FIRST ALBANY COMPANIES INC. DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES

1.1

“Aggregate Vested Balance” or “Aggregate Vested Benefit” shall mean, with respect to the Plan Accounts of any Participant as of a given date, the sum of the amounts that have become vested under all of the Participant’s Plan Accounts, as adjusted to reflect all applicable Investment Adjustments and all prior withdrawals and distributions, in accordance with Article 3 of the Plan and the provisions of the applicable Enrollment Forms.

1.2

“Amended Annual Election Form” shall mean the Amended Annual Election Form required by the Committee to be signed and submitted by a Participant to effect a permitted change in the elections previously made by the Participant under any Annual Election Form.

1.3

“Amended Distribution Election Form” shall mean the Amended Distribution Election Form required by the Committee to be signed and submitted by a Participant to effect a permitted change in the Distribution Election previously made by the Participant under any Distribution Election Form.

1.4

“Annual Company Match” shall mean the aggregate amount credited by the Company to a Participant in respect of a particular Plan Year under Section 3.02.

1.5

“Annual Company Match Account” shall mean a Participant’s Annual Company Match for a Plan Year, as adjusted to reflect all applicable Investment Adjustments and all prior distributions and withdrawals.

1.6

“Annual Deferral Account” shall mean a Participant’s Annual Participant Deferral for a Plan Year, as adjusted to reflect all applicable Investment Adjustments and all prior distributions and withdrawals.

1.7

“Annual Deferral Agreement” shall mean the Annual Deferral Agreement required by the Committee to be signed and submitted by a Participant in connection with the Participant’s deferral election with respect to a given Plan Year.

1.8

“Annual Discretionary Allocation” shall mean the aggregate amount credited by the Company to a Participant in respect of a particular Plan Year under Section 3.03.

1.9

“Annual Discretionary Allocation Account” shall mean a Participant’s Annual Discretionary Allocation for a Plan Year, as adjusted to reflect all applicable Investment Adjustments and all prior distributions and withdrawals.

1.10

“Annual Election Form” shall mean the Annual Election Form required by the Committee to be signed and submitted by a Participant in connection with the Participant’s deferral election with respect to a given Plan Year.

1.11

“Annual Participant Deferral” shall mean the aggregate amount deferred by a Participant in respect of a particular Plan Year under Section 3.01.

1.12

“Base Annual Salary” shall mean the annual base salary payable to a Participant by an Employer in cash in respect of services rendered during a Plan Year, including any Elective Deductions, but excluding Bonus Amounts, Commission Payouts or other additional incentives or awards payable to the Participant.

1.13

“Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 10, that are entitled to receive a Participant’s Aggregate Account Balance under this Plan in the event of the Participant’s death.

1.14

“Beneficiary Designation Form” shall mean the Beneficiary Designation Form or Amended Beneficiary Designation Form last signed and submitted by a Participant and accepted by the Committee.

1.15

“Board” shall mean the board of directors of the Company.

1.16

“Bonus Amounts” shall mean Discretionary Bonus Amounts and Guaranteed Bonus Amounts.

1.17

“Change in Control” shall mean the earliest to occur of the following events:

(a)

The consummation of any transaction or series of transactions as a result of which any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) other than an “Excluded Person” (as hereinafter defined) has or obtains ownership or control, directly or indirectly, of fifty percent (50%) or more of the combined voting power of all securities of the Company or any successor or surviving corporation of any merger, consolidation or reorganization involving the Company (the “Voting Securities”). The term “Excluded Person” means any one or more of the following: (i) the Company or any majority-owned subsidiary of the Company, (ii) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any majority-owned subsidiary of the Company, (iii) any Person who as of the initial effective date of this Plan owned or controlled, directly or indirectly, ten percent (10%) or more of the then outstanding Voting Securities, or any individual, entity or group that was part of such a Person;

(b)

A merger, consolidation or reorganization involving the Company as a result of which the holders of Voting Securities immediately before such merger, consolidation or reorganization do not immediately following such merger, consolidation or reorganization own or control, directly or indirectly, at least fifty percent (50%) of the Voting Securities in substantially the same proportion as their ownership or control of the Voting Securities immediately before such merger, consolidation or reorganization; or

(c)

The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a majority-owned subsidiary of the Company).

1.18

“Claimant” shall have the meaning set forth in Section 13.1.

1.19

“Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

1.20

“Commission Payouts” shall mean the amounts payable to a Participant by an Employer in cash in respect of services rendered during a Plan Year under any commission scheme or commission draw arrangement, including any Elective Deductions, but excluding Bonus Amounts, stock-related awards and other non-monetary incentives.

1.21

“Committee” shall mean the committee described in Article 11.

1.22

“Company” shall mean First Albany Companies Inc., a New York corporation, and any successor to all or substantially all of its assets or business.

1.23

“Company Stock” shall mean the common stock, par value $.01 per share, of the Company.

1.24

“Covered Termination” shall mean the Participant’s Termination of Employment within two (2) years following a Change in Control as a result of the Participant’s resignation for good reason or a termination by the Participant’s Employer without cause. For these purposes a Participant’s resignation for good reason shall mean a Participant’s resignation following (i) a diminution in the Participant’s status, title, position or responsibilities, or an assignment to the Participant of duties inconsistent with the Participant’s status, title or position other than for cause or (ii) a reduction of more than ten percent (10%) in the Participant’s aggregate annualized compensation rate solely as a result of a change adopted unilaterally by the Company. A Participant’s resignation shall not be treated as a resignation for good reason unless it occurs after one of the foregoing events and the Participant provides the Employer with written notice of the event within six (6) months of the occurrence of the event and within seven (7) days before the effective date of the Participant’s resignation and the Employer shall not have cured such event prior to such resignation. A termination by the Participant’s Employer without cause shall mean an involuntary termination of the Participant’s employment by Participant’s Employer other than a termination for cause. For this purpose, a termination for cause includes any termination by reason of the Participant’s (i) willful and continued failure to perform the duties of his or her position after receiving notice of such failure and being given reasonable opportunity to cure such failure; (ii) willful misconduct which is demonstrably and materially injurious to the Employer; (iii) conviction of a felony; or (iv) material breach of applicable federal or state securities laws, regulations or licensing requirements or the applicable rules or regulations of any self-regulatory body. No act or failure to act on the part of a Participant shall be considered “willful” unless it is done or omitted to be done in bad faith or without reasonable belief that the action or omission was in the best interest of the Employer. No termination shall be considered a termination for cause unless it is effected by a written notice to the Participant stating in detail the grounds constituting cause.

1.25

“Disability” shall mean a period of disability during which a Participant qualifies for total permanent disability benefits under the Participant’s Employer’s long-term disability plan, or, if a Participant does not participate in such a plan, a period of disability during which the Participant would have qualified for total permanent disability benefits under such a plan had the Participant been a participant in such a plan, as determined in the sole discretion of the Committee. If the Participant’s Employer does not sponsor such a plan, or discontinues to sponsor such a plan, Disability shall be determined by the Committee in its sole discretion.

1.26

“Disability Benefit” shall mean the benefit set forth in Article 9.

1.27

“Discretionary Bonus Amounts” shall mean such amounts that are determined in the sole discretion of an Employer and are payable in cash to a Participant in respect of services rendered during a Plan Year under any bonus or incentive plan or arrangement of an Employer, including any Elective Deductions, but excluding Commission Payouts, stock-related awards and other non-monetary incentives.

1.28

“Distribution Election” shall mean an election made in accordance with Section 5.01.

1.29

“Distribution Election Form” shall mean the Distribution Election Form required by the Committee to be signed and submitted by a Participant with respect to a Distribution Election.

1.30

“Election Form” shall mean, with respect to any Plan Account, the Annual Election Form or the Amended Annual Election Form last signed and submitted by the Participant and accepted by the Committee with respect to that Plan Account.

1.31

“Elective Deductions” shall mean deductions made from a Participant’s Base Annual Salary, Bonus Amounts and Commission Payouts for amounts voluntarily deferred or contributed by the Participant pursuant to all qualified and non-qualified compensation deferral plans, including, without limitation, amounts not included in the Participant’s gross income under Code Sections 125, 132(f)(4), 402(e)(3) and 402(h), provided, however, that all such amounts would have been payable in cash to the Employee had there been no such plan.

1.32

“Employee” shall mean a person who is an employee of any Employer.

1.33

“Employer” shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor.

1.34

“Enrollment Forms” shall mean, for any Plan Year, the Annual Deferral Agreement, the Annual Election Form, the Distribution Election Form, the Beneficiary Designation Form, the Subordination Agreement and any other forms or documents which may be required of a Participant by the Committee, in its sole discretion.

1.35

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

1.36

“Guaranteed Bonus Amounts” shall mean predetermined amounts that are not subject to Employer discretion and are payable in cash to a Participant in respect of services rendered during a Plan Year under any bonus or incentive plan or arrangement of an Employer, including any Elective Deductions, but excluding Commission Payouts, stock-related awards and other non-monetary incentives.

1.37

“Investment Adjustment” shall mean an adjustment made to the balance of any Plan Account in accordance with Section 3.05 to reflect the performance of an Investment Benchmark pursuant to which the value of the Plan Account is measured.

1.38

“Investment Benchmark” shall mean a benchmark made available under the Plan from time to time by the Committee for purposes of valuing Plan Accounts.

1.39

“Participant” shall mean any eligible Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs the applicable Enrollment Forms (and other forms required by the Committee), (iv) whose signed Enrollment Forms (and other required forms) are accepted by the Committee, (v) who commences participation in the Plan, and (vi) whose participation has not terminated. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have an account balance under the Plan, even if he or she has an interest in the Participant’s benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce.

1.40

“Plan” shall mean the First Albany Companies Inc. Deferred Compensation Plan For Key Employees (formerly known as the First Albany Companies Inc. Executive Officers Deferred Compensation Plan), which shall be evidenced by this instrument and by each Enrollment Form, as they may be amended from time to time.

1.41

“Plan Accounts” shall mean the Annual Deferral Accounts, Annual Company Match Accounts and Annual Discretionary Allocation Accounts established under the Plan.

1.42

“Plan Year” shall mean the period beginning on January 1 of each year and ending December 31.

1.43

“Reporting Person” shall mean an Employee who is subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended.

1.44

“Restricted Investment Benchmark” means an Investment Benchmark which is designated as a Restricted Investment Benchmark by the Committee at the time such Investment Benchmark is initially made available under the Plan.

1.45

“Subordinated Amount” shall mean, with respect to a Plan Year, that portion of a Participant’s Annual Participant Deferral, Annual Discretionary Allocation and Annual Company Match that are subject to the restrictions and limitations set forth in the Subordination Agreement executed by the Participant in respect of such Plan Year. A Participant’s Subordinated Amount shall not include (i) any portion of the Participant’s Annual Participant Deferral, Annual Discretionary Allocation and Annual Company Match that is allocated to an Investment Benchmark that tracks the performance of First Albany Companies Inc. Common Stock or that is otherwise payable in shares of First Albany Companies Inc. Common Stock or (ii) any earnings credited to a Participant’s Annual Participant Deferral Account, Annual Discretionary Allocation Account or Annual Company Match Account. For Plan Years prior to the 2002 Plan Year, Subordinated Amounts shall be determined based on a Participant’s Investment Benchmark elections that are in effect on December 31, 2001. For the 2002 Plan Year and thereafter, Subordinated Amounts shall be determined based on the Investment Benchmark election made by a Participant at the time of annual enrollment.” For each Participant that is a party to a Subordination Agreement for a given Plan Year, the Company shall, as soon as practicable after the end of such Plan Year, notify the New York Stock Exchange of the Subordinated Amount that was credited to the Participant’s Plan Accounts in respect of such Plan Year.

1.46

“Subordination Agreement” means the New York Stock Exchange Subordination Agreement required by the Committee to be signed and submitted by a Participant in connection with the Participant’s deferral election with respect to a given Plan Year.

1.47

“Survivor Benefit” shall mean the benefit set forth in Article 6.

1.48

“Termination of Employment” shall mean the severing of employment with all Employers, voluntarily or involuntarily, for any reason.

1.49

“Trust” shall mean the trust established in accordance with Article 14.

1.50

“Unforeseeable Financial Emergency” shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant’s property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee. In making its determination the Committee shall be guided by the prevailing authorities applicable under the Code.

1.51

“Vested Account Balance” shall mean, with respect to any Plan Account as of a given date, the sum of the amounts that have become vested, as adjusted to reflect all applicable Investment Adjustments and all prior withdrawals and distributions, in accordance with Article 3 of the Plan and the provisions of applicable Enrollment Forms.

1.52

“Years of Service” shall mean the total number of full Plan Years during which a Participant has been continuously employed by one or more Employers. Any partial Plan Year during which a Participant has been employed by an Employer shall not be counted.

3.01

Participant Deferrals.

(b)

Minimum Deferral. (i) Minimum. For each Plan Year the Committee may permit a Participant to elect to defer, as his or her Annual Participant Deferral, one or more of the following forms of compensation, payable to the Participant but not yet received during the Plan Year, in the following minimum amounts:

If an election is made for less than stated minimum amounts, or if no election is made, the amount deferred shall be zero.

                    (ii) Short Plan Year. If a Participant first becomes a Participant after the first day of a Plan Year, the minimum deferral of each of the Participant’s Base Annual Salary, Bonus Amounts and Commission Payouts shall be an amount equal to the minimum set forth above, multiplied by a fraction, the numerator of which is the number of complete months remaining in the Plan Year and the denominator of which is 12.

(c)

Maximum Deferral. (i) 2001 Plan Year and After. For each Plan Year, beginning with the 2001 Plan Year, the Committee may permit a Participant to elect to defer, as his or her Annual Participant Deferral, one or more of the following forms of compensation, payable to the Participant but not yet received during the Plan Year, up to the following maximum percentages:

                    (ii) Plan Years Prior to 2001 Plan Year. For each Plan Year prior to the 2001 Plan Year, the Committee permitted a Participant to elect to defer, as his or her Annual Participant Deferral, one or more of the following forms of compensation, payable to the Participant but not yet received during the Plan Year, up to the following maximum percentages:

(d)

Deferral Designations. (i) Base Annual Salary. A Participant may designate the amount of the Annual Participant Deferral to be deducted from his or her Base Annual Salary as either a percentage of his or her Base Annual Salary, a fixed dollar amount or a percentage of base salary up to a fixed dollar amount. Such amount shall be withheld from each regularly scheduled Base Annual Salary payment in equal amounts.

                    (ii) Bonus Amounts. A Participant may designate the amount of the Annual Participant Deferral to be deducted from his or her Bonus Amounts as either a percentage or a fixed dollar amount of specified Bonus Amounts expected by the Participant. If a Participant designates the Annual Participant Deferral to be deducted from any Bonus Amount as a fixed dollar amount and such fixed dollar amount exceeds the Bonus Amount actually payable to the Participant, the entire amount of such Bonus Amount shall be withheld.

                    (iii) Commission Payouts. A Participant may designate the amount of the Annual Participant Deferral to be deducted from his or her Commission Payouts as either a percentage of his or her Commission Payouts, a fixed dollar amount or a percentage of commission Payouts up to fixed dollar amount. Such amount shall be withheld from the Commission Payout portion of each regularly scheduled Commission Payout payment in equal amounts.