EX-10.6: EMPLOYMENT AGREEMENT

Exhibit 10.6

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 LEE FENSTERSTOCK (“Executive”).

WITNESSETH :

          WHEREAS, Company desires to employ Executive as its Chairman and Chief Executive 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 (“Recapitalization Transaction”).

          (b) 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”). The Employment Period shall automatically be extended for one additional year upon the third anniversary of the Effective Date without the necessity of any affirmative action by any party, unless either party provides at least six (6) months’ advance written notice to the other party that the Employment Period will not be extended. 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 Chairman and Chief Executive Officer of Company. Executive shall have the duties, responsibilities and authority commensurate with such position and such other duties and responsibilities as may be reasonably assigned to Executive by Company’s Board of Directors (“Board”) or that are otherwise set forth in Company’s By-Laws. Within thirty (30) days of the Effective Date, the Board shall appoint Executive as a member and Chairman 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 the Board 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 Fifty Thousand Dollars ($350,000) 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 begins during the Employment Period; provided , that ¸ Executive’s bonus with respect to the fiscal year that begins prior to the first anniversary of the Effective Date shall be pro-rated to correspond to the portion of such fiscal year that follows the first anniversary of the Effective Date. 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 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: 1,000,000 shares		10% upon closing of Recapitalization Transaction		All shares settle on third anniversary of closing
		30% on first anniversary of closing
		30% on second anniversary of closing
		30% on third anniversary of closing
June 30, 2008: 250,000 shares		One-third on June 30, 2009		All shares settle on June 30, 2011
		One-third on June 30, 2010
		One-third on June 30, 2011
January 1, 2009, Based Upon Achieving Performance Targets:		One-third on January 1, 2010		All shares settle on January 1, 2012
250,000 shares		One-third on January 1, 2011
		One-third on January 1, 2012
June 9, 2009: 250,000 shares		One-third on June 30, 2010		All shares settle on June 30, 2012
		One-third on June 30, 2011
		One-third on June 30, 2012
January 1, 2010, Based Upon Achieving Performance Targets:		One-third on January 1, 2011		All shares settle on January 1, 2013
250,000 shares		One-third on January 1, 2012
		One-third 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; provided , that , RSUs may be granted on the day of termination as provided in Section 5(d)(iii) of this Agreement.

          (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 to the following payments and benefits and Company shall have no further obligations to Executive under this Agreement:

          (i) Executive shall be entitled to receive any accrued but unpaid Base Salary through the last day of the Employment Period, and 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;

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

          (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.

           (b) Termination By Executive Without Good Reason . Executive may resign from Company at any time 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 to the following payments and benefits and Company shall have no further obligations to Executive under this Agreement:

          (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 and 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

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

           (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 to the following payments and benefits and Company shall have no further obligations to Executive under this Agreement:

          (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 other bonus with respect to any other 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) Subject to Subsection (c)(iv) of this Section 5, 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

          (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 executes a settlement agreement and release in such form as may be requested by Company which includes, without limitation, a restrictive covenant 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.

           (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 Chairman and Chief Executive Officer, or any other action by Company which results in a diminution in such position, authority, duties or responsibilities, 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 to Company; or

          (F) A Change of Control occurs and Executive does not continue thereafter as the most senior executive officer of the business of the Company as conducted immediately prior to the Change of Control. For purposes of this Section 5, “Change of Control” shall mean a transaction or event as a result of which MatlinPatterson Global Opportunities Partners II, L.P. (and/or one or more of its affiliates) shall no longer have the right to elect all the members of the Board.

          (ii) In the event of termination by Executive for Good Reason for any of the reasons set forth in Subsections (d)(i)(A) through (E)