gbl8kpromnote.htm


    NEITHER
THIS CONVERTIBLE PROMISSORY NOTE (THIS “NOTE”) NOR THE SHARES INTO WHICH THIS
NOTE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE “1933 ACT”), AND EXCEPT FOR ANY TRANSFERS SPECIFICALLY
AUTHORIZED UNDER THE TERMS OF THIS NOTE, NEITHER THIS NOTE NOR SUCH SHARES MAY
BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT
REGISTRATION THEREOF UNDER THE 1933 ACT OR COMPLIANCE WITH RULE 144 OR
RULE 144A PROMULGATED UNDER THE 1933 ACT, OR UNLESS GAMCO INVESTORS, INC.
HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO GAMCO INVESTORS,
INC., THAT SUCH REGISTRATION IS NOT REQUIRED.  TRANSFER OF THIS NOTE
OR ANY INTEREST HEREIN IS ALSO SUBJECT TO RESTRICTIONS UNDER THE TERMS
HEREOF.

     

     

    CONVERTIBLE PROMISSORY
NOTE

     

    
      	 $60,000,000.00	 Dated:  October
      2, 2008
	 	 Rye, New
      York
	 	 


    

     

    FOR VALUE
RECEIVED, the undersigned, GAMCO INVESTORS, INC., a New York corporation (“GAMCO”), promises to pay to
the order of CASCADE INVESTMENT, L.L.C., a Washington limited liability company
(“Cascade”), or its
permitted registered assigns or at such other place or places as the Holder (as
defined below) may designate in writing, on October 2, 2018 (the “Stated Maturity”), the
principal sum of SIXTY MILLION and NO/100 DOLLARS ($60,000,000) minus the
principal amount converted or sold pursuant to the Put Option, the Change of
Control Put Option or the Fundamental Change Put Option (as each such term is
defined below) (such amount, as of any determination date, the “Unpaid Principal Amount”) on
or before October 2, 2018, and to pay interest thereon from and including
October 2, 2008 (the “Issue
Date”) or from the most recent Interest Payment Date (as defined below)
to which interest has been paid or duly provided for, semi-annually on March 31
and September 30 in each year, commencing March 31, 2009, and at Maturity (each,
an “Interest Payment
Date”) at the rate of 6.5% per annum until the principal hereof is paid
or made available for payment; provided, however, that (i)
notwithstanding anything in this Note to the contrary the amount payable to the
Holder at Stated Maturity shall be reduced by an amount equal to (A) the Teton
Value (as defined below) minus (B) the
aggregate Teton Deductions (as defined below) with respect to all prior
exercises of the Put Option, the Change of Control Put Option and the
Fundamental Change Put Option (the “Teton Adjustment”),
(ii) upon the occurrence and during the continuance of an Event of Default
(as defined below) this Note and (iii) any principal and any such
installment of interest which is overdue, in each case shall bear interest at
the rate of 15% per annum (or, if less, the maximum interest rate permitted by
the laws of the State of Washington or any other applicable
jurisdiction).  The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will be paid to the Person in whose
name this Note is registered at the close of business on the day immediately
prior to such Interest Payment Date (whether or not a Business
Day).  Payment of the principal of and interest on this Note will be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.

     

    Any
payments in respect of this Note shall first be applied to Enforcement Costs (as
defined below), then to interest and then to principal.  If it is ever
determined that any rate of interest payable in respect of this Note exceeds the
maximum rate (if any) prescribed by applicable law, then any portion of interest
payments representing any amounts in excess of said maximum shall be applied as
provided in the preceding sentence.

     

    As used
herein, “Maturity” means
the date on which the principal of this Note becomes due and payable as provided
herein, whether at its Stated Maturity, by declaration of acceleration or
otherwise, “Holder”
means, at any time, the person in whose name this Note is registered in the Note
Register (as defined below) and “Business Day” means any day
other than a Saturday, a Sunday or any other day on which banking institutions
in the Borough of Manhattan, The City of New York are authorized or
required by law or executive order to be closed.

     

    This Note
was issued by GAMCO pursuant to that certain Note Purchase Agreement, dated as
of October 2, 2008 (the “Purchase Agreement”), among
GAMCO, Cascade and the Gabelli Stockholders.  Capitalized terms not
otherwise defined in this Note shall have the meaning set forth in the Purchase
Agreement, which definitions are incorporated herein.

     

    The
Holder agrees to engage in good faith discussions with the GAMCO regarding the
possible subordination of the Note in October 2009.

     

    No Redemption or Prepayment
Prior to October 2, 2013

     

    GAMCO
agrees and acknowledges that the conversion feature of this Note during the term
of the Note is a valuable right and that the Holder would not have purchased
this Note without assurances that the Note would not be called or prepaid by
GAMCO.  Accordingly, GAMCO acknowledges and agrees that prior to
October 2, 2013 it shall not be entitled to and will not, without the consent of
the Holder, make any prepayments of principal on this Note other than pursuant
to an acceleration of this Note or Forced Conversion (as hereinafter defined),
in each case as provided below.  GAMCO may redeem this Note in whole
but not in part on any date on or after October 2, 2013 (the “Redemption Date”) if
(i) at least 30 days’ prior to the Redemption Date, GAMCO delivers to
Holder a written notice stating that it intends to effect such a redemption and
specifying the Redemption Date, (ii) on the Redemption Date, GAMCO delivers
to Holder a certificate, dated the Redemption Date, duly executed and delivered
by the chief executive officer of GAMCO certifying that, to the best of his
knowledge after reasonable investigation, neither he nor GAMCO is then in
possession of any non-public information concerning GAMCO, any of its
subsidiaries or any of their businesses or operations which could reasonably be
expected to have a material positive effect on the market price (or, if no such
market price exists, the fair market value) of the Common Stock or other
consideration issuable upon conversion of the Note and (iii) on the
Redemption Date, GAMCO pays to Holder by wire transfer of immediately available
funds cash in an amount equal to (A) (i) 101% of the Unpaid Principal Amount
minus (ii) the Teton Adjustment plus (B) all accrued but unpaid interest thereon
to but excluding the Redemption Date (the delivery of such notice and
certificate and the making of such payment are referred to herein collectively
as the “Required
Actions”).  If the market price of the Common Stock could not
reasonably be expected to exceed the then current Conversion Price after
disclosure of any non-public information concerning GAMCO, any of its
subsidiaries or any of their businesses of operations, then such non-public
information shall be conclusive presumed not to have a material positive effect
for purposes of the immediately preceding sentence.  This Note will be
fully discharged and cease to have any further legal force or effect if and when
GAMCO has fully performed all of the Required Actions on the Redemption Date,
and the Holder agrees to return this Note to GAMCO promptly following such full
performance.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Events of
Default

     

    “Event of Default”, wherever
used with respect to this Note, means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Authority):

     

    
      	
               
      

            	
              (a)

            	
              Payment
      Default.  GAMCO shall fail to pay or cause to be paid all
      or any portion of the principal of or interest on this Note when it
      becomes due and payable, and, in the event of failure to pay interest on
      the Note, such failure continues for 10 days and time for payment has
      not been extended or deferred by the Holder;
or

            


    

     

    
      	
               
      

            	
              (b)

            	
              Escrow Agreement
      Default.  The Escrow Agent shall fail to honor a request
      for disbursement of the funds under the Escrow Agreement to Cascade, or
      GAMCO shall breach its obligations with respect to the Escrow Agreement in
      Section 4.3 of the Purchase Agreement, and such failure continues for
      5 days and time for payment has not been extended or deferred by the
      Holder.

            


    

     

    
      	
               
      

            	
              (c)

            	
              Put Option
      Default.  GAMCO shall fail to pay or cause to be paid all
      or any portion of the Put Consideration when it becomes due and payable,
      and such failure continues for 5 days and time for payment has not
      been extended or deferred by the Holder;
or

            


    

     

    
      	
               
      

            	
              (d)

            	
              Change of Control Put
      Option or Fundamental Change Put Option Default.  GAMCO
      shall fail to pay or cause to be paid all or any portion of the Change of
      Control Put Consideration or the Fundamental Change Put Consideration when
      it becomes due and payable; or

            


    

     

    
      	
               
      

            	
              (e)

            	
              Breach of
      Representation or Warranty.  Any representation or
      warranty made by GAMCO in the Purchase Agreement shall prove to have been
      untrue or misleading when made in any respect that is material and adverse
      to the value of the Holder’s investment in the Note or the Conversion
      Shares; provided,
      however, that this shall constitute an Event of Default only if
      Cascade or one of its Affiliates (as defined below) is the Holder and if
      the Holder accelerates this Note as provided below during the period in
      which any such representation and warranty survives as provided in the
      Purchase Agreement; or

            


    

     

    
      	
               
      

            	
              (f)

            	
              Breach of Other
      Covenants or Failure of any Condition.  GAMCO shall fail
      to perform, keep or observe any agreement or covenant contained in this
      Note or the Purchase Agreement that is not covered by clauses (a)
      through (d) above, and any such failure shall remain unremedied for thirty
      (30) days after written notice thereof shall have been given to GAMCO
      by the Holder; provided,
      however, that if any such failure is not susceptible to cure within
      30 days and GAMCO commences to cure such failure within said 30-day
      period, then no Event of Default shall be deemed to have occurred if GAMCO
      diligently prosecutes said cure thereafter to completion and cures said
      failure by the sixtieth (60th) day after the date of said notice;
      or

            


    

     

    
      	
               
      

            	
              (g)

            	
              Cross Defaults
      (Payment and Other).  GAMCO or any of its Subsidiaries
      that are at the time significant subsidiaries of GAMCO within the meaning
      of Rule 1-02(w) of Regulation S-X promulgated by the Securities
      and Exchange Commission (the “SEC”) as of the date of
      this Note (each, a “Significant Subsidiary”)
      shall be in default under indebtedness for borrowed money with an
      aggregate principal amount of twenty five million dollars ($25,000,000) or
      more to any person or persons and such default (i) shall constitute a
      failure to make any payment of or with respect to such indebtedness or
      (ii) permits the holder thereof to accelerate the payment of such
      indebtedness or otherwise causes such indebtedness to become due and
      payable prior to its stated maturity.  Notwithstanding the
      foregoing, there shall not be an Event of Default under this
      section (f) until expiration of, without cure, any period for cure
      contained in any other agreement regarding such indebtedness;
      or

            


    

     

    
      	
               
      

            	
              (h)

            	
              Judgments.  A
      final judgment or final order (not covered by insurance, treating
      deductibles, self-insurance and retentions as not so covered) for the
      payment of money in excess of twenty-five million dollars ($25,000,000) in
      the aggregate for all such judgments and orders is entered by a court or
      courts of competent jurisdiction against GAMCO or any of its Significant
      Subsidiaries and shall not be paid or discharged, and there shall be a
      period of 60 consecutive days after the final judgment or order that
      causes such aggregate amount to exceed twenty-five million dollars
      ($25,000,000) during which a stay of enforcement of such final judgment or
      order is not in effect; or

            


    

     

    
      	
               
      

            	
              (i)

            	
              Involuntary Bankruptcy
      Events.  The entry by a court having jurisdiction in the
      premises of a decree or order (A) for relief in respect of GAMCO or
      any of its Significant Subsidiaries (each, a “Subject Entity”) in an
      involuntary case or proceeding under any applicable Federal or state
      bankruptcy, insolvency, reorganization or other similar law or
      (B) adjudging any Subject Entity bankrupt or insolvent, or approving
      as properly filed a petition seeking reorganization, arrangement,
      adjustment or composition of or in respect of any Subject Entity under any
      applicable Federal or state law, or appointing a custodian, receiver,
      liquidator, assignee, trustee, sequestrator or other similar official of
      any Subject Entity or of any substantial part of any property of any
      Subject Entity, or ordering the winding up or liquidation of the affairs
      of any Subject Entity, and the continuance of any such decree or order
      unstayed and in effect for a period of 60 consecutive days;
      or

            


    

     

    
      	
               
      

            	
              (j)

            	
              Voluntary Bankruptcy
      Events.  Any Subject Entity commences a voluntary case or
      proceeding under any applicable Federal or state bankruptcy, insolvency,
      reorganization or other similar law or of any other case or proceeding to
      be adjudicated as bankrupt or insolvent, or the consent by any Subject
      Entity to the entry of a decree or order for relief in respect of it in an
      involuntary case or proceeding under any applicable Federal or state
      bankruptcy, insolvency, reorganization or other similar law or to the
      commencement of any bankruptcy or insolvency case or proceeding against
      it, or the filing by any Subject Entity of a petition or answer or consent
      seeking reorganization or relief under any applicable Federal or state
      law, or the consent by any Subject Entity to the filing of such a petition
      or to the appointment of or taking possession by a custodian, receiver,
      liquidator, assignee, trustee, sequestrator or other similar official of
      such Subject Entity or of any substantial part of such Subject Entity’s
      property, or the making by any Subject Entity of an assignment for the
      benefit of creditors, or the admission by any Subject Entity in writing of
      its inability to pay its debts generally as they become due, or the taking
      of corporate action by any Subject Entity in furtherance of any such
      action.

            


    

     

    If an
Event of Default (other than an Event of Default specified in clause (i) or
(j) above with respect to GAMCO) occurs and is continuing, the Holder may
declare (A) (i) the Unpaid Principal Amount of this Note minus (ii) the Teton
Adjustment and (B) all accrued and unpaid interest hereon to be immediately due
and payable.  If an Event of Default specified in clause (i) or
(j) above occurs with respect to GAMCO, the Unpaid Principal Amount of the Note
and all accrued and unpaid interest hereon shall automatically become and be
immediately due and payable without any declaration or other act on the part of
the Holder or any other Person.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Conversion
Rights

     

    The
Holder shall have the right to convert this Note as provided in Exhibit A
hereto, which Exhibit shall be incorporated by reference herein.

     

    If the
Closing Price (as hereinafter defined) of the Common Stock is at least 125%,
150%, 175% or 200%, as the case may be, of the Conversion Price (as hereinafter
defined) on each Trading Day (as hereinafter defined) during any period of
20 consecutive Trading Days (each, a “Qualified Trading Period”)
occurring within any six month period beginning on the Exercise Date (as
hereinafter defined) or any six month anniversary thereof and ending on the next
six month anniversary of the Exercise Date (each, a “Six Month Period”), then on
any date on or after the tenth Business Day following the last trading day of
any such Qualified Trading Period during such Six Month Period (each a “Conversion Date”) GAMCO may
convert any portion of the Unpaid Principal Amount which, together with the
aggregate principal amount of this Note that has been converted by the Holder on
or prior to such Conversion Date or by GAMCO pursuant to this provision with
respect to such Six Month Period, does not exceed the Maximum Conversion Amount
(as defined below) with respect to such Six Month Period, into fully paid and
nonassessable shares of Common Stock (calculated as to each conversion to the
nearest full share of Common Stock) at the Conversion Price in effect on the
applicable Conversion Date by delivering written notice to that effect to the
Holder on or prior to such Conversion Date; provided, however, that notwithstanding
the foregoing to the extent that any prior conversions by the Holder prevented
GAMCO from converting the full Maximum Conversion Amount with respect to any Six
Month Period and GAMCO caused the conversion of all of the Unpaid Principal
Amount that it was permitted to convert with respect to such Six Month Period,
then to such extent such prior conversions by the Holder shall not be taken into
account in calculating the Unpaid Principal Amount that GAMCO is entitled to
convert in any subsequent Six Month Period pursuant to the foregoing
provisions.  After any conversion pursuant to the foregoing, the
Holder shall have the right and option (the “Share Put Option”), but not
the obligation, exercisable by delivering a written notice (the “Share Put Notice”) to GAMCO no
later than the tenth day after the Conversion Date, to cause GAMCO to purchase
up to 50% of the Conversion Shares issued in such conversion (the “Forced Conversion Shares”) for
a purchase price per share in cash equal to the average of the Closing Prices
for the five Trading Days immediately following the date on which the Share Put
Notice is delivered to GAMCO (the “Share Put
Consideration”).  The closing of any Share Put Option will be
held at 10:00 A.M. at the principal executive offices of the Holder on the
later of the ninth Trading Day immediately following the date on which the Share
Put Notice is delivered to GAMCO or the first day on which all regulatory
approvals and requirements applicable to such closing shall have been obtained
or satisfied, or at such other time and place upon which the Holder and GAMCO
shall agree.  At such closing, GAMCO shall pay the Share Put
Consideration to the Holder in cash by wire transfer of immediately available
funds against the delivery to GAMCO of a certificate representing the Forced
Conversion Shares with respect to which the Share Put Option has been exercised,
duly endorsed to GAMCO or in blank, and concurrently with such delivery GAMCO
shall, or shall cause the applicable transfer agent for such shares to, duly
execute and deliver to the Holder a new share certificate representing the
number of Forced Conversion Shares with respect to which the Share Put Option
has not been exercised.

     

    The
“Maximum Conversion
Amount” means, with respect to any Six Month Period,
(i) $15 million, if the Closing Price during each of the
20 consecutive Trading Days during the first Qualified Trading Period in
such Six Month Period with respect to which GAMCO has effected a conversion
pursuant to the foregoing provisions (the “Qualified Trading Price”) is
at least 125% but less than 150% of the Conversion Price,
(ii) $30 million, if the Qualified Trading Price is at least 150% but
less than 175% of the Conversion Price, (iii) $45 million, if the
Qualified Trading Price is at least 175% but less than 200% of the Conversion
Price, or (iv) $60 million, if the Qualified Trading Price is at least
200% of the Conversion Price.

     

    Except as
otherwise provided above, any conversion pursuant to the foregoing clauses
(each, a “Forced
Conversion”) shall be made in accordance with the provisions of Exhibit A.  If
GAMCO effects a Forced Conversion, then on such Conversion Date the Holder shall
surrender the Note at the principal executive offices of GAMCO (which, if GAMCO
shall so require, shall be duly endorsed to GAMCO or in blank, or be accompanied
by proper instruments of transfer to GAMCO or in blank), accompanied by
irrevocable written notice to GAMCO specifying the name or names (with address
or addresses) in which a certificate or certificates evidencing the full number
of shares of Common Stock issuable upon such conversion are to be issued and
GAMCO shall deliver such certificate or certificates registered in the name(s)
and in the denominations set forth in such instructions, together with a cash
adjustment in respect of any fraction of a share of Common Stock and, if less
than all of the Unpaid Principal Amount is being converted, a new Note of like
tenor with an Unpaid Principal Amount equal to the portion not being
converted.  Any such conversion shall be deemed to have been made as
of the applicable Conversion Date, and the person or persons entitled to receive
the Common Stock deliverable upon conversion of this Note shall be treated for
all purposes as the record holder or holders of such Common Stock on such
date.

     

    Put
Option

     

    The
Holder shall have the right and option, but not the obligation, to cause GAMCO
to purchase all or any portion of the Unpaid Principal Amount of this Note (the
“Put Option”) on October
2, 2009 (the “Exercise
Date”) for a purchase price in cash (the “Put Consideration”) equal to
(i) 100% of the principal amount of the Note to be purchased plus accrued and
unpaid interest thereon to but excluding the Exercise Date minus (ii) the Teton
Deduction (as defined below). The Put Consideration shall be payable to the
Holder by wire transfer of immediately available funds on the Exercise Date
against the delivery to GAMCO of this Note duly endorsed to it or in blank;
provided, however, that if only a
portion of the principal amount of this Note is being purchased, then
concurrently with such delivery GAMCO shall duly execute and deliver to the
Holder a new Note of the same tenor as this Note but with a principal amount
equal to the principal amount of this Note not being purchased.  In
order to exercise the Put Option, the Holder must deliver a written notice of
its election to exercise to GAMCO at least 30 days prior to the Exercise
Date.  Notwithstanding the foregoing, if the Holder has not delivered
written notice of its election to exercise the Put Option in whole, the Holder
may change the Exercise Date to October 2, 2010 by delivering a written notice
of such change to GAMCO at least 30 days prior to October 2, 2009 and from and
after the delivery of such written notice the Exercise Date shall be deemed to
be October 2, 2010 for all purposes of this Note. The closing of any exercise of
the Put Option will be held at 10:00 A.M. at the principal executive
offices of the Holder on the Exercise Date, or at such other time and place upon
which the Holder and GAMCO shall agree.

     

     “Teton Deduction” shall mean,
with respect to any exercise of the Put Option, the Change of Control Put Option
or Fundamental Change Put Option, the product of (i) the Teton Value and (ii) a
fraction the numerator of which shall be the principal amount of the Note to be
purchased pursuant to such exercise and the denominator of which shall be
$60,000,000.

     

    Change of Control Put
Option

     

    If a
Change of Control or a Key Executive Change occurs at any time, the Holder shall
have the right and option, but not the obligation, to cause GAMCO to purchase on
the Change of Control Exercise Date (as defined below) all or any portion of the
Unpaid Principal Amount of this Note (the “Change of Control Put Option”)
for a purchase price in cash (the “Change of Control Put
Consideration”) equal to (i) 101% of the principal amount of the Note to
be purchased plus accrued and unpaid interest thereon to but excluding the
Change of Control Exercise Date minus (ii) the Teton
Deduction.  The Change of Control Put Consideration shall be payable
to the Holder by wire transfer of immediately available funds on the Change of
Control Exercise Date against the delivery to GAMCO of this Note duly endorsed
to it or in blank; provided,
however, that if only a portion of the principal amount of this Note is
being purchased, then concurrently with such delivery GAMCO shall duly execute
and deliver to the Holder a new Note of the same tenor as this Note but with a
principal amount equal to the principal amount of this Note not being
purchased.  GAMCO shall give the Holder prompt written notice if a
Change of Control or a Key Executive Change occurs (a “Notice”).  In order
to exercise the Change of Control Put Option with respect to any Change of
Control or Key Executive Change, the Holder must deliver a written notice of its
election to exercise to GAMCO within 30 days after it has received the
Notice relating thereto and the closing of any exercise of the Change of Control
Put Option will be held at 10:00 A.M. at the principal executive offices of the
Holder on the 30th day
after GAMCO receives such written notice, or at such other time and place upon
which the Holder and GAMCO shall agree (the “Change of Control Exercise
Date”).

     

    “Change of Control” means the
occurrence of any of the following:  (i) the sale, lease,
transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or more related transactions, of all or substantially all
of the properties and assets of GAMCO and its Subsidiaries, taken as a whole, to
any Person or group (as such term is defined for purposes of Rule 13d-5
under the Securities Exchange Act of 1934, as amended (the “1934 Act”) or any successor
rule), (ii) the adoption of a plan relating to the liquidation or
dissolution of GAMCO, (iii) the consummation of any transaction or other
event (including, without limitation, any merger or consolidation) the result of
which is that any “person” (as defined above), other than Mario J. Gabelli
and the Gabelli Entities (considered as a single Person solely for this
purpose), becomes the “beneficial owner” (as such term is defined in
Rule 13d-3 and Rule 13d-5 under the 1934 Act), directly or indirectly,
of more than 40% of the total voting power of all the then outstanding shares of
Voting Stock of GAMCO or any Person with which GAMCO consolidates or into which
GAMCO merges, and more of the total voting power of all such shares than is
beneficially owned at such time by Mario J. Gabelli and the Gabelli
Entities (considered as a single Person solely for this purpose), or
(iv) the first day on which a majority of the members of the Board of
Directors of GAMCO are not Continuing Directors.

     

    “Continuing Directors” means,
as of any date of determination, any member of the Board of Directors of GAMCO
who (i) was a member of such Board of Directors on the Issue Date or
(ii) was nominated for election or elected to such Board of Directors with
the approval, recommendation or endorsement of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election.

     

    “Key Executive Change” shall be
deemed to have occurred at any time that (for any reason) Mario J. Gabelli
ceases to provide the predominant executive leadership to GAMCO and its
Subsidiaries, taken as a whole.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Fundamental Change Put
Option

     

     

    If a
Fundamental Change (as defined below) occurs prior to October 2, 2013, then the
Holder shall have the right and option, but not the obligation, to cause GAMCO
to purchase on the Fundamental Change Exercise Date (as defined below) all or
any portion of the Unpaid Principal Amount of this Note (the “Fundamental Change Option”)
for a purchase price in cash (the “Fundamental Change Put
Consideration”) equal to (i) the Fundamental Change Value (as defined
below) of the principal amount of this Note to be purchased plus accrued and
unpaid interest thereon to but excluding the Fundamental Change Exercise Date
minus (ii) the
Teton Deduction. The Fundamental Change Put Consideration shall be payable to
the Holder by wire transfer of immediately available funds on the Fundamental
Change Exercise Date against the delivery to GAMCO of this Note duly endorsed to
it or in blank; provided,
however, that if only a portion of the principal amount of this Note is
being purchased, then concurrently with such delivery GAMCO shall duly execute
and deliver to the Holder a new Note of the same tenor as this Note but with a
principal amount equal to the principal amount of this Note not being purchased.
GAMCO shall give the Holder prompt written notice if a Fundamental Change occurs
(a “Fundamental Change
Notice”). In order to exercise the Fundamental Change Put Option with
respect to any Fundamental Change, the Holder must deliver a written notice of
its election to exercise to GAMCO within 30 days after it has received the
Fundamental Change Notice relating thereto and the closing of any exercise of
such Fundamental Change Option will be held at 10:00 A.M. at the principal
executive offices of the Holder on the 30th day after GAMCO receives such
written notice, or at such other time and place upon which the Holder and GAMCO
shall agree (the “Fundamental
Change Exercise Date”). If the Holder does not exercise the Fundamental
Change Put Option, this Note shall remain outstanding as adjusted pursuant to
the provisions of Section 6 of Exhibit A to this Note.

     

    “Fundamental Change” means (i)
the occurrence of any of the events described in clauses (i), (ii) or (iii) of
the definition of Change of Control, (ii) any recapitalization, reclassification
or other transaction in which all or substantially all of the Common Stock is
converted into, or exchanged for cash, securities or other property and (iii)
any merger or consolidation of GAMCO with or into any other Person or other than
any such merger or consolidation (a) pursuant to which the holders of 50% or
more of the total voting power of all of the shares of capital stock of GAMCO
entitled to vote generally in elections of directors immediately prior to such
transaction have the right to exercise, directly or indirectly, 50% or more of
the total voting power of all shares of capital stock entitled to vote generally
in the election of directors of the continuing or surviving corporation
immediately after such transaction, (b) that does not result in a
reclassification, conversion, exchange or cancellation of the Common Stock, (c)
which is effected solely to change our jurisdiction of incorporation and results
in a reclassification, conversion or exchange of the Common Stock solely into
shares of common stock of the surviving entity, or (d) in which more of the 90%
or more of the consideration payable for the Common Stock (excluding cash
payments for fractional shares and cash payments made pursuant to dissenters’
appraisal rights) in such transaction consists of shares of common stock or
American Depositary Receipts in respect of shares of common stock that are
listed and publicly traded on any of The New York Stock Exchange, the NASDAQ
Global Market or the NASDAQ Global Select Market (or any of their respective
successors) or that will be so traded or quoted immediately following the
transaction and as a result of such transaction or transactions this Note will
become convertible into cash and/or such shares of such common stock or such
American Depositary Receipts pursuant to Section 8 of Exhibit A to this
Note.

     

    “Fundamental Change Value”
means, with respect to any principal amount of this Note, the fair market value
of such principal amount, as determined by the Independent Expert (as defined
below) appointed for such purpose, using one or more valuation methods that the
Independent Expert in its best professional judgment determines to be the most
appropriate, assuming such principal amount is to be sold in an arm’s length
transaction where there is no compulsion on the part of any party to buy or sell
and taking into account all relevant factors, including without limitation the
option value of such principal amount.

     

    “Independent Expert” means a
nationally recognized investment banking firm mutually agreed by the Holder and
GAMCO which does not have any material financial interest or other material
economic relationship with either party or any of their Affiliates. If the
parties cannot agree on an Independent Expert, each of them shall choose a
Person otherwise qualified to be an Independent Expert and the Persons so
selected will promptly select the Independent Expert.

     

    


    Information
Obligations

     

    GAMCO
will deliver to the Holder (without duplication):

     

    
      	
               
      

            	
              (a)

            	
              as
      soon as available and in any event within 90 days after the end of
      each fiscal year of GAMCO, a consolidated balance sheet of GAMCO and its
      Subsidiaries as of the end of such fiscal year and the related statements
      of operations and cash flow for such fiscal year, setting forth in each
      case in comparative form the figures for the previous fiscal year, and
      accompanied by a report thereon of an independent public accountant of
      nationally recognized standing;

            


    

     

    
      	
               
      

            	
              (b)

            	
              as
      soon as available and in any event within 45 days after the end of
      each of the first three quarters of each fiscal year of GAMCO, a
      consolidated balance sheet of GAMCO and its Subsidiaries as of the end of
      such quarter and the related statements of operations and cash flow for
      such quarter and for the portion of GAMCO’s fiscal year then ended,
      setting forth in each case in comparative form the figures for the
      corresponding quarter and the corresponding portion of GAMCO’s previous
      fiscal year, all certified (subject to normal year-end adjustments) as to
      fairness of presentation, consistency and, except for the absence of
      footnotes, generally accepted accounting principles by the chief financial
      officer or the chief accounting officer of
  GAMCO;

            


    

     

    
      	
               
      

            	
              (c)

            	
              promptly
      upon the furnishing thereof to the security holders of GAMCO or any of its
      Subsidiaries generally, copies of all financial statements, reports, proxy
      statements and any other information or reports so
    furnished;

            


    

     

    
      	
               
      

            	
              (d)

            	
              promptly
      after they are so filed, or furnished, all documents filed with, or
      furnished to the SEC by GAMCO pursuant to the 1933 Act and the 1934 Act
      (other than Schedules 13D and 13G, Forms 13F and Forms 3, 4
      and 5); and

            


    

     

    
      	
               
      

            	
              (e)

            	
              within
      five days after any officer of GAMCO obtains knowledge of any Event of
      Default or any event which, with notice or lapse of time or both, would
      constitute an Event of Default (a “Default”), if such Event
      of Default or Default is then continuing, a certificate of the chief
      financial officer or the chief accounting officer of GAMCO setting forth
      the details thereof and the action which GAMCO is taking or proposes to
      take with respect thereto.

            


    

     

    Notwithstanding
the foregoing, if GAMCO is then subject to the reporting requirements under
Section 13 or 15(d) of the 1934 Act or any successor statute, (i) the
delivery to the Holder of GAMCO’s Annual Report on Form 10-K or any
successor form for the relevant fiscal year within the time periods provided for
in clause (a) shall satisfy the requirements of such clause and
(ii) the delivery to the Holder of GAMCO’s Quarterly Report on
Form 10-Q or any successor form for the relevant fiscal quarter within the
time periods provided for in clause (b) shall satisfy the requirements of
such clause.

     

    Consolidation, Merger and
Sale of Assets

     

    GAMCO
will not consolidate or merge with or into (whether or not GAMCO is the
surviving corporation), or directly and/or indirectly through its Subsidiaries
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the properties and assets of GAMCO and its Subsidiaries
taken as a whole in one or more related transactions, to any other Person
unless:

     

    
      	
               
      

            	
              (a)

            	
              the
      Person formed by or surviving any such consolidation or merger (if other
      than GAMCO) or to which such sale, assignment, transfer, lease, conveyance
      or other disposition shall have been made (the “Successor Company”) is a
      corporation, partnership, limited liability company or other similar
      business entity organized and validly existing under the laws of the
      United States, any state thereof or the District of
    Columbia;

            


    

     

    
      	
               
      

            	
              (b)

            	
              the
      Successor Company assumes all the obligations of GAMCO under the Notes and
      the Purchase Agreement pursuant an agreement in form and substance
      reasonably satisfactory to the Holder;
and

            


    

     

    
      	
               
      

            	
              (c)

            	
              immediately
      after such transaction no Event of Default or event which, with notice or
      lapse of time or both, would constitute an Event of Default
      exists.

            


    

     

    Upon any
consolidation of GAMCO with, or merger of GAMCO into, any other Person or any
transfer, conveyance, sale, lease or other disposition of all or substantially
all of the properties and assets of GAMCO and its Subsidiaries taken as a whole
in one or more related transactions in accordance with this paragraph, the
Successor Company shall succeed to, and be substituted for, and may exercise
every right and power of, GAMCO under this Note and the Purchase Agreement with
the same effect as if such Successor Company had been named as GAMCO herein, and
thereafter, except in the case of a lease, GAMCO shall be relieved of all
obligations and covenants under this Note and the Purchase
Agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Transfer and Related
Provisions

     

    The
Holder shall not offer, sell, contract to sell or otherwise dispose of this Note
without the prior written consent of GAMCO; provided, however, that the Holder
shall be permitted to transfer the Note (i) to any of its Affiliates and
(ii) to any other Person (A) in connection with a transfer of
substantially all of the investments of the original Holder, (B) if the
Holder is legally precluded from holding this Note and (C) during the
continuance of an Event of Default, provided, that such
transferee agrees to be bound by the terms contained herein.

     

    “Affiliate” means, with respect
to any specified Person, any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified
Person.  For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling,” “controlled by” and “under common control with”),
as used with respect to any specified Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.

     

    GAMCO
shall keep at its principal office a register (the “Register”) in which shall be
entered the name and address of the registered holder of this Note and
particulars of this Note and of all permitted transfers of this
Note.  Upon surrender for registration of a permitted transfer of this
Note to GAMCO, GAMCO shall execute and deliver, in the name of the designated
transferee or transferees, one or more new Notes, of any denominations of
$1,000,000 and multiples thereof and like aggregate principal
amount.  Notwithstanding the foregoing, GAMCO shall not be required to
register the transfer of or exchange this Note unless it has been duly
endorsed.  All Notes issued upon any registration of transfer or
exchange of this Note shall be the valid obligations of GAMCO, evidencing the
same debt, and entitled to the same benefits, as this Note.

     

    No
service charge shall be made for any registration of transfer or exchange of
this Note, but GAMCO may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection
therewith.

     

    Prior to
due presentment of this Note for registration of a permitted transfer, GAMCO and
its agents may treat the Person in whose name it is registered as the owner of
this Note for all purposes whatsoever, whether or not it is overdue and neither
GAMCO nor any of its agents shall be affected by notice to the
contrary.

     

    Replacement of
Note

     

    If this
Note has been mutilated and is surrendered to GAMCO, GAMCO shall execute and
deliver in exchange a new Note of the same principal amount and bearing a number
not then outstanding.  If the Holder shall deliver to GAMCO
(i) evidence reasonably satisfactory to GAMCO that this Note has been
destroyed, lost or stolen and (ii) such security or indemnity as may be
required by GAMCO to hold it and its agents harmless, then, in the absence of
notice that this Note has been acquired by a bona fide purchaser, GAMCO shall
execute and deliver, in lieu of this Note, a new Note of a like principal amount
and bearing a number not then outstanding.  The provisions of this
paragraph are exclusive and shall preclude (to the extent lawful) all other
rights and remedies with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Notes.

     

    Miscellaneous

     

    GAMCO
waives presentment for payment, demand, notice of nonpayment, notice of protest
and protest of this Note, and all notices in connection with the delivery,
acceptance, or dishonor of this Note.

     

    GAMCO
agrees that (a) if for any reason any amount due hereunder is paid by
cashier’s, certified teller’s check or other check, there shall be no discharge
of GAMCO’s obligation until said check be finally paid by the issuer thereof;
and (b) the provisions of RCW 62A.3-311 shall not entitle GAMCO to any
accord and satisfaction of any now or hereafter existing claim in dispute
between the Holder and GAMCO (or any of their respective successors and
assigns), all of which provisions and rights are hereby waived.

     

    The
Holder shall not by any act or omission be deemed to waive any of its rights or
remedies under this Note or the Purchase Agreement unless such waiver shall be
in writing and signed by the Holder, and then only to the extent specifically
set forth therein.

     

    No right
or remedy herein conferred upon or reserved to the Holder is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise.  The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

     

    This Note
may not be amended other than with the written consent of the Holder and
GAMCO.

     

    Upon
demand therefor, GAMCO agrees to pay to the Holder all costs and fees arising
out of enforcing this Note, whether incurred in any court action, arbitration,
or mediation, on appeal, in any bankruptcy (or state receivership or other
insolvency or similar proceedings or circumstances), in any forfeiture, and for
any post-judgment collection services (collectively, “Enforcement
Costs”).

     

    GAMCO
and, by its acceptance of this Note, the Holder agree that, subject to the
specific terms hereof and to the extent that Washington law applies, the
provisions of Article 3 of the Uniform Commercial Code of Washington
pertaining to instruments shall be applied to this Note, even if this Note is
not deemed to be an “instrument” or a “negotiable instrument”
thereunder.

     

    If this
Note will at any time become subject to the Trust Indenture Act of 1939, GAMCO
will make appropriate revisions hereto and will enter into an indenture with an
appropriate trustee so as to comply fully with such act.

     

    Except as
noted below, this Note shall be governed by and construed in accordance with the
laws of the State of Washington without giving effect to the conflict of laws
rules thereof.  In any court proceeding, GAMCO agrees to submit to the
jurisdiction of the federal court selected by the Holder, and venue of any
action concerning this Note shall be in King County, Washington
state.  In the event that the federal court selected by the Holder
shall not have jurisdiction, GAMCO agrees to submit to the jurisdiction of the
Washington state court in King County selected by the Holder.  GAMCO
hereby irrevocably waives to the fullest extent permitted by law any objection
which it may now or hereafter have to the laying of such venue and any claim
that any such forum is an inconvenient forum.  Nothing in this Section
shall impair the right of the Holder to bring any action or proceeding against
GAMCO or its property in the courts of any other county or jurisdiction and
GAMCO irrevocably submits to the nonexclusive jurisdiction of the appropriate
courts (as selected by the Holder) of the jurisdiction in which GAMCO is
organized or any place where any property or any office of GAMCO is
located.  In the event Holder transfers or assigns this Note to a
person not one of its Affiliates, then this Note shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the conflict of laws rules thereof and the consent to jurisdiction in the State
of Washington stated above is hereby revoked concurrently with such
transfer.

     

    NOTICE:
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, and intending to be legally bound, the undersigned has duly
executed and delivered this Note as of the date first written
above.

     

    GAMCO INVESTORS,
INC.,

    a New
York corporation

    


    By:   /s/  Douglas R.
Jamieson                                                          

    Douglas R. Jamieson

    Its:President
and Chief Operating Officer


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


     

    Exhibit
A

     

    Conversion
Rights

     

    1. Right of
Conversion.  At the option of the Holder, this Note or any
portion of the principal amount hereof which is $1,000,000 or an integral
multiple thereof, may be converted at the principal amount hereof, or such
portion hereof, into fully paid and nonassessable shares of the Common Stock
(calculated as to each conversion to the nearest 1/100 of a share of Common
Stock) at the Conversion Price (as hereinafter defined) in effect at the time of
conversion, or into such additional or other securities, cash or property and at
such other rates as required in accordance with the provisions set forth
herein.  Such conversion right shall expire at the close of business
on October 2, 2018.  If this Note is redeemed in accordance with its
terms, then such conversion right shall expire at the close of business on the
Redemption Date unless GAMCO fails to take any of the Required Actions on or
prior to the Redemption Date.

     

    2. Conversion
Procedures.  In order to exercise the conversion right, the
Holder shall surrender this Note at the principal executive offices of GAMCO
(which, if GAMCO shall so require, shall be duly endorsed to GAMCO or in blank,
or be accompanied by proper instruments of transfer to GAMCO or in blank),
accompanied by irrevocable written notice to GAMCO to the effect that the Holder
elects so to convert this Note or, if less than the entire principal amount
hereof is to be converted, the portion hereof to be converted (which notice
shall specify the name or names (with address or addresses) in which a
certificate or certificates evidencing the shares of Common Stock to be issued
upon such conversion are to be issued).  Except as otherwise
expressly set forth herein, no payment or adjustment shall be made upon any
conversion of the Note on account of any interest accrued on this Note or on
account of any dividends accrued on the shares of Common Stock issued upon such
conversion.

     

    GAMCO
shall, as soon as practicable after the surrender of this Note at the office
referred to above and compliance with the other conditions herein contained,
deliver at such office, to the person or persons entitled thereto (as specified
in the applicable written notice of conversion), a certificate or certificates
evidencing the number of full shares of Common Stock to which such person or
persons shall be entitled as aforesaid, together with a cash adjustment in
respect of any fraction of a share of Common Stock as hereinafter
provided.  Such conversion shall be deemed to have been made as of the
date of such surrender of this Note (or, if later, the date of compliance with
such other conditions), and the person or persons entitled to receive the Common
Stock deliverable upon conversion of this Note shall be treated for all purposes
as the record holder or holders of such Common Stock on such date.

     

    If this
Note is to be converted in part only, upon such conversion GAMCO shall execute
deliver to the Holder, at the expense of GAMCO, a new Note or Notes of like
tenor in denominations of $1,000,000 and any integral multiple thereof and with
an aggregate principal amount equal to the unconverted portion of the principal
amount of this Note.

     

    3. No
Fractional Shares.  No
fractional shares of Common Stock shall be issued upon conversion of this
Note.  Instead of any fractional share of Common Stock that would
otherwise be issuable to the Holder upon conversion of this Note (or any
specified portion hereof), GAMCO shall pay a cash adjustment in respect of such
fractional share in any amount equal to the same fraction of the Closing Price
(as hereinafter defined) on the day of conversion.

     

    4. Reservation
of Shares; Etc.  GAMCO shall at all times reserve and keep
available, free from preemptive rights out of its authorized but unissued Common
Stock, solely for the purpose of effecting the conversion of this Note, the full
number of shares of Common Stock that would then be deliverable upon the
conversion of all of the principal amount of this Note and any other outstanding
Notes.  The shares of Common Stock issuable upon the conversion of
this Note have not been registered under the Act, will carry a legend
substantially the same as the legend set forth on this Note, and will be subject
to the terms of the Registration Rights Agreement, dated as of August 14,
2001 and as amended on October 2, 2008, between the initial Holder and GAMCO,
and the Purchase Agreement.

     

    If any
shares of Common Stock required to be reserved for purposes of conversion of
this Note require registration with or approval of any governmental authority
under any Federal or State law before such shares may be issued or freely
transferred upon conversion, GAMCO will in good faith and as expeditiously as
possible endeavor to cause such shares to be duly registered or approved as the
case may be.  If the Common Stock is quoted on the New York Stock
Exchange or any other U.S. national securities exchange, GAMCO will, if
permitted by the rules of such exchange, list and keep listed on such exchange,
upon official notice of issuance, all shares of Common Stock issuable upon
conversion of this Note and any other outstanding
Notes.  Notwithstanding the foregoing, the reference to free
transferability in the first sentence of this paragraph and the reference to
listing in the second sentence of this paragraph shall apply only when this Note
shall have become freely transferable under the federal securities
laws.

     

    5. Prior
Notice of Certain Events.  If GAMCO shall authorize any
transaction that would require an adjustment to the Conversion Price (other than
a transaction referred to in clauses (a) or (c) of Section 6 below) or there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
GAMCO, then GAMCO shall notify the Holder, at least 20 days (or, in the
case of a transaction referred to in clauses (b), (d) or (e) of
Section 6 below, 10 days) prior to the applicable record, expiration
or consummation date hereinafter specified, a notice stating (i) the record
date fixed for the determination of holders of Common Stock entitled to the
applicable issuance, dividend or distribution or (ii) the date of
expiration of the applicable tender or exchange offer, as the case may
be.

     

    6. Adjustment
of Conversion Price.

     

    (a) In case
GAMCO shall pay or make a dividend or other distribution on any class of Capital
Stock of GAMCO payable in Common Stock, the Conversion Price in effect at the
opening of business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination and the denominator shall
be the sum of such number of shares and the total number of shares constituting
such dividend or other distribution, such reduction to become effective
immediately after the opening of business on the day following the date fixed
for such determination.  (For the purposes of determining adjustments
to the Conversion Price as set forth herein, shares of Common Stock held in the
treasury of GAMCO, and distributions or issuances in respect thereof shall be
disregarded.)

     

    (b) In case
GAMCO shall issue rights or warrants to all or substantially all holders of its
Common Stock entitling them, for a period of not more than 60 days, to
subscribe for or purchase shares of Common Stock at a price per share less than
the Current Market Price (as hereinafter defined) on the date fixed for the
determination of stockholders entitled to receive such rights or warrants, the
Conversion Price in effect at the opening of business on the day following the
date fixed for termination of such subscription or purchase period shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the offering price of the total number of
shares of Common Stock actually purchased upon exercise of such rights or
warrants would have purchased at such Current Market Price and the denominator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Common Stock actually purchased upon exercise of such rights or warrants, such
reduction to become effective immediately after the opening of business on the
day following the date fixed for such termination.

     

    (c) In case
outstanding shares of Common Stock shall be subdivided into a greater number of
shares of Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such subdivision becomes
effective shall be proportionately reduced, and conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business on the
day following the day upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes
effective.

     

    (d) Subject
to paragraph (g) below, in case GAMCO shall, by dividend or otherwise,
distribute to all or substantially all holders of its Common Stock evidences of
indebtedness, shares of capital stock of any class or series, other securities,
cash or assets (other than Stapled Securities (as hereinafter defined), Common
Stock, rights or warrants referred to in clause (b) of this Section 6,
a dividend or distribution payable exclusively in cash or a Spin Off (as
defined below)), the Conversion Price in effect immediately prior to the close
of business on the date fixed for the payment of such distribution shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the Current Market Price on the date fixed for such payment
less the then fair market value (as determined in good faith by the Board of
Directors of GAMCO (the “Board
of Directors”), whose good faith determination shall be conclusive and
described in a resolution of the Board of Directors) (as to any securities or
other property, the "Fair
Market Value") of the portion of such evidences of indebtedness, shares
of capital stock, other securities, cash and assets distributed per share of
Common Stock and the denominator shall be such Current Market Price, such
reduction to become effective immediately prior to the opening of business on
the day following the date fixed for such payment.  Subject to
paragraph (g) below, in case GAMCO shall, by dividend or otherwise, distribute
to all or substantially all holders of Common Stock shares of any capital stock
of, or other equity interest in, any Subsidiary or other business unit of GAMCO
and, immediately after such distribution, such capital stock or other equity
interest is registered under the 1934 Act and listed and publicly traded on a
national securities exchange registered under Section 6 of the 1934 Act
(each, a “Spin-Off”),
then the Conversion Price in effect immediately prior to the close of business
on the tenth day of such trading immediately following and including the
effective date of the Spin Off (the “Tenth Trading Day”) shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be (i) the average of the Closing Prices of the Common
Stock on the first ten days of such public trading immediately following and
including such effective date (the “Ten Trading Days”) less
(ii) the average of the Closing Prices of the amount of such capital stock
or other equity interests distributed per share of Common Stock on such exchange
during the Ten Trading Days (the “Average Spin Off Price”) and
the denominator shall be the average of the Closing Prices calculated pursuant
to the preceding clause (i), such reduction to become effective immediately
after the close of business on the Tenth Trading Day.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (e) In case
GAMCO shall, by dividend or otherwise, make a distribution to all or
substantially all holders of its Common Stock payable exclusively in cash in any
twelve month period (excluding any distributions declared prior to the date of
this Note) which, in the aggregate, exceed $1.12 per share of Common Stock (the
“Twelve Month Dividend
Threshold” and the amount of such excess per share of Common Stock, the
“Excess Amount”), the
Conversion Price in effect immediately prior to the close of business on the
date fixed for such payment shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the Current Market Price on
the date fixed for such payment less the Excess Amount and the denominator shall
be such Current Market Price, such reduction to become effective immediately
prior to the opening of business on the day following the date fixed for such
payment; provided,
however, that notwithstanding the foregoing whenever the Conversion Price
is adjusted pursuant to this Section 6 the Twelve Month Dividend Threshold
shall be proportionally adjusted in the same manner.

     

    (f) In case
GAMCO or any of its Subsidiaries shall consummate a tender or exchange offer for
all or any portion of the Common Stock, the Conversion Price in effect
immediately prior to the close of business on the date of expiration of such
tender or exchange offer shall be reduced by multiplying such Conversion Price
by a fraction of which the numerator shall be the Current Market Price on such
date of expiration less the Per Share Premium Amount (as hereinafter defined)
paid in such tender or exchange offer and the denominator shall be such
Current Market Price, such reduction to become effective immediately prior to
the opening of business on the day following such date of
expiration.

     

    (g) Notwithstanding
anything to the contrary in Section 6(d), no adjustment to the Conversion Price
shall be made as a result of the distribution to GAMCO's stockholders of common
stock of Teton Advisors, Inc. (the “Teton Spin-off”) and, in lieu
thereof, GAMCO shall deliver to the Holder such number of shares of common stock
of Teton Advisors, Inc. (the “Teton Common Stock”) that it
would have received in the Teton Spin-off if it had converted this Note
immediately prior to the close of business on the day immediately prior to the
record date fixed for such transaction. The "Teton Value" shall mean the
product of (i) (A) if at the time of the Teton Spin-off the Teton Common Stock
is registered under the 1934 Act and listed and publicly traded on a national
securities exchange registered under Section 6 of the 1934 Act, the Average
Spin Off Price of the Teton Common Stock or (B) in all other cases, the Fair
Market Value of the amount of Teton Common Stock distributed per share of Common
Stock and (ii) the number of shares of Teton Common Stock delivered to the
Holder pursuant this Section 6(g). In order to participate in the Teton
Spin-off, the Holder agrees to execute all agreements. questionnaires and other
documents that are reasonably requested by the Company and that are required by
the holders of the Common Stock.

     

    (h) In case
GAMCO or any of its Subsidiaries proposes to issue debt securities that are
convertible at the option of the holder thereof into, or exercisable for, Common
Stock after the Issue Date and prior to October 2, 2009 with a conversion price
that is lower or an interest rate that is higher than this Note (the “New Debt Securities”), GAMCO
shall, no later than  the tenth (10th) day  after the
consummation of such transaction (a “Proposed Transaction”), give
notice in writing to Holder of such  Proposed Transaction specifying
the different terms in reasonable detail.  By written notice to GAMCO
within thirty (30) days after the date on which the Holder receives such notice,
the Holder may elect to have the Conversion Price reduced to the Proposed
Transaction conversion price and/or the interest rate on this Note increased to
that of the Proposed Transaction.  Notwithstanding anything to the
contrary contained herein, this paragraph (h) shall not be applicable to: (i)
any issuances or grants of equity securities (including preferred stock), (ii)
the exercise or conversion of any options, warrants or convertible securities in
existence as of the date hereof, (iii) the issuance of debt securities, either
directly or indirectly, in connection with the Teton Spin-off or any
acquisition, strategic business combination or investment by GAMCO or any
of its subsidiaries in any party which is not prior to such transaction an
Affiliate of GAMCO or any of its subsidiaries (whether by merger, consolidation,
stock swap, sale of assets or securities, or otherwise), (iv) any issuance
of  any mandatorily convertible security (utilizing a forward purchase
contract, unit structure or otherwise) or any other debt security that is not
convertible into or exercisable for Common Stock at the option of the holder
thereof, or (v) any event that would otherwise result in an adjustment to the
Conversion Price pursuant to this Section 6. This paragraph (h) shall terminate
and be of no further force and effect on October 2, 2009.

     

    (i) In case
GAMCO shall, by dividend or otherwise, make a distribution referred to in
paragraph (d) or (e) above, the Holder converting this Note (or any portion
of the principal amount hereof) subsequent to the close of business on the date
fixed for the determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the Conversion Price adjustment
in respect of such distribution shall also be entitled to receive, for each
share of Common Stock into which this Note (or portion of the principal amount
being converted), the portion of the evidences of indebtedness, shares of
capital stock, other securities, cash and assets so distributed applicable to
one share of Common Stock; provided, however, that, at the
election of GAMCO (whose election shall be evidenced by a resolution of the
Board of Directors) with respect to all holders so converting, GAMCO may, in
lieu of distributing to such holder any portion or all of such evidences of
indebtedness, shares of capital stock, other securities, cash and assets to
which such holder is entitled as set forth above, (i) pay such holder an
amount in cash equal to the Fair Market Value thereof or (ii) distribute to
such holder a due bill therefor, provided that such due bill (A) meets any
applicable requirements of the principal national securities exchange or other
market on which the Common Stock is then traded and (B) requires payment or
delivery of such evidences of indebtedness, shares of capital stock, other
securities, cash or assets no later than the date of payment thereof to holders
of shares of Common Stock receiving such distribution.

     

    (j) GAMCO may
make such reductions in the Conversion Price, in addition to those required by
the foregoing paragraphs, as it considers to be advisable to avoid or diminish
any income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.  In
addition, GAMCO from time to time may reduce the Conversion Price by any amount
for any period of time if the period is at least twenty days, the reduction is
irrevocable during the period, and the Board of Directors of GAMCO shall have
made a determination that such reduction would be in the best interest of GAMCO,
which determination shall be conclusive.  Whenever the Conversion
Price is reduced pursuant to the preceding sentence, GAMCO shall provide written
notice to the Holder of this Note and the holders of any other outstanding Notes
of the reduction at least fifteen days prior to the date the reduced Conversion
Price takes effect, and such notice shall state the reduced Conversion Price and
the period it will be in effect.

     

    (k) GAMCO may
not engage in any transaction if, as a result thereof, the Conversion Price
would be reduced to below the par value per share of the Common
Stock.

     

    (l) No
adjustment in the Conversion Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in the Conversion Price;
provided, however, that any adjustments
which by reason of this paragraph are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.

     

    (m) Whenever
the Conversion Price is adjusted as herein provided, GAMCO shall compute the
adjusted Conversion Price and shall prepare a certificate signed by the
Treasurer of GAMCO setting forth the adjusted Conversion Price and showing in
reasonable detail the facts upon which such adjustment is based, and such
certificate shall be given by GAMCO to the Holder of this Note and the holders
of any other outstanding Notes.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    7. Stapled
Securities.

     

    (a) Prior to
a Separation Event (as hereinafter defined) with respect to any Stapled
Securities, such Stapled Securities will be deemed, for purposes of the
adjustments contemplated hereby, to comprise part of the shares of Common Stock
to which such Stapled Securities appertain, and as a result, distributions in
respect of such Stapled Securities will be deemed, for such purposes, to be
distributions in respect of such shares.

     

    (b) If the
Holder converts this Note (or any portion of the principal amount hereof) after
a Separation Event with respect to any Stapled Securities, it shall be entitled
to receive upon such conversion, in addition to the shares of Common Stock
issuable upon such conversion, the same rights to which the Holder would have
been entitled under the Stapled Securities that would have appertained to such
shares of Common Stock if the Holder had effected such conversion before such
Separation Event.

     

    8. Consolidations,
Mergers or Sales of
Assets.  In the event of any consolidation of GAMCO with, or
merger of GAMCO into, any other Person, any merger of another Person to GAMCO
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of the Common Stock) or any sale
or transfer of all or substantially all of the assets GAMCO, the Person formed
by such consolidation or resulting from such merger or which acquires such
assets, as the case may be, shall enter into a written agreement with the
Holder, in form and substance reasonably acceptable to the Holder, providing
that the Holder shall have the right thereafter, during the period in which this
Note shall be convertible, to convert this Note (or portion of the principal
amount hereof) only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock into which this Note (or portion
thereof) might have been converted immediately prior to such consolidation,
merger, sale or transfer, assuming the Holder (i) is not a Person with
which GAMCO consolidated or into which GAMCO merged or which merged into GAMCO
or to which such sale or transfer was made, as the case may be, (a “Constituent Person”) or an
Affiliate of a Constituent Person and (ii) failed to exercise his or her
rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer;
provided, however, that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of Common
Stock held immediately prior to such consolidation, merger, sale or transfer by
Persons other than a Constituent Person or an Affiliate thereof and in respect
of which such rights of election shall not have been exercised (each, a “Non-Electing Share”), then for
purposes of this Section 8 the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by
each Non-Electing Share shall be deemed to be the kind and amount so receivable
per share by a plurality of the Non-Electing Shares.  Such written
agreement shall provide for adjustments which, for events subsequent to the
effective date of such agreement, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Exhibit A.  The
provisions of this Section 8 shall similarly apply to successive consolidations,
mergers, sales or transfers.  If the conversion rights of the Holder
of this Note shall be adjusted pursuant to this Section 8, then GAMCO shall
cause to be given to the Holder and any other holders of outstanding
Notes, within 5 days after consummation of the transaction triggering
such adjustment, a notice describing such adjustment in appropriate
detail.

     

    9. Taxes.  GAMCO
shall pay any and all stock transfer, documentary stamp and other taxes that may
be payable in respect of any issuance or delivery of shares of Common Stock or
other securities issued or delivered on conversion of this
Note.  GAMCO shall not, however, be required to pay any such tax which
may be payable in respect of any transfer involved in the issuance or delivery
of shares of Common Stock or other securities in a name other than to the
Holder, and shall not be required to make any such issuance or delivery unless
and until the person otherwise entitled to such issuance or delivery has paid to
GAMCO the amount of any such tax or has established, to the satisfaction of
GAMCO, that such tax has been paid or is not payable.

     

    10. Certain
Definitions.  The following definitions shall apply to terms
used in this Exhibit A:

     

    “Closing Price” of any common
stock on any day means the last reported per share sale price, regular way, of
the common stock on such day, or, in case no such sale takes place on such day,
the average of the reported closing per share bid and asked prices, regular way,
of the common stock on such day, in each case on the New York Stock
Exchange or, if the common stock is not listed or admitted to trading on the
New York Stock Exchange, on the principal national securities exchange or
quotation system on which the common stock is listed or admitted to trading or
quoted, or, if the common stock is not listed or admitted to trading or quoted
on any national securities exchange or quotation system, the average of the
closing per share bid and asked prices of the common stock on such day in the
over-the-counter market as reported by a generally accepted national quotation
service or, if not so available in such manner, as furnished by any
New York Stock Exchange member firm selected from time to time by the Board
of Directors of GAMCO for that purpose or, if not so available in such manner,
as otherwise determined in good faith by the Board of Directors (whose good
faith determination shall be conclusive and described in a resolution of the
Board of Directors).

     

    “Common Stock” shall mean the
Class A Common Stock, par value $0.001 per share, of GAMCO or, subject to
Section 8, any shares of any class or classes resulting from any
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of GAMCO and which are not subject to redemption by
GAMCO; provided, however, that if at any time
there shall be more than one such resulting class, the shares of each such class
then so issuable shall be substantially in the proportion which the total number
of shares of such class resulting from such reclassification bears to the total
number of shares of all such classes resulting from all such
reclassifications.

     

    “Conversion Price” initially
means $70.00, subject to adjustment from time to time as set forth
herein.

     

    “Current Market Price” on any
date in question means, with respect to any adjustment in conversion rights as
set forth herein, the average of the daily Closing Prices for the Common Stock
for the five consecutive Trading Days selected by the Board of Directors
commencing not more than 20 Trading Days before, and ending not later than,
the earlier of the date in question and the day before the Ex Date with respect
to the transaction requiring such adjustment; provided, however, that (i) if any
other transaction occurs requiring a prior adjustment to the Conversion Price
and the Ex Date for such other transaction falls after the first of the five
consecutive Trading Days so selected by the Board of Directors, the Closing
Price for each such Trading Day falling prior to the Ex Date for such other
transaction shall be adjusted by multiplying such Closing Price by the same
fraction by which the Conversion Price is so required to be adjusted as a result
of such other transaction and (ii) if any other transaction occurs
requiring a subsequent adjustment to the Conversion Price and the Ex Date for
such other transaction falls on or before the last of the five consecutive
Trading Days so selected by the Board of Directors, the Closing Price for each
such Trading Day falling on or after the Ex Date for such other transaction
shall be adjusted by dividing such Closing Price by the same fraction by which
the Conversion Price is so required to be adjusted as a result of such other
transaction.

     

    “Ex Date” means (i) when
used with respect to any dividend, distribution or issuance, the first date on
which the Common Stock trades regular way on the relevant exchange or in the
relevant market from which the Closing Price is obtained without the right to
receive such dividend, distribution or issuance, (ii) when used with
respect to any subdivision or combination of shares of Common Stock, the first
date on which the Common Stock trades regular way on such exchange or in such
market after the time at which such subdivision or combination becomes
effective, (iii) when used with respect to any tender or exchange offer,
the first date on which the Common Stock trades regular way on such exchange or
in such market after such tender or exchange offer expires and (iv) when
used with respect to any other transaction, the date of consummation of such
transaction.

     

    “Per Share Premium Amount”
means, with respect to any tender or exchange offer, (i) the Premium Amount
paid as part of such tender or exchange offer divided by (ii) the
Post-Tender Offer Number of Common Shares.

     

    “Post-Tender Offer Number of Common
Shares” means, with respect to any tender or exchange offer, the number
of shares of Common Stock outstanding at the close of business on the date of
expiration of such tender or exchange offer (before giving effect to the
acquisition of shares of Common Stock pursuant thereto) minus the number of
shares of Common Stock acquired pursuant thereto.

     

    “Premium Amount” means, with
respect to any tender or exchange offer, (i) the Tender Consideration paid
in such tender or exchange offer minus (ii) the product of the Current
Market Price on the date of expiration of such tender or exchange offer and the
number of shares of Common Stock acquired pursuant to such tender or exchange
offer.

     

    “Separation Event” has the
meaning set forth in the definition of the term “Stapled Securities”
below.

     

    “Stapled Securities” means
securities issued under any plan or agreement providing in substance that, until
such securities are redeemed or the rights thereunder are otherwise terminated
or a specified event occurs (a “Separation Event”), (i) a
specified number of such securities will appertain to each share of Common Stock
then issued or to be issued in the future (including shares issued upon
conversion of this Note) and (ii) each such security will be evidenced or
represented by the certificate representing the share of Common Stock to which
it appertains and will automatically trade with such share.

     

    “Tender Consideration” means,
with respect to any tender or exchange offer, the aggregate of the cash plus the
fair market value (as determined in good faith by the Board of Directors, whose
good faith determination shall be conclusive and described in a resolution of
the Board of Directors) of all non-cash consideration paid in respect of such
tender or exchange offer.

     

    “Trading Day” means a day on
which securities are traded on the national securities exchange or quotation
system or in the over-the-counter market used to determine Closing Prices for
the Common Stock.