respect to such
      advance; and (B) any request by Company that Executive extend the statute of
      limitations relating to payment of taxes for his taxable year with respect
      to
      which such contested amount is claimed to be due is limited solely to such
      contested amount. Furthermore, Company’s control of the contest shall be limited
      to issues with respect to which a Gross-Up Payment would be payable hereunder
      and Executive shall be entitled to settle or contest, as the case may be, any
      other issue raised by the Internal Revenue Service or any other taxing
      authority. If, after the receipt by Executive of an amount advanced by Company
      pursuant to this Section 6, Executive becomes entitled to receive any refund
      with respect to such claim, Executive shall (subject to Company’s complying with
      the requirements of this Section 6) promptly pay to Company the amount of such
      refund (together with any interest paid or credited thereon after taxes
      applicable thereto). If, after the receipt by Executive of an amount advanced
      by
      Company pursuant to this Section 6, a determination is made that Executive
      shall
      not be entitled to any refund with respect to such claim and Company does not
      notify Executive in writing of its intent to contest such denial of refund
      prior
      to the expiration of thirty (30) days after such determination, then such
      advance shall not be required to be repaid and the amount of such advance shall
      offset, to the extent thereof, the amount of Gross-Up Payment required to be
      paid.

     

    
      	 	
              7.

            	
              Confidential
                Information; Removal of Documents; Certain Post-Employ­ment
                Undertakings.

            


    

     

        (a)
      Except
      (i) as required in order to perform his obligations under this Agreement, (ii)
      as may otherwise be required by law or any legal process, or (iii) as is
      necessary in connection with any adversarial proceeding against Company (in
      which case Executive shall use his reasonable best efforts in cooperating with
      Company in obtaining a protective order against disclosure by a court of
      competent jurisdiction), Executive shall not, without the express prior written
      consent of Company, disclose or divulge to any other person or entity, or use
      or
      modify for use, directly or indirectly, in any way, for any person or entity
      any
      of Company’s or an Affiliate’s (as defined below) Confidential Information at
      any time during or after Executive’s employment. For purposes of this Agreement,
“Confidential Information” shall mean any valuable, competitively sensitive or
      proprietary data and information related to business carried on by Company
      or
      any Affiliate (the “Business”), including, without limitation, Trade Secrets (as
      defined below), that are not generally known by or readily available to
      Company’s or any Affiliate’s competitors. “Trade Secrets” shall mean information
      or data of Company or any Affiliate in connection with the Business, including,
      but not limited to, technical or non-technical data,
      financial information, programs, devices, methods, techniques, drawings,
      processes, financial plans, product plans, or lists of actual or potential
      customers or suppliers, that: (A) derive economic value, actual or potential,
      from not being generally known to, and not being readily ascertainable by proper
      means by, other persons who can obtain economic value from their disclosure
      or
      use; and (B) are the subject of efforts that are reasonable under the
      circumstances to maintain their secrecy. “Affiliate” shall mean an entity in
      control of, controlled by or under common control with Company.

     

        (b)
      All
      records, files, drawings, documents, models, equipment, and the like containing
      Confidential Information or needed in the Business over which Executive has
      control shall not be removed from Company’s premises without its written
      consent, unless such removal is in the furtherance of the Business or is in
      connection with Executive’s carrying out his duties under this Agreement and, if
      so removed, shall be returned to Company promptly after termination of
      Executive’s employment hereunder, or otherwise promptly after removal if such
      removal occurs following termination of employment. Company shall be the owner
      of all Trade Secrets and other products relating to the Business developed
      by
      Executive alone or in conjunction with others as part of his employment with
      Company.

     

        (c)
      In the
      scope of Executive’s employment with Company, Executive may be requested, alone
      or with others, to create, invent, enhance, and modify items which are or could
      be deemed to be Confidential Information. Executive acknowledges and agrees
      that
      all such information is intended to be, and will remain, the sole and exclusive
      property of Company. If Executive’s employment with Company terminates for any
      reason, he shall promptly and fully disclose all such property to Company,
      shall
      provide Company with any information that it may reasonably request about such
      property and shall execute such agreements, assignments or other instruments
      as
      may be reasonably requested by Company to reflect such ownership by Company
      and
      shall fully cooperate with Company to protect the business relationships of
      Company and to insure that there will be no unreasonable interference or
      disruption of such business relation­ships.

     

    8.     Restrictive
      Covenants.

     

        (a)
      Executive
      covenants that, during the Employment Period, he will not, without the prior
      written consent of Company, participate in the ownership, management, operation
      or control of a Competitor or be employed by or perform services for a
      Competitor in a position substantially similar to Executive’s position with
      Company; provided, however, that Executive may own, solely as a passive
      investment, securities of any entity traded on any national securities exchange
      if Executive is not a controlling person of (nor owns individually or as a
      member of a group, 5% or more of) such entity. For purposes of this Section
      8,
“Competitor” means any broker-dealer or financial advisory firm whose principal
      place of business is in the United States.

     

        (b)
      Executive
      covenants that in the event his employment by the Company shall terminate for
      any reason, then during a period of twelve (12) months after the date of such
      termination, Executive shall not, directly or indirectly, solicit for employment
      or hire anyone who was an employee of Company within the period of 180 days
      prior to such termination.

     

    9.    
      Remedy.

     

        (a)
      Executive
      acknowledges that: (i) as a result of Executive’s employment by Company,
      Executive will obtain Confidential Information; (ii) the Confidential
      Informa­tion has been developed and created by Company at substantial
      expense and the Confidential Information constitutes valuable proprietary assets
      and Company will suffer substantial damage and irreparable harm which will
      be
      difficult to compute if during the term of employment and thereafter, Executive
      should divulge such Confidential Information in violation of the provisions
      of
      this Agreement; (iii) the nature of Company’s business is such that it could be
      conducted anywhere in the world and that it is not limited to a geographic
      scope
      or region, (iv) Company will suffer substantial damage which will be difficult
      to compute if Executive should compete with Company or solicit or interfere
      with
      Company’s employees, customers or clients in violation of this Agreement; (v)
      the provisions of this Agreement are reasonable and necessary for the protection
      of Company’s business; (vi) Executive will not be unreasonably precluded from
      earning a living following his termination of employment if the provisions
      of
      Sections 7 and 8 of this Agreement are fully enforced; and (vii) Company would
      not have entered into this Agreement unless Executive agreed to be bound by
      the
      terms of Sections 7 and 8 of this Agree­ment.

     

        (b)
      Should
      Executive engage in or perform any of the acts prohibited by Section 7 or
      Section 8 hereof, it is agreed that Company shall be entitled to full injunctive
      relief, to be issued by any competent court of equity, enjoining and restraining
      Executive and each and every other person, firm, organization, association,
      or
      corporation concerned therein, from the continuance of such volatile
      acts.

     

    10.    Assignment.

     

        This
      Agreement shall be binding upon and shall inure to the benefit of Company,
      its
      successors and any person, firm, corporation or other entity that succeeds
      to
      all or substantially all of the business, assets or property of Company,
      including without limitation in connection with any sale of Company. This
      Agreement may be assigned, in whole but not in part, by Company to any successor
      to the Company or its business or any subsidiary or Affiliate of Company,
provided, that, such assignment does not relieve Company of its
      obligations under this Agreement if the assignee fails to perform. Executive
      may
      not assign any rights or delegate any duties in or under this
      Agreement.

     

     

    11.    Waiver.

     

        The
      waiver by
      either party of a breach of any provision of this Agreement shall not operate
      as
      or be construed as a waiver of any prior or subsequent breach
      thereof.

     

     

    12.    Amendment
      or Modification.

     

        No
      provision
      of this Agreement may be modified, waived or discharged unless such waiver,
      modification or discharge is agreed to in writing signed by Executive and a
      duly
      authorized officer of Company (other than Executive) acting on behalf of the
      Board.

     

     

    13.    Governing
      Law.

     

        This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York, without regard to choice or conflict of law
      principles.

     

    14.    Severability.

     

        The
      invalidity or unenforceability of any provision of this Agree­ment shall not
      affect the validity or enforceability of any other provisions of this Agreement,
      which shall remain in full force and effect.

     

    15.    Notices.

     

        Any
      notices
      required or permitted to be given hereunder shall be sufficient if in writing,
      and if delivered by hand, by courier, by facsimile, or sent by certified mail,
      return receipt requested, prepaid, to the address set forth below or such other
      address as either party may from time to time designate in writing to the other
      and shall be deemed given as of the date of the delivery if delivered by hand
      or
      by courier, if mailed, four (4) days after the date of mailing.

     

    
      	
              If
                to Executive:

            	
              Peter
                McNierney

              c/o
                First Albany Capital Inc.

              One
                Penn Plaza - 42nd floor

              New
                York, NY 10119

               

              With
                a copy to:

               

              Paul
                J. Wessel

              Milbank,
                Tweed, Hadley & McCloy LLP

              1
                Chase Manhattan Plaza

              New
                York, NY 10005

            
	
              If
                to Company:

            	
              First
                Albany Companies Inc.

              677
                Broadway

              Albany,
                NY 12207

              Attention:
                Patricia Craig

               

              With
                a copy to:

               

              Dewey
                Ballantine LLP

              1301
                Avenue of the Americas

              New
                York, NY 10019

              Attention:
                Christopher P. Peterson

            


    

     

    16.    Entire
      Agreement and Binding Effect.

        

        This
      Agreement contains the entire agreement of the parties with respect to the
      subject matter hereof and supersedes all prior agreements, promises, covenants,
      arrangements, communications, representations or warranties, whether oral or
      written, by any officer, employee or representative of any party hereto in
      respect of such subject matter. This Agreement shall be binding upon and inure
      to the benefit of the parties hereto and their respective successors, permitted
      assigns, and legal representatives.

     

    17.    Counterparts.

     

        This
      Agreement may be executed in counterparts, each of which shall be deemed an
      original, but all of which together shall constitute one and the same
      instrument, and in pleading or providing any provision of this Agreement it
      shall not be necessary to produce more than one of such
      counterparts.

     

    18.    Headings.

     

        The
      Section
      headings appearing in this Agreement are for reference purposes only and shall
      not be considered a part of this Agreement or in any way modify, amend or affect
      its provisions.

     

    19.    Indemnification.

     

        Company
      will,
      to the maximum extent permitted under applicable law and Company’s By-Laws and
      consistent therewith, indemnify and hold Executive harmless against expenses
      and
      other amounts actually and reasonably incurred in connection with any proceeding
      arising by reason of Executive’s employment by Company. In addition, Company
      shall cover Executive under directors’ and officers’ liability insurance both
      during and, while potential liability exists, after the term of employment
      in
      the same amount and to the same extent as Company covers its other officers
      and
      directors.

     

    20.    Drafting.

     

         The
      parties hereto acknowledge and agree that this Agreement has been drafted
      jointly by Company and Executive and each has had ample opportunity to review
      and understand its provisions and seek competent legal advice.

     

    21.    Dispute
      Resolution.

     

        Except
      as
      provided in Section 9 of this Agreement, all disputes arising out of, or related
      to, this Agreement, or the breach thereof, shall be settled by binding
      arbitration in the City of New York, New York, in accordance with the applicable
      rules then in effect of the American Arbitration Association, and the
      arbitrator’s decision shall be binding and final, and judgment upon the award
      rendered may be entered in any court having jurisdiction thereof.

     

    22.    Survival.

     

        The
      respective obligations of, and benefits offered to Executive and Company as
      provided in this Agreement shall survive the termination of this Agreement
      to
      carry out their intended purpose.

     

    23.    Compliance
      with Section 409A.

     

        Notwithstanding
      any
      provision of this Agree­ment to the contrary, no payment or benefit shall be
      paid at any time or in any manner that would result in the imposition of
      additional tax pursuant to Section 409A of the Code. The parties agree that
      any
      such payment or benefit will be restructured in order to comply with the
      requirements of Section 409A on a basis that preserves to the maximum extent
      possible the economic rights of Executive hereunder.

     
      
        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement as of
      the 15th day of May, 2007.

     

    
      	
              FIRST
                ALBANY COMPANIES INC.

            
	 
	 
	 
	
              /s/
                George McNamee

              By:
                George McNamee

              Title:
                Chairman, First Albany Companies Inc.

            
	 
	 
	 
	
              EXECUTIVE:

            
	 
	 
	 
	
              /s/
                Peter McNierney

              PETER
                McNIERNEY