EMPLOYMENT AGREEMENT

         This Employment Agreement (the "Agreement"), effective as of January 1,
2007, by and between Hudson Holding Corporation, a Delaware corporation (the
"Company"), having an address of 111 Town Square Place, 15th Floor, Jersey City,
New Jersey 07310, and Martin Cunningham (the "Employee"), residing at 14 Rodeo
Circle, Syosset, New York 11791.

                                  WITNESSESTH:

         WHEREAS, the Company is a holding company, primarily consisting of a
subsidiary that is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. (the "NASD") engaged in the business of
market making and institutional agency trading; and

         WHEREAS, the Company wishes to employ the Employee and the Employee is
willing to be so employed and to render services to the Company, all upon the
terms and subject to the conditions contained herein;

         NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties agree as follows:

         1. EMPLOYMENT. Subject to and upon the terms and conditions contained
in this Agreement, the Company hereby agrees to employ Employee and Employee
agrees to enter the employ of the Company, for the period set forth in Paragraph
2 hereof, to render the services to the Company, its affiliates and/or
subsidiaries described in Paragraph 3 hereof.

         2. TERM. Employee's term of employment (the "Agreement Term") under
this Agreement shall commence on the date hereof (the "Agreement Date") and
shall continue for a period through and including December 31, 2011, unless
extended in writing by both parties or earlier terminated pursuant to the terms
and conditions set forth herein.

         3. DUTIES.

                  (a) Employee shall be employed as the Company's Chief
Executive Officer. In his capacity as Chief Executive Officer, Employee shall
have the customary powers, responsibilities and authorities of chief executive
officers of corporations of the size, type and nature of the Company, including
that of a public company. It is agreed that Employee shall perform his services
principally in the Company's Jersey City, New Jersey offices, as well as in the
offices of the Company's affiliates and/or subsidiaries, as required by his
duties and responsibilities, or in any other location mutually agreeable to the
parties.

                  (b) Employee shall report to the Chief Executive Officer of
the Company or any other more senior executive officers appointed by the Board
of Directors (the "Board") of the Company and to the Board and agrees to abide
by all bylaws and applicable policies of the Company promulgated from time to
time by the Board of Directors of the Company.

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         4. EXCLUSIVE SERVICES AND BEST EFFORTS. Employee shall devote all of
his working time, attention, best efforts and ability during regular business
hours exclusively to the service of the Company, its affiliates and subsidiaries
during the term of this Agreement. Nothing shall preclude Employee from (i)
engaging in charitable activities and community affairs or (ii) managing his
personal investments and affairs; provided, however, that such activities do not
materially interfere with the proper performance of his duties and
responsibilities as an employee of the Company.

         5. COMPENSATION. As compensation for his services and covenants
hereunder, the Company shall pay Employee the following:

                  (a) SALARY. The Company shall pay Employee a salary (the
"Salary") at the rate of $200,000 per year. The Salary shall be payable in
accordance with the regular payroll practices of the Company.

                  (b) BONUSES.

                           (i) ANNUAL BONUS. In the event the Company's annual
consolidated pretax earnings, as determined in accordance with generally
accepted accounting principles and reported in the Company's Form 10-K (the
"Company's Earnings"), equal or exceed $4.8 million in any fiscal year during
the Agreement Term, the Company shall pay Employee annual bonus compensation
(the "Annual Bonus") in an amount equal to 5% of the Company's Earnings for such
fiscal year. For the fourth quarter of fiscal year 2007, such Annual Bonus shall
be prorated to reflect the actual number of months worked by the Employee during
the fourth quarter of fiscal 2007. Notwithstanding the foregoing, in no event
shall the Annual Bonus payable to Employee pursuant to this Section 5(b)(i) in
any fiscal year during the Agreement Term exceed $1,093,750.

                           A prorated portion of the Annual Bonus shall be
payable quarterly (the "Quarterly Payment") in the event quarterly consolidated
pretax earnings (the "Quarterly Earnings") equal or exceed $1.2 million, subject
to a holdback of 25% (the "Holdback") of the Quarterly Payment due Employee. In
the event Quarterly Earnings are less than $1.2 million, no Quarterly Payment
shall be made and payment of the Annual Bonus, if any, shall be deferred until
the completion of the fiscal year. Payment of the Annual Bonus at the end of the
fiscal year or a Quarterly Payment, each when due, shall be made within forty
five (45) days of the completion of the fiscal quarter or fiscal year, as the
case may be. To the extent the Annual Bonus is due to Employee at the completion
of the fiscal year (including the Holdback), such payment shall be less any
Quarterly Payments received by Employee during the fiscal year. To the extent
that any payment received by the Employee in a fiscal year is in excess of the
Annual Bonus due for such fiscal year, such excess amount shall be credited
toward the amount due Employee for the Annual Bonus for the succeeding fiscal
year.

                  (c) CAR ALLOWANCE. The Company shall provide Employee with a
car allowance of $1,000 per month during the Agreement Term.


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<PAGE>


         6. BUSINESS EXPENSES. Employee shall be reimbursed by the Company for
those business expenses incurred by him, which are reasonable and necessary for
the Employee to perform his duties under this Agreement, upon submission of such
accounts and records as may reasonably be required by the policies established
from time to time by the Company.

         7. CONFIDENTIALITY. Employee shall keep confidential, except as the
Company may otherwise consent in writing, and not disclose or make any use of
except for the benefit of the Company and in no way harmful to the Company, at
any time either during the term of this Agreement or thereafter, any trade
secrets, knowledge, data, intellectual property or other information of the
Company relating to the Company and its businesses, including, without
limitation, information regarding cost of new accounts, customer lists, customer
activity rates and other customer information, technology (hardware and
software), discoveries, processes, algorithms, mask works, strategies, products,
processes, know how, technical data, designs, formulas, test data, business
plans, marketing plans and advertising results or other subject matter
pertaining to any business of the Company or any of its clients, customers,
consultants, licensees or affiliates which Employee may produce, obtain or
otherwise learn of during the course of Employee's performance of services
(collectively "CONFIDENTIAL INFORMATION"). Employee shall not deliver,
reproduce, or in any way allow any such Confidential Information to be delivered
to or used by any third parties without the specific direction or consent of a
duly authorized representative of the Company, except in connection with the
discharge of his duties thereunder. The terms of this paragraph shall survive
termination of this Agreement. Notwithstanding anything to the contrary herein,
Employee shall not have any obligation to keep confidential any information
that: (a) is required by law or regulation to be disclosed by Employee, or (b)
is required to be disclosed by Employee to any government agency or person to
whom disclosure is required by judicial or administrative process.

         8. RETURN OF CONFIDENTIAL MATERIAL. Upon the completion or other
termination of Employee's services for the Company, Employee shall promptly
surrender and deliver to the Company all records, materials, equipment,
drawings, documents, notes and books and data of any nature pertaining to any
invention, trade secret or Confidential Information of the Company or to
Employee's services, and Employee will not take with him any description
containing or pertaining to any Confidential Information, knowledge or data of
the Company which Employee may produce or obtain during the course of his
services. The terms of this paragraph shall survive termination of this
Agreement.

         9. OTHER OBLIGATIONS; CERTAIN REPRESENTATIONS.

                  (a) Employee acknowledges that the Company from time to time
may have agreements with other persons which impose obligations or restrictions
on the Company made during the course of work there under or regarding the
confidential nature of such work. Employee will be bound by all such obligations
and restrictions and will take all action necessary to discharge the obligations
of the Company there under.

                  (b) All of Employee's obligations under this Agreement shall
be subject to any applicable agreements with, and policies issued by the Company
to which Employee is subject, that are generally applicable to the five highest
paid executives of the Company.


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<PAGE>


                  (c) Employee represents and warrants that he has the legal
capacity to enter into this Agreement, is under no employment contract, bond,
confidentiality agreement, non-competition agreement, or any other obligation
that would violate or be in conflict with the terms and conditions of this
Agreement or encumber his performance of duties assigned to him by the Company.
Employee further represents and warrants that he has not signed or committed to
any employment or consultant duties or other obligations that would divert his
full attention from or conflict with from the duties assigned to him by the
Company.

                  (d) Employee holds all licenses required by the NASD, all
applicable self regulatory organizations, and all federal and state securities
and other laws necessary to perform services to the Company as contemplated by
this Agreement. All such licenses are in full force and effect, and Employee
covenants to take such action as is necessary to maintain all such licenses in
full force and effect during the term of this Agreement.

         10. TRADE SECRETS OF OTHERS. Employee represents that his performance
of all the terms of this Agreement as employee to the Company does not and will
not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by Employee in confidence or in trust, and Employee
will not disclose to the Company, or allow the Company to use, any confidential
or proprietary information or material belonging to any other person or entity.
Employee will not enter into any agreement, either written or oral, which is in
conflict with this Agreement.

         11. EMPLOYEE BENEFITS. During the Agreement Term, the Employee shall be
entitled to such insurance, disability and health and medical benefits and be
entitled to participate in such retirement plans or programs as generally made
available to employees of the Company pursuant to the policies of the Company;
provided that the Employee shall be required to comply with the conditions
attendant to such coverage by such plans and shall comply with and be entitled
to benefits only in accordance with the terms and conditions of such plans. The
Employee shall also be entitled to six (6) weeks paid vacation each year at such
times as does not interfere with Employee's performance of his duties hereunder.
Unused vacation days may be carried forward to subsequent years. Furthermore,
Employee will be entitled to at least nine (9) paid holidays each calendar year.
The Company will notify Employee on or about the beginning of each calendar year
with respect to the holiday schedule for that year. The Company may withhold
from any benefits payable to the Employee all federal, state, local and other
taxes and amounts as shall be permitted or required pursuant to law, rule or
regulation.

         12. DEATH AND DISABILITY.

                  (a) The Agreement Term shall terminate on the date of
Employee's death, in which event the Employee's Salary and reimbursable expenses
and benefits owing to Employee through the date of Employee's death shall be
paid to his estate. Employee's estate will not be entitled to any other
compensation upon termination of this Agreement pursuant to this Paragraph
12(a).


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<PAGE>


                  (b) If, during the Agreement Term, in the opinion of a duly
licensed physician acceptable to the Employee and the Company, the Employee
because of physical or mental illness or incapacity shall become substantially
unable to perform the duties and services required of him under this Agreement
for a period of six (6) or more consecutive months or an aggregate of nine (9)
months in any twelve-month period (the "Disability"), the Company may, upon at
least thirty (30) days' prior written notice (given at any time after the
expiration of such period) to the Employee of its intentions to do so, terminate
this Agreement as of such date as may be set forth in the notice. In case of
such termination, the Employee shall be entitled to receive his Salary and
reimbursable expenses and benefits owing to the Employee through the date of
termination. Employee will not be entitled to any other compensation upon
termination of this Agreement pursuant to this Paragraph 12(b).

         13. TERMINATION FOR CAUSE.

                  (a) The Company may terminate the employment of Employee under
this Agreement only for Cause (as hereinafter defined), Disability or the death
of the Employee during the Agreement Term. Upon such termination, the Company
shall be released from any and all further obligations under this Agreement,
except that the Company shall be obligated to pay Employee his Salary,
reimbursable expenses and benefits owing to the Employee through the date of
termination.

                  (b) As used herein, the term "Cause" shall mean:

                           (i) a material breach or material default by Employee
of the terms of (A) this Agreement (except any such breach or default that is
caused by the Disability or death of Employee), which breach or default remains
uncured after twenty (20) days following Employee's receipt from the Company of
written notice specifying such breach or default or (B) any material policy of
the Company (including, without limitation, the Company's policies with respect
to insider trading and other trading activities);

                           (ii) gross negligence or willful misconduct by
Employee or the breach of a fiduciary duty of Employee to the Company in the
performance of his duties hereunder;

                           (iii) the commission by Employee of an act of fraud,
embezzlement or any other crime by Employee in the performance of his duties as
an employee hereunder;

                           (iv) conviction of Employee of a felony or any other
crime that could materially interfere with the performance of Employee's duties
hereunder or materially damages the reputation of the Company;

                           (v) failure to hold and maintain in full force and
effect during the term of this Agreement, all licenses required by the NASD, all
applicable self regulatory organizations, and all federal and state securities
and other laws necessary to perform services to the Company as contemplated by
this Agreement.


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<PAGE>



         14.      CHANGE OF CONTROL.

         (a) In the event that there occurs a "Change of Control" (as defined
below) during the term of this Agreement and as a result thereof the Employee
resigns for Good Reason or this Agreement is terminated, the Company expressly
agrees that upon such resignation or termination, the Company shall pay to the
Employee a sum equal to the Salary due Employee for each calendar year remaining
during the Agreement Term and any Annual Bonus due and not yet paid as of the
Termination Date. As used herein, the term "Change of Control" shall mean,
subject to Section 14(b) hereof, either

         (i)      a sale of all or substantially all of the assets of the
                  Company in one transaction or a series of transactions other
                  than by way of a public offering of the Company's securities,

         (ii)     a merger or consolidation of the Company, whereby the holders
                  of equity securities of the Company prior to the transaction,
                  hold less than 50% of the total voting power of the surviving
                  corporation, or

         (iii)    the sale or transfer of shares of the Company by the Company
                  and/or any one or more of its shareholders, in one transaction
                  or a series of transactions, to one or more parties under
                  circumstances whereby the holders of equity securities of the
                  Company prior to the transaction, hold less than 50% of the
                  total voting power of the surviving corporation.

         (b) Notwithstanding anything set forth herein to the contrary, in the
event that the Employee, as a member of the Company's Board of Directors, votes
in favor of any of the transactions described in either Section 14(a)(i),
14(a)(ii) or 14(a)(iii) above, then in such event, there shall not be deemed to
have occurred a "Change of Control" for the purposes of this Agreement.

         (c) As used herein, the term "Good Reason" shall mean (i) reduction in
the Employee's (then) current Salary as in effect immediately preceding the
Change in Control; (ii) diminution, reduction or other adverse change in the
Annual Bonus or other incentive compensation opportunities available to the
Employee immediately preceding the Change in Control; (iii) significant
diminution of the Employee's title, position, authority or responsibility
immediately preceding the Change in Control; or (v) assignment to the Employee
of duties incompatible with the position occupied by the Employee immediately
preceding the Change in Control.

         15. REMEDY. It is mutually understood and agreed that Employee's
services are special, unique, unusual, extraordinary and of an intellectual
character giving them a peculiar value, the loss of which cannot be reasonably
or adequately compensated in damages or in an action at law. Accordingly, in the
event of any breach of this Agreement by Employee, the Company shall be entitled
to equitable relief by way of injunction or otherwise in addition to damages the
Company may be entitled to recover. In addition, the Company shall be entitled
to reimbursement from Employee, upon request, of any and all reasonable
attorneys' fees and expenses incurred by it in enforcing any term or provision
of this Agreement.


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<PAGE>


         16.      REPRESENTATIONS AND WARRANTIES OF EMPLOYEE.

                  (a) In order to induce the Company to enter into this
Agreement, Employee hereby represents and warrants to the Company as follows:
(i) Employee has the legal capacity and unrestricted right to execute and
deliver this Agreement and to perform all of his obligations hereunder; (ii) the
execution and delivery of this Agreement by Employee and the performance of his
obligations hereunder will not violate or be in conflict with any fiduciary or
other duty, instrument, agreement, document, arrangement or other understanding
to which Employee is a party or by which he is or may be bound of subject; and
(iii) Employee is not a party to any instrument, agreement, document,
arrangement or other understanding with any person (other than the Company)
requiring or restricting the use or disclosure of any confidential information
or the provision of any employment, consulting or other services.

                  (b) Employee hereby agrees to indemnify and hold harmless the
Company from and against any and all losses, costs, damages and expenses
(including, without limitation, its reasonable attorneys' fees) incurred or
suffered by the Company resulting from any breach by Employee of any of his
representations or warranties set forth herein.

         17. NOTICES. All notices given hereunder shall be in writing and shall
be deemed effectively given when mailed, if sent by registered or certified
mail, return receipt requested, address to Employee at his address set forth on
the first page of this Agreement and to the Company at its address set forth on
the first page of this Agreement, Attention: Daisy Minott, with a copy to
Ellenoff Grossman & Schole, LLP, 370 Lexington Avenue, 19th Floor, New York, New
York 10016, Attention: Eden Rohrer, Esq., or at such address as such party shall
have designated by a notice given in accordance with this Paragraph 6.

         18. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties with respect to its subject matter and no change,
alteration or modification hereof may be made except in writing signed by the
parties hereto. Any prior or other agreements, promises, negotiations,
understandings or representations not expressly set forth in this Agreement are
of no force or effect.

         19. SEVERABILITY. If any provision of this Agreement shall be
unenforceable under any applicable law, then notwithstanding such
unenforceability, the remainder of this Agreement shall continue in full force
and effect.

         20. AMENDMENTS, MODIFICATIONS, WAIVERS.No amendment, modification or
waiver of any provisions of this Agreement shall be effective unless the same
shall be in writing and signed by each of the parties hereto, and then such
waiver or consent shall be effective only in specific instances and for the
specific purpose for which given.


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<PAGE>


         21. ASSIGNMENT. Neither this Agreement, nor any of Employee's rights,
powers, duties or obligations hereunder, may be assigned by Employee. This
Agreement shall be binding upon and inure to the benefit of Employee and his
heirs and legal representatives and the Company and its successors and assigns.
Successors of the Company shall include, without limitation, any corporation or
corporations acquiring, directly or indirectly, all or substantially all of the
assets of the Company, whether by merger, acquisition, consolidation, purchase
or otherwise, and such successor shall thereafter be deemed "the Company" for
purposes hereof.

         22. APPLICABLE LAW. This Agreement shall be deemed to have been made,
drafted, negotiated and the transactions contemplated hereby consummated and
fully performed in the State of New Jersey and shall be governed by and
construed in accordance with the laws of the State of New Jersey, without regard
to the conflicts of law rules thereof.

         23. JURISDICTION AND VENUE. It is hereby irrevocably agreed that all
disputes or controversies between the Company and Employee arising out of, in
connection with or relating to this Agreement must be brought in the New Jersey
Superior Court, Hudson County or in the United States District Court for the
District of New Jersey (if jurisdiction is available in such court). Each party
irrevocably and unconditionally commits to the in personam jurisdiction of such
courts and waives, to the fullest extent permitted by law, any objections that
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in such courts, any claim that any such suit and action or
proceeding brought in such court has been brought in an inconvenient forum. In
any suit, action or proceeding, each party waives, to the fullest extent it may
effectively do so, personal service of any summons, compliant or other process
and agrees that the service thereof may be made by certified or registered mail,
addressed to such party at its address set forth in Section 6 hereof.

         24. FULL UNDERSTANDING. Employee represents and agrees that he fully
understands his right to discuss all aspects of this Agreement with his private
attorney, that to the extent, if any that he desired, he availed himself of this
right, that he has carefully read and fully understands all provisions of this
Agreement, that he is competent to execute this Agreement, that his agreement to
execute this Agreement has not been obtained by any duress and that he freely
and voluntarily enters into it, and that he has read this document in its
entirety and fully understands the meaning, intent and consequences of this
document, which is that it constitutes and agreement of employment.

         25. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same agreement.



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<PAGE>


         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.



                                   HUDSON HOLDING CORPORATION


                                   By: /S/ Keith R. Knox
                                       -----------------------------------------
                                       Name: Keith R. Knox
                                       Title: President



                                   EMPLOYEE


                                   /S/ Martin C. Cunningham
                                   --------------------------------------------
                                   Martin C. Cunningham





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