EMMIS COMMUNICATIONS CORP (Form: 10-Q, Received: 07/12/2012 06:04:57)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2012

EMMIS COMMUNICATIONS CORPORATION

(Exact name of registrant as specified in its charter)

INDIANA

0-23264

35-1542018

(State of incorporation

or organization)

(Commission

file number)

(I.R.S. Employer

Identification No.)

ONE EMMIS PLAZA

40 MONUMENT CIRCLE, SUITE 700

INDIANAPOLIS, INDIANA 46204

(Address of principal executive offices)

(317) 266-0100

(Registrant’s Telephone Number,

Including Area Code)

NOT APPLICABLE

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The number of shares outstanding of each of Emmis Communications Corporation’s classes of common stock, as of July 6, 2012, was:


	34,077,279			Shares of Class A Common Stock, $.01 Par Value
	4,722,684			Shares of Class B Common Stock, $.01 Par Value
	0			Shares of Class C Common Stock, $.01 Par Value

INDEX


	Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements		3

Condensed Consolidated Statements of Operations for the three-month periods ended May 31, 2011 and 2012		3

Consolidated Statements of Comprehensive Loss for the three-month periods ended May 31, 2011 and 2012		5

Condensed Consolidated Balance Sheets as of February 29, 2012 and May 31, 2012		6

Condensed Consolidated Statement of Changes in Deficit for the three-month period ended May 31, 2012		8

Condensed Consolidated Statements of Cash Flows for the three-month periods ended May 31, 2011 and 2012		9

Notes to Condensed Consolidated Financial Statements		11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		27

Item 3. Quantitative and Qualitative Disclosures about Market Risk		41

Item 4. Controls and Procedures		41

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		41

Item 3. Defaults Upon Senior Securities		41

Item 6. Exhibits		42

Signatures		45

-2-

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)


	Three Months Ended
	May 31,
	2011			2012
NET REVENUES	$	61,146		$	56,787
OPERATING EXPENSES:
Station operating expenses excluding depreciation and amortization expense of $1,847 and $1,217, respectively		49,334			46,844
Corporate expenses excluding depreciation and amortization expense of $264 and $461, respectively		7,335			4,972
Impairment loss		—			10,971
Depreciation and amortization		2,111			1,678
Gain on sale of assets		(3	)		(10,000	)

Total operating expenses		58,777			54,465

OPERATING INCOME		2,369			2,322

OTHER EXPENSE:
Interest expense		(7,214	)		(8,123	)
Loss on debt extinguishment		(1,478	)		(484	)
Other (income) expense, net		(6	)		304

Total other expense		(8,698	)		(8,303	)

LOSS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS		(6,329	)		(5,981	)
BENEFIT FOR INCOME TAXES		(2,742	)		(3,108	)

LOSS FROM CONTINUING OPERATIONS		(3,587	)		(2,873	)
GAIN FROM DISCONTINUED OPERATIONS, NET OF TAX		2,894			—

CONSOLIDATED NET LOSS		(693	)		(2,873	)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		1,352			1,262

NET LOSS ATTRIBUTABLE TO THE COMPANY		(2,045	)		(4,135	)
PREFERRED STOCK DIVIDENDS		2,523			896

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(4,568	)	$	(5,031	)

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

-3-

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(Unaudited)

(In thousands, except per share data)


	Three Months Ended
	May 31,
	2011			2012
Amounts attributable to common shareholders for basic earnings per share:
Continuing operations	$	(7,483	)	$	(5,031	)
Discontinued operations		2,915			—

Net loss attributable to common shareholders	$	(4,568	)	$	(5,031	)

Basic net income (loss) per share attributable to common shareholders:
Continuing operations	$	(0.20	)	$	(0.13	)
Discontinued operations, net of tax		0.08			—

Net loss attributable to common shareholders	$	(0.12	)	$	(0.13	)

Basic weighted average common shares outstanding		38,201			38,779

Diluted net income (loss) per share attributable to common shareholders:
Continuing operations	$	(0.20	)	$	(0.13	)
Discontinued operations, net of tax		0.08			—

Net loss attributable to common shareholders	$	(0.12	)	$	(0.13	)

Diluted weighted average common shares outstanding		38,201			38,779

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

-4-

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)


	Three Months Ended May 31,
	2011			2012
CONSOLIDATED NET LOSS	$	(693	)	$	(2,873	)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES:
Change in value of derivative instrument and related income tax effects		(489	)		—
Cumulative translation adjustment		434			229

COMPREHENSIVE LOSS		(748	)		(2,644	)
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		1,383			1,285

COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(2,131	)	$	(3,929	)

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

-5-

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


			May 31,
	February 29,		2012
	2012		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	5,619	$	10,486
Accounts receivable, net		32,880		34,236
Prepaid expenses		12,940		13,839
Other current assets		2,252		12,133
Current assets — discontinued operations		991		1,152

Total current assets		54,682		71,846

PROPERTY AND EQUIPMENT, NET		40,502		39,763
INTANGIBLE ASSETS (Note 3):
Indefinite-lived intangibles		213,009		202,038
Goodwill		24,175		24,175
Other intangibles, net		1,998		1,939

Total intangible assets		239,182		228,152

OTHER ASSETS, NET		6,395		11,178
NONCURRENT ASSETS — DISCONTINUED OPERATIONS		8		—

Total assets	$	340,769	$	350,939

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

-6-

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands, except share data)


				May 31,
	February 29,			2012
	2012			(Unaudited)
LIABILITIES AND DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	11,344		$	13,799
Current maturities of long-term debt (Note 4)		7,978			5,501
Accrued salaries and commissions		8,136			5,786
Accrued interest		3,038			2,074
Deferred revenue		16,669			17,220
Other current liabilities		6,206			5,174
Current liabilities - discontinued operations		551			455

Total current liabilities		53,922			50,009

LONG-TERM DEBT, NET OF CURRENT MATURITIES		229,725			251,324

OTHER NONCURRENT LIABILITIES		10,988			9,140

DEFERRED INCOME TAXES		52,648			50,037

Total liabilities		347,283			360,510

COMMITMENTS AND CONTINGENCIES

SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK, $0.01 PAR VALUE; $50.00 LIQUIDATION PREFERENCE; AUTHORIZED 2,875,000 SHARES; ISSUED AND OUTSTANDING 2,422,320 SHARES AT FEBRUARY 29, 2012 AND 2,822,320 AT MAY 31, 2012. EMMIS HAS OBTAINED RIGHTS IN 1,884,679 OF THE SHARES OUTSTANDING AS OF MAY 31, 2012 (REDEMPTION AMOUNT, INCLUDING UNDECLARED DIVIDENDS IN ARREARS, OF $57,351 AND $58,247, RESPECTIVELY). (Note 2)		46,882			46,882

SHAREHOLDERS’ DEFICIT:
Class A common stock, $.01 par value; authorized 170,000,000 shares; issued and outstanding 34,007,279 shares at February 29, 2012 and 34,077,279 shares at May 31, 2012		340			341
Class B common stock, $.01 par value; authorized 30,000,000 shares; issued and outstanding 4,722,684 shares at February 29, 2012 and May 31, 2012, respectively		47			47
Additional paid-in capital		529,793			530,203
Accumulated deficit		(632,608	)		(636,743	)
Accumulated other comprehensive income		1,190			1,396

Total shareholders’ deficit		(101,238	)		(104,756	)
NONCONTROLLING INTERESTS		47,842			48,303

Total deficit		(53,396	)		(56,453	)

Total liabilities and deficit	$	340,769		$	350,939

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

-7-

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT

(Unaudited)

(In thousands, except share data)


														Accumulated
	Class A				Class B				Additional					Other
	Common Stock				Common Stock				Paid-in		Accumulated			Comprehensive		Noncontrolling			Total
	Shares		Amount		Shares		Amount		Capital		Deficit			Income		Interests			Deficit
BALANCE, FEBRUARY 29, 2012		34,007,279	$	340		4,722,684	$	47	$	529,793	$	(632,608	)	$	1,190	$	47,842		$	(53,396	)

Net loss												(4,135	)				1,262			(2,873	)
Issuance of Common Stock to employees and officers										389										389
Exercise of stock options		70,000		1						21										22
Payments of dividends and distributions to noncontrolling interests																	(824	)		(824	)
Cumulative translation adjustment															206		23			229

BALANCE, MAY 31, 2012		34,077,279	$	341		4,722,684	$	47	$	530,203	$	(636,743	)	$	1,396	$	48,303		$	(56,453	)

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

-8-

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	Three Months Ended May 31,
	2011			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net loss	$	(693	)	$	(2,873	)
Adjustments to reconcile consolidated net loss to net cash used in operating activities -
Discontinued operations		(2,894	)		—
Impairment loss		—			10,971
Depreciation and amortization		2,322			1,973
Noncash accretion of debt instruments to interest expense		—			3,231
Loss on debt extinguishment		1,478			484
Provision for bad debts		120			124
Benefit for deferred income taxes		(2,789	)		(2,613	)
Noncash compensation		282			391
Gain on sale of assets		(3	)		(10,000	)
Changes in assets and liabilities -
Accounts receivable		(557	)		(1,443	)
Prepaid expenses and other current assets		673			(873	)
Other assets		(48	)		(152	)
Accounts payable and accrued liabilities		2,468			(970	)
Deferred revenue		(800	)		551
Income taxes		(223	)		(666	)
Other liabilities		(603	)		(3,572	)
Net cash used in operating activities - discontinued operations		(8	)		—

Net cash used in operating activities		(1,275	)		(5,437	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(1,273	)		(775	)
Investment in unconsolidated affiliate		—			(2,000	)
Other		9			21
Net cash provided by investing activities — discontinued operations		5,797			—

Net cash provided by (used in) investing activities		4,533			(2,754	)

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

-9-

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

(Dollars in thousands)


	Three Months Ended May 31,
	2011			2012
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt		(6,489	)		(75,019	)
Proceeds from long-term debt		6,000			92,198
Debt-related costs		(516	)		(3,423	)
Payments of dividends and distributions to noncontrolling interests		(1,400	)		(824	)
Proceeds from the exercise of stock options		—			21
Settlement of tax withholding obligations on stock issued to employees		(74	)		—

Net cash provided by (used in) financing activities		(2,479	)		12,953

Effect of exchange rates on cash and cash equivalents		323			105

INCREASE IN CASH AND CASH EQUIVALENTS		1,102			4,867

CASH AND CASH EQUIVALENTS:
Beginning of period		6,068			5,619

End of period	$	7,170		$	10,486

SUPPLEMENTAL DISCLOSURES:
Cash paid for -
Interest	$	4,742		$	9,830
Income taxes, net of refunds		559			194

Noncash financing transactions-
Value of stock issued to employees under stock compensation program and to satisfy accrued incentives		242			389

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

-10-

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS UNLESS INDICATED OTHERWISE, EXCEPT SHARE DATA)

May 31, 2012

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Preparation of Interim Financial Statements

Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), the condensed consolidated interim financial statements included herein have been prepared, without audit, by Emmis Communications Corporation (“ECC”) and its subsidiaries (collectively, “our,” “us,” “we,” “Emmis” or the “Company”). As permitted under the applicable rules and regulations of the SEC, certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, Emmis believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report for Emmis filed on Form 10-K for the year ended February 29, 2012. The Company’s results are subject to seasonal fluctuations. Therefore, results shown on an interim basis are not necessarily indicative of results for a full year.

In the opinion of Emmis, the accompanying condensed consolidated interim financial statements contain all material adjustments (consisting only of normal recurring adjustments) necessary to present fairly the consolidated financial position of Emmis at May 31, 2012, and the results of its operations and cash flows for the three-month periods ended May 31, 2011 and 2012.

Basic and Diluted Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Potentially dilutive securities at May 31, 2011 and 2012 consisted of stock options, restricted stock awards and the 6.25% Series A cumulative convertible preferred stock (the “Preferred Stock”). Each share of our outstanding Preferred Stock in which the Company has not obtained rights may, at the election of the preferred holder, convert into 2.44 shares of common stock. Conversion of these shares of Preferred Stock into common stock would be antidilutive for the three-month periods ended May 31, 2011 and 2012. Shares excluded from the calculation as the effect of their conversion into shares of our common stock would be antidilutive were as follows:


	Three Months Ended May 31,
	2011		2012
	(shares in 000’s)
6.25% Series A cumulative convertible preferred stock		6,854		2,288
Stock options and restricted stock awards		7,477		9,166

Antidilutive common share equivalents		14,331		11,454

-11-

Discontinued Operation – Slager

On October 28, 2009, the Hungarian National Radio and Television Board (ORTT) announced that it was awarding to another bidder the national radio license then held by our majority-owned subsidiary, Slager. Slager ceased broadcasting effective November 19, 2009. The Company believes that the awarding of the license to another bidder was unlawful. In October 2011, Emmis filed for arbitration with the International Centre for Settlement of Investment Disputes seeking resolution of its claim.

Slager had historically been included in the radio segment. The following table summarizes certain operating results for Slager for all periods presented:


	Three months ended May 31,
	2011			2012
Net revenues	$	7		$	—
Station operating expenses, excluding depreciation and amortization expense		90			—
Other income		95			—
Loss before income taxes		12			—
Loss attributable to minority interests		(21	)		—

Discontinued Operation – Flint Peak Tower Site

On April 6, 2011, Emmis sold land, towers and other equipment at its Glendale, CA tower site (the “Flint Peak Tower Site”) to Richland Towers Management Flint, Inc. for $6.0 million in cash. In connection with the sale, Emmis recorded a gain on sale of assets of approximately $4.9 million. Net proceeds from the sale were used to repay amounts outstanding under the credit facility.

The operations of the Flint Peak Tower Site had historically been included in the radio segment. The following table summarizes certain operating results for the Flint Peak Tower Site for all periods presented:


	Three months ended May 31,
	2011		2012
Net revenues	$	59	$	—
Station operating expenses, excluding depreciation and amortization expense		49		—
Depreciation and amortization		7		—
Gain on sale of assets		4,882		—
Income before income taxes		4,885		—
Provision for income taxes		2,003		—

-12-

Summary of Assets and Liabilities of Discontinued Operations:


	As of February 29, 2012				As of May 31, 2012
			Flint Peak Tower
	Slager		Site and Other		Slager
Current assets:
Cash and cash equivalents	$	914	$	—	$	1,090
Prepaid expenses		—		—		—
Other		77		—		62

Total current assets		991		—		1,152

Noncurrent assets:
Other noncurrent assets		8		—		—

Total noncurrent assets		8		—		—

Total assets	$	999	$	—	$	1,152

Current liabilities:
Accounts payable and accrued expenses	$	457	$	94	$	455

Total current liabilities	$	457	$	94	$	455

Local Programming and Marketing Agreement Fees

The Company from time to time enters into local programming and marketing agreements (“LMAs”) in connection with acquisitions or dispositions of radio stations, pending regulatory approval of transfer of the FCC licenses. In such cases where the Company enters into an LMA in connection with a disposition, the Company generally receives specified periodic payments in exchange for the counterparty receiving the right to program and sell advertising for a specified portion of the station’s inventory of broadcast time. Nevertheless, as the holder of the FCC license, the Company retains control and responsibility for the operation of the station, including responsibility over all programming broadcast on the station.

On April 26, 2012, Emmis entered into an LMA with a subsidiary of Disney Enterprises, Inc. for 98.7FM in New York (formerly WRKS-FM and now WEPN-FM, hereinafter referred to as “98.7FM”). The LMA for this station started on April 30, 2012 and will continue until August 31, 2024 (see Note 8 for more discussion of this LMA and related transactions). Grupo Radio Centro, S.A.B. de C.V (“GRC”), a Mexican broadcasting company, continues to provide programming and sell advertising for KXOS-FM in Los Angeles pursuant to an LMA.

LMA fees, recorded as net revenues in the accompanying condensed consolidated statements of operations, for the three-month periods ended May 31, 2011 and 2012 were as follows:


	Three months ended May 31,
	2011		2012
KXOS-FM, Los Angeles	$	1,750	$	1,750
98.7FM, New York		—		861

Total	$	1,750	$	2,611

-13-

Note 2. Share Based Payments

The amounts recorded as share based compensation expense consist of stock option and restricted stock grants, common stock issued to employees and directors in lieu of cash payments, and Preferred Stock contributed to the 2012 Retention Plan.

Stock Option Awards

The Company has granted options to purchase its common stock to employees and directors of the Company under various stock option plans at no less than the fair market value of the underlying stock on the date of grant. These options are granted for a term not exceeding 10 years and are forfeited, except in certain circumstances, in the event the employee or director terminates his or her employment or relationship with the Company. Generally, these options either vest annually over three years (one-third each year for three years), or cliff vest at the end of three years. The Company issues new shares upon the exercise of stock options.

The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model and expensed on a straight-line basis over the vesting period. Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The Company includes estimated forfeitures in its compensation cost and updates the estimated forfeiture rate through the final vesting date of awards. Prior to March 1, 2012, the Company used the simplified method to estimate the expected term for all options granted. Although the Company had granted options for many years, the historical exercise activity of our options was impacted by the way the Company processed the equitable adjustment of our November 2006 special dividend. Consequently, the Company believes that reliable data regarding exercise behavior only exists for the period subsequent to November 2006, which it determined was insufficient experience upon which to estimate the expected term through fiscal 2012. However, beginning in fiscal 2013, the Company determined that sufficient reliable data regarding its employees’ exercise behavior was available and it ceased using the simplified method. This change did not materially impact our results of operations. The risk-free interest rate for periods within the life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following assumptions were used to calculate the fair value of the Company’s options on the date of grant during the three months ended May 31, 2011 and 2012:


	Three Months Ended May 31,
	2011	2012
Risk-Free Interest Rate:	2.3% - 2.5%	0.7%
Expected Dividend Yield:	0%	0%
Expected Life (Years):	6.0	4.2
Expected Volatility:	110.2% - 110.9%	129.5% - 131.4%

The following table presents a summary of the Company’s stock options outstanding at May 31, 2012, and stock option activity during the three months ended May 31, 2012 (“Price” reflects the weighted average exercise price per share):

-14-


					Weighted Average		Aggregate
					Remaining		Intrinsic
	Options		Price		Contractual Term		Value
Outstanding, beginning of period		8,426,564	$	7.26
Granted		2,348,000		0.86
Exercised (1)		70,000		0.30
Forfeited		—		—
Expired		488,053		19.78

Outstanding, end of period		10,216,511		5.24		6.2	$	4,181
Exercisable, end of period		6,930,845		7.30		4.7	$	2,185

(1)	The Company did not record an income tax benefit related to option exercises in the three months ended May 31, 2012. No options were exercised during the three months ended May 31, 2011.

The weighted average grant date fair value of options granted during the three months ended May 31, 2011 and 2012, was $0.94 and $0.71, respectively.

A summary of the Company’s nonvested options at May 31, 2012, and changes during the three months ended May 31, 2012, is presented below:


			Weighted Average
			Grant Date
	Options		Fair Value
Nonvested, beginning of period		3,193,171	$	0.58
Granted		2,348,000		0.71
Vested		2,255,505		0.51
Forfeited		—		—

Nonvested, end of period		3,285,666		0.73

There were 1.4 million shares available for future grants under the Company’s various equity plans at May 31, 2012. The vesting dates of outstanding options at May 31, 2012 range from July 2012 to March 2017, and expiration dates range from June 2012 to May 2022.

Restricted Stock Awards

The Company grants restricted stock awards to directors annually, though it has granted restricted stock to employees in prior years. These awards to directors are granted on the date of our annual meeting of shareholders and vest on the earlier of (i) the completion of the director’s three-year term or (ii) the third anniversary of the date of grant. Restricted stock award grants prior to fiscal 2011 were granted out of the Company’s 2004 Equity Compensation Plan and restricted stock award grants since March 1, 2010 have been granted out of the Company’s 2010 Equity Compensation Plan. The Company may also award, out of the Company’s 2010 Equity Compensation Plan, stock to settle certain bonuses and other compensation that otherwise would be paid in cash. Any restrictions on these shares are immediately lapsed on the grant date.

The following table presents a summary of the Company’s restricted stock grants outstanding at May 31, 2012, and restricted stock activity during the three months ended May 31, 2012 (“Price” reflects the weighted average share price at the date of grant):

-15-


	Awards		Price
Grants outstanding, beginning of period		24,145	$	0.90
Granted		—		—
Vested (restriction lapsed)		—		—
Forfeited		—		—

Grants outstanding, end of period		24,145		0.90

The total grant date fair value of shares vested during the three months ended May 31, 2011 was $0.6 million. No shares vested during the three months ended May 31, 2012.

Preferred Stock and the 2012 Retention Plan

During the year ended February 29, 2012, the Company purchased rights in 1,484,679 shares of its Preferred Stock. The purchase price for the rights in the Preferred Stock was paid in cash, but these shares are subject to total return swap arrangements. We have entered into confirmations for total return swaps and voting agreements with several preferred holders. Pursuant to these agreements and arrangements, we have the ability to direct the vote of 1,484,679 shares of Preferred Stock, or approximately 61% of the Preferred Stock outstanding as of February 29, 2012.

On April 2, 2012, the shareholders of the Company approved the 2012 Retention Plan and Trust Agreement (the “Trust” or the “2012 Retention Plan”) at a special meeting of shareholders. The Company contributed 400,000 shares of its Preferred Stock to the Trust in connection with the approval of the 2012 Retention Plan. Awards granted under the 2012 Retention Plan entitle the participants to receive a distribution two years from the date of shareholder approval of the plan, provided the participant is still an employee and was an employee upon inception of the plan. Distributions may be in the form of Class A common stock if the Company elects to convert the Preferred Stock to common stock at the then-current conversion ratio prior to distribution. The initial Trustee of the plan is Jeffrey H. Smulyan, our Chairman of the Board, President and Chief Executive Officer.

As of the Trust’s inception and May 31, 2012, no preferred shares have been allocated to individual employees, nor is any individual entitled to any minimum number of shares. As a result, the service inception date for these awards precedes the grant date, and the Company is accounting for the 2012 Retention Plan as a liability plan, using variable accounting. Prior to establishment of a grant date, the Company will estimate the fair value of the shares at each reporting period, and will recognize the compensation expense over a two-year period that began on April 2, 2012. Upon the second anniversary of the Trust’s inception, the Trust’s governance may allocate the shares to individual employees, at which point fully vested shares will be distributed to employees. The Trust is consolidated by the Company and both the assets and deferred compensation obligation of the Trust are accounted for within preferred stock in the accompanying condensed consolidated balance sheets. The Company recognized approximately $0.1 million of compensation expense related to the 2012 Retention Plan in the quarter ended May 31, 2012.

In connection with the approval of the 2012 Retention Plan, the Trustee and the Trust entered into a Voting and Transfer Restriction Agreement with Emmis, pursuant to which Emmis has the right to direct the vote of the 400,000 shares of Preferred Stock contributed to the Trust under the 2012 Retention Plan. As such, the Company effectively controls approximately 66.8% of the outstanding Preferred Stock. The Company also has the right to exchange the 400,000 shares of Preferred Stock into shares of Class A common stock at the same ratio as the conversion formula in the Preferred Stock (currently 2.44 shares of Class A common stock for each share of Preferred Stock).

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Recognized Non-Cash Compensation Expense

The following table summarizes stock-based compensation expense and related tax benefits recognized by the Company in the three months ended May 31, 2011 and 2012:


	Three months ended May 31,
	2011		2012
Station operating expenses	$	80	$	153
Corporate expenses		202		238

Stock-based compensation expense included in operating expenses		282		391
Tax benefit		—		—

Recognized stock-based compensation expense, net of tax	$	282	$	391

As of May 31, 2012, there was $3.3 million of unrecognized compensation cost, net of estimated forfeitures, related to nonvested share-based compensation arrangements. The cost is expected to be recognized over a weighted average period of approximately 2.1 years.

Note 3. Intangible Assets and Goodwill

Valuation of Indefinite-lived Broadcasting Licenses

In accordance with Accounting Standards Codification (“ASC”) Topic 350, Intangibles—Goodwill and Other, the Company’s Federal Communications Commission (“FCC”) licenses are considered indefinite-lived intangibles. These assets, which the Company determined were its only indefinite-lived intangibles, are not subject to amortization, but are tested for impairment at least annually as discussed below.

The carrying amounts of the Company’s FCC licenses were $213.0 million as of February 29, 2012 and $202.0 million as of May 31, 2012. The decline in FCC licenses is attributable to the impairment charge recorded for 98.7FM. Pursuant to Emmis’ accounting policy, stations in a geographic market cluster are considered a single unit of accounting, provided that they are not being operated under an LMA by another broadcaster. As of February 29, 2012, our two stations in New York were considered a single unit of accounting. In connection with the execution of the LMA discussed above and in Note 8, the Company separated the two New York stations into separate units of accounting. The Company performed an interim impairment test of the 98.7FM license as of May 1, 2012 which resulted in an impairment charge of $11.0 million.

The Company generally performs its annual impairment test of indefinite-lived intangibles as of December 1 of each year. When indicators of impairment are present, as was the case with 98.7FM as noted above, the Company will perform an interim impairment test. These impairment tests may result in impairment charges in future periods.

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Fair value of our FCC licenses is estimated to be the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. To determine the fair value of our FCC licenses, the Company uses an income valuation method when it performs its impairment tests. Under this method, the Company projects cash flows that would be generated by each of its units of accounting assuming the unit of accounting was commencing operations in its respective market at the beginning of the valuation period. This cash flow stream is discounted to arrive at a value for the FCC license. The Company assumes the competitive situation that exists in each market remains unchanged, with the exception that its unit of accounting commenced operations at the beginning of the valuation period. In doing so, the Company extracts the value of going concern and any other assets acquired, and strictly values the FCC license. Major assumptions involved in this analysis include market revenue, market revenue growth rates, unit of accounting audience share, unit of accounting revenue share and discount rate. Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control. When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by ASC Topic 350-30-35. In our case, radio stations in a geographic market cluster are considered a single unit of accounting, provided that they are not being operated under an LMA.

Valuation of Goodwill

ASC Topic 350-20-35 requires the Company to test goodwill for impairment at least annually using a two-step process. The first step is a screen for potential impairment, while the second step measures the amount of impairment. The Company conducts the two-step impairment test on December 1 of each fiscal year, unless indications of impairment exist during an interim period. During the quarter ended May 31, 2012, no new or additional impairment indicators emerged; hence, no interim impairment testing was warranted. When assessing its goodwill for impairment, the Company uses an enterprise valuation approach to determine the fair value of each of the Company’s reporting units (radio stations grouped by market and magazines on an individual basis). Management determines enterprise value for each of its reporting units by multiplying the two-year average station operating income generated by each reporting unit (current year based on actual results and the next year based on budgeted results) by an estimated market multiple. The Company uses a blended station operating income trading multiple of publicly traded radio operators as a benchmark for the multiple it applies to its radio reporting units. There are no publicly traded publishing companies that are focused predominantly on city and regional magazines as is our publishing segment. Therefore, the market multiple used as a benchmark for our publishing reporting units has been based on recently completed transactions within the city and regional magazine industry or analyst reports that include valuations of magazine divisions within publicly traded media conglomerates. Management believes this methodology for valuing radio and publishing properties is a common approach and believes that the multiples used in the valuation are reasonable given our peer comparisons and recent market transactions. To corroborate the step-one reporting unit fair values determined using the market approach described above, management also uses an income approach, which is a discounted cash flow method to determine the fair value of the reporting unit.

This enterprise valuation is compared to the carrying value of the reporting unit for the first step of the goodwill impairment test. If the reporting unit exhibits impairment, the Company proceeds to the second step of the goodwill impairment test. For its step-two testing, the enterprise value is allocated among the tangible assets, indefinite-lived intangible assets (FCC licenses valued using a direct-method valuation approach) and unrecognized intangible assets, such as customer lists, with the residual amount representing the implied fair value of the goodwill. To the extent the carrying amount of the goodwill exceeds the implied fair value of the goodwill, the difference is recorded as an impairment charge in the statement of operations.

As of February 29, 2012 and May 31, 2012, the carrying amount of the Company’s goodwill was $24.2 million. As of February 29, 2012 and May 31, 2012 approximately $6.3 million and $17.9 million of our goodwill was attributable to our radio and publishing divisions, respectively.

Definite-lived intangibles

The Company’s definite-lived intangible assets consist primarily of foreign broadcasting licenses, and trademarks, all of which are amortized over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The following table presents the weighted-average useful life, gross carrying amount and accumulated amortization for each major class of definite-lived intangible assets at February 29, 2012 and May 31, 2012:

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		February 29, 2012						May 31, 2012
	Weighted Average	Gross				Net		Gross				Net
	Remaining Useful Life	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	(in years)	Amount		Amortization		Amount		Amount		Amortization		Amount
Foreign Broadcasting Licenses	8.9	$	8,716	$	6,976	$	1,740	$	8,716	$	7,024	$	1,692
Trademarks	12.9		749		502		247		749		507		242
Favorable Office Leases	0.3		688		677		11		688		683		5

TOTAL		$	10,153	$	8,155	$	1,998	$	10,153	$	8,214	$	1,939

Total amortization expense from definite-lived intangibles for the three–month periods ended May 31, 2011 and 2012 was $0.3 million and less than $0.1 million, respectively. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangibles:


YEAR ENDED FEBRUARY 28 (29),
2013	$	223
2014		209
2015		207
2016		207
2017		207

Note 4. Long-term Debt

Long-term debt was comprised of the following at February 29, 2012 and May 31, 2012:


	As of February 29,			As of May 31,
	2012			2012
Credit Agreement debt
Revolver	$	6,000		$	—
Term Loan B		87,877			61,662
Extended Term Loan B		109,966			77,162

Total Credit Agreement debt		203,843			138,824

Senior unsecured notes		33,860			35,803

98.7FM nonrecourse debt		—			82,198

Less current maturities:
Credit Agreement debt		(7,978	)		(1,388	)
98.7FM nonrecourse debt		—			(4,113	)

Total long-term debt	$	229,725		$	251,324

Credit Agreement Debt

At May 31, 2012, we had $138.8 million of outstanding term loans. Revolver availability at May 31, 2012 was $9.5 million, which is net of $0.5 million of outstanding letters of credit. During the three months ended May 31, 2012, the Company repaid $58.7 million of outstanding term loans and all amounts borrowed under the revolver from the proceeds received from the issuance of the 98.7FM debt as discussed in Note 8. Our revolver matures on November 2, 2012.

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The Credit Agreement was amended twice during the three months ended May 31, 2012. See Note 9 for more discussion of the amendments.

Senior Unsecured Notes

Interest on the senior unsecured notes is paid in kind and compounds quarterly at a rate of 22.95% per annum, except that during the continuance of any event of default the rate will be 24.95% per annum payable on demand in cash. During the three months ended May 31, 2012, the Company recorded $1.9 million of interest expense related to the senior unsecured notes. The Notes mature on February 1, 2015, at which time the principal balance and all accreted interest is due entirely in cash.

The senior unsecured notes were amended twice during the three months ended May 31, 2012. See Note 9 for more discussion of the amendments.

98.7FM Nonrecourse Debt

On May 30, 2012, the Company, through wholly-owned, newly-created subsidiaries, issued $82.2 million of nonrecourse notes. Teachers Insurance and Annuity Association of America (“TIAA”), through a participation agreement with Wells Fargo Bank Northwest, National Association (“Wells Fargo”), is entitled to receive payments made on the notes. The notes are obligations only of the newly-created subsidiaries, are non-recourse to the rest of the Company’s subsidiaries and are secured by the assets of the newly-created subsidiaries, including the payments made to the newly-created subsidiary related to the 98.7FM LMA, which are guaranteed by Disney Enterprises, Inc. The notes bear interest at 4.1%. See Note 8 for more discussion of the 98.7FM nonrecourse debt and LMA.

Mandatory principal payments related to the 98.7FM nonrecourse debt for the next five years and thereafter are summarized below:


Year Ended	98.7FM Nonrecourse
February 28 (29),	Debt Principal Repayments
2013	$	3,130
2014		4,126
2015		4,541
2016		4,990
2017		5,453
Thereafter		59,958

Total	$	82,198

Note 5. Liquidity

The Company continually projects its anticipated cash needs, which include its operating needs, capital needs, principal and interest payments on its indebtedness and preferred stock dividends. As of the filing of this Form 10-Q, management believes the Company can meet its liquidity needs through the end of fiscal year 2013 with cash and cash equivalents on hand and projected cash flows from operations. Based on these projections, management also believes the Company will be in compliance with its debt covenants through the end of fiscal year 2013.

Borrowings under the Credit Agreement depend upon our continued compliance with certain operating covenants and financial ratios. The Company must maintain a minimum amount of trailing twelve-month Consolidated EBITDA (as defined in the Credit Agreement) and at least $5 million in Liquidity (as defined in the Credit Agreement). The Credit Agreement also contains certain other non-financial covenants. We were in compliance with all financial and non-financial covenants as of May 31, 2012. Our Liquidity (as defined in the Credit Agreement) as of May 31, 2012 was $13.5 million. Our minimum Consolidated EBITDA (as defined in the Credit Agreement) requirement and actual amount as of May 31, 2012 was as follows:

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	As of May 31, 2012
			Actual Trailing
	Covenant		Twelve-Month
	Requirement		Consolidated EBITDA ¹
Trailing Twelve-month Consolidated EBITDA ¹	$	24,000	$	26,264

Note 6. Fair Value Measurements

As defined in ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

Recurring Fair Value Measurements

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of February 29, 2012 and May 31, 2012. The financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.


	As of May 31, 2012
	Level 1		Level 2		Level 3
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical Assets		Observable		Unobservable
	or Liabilities		Inputs		Inputs		Total
Available for sale securities	$	—	$	—	$	160	$	160

Total assets measured at fair value on a recurring basis	$	—	$	—	$	160	$	160

¹	As defined in the Credit Agreement

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	As of February 29, 2012
	Level 1		Level 2		Level 3
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical Assets		Observable		Unobservable
	or Liabilities		Inputs		Inputs		Total
Available for sale securities	$	—	$	—	$	160	$	160

Total assets measured at fair value on a recurring basis	$	—	$	—	$	160	$	160

Available for sale securities — Emmis’ available for sale security is an investment in preferred stock of a company that is not traded in active markets. The investment is recorded at fair value, which is generally estimated using significant unobservable market parameters, resulting in Level 3 categorization.

The following table shows a reconciliation of the beginning and ending balances for fair value measurements using significant unobservable inputs:


	For the Three Months Ended
	May 31, 2011					May 31, 2012
	Available					Available
	For Sale		Derivative			For Sale
	Securities		Instruments			Securities
Beginning Balance	$	189	$	297		$	160
Realized losses included in earnings		—		(297	)		—

Ending Balance	$	189	$	—		$	160

Non-Recurring Fair Value Measurements

The Company has certain assets that are measured at fair value on a non-recurring basis under circumstances and events that include those described in Note 3, Intangible Assets and Goodwill, and are adjusted to fair value only when the carrying values are more than the fair values. The categorization of the framework used to price the assets is considered a Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value (see Note 3 for more discussion).

Fair Value of Other Financial Instruments

The estimated fair value of financial instruments is determined using the best available market information and appropriate valuation methodologies. Considerable judgment is necessary, however, in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange, or the value that ultimately will be realized upon maturity or disposition. The use of different market assumptions may have a material effect on the estimated fair value amounts.

The following methods and assumptions were used to estimate the fair value of financial instruments:

• Cash and cash equivalents, accounts receivable and accounts payable, including accrued liabilities : The carrying amount of these assets and liabilities approximates fair value because of the short maturity of these instruments.

• Credit Agreement debt : As of February 29, 2012 and May 31, 2012, the fair value of the Company’s Credit Agreement debt was $198.0 million and $136.5 million, respectively, while the carrying value was $203.8 million and $138.8 million, respectively. The Company’s assessment of the fair value of the Credit Agreement debt is based on bid prices for the portion of debt that is actively traded and is considered a level 1 measurement. The Extended Term Loans are not actively traded and are considered a level 3 measurement. The Company believes that the current carrying value of the Extended Term Loans approximates its fair value.

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• 6.25% Series A cumulative convertible preferred stock : As of February 29, 2012 and May 31, 2012, the fair value of the Company’s Preferred Stock for which the Company does not have voting rights, based on quoted market prices, was $20.2 million and $15.0 million, respectively, while the carrying value was $46.9 million for both periods. The carrying value of Preferred Stock excludes undeclared dividends in arrears. Exclusive of shares outstanding which the Company has acquired voting rights, undeclared dividends in arrears were of $10.5 million and $11.4 million as of February 29, 2012 and May 31, 2012, respectively. As quoted market prices are available, this is considered a level 1 measurement.

• Senior unsecured notes : The senior unsecured notes are not actively traded and are considered a level 3 measurement (see Note 4 for more discussion of the senior unsecured notes). The Company believes that the current carrying value of the senior unsecured notes approximates its fair value.

• 98.7FM nonrecourse debt : The 98.7FM nonrecourse debt is not actively traded and is considered a level 3 measurement (see Note 4 and Note 8 for more discussion of the 98.7FM nonrecourse debt). The Company believes that the current carrying value of the 98.7FM nonrecourse debt approximates its fair value.

Note 7. Segment Information

The Company’s operations are aligned into two business segments: (i) Radio and (ii) Publishing. These business segments are consistent with the Company’s management of these businesses and its financial reporting structure. Corporate expenses are not allocated to reportable segments. The results of operations of our Hungary radio operations and the operations related to our Flint Peak Tower Site, both of which had previously been included in the radio segment, have been classified as discontinued operations and have been excluded from the segment disclosures below. See Note 1 for more discussion of our discontinued operations.

The Company’s segments operate primarily in the United States, but we also operate radio stations located in Slovakia and Bulgaria. The following table summarizes the net revenues and long-lived assets of our international properties included in our condensed consolidated financial statements.


	Net Revenues				Long-lived Assets
	Three Months Ended May 31,				As of February 29,		As of May 31,
	2011		2012		2012		2012
Continuing Operations:

Slovakia	$	2,672	$	2,277	$	6,313	$	6,181

Bulgaria		255		234		578		490

Discontinued Operations (see Note 1):

Hungary	$	7	$	—	$	8	$	—

The accounting policies as described in the summary of significant accounting policies included in the Company’s Annual Report filed on Form 10-K, for the year ended February 29, 2012, and in Note 1 to these condensed consolidated financial statements, are applied consistently across segments.

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Three Months Ended
May 31, 2012	Radio			Publishing		Corporate			Consolidated
Net revenues	$	40,376		$	16,411	$	—		$	56,787
Station operating expenses, excluding depreciation and amortization		30,600			16,244		—			46,844
Corporate expenses, excluding depreciation and amortization		—			—		4,972			4,972
Depreciation and amortization		1,109			108		461			1,678
Impairment loss		10,971			—		—			10,971
Gain on sale of assets		(10,000	)		—		—			(10,000	)

Operating income (loss)	$	7,696		$	59	$	(5,433	)	$	2,322


Three Months Ended
May 31, 2011	Radio			Publishing			Corporate			Consolidated
Net revenues	$	45,370		$	15,776		$	—		$	61,146
Station operating expenses, excluding depreciation and amortization		32,988			16,346			—			49,334
Corporate expenses, excluding depreciation and amortization		—			—			7,335			7,335
Depreciation and amortization		1,735			112			264			2,111
Gain on sale of fixed assets		(3	)		—			—			(3	)

Operating income (loss)	$	10,650		$	(682	)	$	(7,599	)	$	2,369


	As of February 29, 2012
	Radio		Publishing		Corporate		Consolidated
Assets — continuing operations	$	277,676	$	37,332	$	24,762	$	339,770
Assets — discontinued operations		999		—		—		999

Total assets	$	278,675	$	37,332	$	24,762	$	340,769


	As of May 31, 2012
	Radio		Publishing		Corporate		Consolidated
Assets — continuing operations	$	285,636	$	35,393	$	28,758	$	349,787
Assets — discontinued operations		1,152		—		—		1,152

Total assets	$	286,788	$	35,393	$	28,758	$	350,939

Note 8. 98.7FM New York Intellectual Property Sale, LMA and Related Financing Transaction

Sale of WRKS-FM Intellectual Property

On April 5, 2012, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with YMF Media LLC (“YMF”). Yucaipa Corporate Initiatives Fund II, L.P., Yucaipa Corporate Initiatives (Parallel) Fund II, L.P., Fortress Credit Funding I, LP., Drawbridge Special Opportunities Fund Ltd. and CF ICBC LLC agreed to guarantee certain obligations of the Purchaser under the Asset Purchase Agreement.

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Pursuant to the Asset Purchase Agreement, the Company agreed to sell certain intellectual property rights, described below, to YMF, and YMF agreed to also assume certain liabilities of the Company. The purchase price was $10.0 million, plus quarterly earn-out payments, if any, equal to 15% of the incremental gross revenue over a three-year period in excess of calendar 2011 gross revenues attributable to radio station WBLS-FM, 107.5FM, New York, NY, which is owned by YMF. The assets sold to YMF included intellectual property rights used or held for use by the Company exclusively in the business or operation of 98.7FM, and all assignable registrations, applications, renewals, issuances, extensions, restorations and reversions for, in respect of or relating to the intellectual property. The Asset Purchase Agreement contained customary representations, warranties, covenants and indemnities.

The sale of WRKS-FM’s intellectual property became effective on May 7, 2012. The $10.0 million gain is reflected in gain on sale of assets and the receivable is reflected in other current assets in the condensed consolidated statements of operations and condensed consolidated balance sheets, respectively. Emmis collected the $10.0 million intellectual property sale proceeds on July 6, 2012 and used the entire amount to repay term loans under the Company’s Credit Agreement.

98.7FM Local Programming and Marketing Agreement

On April 26, 2012, the Company entered into an LMA with New York AM Radio, LLC (“Programmer”) pursuant to which, commencing April 30, 2012, Programmer purchased from Emmis the right to provide programming on 98.7FM (the “Station”) until August 31, 2024, subject to certain conditions. Disney Enterprises, Inc., the parent company of Programmer, has guaranteed the obligations of Programmer under the LMA. The Company retains ownership and control of the Station, including the related FCC license, during the term of the LMA and will receive an annual fee from Programmer of $8.4 million for the first year of the term under the LMA, which fee will increase by 3.5% each year thereafter until the LMA’s termination. LMA fee revenue is recorded on a straight-line basis over the term of the LMA. The Company assigned the LMA to a wholly-owned, newly-formed subsidiary (the “Financing Subsidiary”) in connection with the funding of the 98.7FM nonrecourse debt under the Participation Agreement, each as described below.

Issuance of 98.7FM Nonrecourse Debt

On April 26, 2012, the Financing Subsidiary and a subsidiary of the Financing Subsidiary, which was formed to hold the FCC License for the Station (the “License Subsidiary”), entered into a Participation Agreement (the “Participation Agreement”) with Wells Fargo and TIAA. On May 30, 2012, subsequent to the contribution of certain assets including the FCC License of 98.7FM to the License Subsidiary, the Company closed on the financing under the Participation Agreement with Wells Fargo and TIAA. Pursuant to the Participation Agreement, Wells Fargo sold to TIAA a 100% participation interest in a 4.10% promissory note issued, jointly and severally, by the Financing Subsidiary and the License Subsidiary in the principal amount of approximately $82.2 million (the “98.7FM Note”). The 98.7FM Note will mature on August 1, 2024 and bears interest at a rate equal to 4.10% per annum. Principal payments to be made under the note are described in Note 4. The 98.7FMNote is principally secured by, among other things, an assignment of the proceeds of the 98.7FM LMA and a guarantee by Disney Enterprises, Inc. As evidence of TIAA’s purchase of the participation interest in the 98.7FM Note, TIAA received a Pass-Through Certificate which entitles TIAA to receive payments made under the 98.7FM Note. In its capacity as the trustee, Wells Fargo receives fees and expenses for undertaking certain obligations related to the 98.7FM Note.

Approximately $74.7 million of the net proceeds from the 98.7FM Note were used to repay indebtedness under the senior credit agreement of Emmis Operating Company, including all amounts then outstanding under its revolver, $4.3 million was retained by Emmis Operating Company for general corporate purposes, including the settlement of contract termination and severance obligations related to 98.7FM as well as Extended Term Loan B exit fee obligations, and the remainder was used to pay transaction costs. Approximately $3.2 million of transaction fees related to the issuance of the 98.7FM Note were capitalized and are being amortized over the life of the 98.7FM Note, which fully matures in August 2024, which coincides with the expiration of the 98.7FM LMA. These deferred debt costs are included in other assets, net in the condensed consolidated balance sheet.

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The Company expects that proceeds from the 98.7FM LMA will be sufficient to pay all debt service related to the 98.7FM Note, as well as all operating costs of the Station.

Note 9. Long-term Debt Amendments

Fifth Amendment to Credit Agreement, First Amendment to Senior Unsecured Notes

On March 20, 2012, Emmis entered into amendments of its senior secured credit facility and senior unsecured notes to allow us to issue Preferred Stock into the 2012 Retention Plan and Trust. These amendments did not change any financial covenants, but amended certain provisions of the Credit Agreement and senior unsecured notes to allow Emmis to contribute shares to the 2012 Retention Plan and Trust Agreement as discussed in Note 2.

Sixth Amendment to Credit Agreement, Second Amendment to Senior Unsecured Notes

On April 26, 2012, Emmis entered into amendments of its senior secured credit facility and senior unsecured notes to allow for the entry into the agreements and consummation of the 98.7FM transactions described in Note 8 above. In addition, the sixth amendment to the Credit Agreement reduced the amount of required minimum trailing twelve-month Consolidated EBITDA (as defined in the credit agreement) from $25 million to $24 million and allowed for $20 million of the net proceeds received from the 98.7FM Note to be used for revolver repayment and general corporate purposes, while simultaneously reducing the revolver commitment by $10 million, from $20 million to $10 million.

Note 10. Investment in Courseload, Inc.

On May 1, 2012, the Company purchased $2.0 million of the preferred stock of Courseload, Inc., a provider of online textbooks and other course material. Emmis can, at its discretion, purchase up to an additional $4.0 million of preferred stock in Courseload, Inc. through November 2012. This investment is accounted for under the cost method as the preferred stock in Courseload, Inc, does not have a readily determinable fair value.

Note 11. Amendment to KXOS-FM LMA

On April 13, 2012, the Company entered into a First Amendment to Put and Call Agreement (the “Amendment”) with a subsidiary of GRC and certain of its “Qualified Designees” (as defined in the Put and Call Agreement dated April 3, 2009 (the “Put and Call Agreement”)). On April 3, 2009, Emmis and GRC had entered into a seven year LMA under which GRC has provided programming for radio station KXOS-FM (f/k/a KMVN-FM), Los Angeles, CA. At the same time, Emmis and GRC entered into the Put and Call Agreement under which GRC has the right to purchase KXOS-FM for $110 million at any time during the term of the LMA and Emmis has the right to require GRC to purchase KXOS-FM for the same amount at the end of the term of the LMA. The First Amendment effectively gives the Qualified Designees the right to purchase KXOS-FM for $85.5 million dollars provided that the purchase closes on or before March 27, 2013. The LMA will remain in effect until the closing of the purchase. If the closing does not occur on or before March 27, 2013, the LMA will continue to remain in effect, the call option exercised by the Qualified Designees will terminate and the amendments to the Put and Call set forth in the Amendment will be null and void (i.e., the purchase price for KXOS-FM will revert to $110 million). In April 2012, Emmis applied for FCC approval of the transfer of the KXOS-FM FCC license. The FCC approved the KXOS-FM FCC license transfer on June 22, 2012. Any closing under the Amendment is subject to customary representations, warranties, covenants and conditions, including GRC’s ability to obtain financing for the transaction, but we are hopeful closing will occur in our fiscal quarter ending August 31, 2012.

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Note 12. Regulatory, Legal and Other Matters

Emmis is a party to various legal proceedings arising in the ordinary course of business. In the opinion of management of the Company, however, there are no legal proceedings pending against the Company that we believe are likely to have a material adverse effect on the Company.

Emmis and certain of its officers and directors are named as defendants in a lawsuit filed by certain holders of Preferred Stock (the “Lock-Up Group”) April 16, 2012, in the United States District Court for the Southern District of Indiana entitled Corre Opportunities Fund, LP, et al. v. Emmis Communications Corporation, et al . The plaintiffs allege that Emmis and the other defendants violated various provisions of the federal securities laws and breached fiduciary duties in connection with Emmis’ entry into total return swap agreements and voting agreements with certain holders of Emmis Preferred Stock, and in issuing shares of Preferred Stock to Emmis’ 2012 Retention Plan and Trust (the “Trust”) and entering into a voting agreement with the trustee of the Trust. The plaintiffs also allege that Emmis would violate certain provisions of Indiana corporate law by directing the voting of the shares of Preferred Stock subject to the total return swap agreements (the “Swap Shares”) and the shares of Preferred Stock held by the Trust (the “Trust Shares’) in favor of certain proposed amendments to Emmis’ Articles of Incorporation. The plaintiffs seek declaratory and injunctive relief.

Emmis has filed an answer denying the material allegations of the complaint, and has filed a counterclaim seeking a declaratory judgment that Emmis may legally direct the voting of the Swap Shares and the Trust Shares in favor of the proposed amendments. Emmis is defending this lawsuit vigorously.

Emmis has asked the U.S. District Court to issue a declaratory judgment with respect to Emmis’ counterclaim confirming that the Proposed Amendments comply with Indiana law and the Articles of Incorporation. Although the date of any ruling by the U.S. District Court in the federal litigation (including the Lock-Up Group’s claims and Emmis’s counterclaim for declaratory judgment) cannot be predicted with certainty, it is expected that a hearing on the Lock-Up Group’s claim for injunctive relief will be held before the date of any shareholder vote on the Proposed Amendments. On May 31, 2012, the U.S. District Court entered an order (a) requiring that the court be notified upon Emmis’ filing of the definitive version of this Proxy Statement; and (b) stating that the court will set the Lock-Up Group’s preliminary injunction motion for hearing on a date that is within thirty days of the court being so notified. At the same time, Emmis and the Lock-Up Group agreed that the shareholder vote on the Proposed Amendments will be scheduled for a date that is at least thirty days after the filing of the definitive version of this Proxy Statement.

Certain individuals and groups have challenged applications for renewal of the FCC licenses of certain of the Company’s stations. The challenges to the license renewal applications are currently pending before the FCC. Emmis does not expect the challenges to result in the denial of any license renewals.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Note: Certain statements included in this report or in the financial statements contained herein which are not statements of historical fact, including but not limited to those identified with the words “expect,” “should,” “will” or “look” are intended to be, and are, by this Note, identified as “forward-looking statements,” as defined in the Securities and Exchange Act of 1934, as amended. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future result, performance or achievement expressed or implied by such forward-looking statement. Such factors include, among others:

•

general economic and business conditions;

•

fluctuations in the demand for advertising and demand for different types of advertising media;

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•

our ability to service our outstanding debt;

•

loss of key personnel;

•

increased competition in our markets and the broadcasting industry;

•

our ability to attract and secure programming, on-air talent, writers and photographers;

•

inability to obtain (or to obtain timely) necessary approvals for purchase or sale transactions or to complete the transactions for other reasons generally beyond our control;

•

increases in the costs of programming, including on-air talent;

•

new or changing regulations of the Federal Communications Commission or other governmental agencies;

•

changes in radio audience measurement methodologies;

•

competition from new or different technologies;

•

war, terrorist acts or political instability; and

•

other factors mentioned in other documents filed by the Company with the Securities and Exchange Commission.

For a more detailed discussion of these and other risk factors, see the Risk Factors section of our Annual Report on Form 10-K, for the year ended February 29, 2012. Emmis does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.

GENERAL

We are a diversified media company. We own and operate radio and publishing properties located primarily in the United States. Our revenues are mostly affected by the advertising rates our entities charge, as advertising sales represent approximately 70% of our consolidated revenues. These rates are in large part based on our entities’ ability to attract audiences/subscribers in demographic groups targeted by their advertisers. Arbitron Inc. generally measures radio station ratings in our domestic markets on a weekly basis using a passive digital system of measuring listening (the Portable People Meter ^TM ). Because audience ratings in a station’s local market are critical to the station’s financial success, our strategy is to use market research and advertising and promotion to attract and retain audiences in each station’s chosen demographic target group.

Our revenues vary throughout the year. As is typical in the broadcasting industry, our revenues and operating income are usually lowest in our fourth fiscal quarter.

In addition to the sale of advertising time for cash, stations typically exchange advertising time for goods or services, which can be used by the station in its business operations. These barter transactions are recorded at the estimated fair value of the product or service received. We generally confine the use of such trade transactions to promotional items or services for which we would otherwise have paid cash. In addition, it is our general policy not to pre-empt advertising spots paid for in cash with advertising spots paid for in trade.

The following table summarizes the sources of our revenues for the three-month periods ended May 31, 2011 and 2012. All revenues generated by our international radio properties are included in the “Local” category. The category “Non Traditional” principally consists of ticket sales and sponsorships of events our stations and magazines conduct in their local markets. The category “Other” includes, among other items, revenues generated by the websites of our entities and barter.

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	Three Months Ended May 31,
	2011		% of Total			2012		% of Total
	(Dollars in thousands)
Net revenues:
Local	$	35,166		57.5	%	$	30,741		54.1	%
National		9,048		14.8	%		8,180		14.4	%
Political		266		0.4	%		863		1.5	%
Publication Sales		3,444		5.6	%		3,455		6.1	%
Non Traditional		2,956		4.8	%		3,118		5.5	%
LMA Fees		1,750		2.9	%		2,611		4.6	%
Other		8,516		14.0	%		7,819		13.8	%

Total net revenues	$	61,146				$	56,787

As previously mentioned, we derive approximately 70% of our net revenues from advertising sales. Our radio stations derive a higher percentage of their advertising revenues from local sales than our publishing entities. In the three-month period ended May 31, 2012, local sales, excluding political revenues, represented approximately 83% and 66% of our advertising revenues for our radio and publishing divisions, respectively.

No customer represents more than 10% of our consolidated net revenues. Our top ten categories for radio represent approximately 61% of our radio division’s total advertising net revenues for the three-month periods ended May 31, 2011 and 2012. The automotive industry, representing approximately 11% of our radio net revenues, is the largest category for our radio division for the three-month periods ended May 31, 2011 and 2012, respectively.

The majority of our expenses are fixed in nature, principally consisting of salaries and related employee benefit costs, office and tower rent, utilities, property and casualty insurance and programming-related expenses. However, approximately 20% of our expenses vary in connection with changes in revenues. These variable expenses primarily relate to sales commissions and bad debt reserves. In addition, costs related to our marketing and promotions department are highly discretionary and incurred primarily to maintain and/or increase our audience and market share.

KNOWN TRENDS AND UNCERTAINTIES

Although advertising revenues have stabilized following the recent global recession, domestic radio revenue growth has been challenged for several years. Management believes this is principally the result of three factors: (1) the proliferation of advertising inventory caused by the emergence of new media, such as various media distributed via the Internet, telecommunication companies and cable interconnects, as well as social networks and social coupon sites, all of which are gaining advertising share against radio and other traditional media, (2) the perception of investors and advertisers that satellite radio and portable media players diminish the effectiveness of radio advertising, and (3) the adoption of a new method of gathering ratings data, which has shown an increase in cumulative audience size, but a decrease in time spent listening as compared to the previous method of gathering ratings data.

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The Company and the radio industry have begun several initiatives to address these issues. The radio industry is working aggressively to increase the number of portable digital media devices that contain an FM tuner, including smartphones and music players. In many countries, FM tuners are common features in portable digital media devices. The radio industry is working with leading United States network providers, device manufacturers, regulators and legislators to ensure that FM tuners are included in future portable digital media devices. Including FM as a feature on these devices has the potential to increase radio listening and improve perception of the radio industry while offering network providers the benefits of a proven emergency notification system, reduced network congestion from audio streaming services, and a host of new revenue generating applications.

The Company has also aggressively worked to harness the power of broadband and mobile media distribution in the development of emerging business opportunities by becoming one of the fifteen largest streaming audio providers in the United States, developing highly interactive websites with content that engages our listeners, using SMS texting and delivering real-time traffic to navigation devices. We have created the Loud Digital Network, which combines our original content with other music and entertainment content to form one of the ten largest music and entertainment networks on the Internet.

Along with the rest of the radio industry, the majority of our stations have deployed HD Radio ^® . HD Radio ^® offers listeners advantages over standard analog broadcasts, including improved sound quality and additional digital channels. To make the rollout of HD Radio ^® more efficient, a consortium of broadcasters representing a majority of the radio stations in nearly all of our markets have agreed to work together in each radio market to ensure the most diverse consumer offering possible and to accelerate the rollout of HD Radio ^® receivers, particularly in automobiles. In addition to offering secondary channels, the HD Radio ^® spectrum allows broadcasters to transmit other forms of data. We are participating in a joint venture with other broadcasters to provide the bandwidth that a third party will use to transmit location-based data to hand-held and in-car navigation devices. It is unclear what impact HD Radio ^® will have on the markets in which we operate.

The results of our domestic radio operations are heavily dependent on the results of our stations in the New York and Los Angeles markets. These markets account for nearly 50% of our domestic radio net revenues. During fiscal 2012, KPWR-FM in Los Angeles experienced revenue growth that was better than the overall Los Angeles radio market, whereas our New York cluster trailed the revenue performance of the New York market due to weak performance at our adult urban station, WRKS-FM. During the three months ended May 31, 2012, we entered into an LMA for WRKS-FM. See Note 8 to the accompanying condensed consolidated financial statements for more discussion. Our results in New York and Los Angeles are often more volatile than our larger competitors due to our lack of scale in these markets. We are overly dependent on the performance of one station in each of these markets, and as the competitive environment shifts, our ability to adapt is limited. Furthermore, some of our competitors that operate larger station clusters in New York and Los Angeles are able to leverage their market share to extract a greater percentage of available advertising revenue through discounting unit rates.

As part of our business strategy, we continually evaluate potential acquisitions of radio stations, publishing properties and other businesses that we believe hold promise for long-term appreciation in value and leverage our strengths. However, Emmis Operating Company’s (the Company’s principal operating subsidiary, hereinafter “EOC”) Credit Agreement substantially limits our ability to make acquisitions. We also regularly review our portfolio of assets and may opportunistically dispose of assets when we believe it is appropriate to do so.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are defined as those that encompass significant judgments and uncertainties, and potentially lead to materially different results under different assumptions and conditions. We believe that our critical accounting policies are those described below.

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Revenue Recognition

Broadcasting revenue is recognized as advertisements are aired. Publication revenue is recognized in the month of delivery of the publication. Both broadcasting revenue and publication revenue recognition is subject to meeting certain conditions such as persuasive evidence that an arrangement exists and collection is reasonably assured. LMA fee revenue is recognized on a straight-line basis over the term of the LMA. These criteria are generally met at the time the advertisement is aired for broadcasting revenue and upon delivery of the publication for publication revenue. Advertising revenues presented in the financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of 15% of gross revenues.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is recorded based on management’s judgment of the collectability of receivables. When assessing the collectability of receivables, management considers, among other things, historical loss experience and existing economic conditions.

FCC Licenses and Goodwill

We have made acquisitions in the past for which a significant amount of the purchase price was allocated to FCC licenses and goodwill assets. As of May 31, 2012, we have recorded approximately $226.2 in goodwill and FCC licenses, which represents approximately 64% of our total assets.

In the case of our U.S. radio stations, we would not be able to operate the properties without the related FCC license for each property. FCC licenses are renewed every eight years; consequently, we continually monitor our stations’ compliance with the various regulatory requirements. Historically, all of our FCC licenses have been renewed at the end of their respective periods, and we expect that all FCC licenses will continue to be renewed in the future. We consider our FCC licenses to be indefinite-lived intangibles. Our foreign broadcasting licenses expire during periods ranging from February 2021 to February 2026. While all of our international broadcasting licenses were recently extended, we will need to submit extension applications upon their expiration to continue our broadcast operations in these countries. While there is a general expectancy of renewal of radio broadcast licenses in most countries and we expect to actively seek renewal of our foreign licenses, both of the countries in which we operate do not have the regulatory framework or history that we have with respect to license renewals in the United States. This makes the risk of non-renewal (or of renewal on less favorable terms) of foreign licenses greater than for United States licenses. We treat our foreign broadcasting licenses as definite-lived intangibles and amortize them over their respective license periods.

We do not amortize goodwill or other indefinite-lived intangible assets, but rather test for impairment at least annually or more frequently if events or circumstances indicate that an asset may be impaired. When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by Accounting Standards Codification (“ASC”) Topic 350-30-35. In our case, radio stations in a geographic market cluster are considered a single unit of accounting, provided that they are not being operated under an LMA by another broadcaster.

We complete our annual impairment tests on December 1 of each year and perform additional interim impairment testing whenever triggering events suggest such testing is warranted.

Valuation of Indefinite-lived Broadcasting Licenses

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Valuation of Goodwill

ASC Topic 350 requires the Company to test goodwill for impairment at least annually using a two-step process. The first step is a screen for potential impairment, while the second step measures the amount of impairment. The Company conducts the two-step impairment test on December 1 of each fiscal year, unless indications of impairment exist during an interim period. When assessing its goodwill for impairment, the Company uses an enterprise valuation approach to determine the fair value of each of the Company’s reporting units (radio stations grouped by market and magazines on an individual basis). Management determines enterprise value for each of its reporting units by multiplying the two-year average station operating income generated by each reporting unit (current year based on actual results and the next year based on budgeted results) by an estimated market multiple. The Company uses a blended station operating income trading multiple of publicly traded radio operators as a benchmark for the multiple it applies to its radio reporting units. There are no publicly traded publishing companies that are focused predominantly on city and regional magazines as is our publishing segment. Therefore, the market multiple used as a benchmark for our publishing reporting units is based on recently completed transactions within the city and regional magazine industry or analyst reports that include valuations of magazine divisions within publicly traded media conglomerates. Management believes this methodology for valuing radio and publishing properties is a common approach and believes that the multiples used in the valuation are reasonable given our peer comparisons and recent market transactions. To corroborate the step-one reporting unit fair values determined using the market approach described above, management also uses an income approach, which is a discounted cash flow method to determine the fair value of the reporting unit.

Deferred Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequence of events that have been recognized in the Company’s financial statements or income tax returns. Income taxes are recognized during the year in which the underlying transactions are reflected in the consolidated statements of operations. Deferred taxes are provided for temporary differences between amounts of assets and liabilities as recorded for financial reporting purposes and amounts recorded for income tax purposes. After determining the total amount of deferred tax assets, the Company determines whether it is more likely than not that some portion of the deferred tax assets will not be realized. If the Company determines that a deferred tax asset is not likely to be realized, a valuation allowance will be established against that asset to record it at its expected realizable value.

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Estimate of Effective Tax Rates

We estimate the effective tax rates and associated liabilities or assets for each legal entity within Emmis. These estimates are based upon our interpretation of United States and local tax laws as they apply to our legal entities and our overall tax structure. Audits by local tax jurisdictions, including the United States Government, could yield different interpretations from our own and cause the Company to owe more taxes than originally recorded. We utilize advisors in the various tax jurisdictions to evaluate our position and to assist in our calculation of our tax expense and related assets and liabilities.

Results of Operations for the Three-month Periods Ended May 31, 2012, Compared to May 31, 2011

Net revenues:


	For the three months ended May 31,
	2011		2012		$ Change			% Change
	(As reported, amounts in thousands)
Net revenues:
Radio	$	45,370	$	40,376	$	(4,994	)		(11.0	)%
Publishing		15,776		16,411		635			4.0	%

Total net revenues	$	61,146	$	56,787	$	(4,359	)		(7.1	)%

Radio net revenues decreased in the three-month period ended May 31, 2012 as compared to the same period of the prior year principally due to the July 15, 2011 commencement of a Local Marketing Agreement (“LMA”) related to the Merlin Stations and the ultimate sale of a controlling interest in these stations on September 1, 2011. As Emmis retained a noncontrolling equity ownership in the Merlin Stations, they have not been classified as discontinued operations. Excluding the Merlin Stations, radio net revenues would have increased $0.7 million or 1.8%. We typically monitor the performance of our domestic stations against the aggregate performance of the markets in which we operate based on reports for the periods prepared by Miller Kaplan. Miller Kaplan reports are generally prepared on a gross revenues basis and exclude revenues from barter arrangements. Miller Kaplan information through May 2012 is not yet available. The following discussion of year-to-date results is for the two months ended April 2012. Miller Kaplan reported gross revenues for our domestic radio markets decreased 5.0% for the two-month period ended April 30, 2012 as compared to the same period of the prior year. Excluding the Merlin Stations, our gross revenues as reported to Miller Kaplan decreased 2.2% for the two-month period ended April 30, 2012 as compared to the same period of the prior year. For the two-month period ending April 30, 2012, our gross revenues exceeded the market average in New York, Los Angeles and Indianapolis, but trailed market performance in St. Louis and Austin. Miller Kaplan does not report gross revenue market data for our Terre Haute market. For the three-month period ended May 31, 2012 as compared to the same period of the prior year, our average rate per minute for our domestic radio stations was down 2.9%, and our minutes sold were up 4.9%.

Publishing net revenues increased in the three-month period ended May 31, 2012 as compared to the same period of the prior year mostly due to performance of our Texas Monthly and Los Angeles Magazine publications. While these publications saw improvement in advertising demand, the advertising market for our smaller market publications remains challenged.

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Station operating expenses excluding depreciation and amortization expense:


	For the three months ended May 31,
	2011		2012		$ Change			% Change
	(As reported, amounts in thousands)
Station operating expenses excluding depreciation and amortization expense:
Radio	$	32,988	$	30,600	$	(2,388	)		(7.2	)%
Publishing		16,346		16,244		(102	)		(0.6	)%

Total station operating expenses excluding depreciation and amortization expense	$	49,334	$	46,844	$	(2,490	)		(5.0	)%

Station operating expenses, excluding depreciation and amortization expense for the three-month periods ended May 31, 2012 were significantly affected by the LMA of the Merlin Stations in the prior year and the LMA of 98.7FM in the current year. In connection with the LMA of 98.7FM, the Company incurred approximately $3.2 million of costs, predominately related to contract termination payments and severance costs. Also, as Emmis retained a noncontrolling equity interest in the Merlin Stations, the results of those stations are included in continuing operations in the prior year. Station operating expenses excluding depreciation and amortization expense for the Merlin Stations in the prior year were $5.2 million. Excluding these items, radio station operating expenses, excluding depreciation and amortization expense for the three-month period ending May 31, 2012 would have decreased $0.4 million or 1.6% as compared to the same period of the prior year.

Station operating expenses excluding depreciation and amortization expense for publishing for the three-month period ended May 31, 2012 remained flat as publications continue to control costs in light of weak advertising demand.

Corporate expenses excluding depreciation and amortization expense:


	For the three months ended May 31,
	2011		2012		$ Change			% Change
	(As reported, amounts in thousands)
Corporate expenses excluding depreciation and amortization expense	$	7,335	$	4,972	$	(2,363	)		(32.2	)%

During the three-month period ending May 31, 2011, the Company incurred approximately $3.0 million of fees in connection with the Third Amendment to our Credit Agreement. Additionally, in the prior year the Company paid a nonrecurring $0.8 million bonus to certain employees. In the three months ended May 31, 2012, the Company incurred approximately $1.5 million of legal costs associated with our preferred stock, the majority of which related to litigation with certain holders of our preferred stock.

Impairment loss:


	For the three months ended May 31,
	2011		2012		$ Change
	(As reported, amounts in thousands)
Impairment loss:
Radio	$	—	$	10,971	$	10,971
Publishing		—		—		—

Total impairment loss	$	—	$	10,971	$	10,971

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Pursuant to the Company’s accounting policy, a station operating under an LMA is considered a single unit of accounting. In connection with the execution of the 98.7FM LMA, the Company determined that the 98.7FM FCC License, now considered a single unit of accounting, was impaired, and recorded a $11.0 million impairment charge.

Depreciation and amortization:


	For the three months ended May 31,
	2011		2012		$ Change			% Change
	(As reported, amounts in thousands)
Depreciation and amortization:
Radio	$	1,735	$	1,109	$	(626	)		(36.1	)%
Publishing		112		108		(4	)		(3.6	)%
Corporate		264		461		197			74.6	%

Total depreciation and amortization	$	2,111	$	1,678	$	(433	)		(20.5	)%

The decrease in radio depreciation expense for the three-month period ended May 31, 2012 is mostly attributable to certain assets becoming fully depreciated; thus the Company has ceased to record depreciation expense on those assets. Also, property and equipment of the Merlin stations has been sold and is no longer being depreciated and our license in Slovakia was extended by an additional eight years and is now being amortized through February 2021.

Gain on sale of assets:


	For the three months ended May 31,
	2011		2012		$ Change
	(As reported, amounts in thousands)
Gain on sale of assets:
Radio	$	3	$	10,000	$	9,997
Publishing		—		—		—

Total gain on sale of assets	$	3	$	10,000	$	9,997

In April 2012, Emmis sold the intellectual property of WRKS-FM in New York for $10.0 million.

Operating income (loss):


	For the three months ended May 31,
	2011			2012			$ Change			% Change
	(As reported, amounts in thousands)
Operating income (loss):
Radio	$	10,650		$	7,696		$	(2,954	)		(27.7	)%
Publishing		(682	)		59			741			(108.7	)%
Corporate		(7,599	)		(5,433	)		2,166			28.5	%

Total operating income:	$	2,369		$	2,322		$	(47	)		(2.0	)%

Radio operating income decreased in the three-month period ended May 31, 2012 predominately due to $3.2 million of contract termination and severance costs associated with the LMA of 98.7FM. The impact of the sale of the Merlin Stations, the impairment loss and the gain on sale of WRKS-FM intellectual property substantially negated one another.

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Publishing operating income increased in the three-month period ended May 31, 2012 due to strong revenue performance at our Texas Monthly and Los Angeles Magazine publications.

Corporate operating losses varied during the three-month periods ended May 31, 2011 and 2012 predominately due to significant transaction-related costs.

Interest expense:


	For the three months ended May 31,
	2011		2012		$ Change		% Change
	(As reported, amounts in thousands)
Interest expense	$	7,214	$	8,123	$	909		12.6	%

Although amounts outstanding under the Company’s Credit Agreement decreased significantly since May 31, 2011, interest expense increased during the three months ended May 31, 2012. The increase in interest expense is attributable to the issuance of senior unsecured notes in November 2011 and February 2012, which bear interest at 22.95%. Also contributing to the increase in interest expense is the 6% exit fee that is due upon repayment of a portion of our term loans. The Company is accruing this exit fee ratably over the term of the Extended Term Loans as a component of interest expense. In periods in which the exit fee payment exceeds accrued exit fees, the Company charges the difference immediately to interest expense. The exit fees paid in connection with the 98.7FM financing transaction exceeded exit fees then accrued by approximately $0.6 million, which the Company recorded as interest expense in the three months ended May 31, 2012.

Loss on debt extinguishment:


	For the three months ended May 31,
	2011		2012		$ Change			% Change
	(As reported, amounts in thousands)
Loss on debt extinguishment	$	1,478	$	484	$	(994	)		(67.3	)%

The loss on debt extinguishment for the three-month period ended May 31, 2011 includes a $1.5 million charge on debt extinguishment related to the write-off of debt fees as a portion of our term loans were deemed to be substantially modified in connection with the Third Amendment. During the three-month period ended May 31, 2012, the Company recorded a loss on debt extinguishment of $0.5 million related to the write-off of debt fees associated with term loans repaid during the quarter.

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Provision for income taxes:


	For the three months ended May 31,
	2011			2012			$ Change			% Change
	(As reported, amounts in thousands)
Benefit for income taxes	$	(2,742	)	$	(3,108	)	$	(366	)		(13.3	)%

The Company is recording a valuation allowance for its net deferred tax assets, including its net operating loss carryforwards, but excluding deferred tax liabilities related to indefinite-lived intangibles. Additionally, during the three-month period ended May 31, 2011, the Company recorded a benefit for income taxes of approximately $0.8 million related to interest rate swap agreements that matured during the period. A full valuation allowance was previously established for the deferred tax asset related to the interest rate swap agreement and was realized during the period. This benefit had previously been recorded in accumulated other comprehensive income (loss) pending the maturity of the swap agreement. The Company also recorded a benefit from continuing operations to offset the income tax provision recorded in discontinued operations related to the sale of the Flint Peak Tower Site.

In the three months ended May 31, 2012, we recorded a tax benefit associated with our $11.0 million impairment loss, which was partially offset by tax expense associated with deferred tax liabilities of our indefinite-lived intangibles.

Gain from discontinued operations, net of tax:


	For the three months ended May 31,
	2011			2012		$ Change		% Change
	(As reported, amounts in thousands)
Gain from discontinued operations, net of tax	$	(2,894	)	$	—	$	2,894		(100.0	)%

Our Hungarian radio operations and the operations of our Flint Peak Tower Site have been classified as discontinued operations in the accompanying condensed consolidated statements. The decrease in income from discontinued operations, net of tax, for the three months ended May 31, 2012 mostly relates to the gain on sale of the Flint Peak Tower Site in the prior year.

Consolidated net loss:


	For the three months ended May 31,
	2011			2012			$ Change			% Change
	(As reported, amounts in thousands)
Consolidated net loss	$	(693	)	$	(2,873	)	$	(2,180	)		314.6	%

Consolidated net loss increased due to the factors described above.

Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by operations and cash available through revolver borrowings under our credit facility. Our primary uses of capital during the past few years have been, and are expected to continue to be, capital expenditures, working capital, debt service requirements and the repayment of debt.

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At May 31, 2012, we had cash and cash equivalents of $10.5 million and net working capital of $21.8 million. At February 29, 2012, we had cash and cash equivalents of $5.6 million and net working capital of $0.8 million. The increase in working capital from February 29, 2012 is mostly due to $10.0 million that was due from YMF in connection with the sale of WRKS-FM intellectual property, additional cash on hand due to the 98.7FM LMA and related financing transaction, and an increase in accounts receivable due to the seasonal fluctuation of the business. Cash and cash equivalents held at various European banking institutions at February 29, 2012 and May 31, 2012 was $4.3 million and $4.9 million (which includes approximately $1.0 million of cash related to our Slager discontinued operation which is classified as current assets – discontinued operations in the condensed consolidated balance sheets), respectively. Our ability to access our share of these international cash balances (net of noncontrolling interests) is limited by country-specific statutory requirements.

On May 30, 2012, the Company, through wholly-owned, newly-created subsidiaries, issued $82.2 million of nonrecourse notes. TIAA, through a participation agreement with Wells Fargo, is entitled to receive payments made on the notes. The notes are obligations only of the newly-created subsidiaries, are non-recourse to the rest of the Company’s subsidiaries and are secured by the assets of the newly-created subsidiaries, including the payments made to the newly-created subsidiary related to the 98.7FM LMA, which are guaranteed by Disney Enterprises, Inc. The notes bear interest at 4.1%. See Note 8 for more discussion of the 98.7FM nonrecourse debt and LMA.

Emmis collected the $10.0 million intellectual property sale proceeds on July 6, 2012 and used the entire amount to repay term loans under the Company’s Credit Agreement.

In recent years, the Company has recorded significant impairment charges, mostly attributable to our FCC licenses. These impairment charges have had no impact on our liquidity or compliance with debt covenants.

Operating Activities

Cash used in operating activities was $1.3 million and $5.4 million for the three-month periods ended May 31, 2011 and 2012. The increase in cash used in operating activities is mostly due to transactional costs associated with the LMA of 98.7FM.

Investing Activities

Cash used in investing activities was $2.8 million for the three-month period ended May 31, 2012 versus cash provided by investing activities of $4.5 million in the same period of the prior year. During the three-month period ended May 31, 2011, the Company sold its Flint Peak Tower Site for $5.8 million of net cash proceeds. The proceeds related to the Flint Peak Tower sale are classified as cash provided by discontinued operations in the accompanying condensed consolidated statements of cash flows. In the current year, we invested $2.0 million in Courseload, Inc., a company that provides online access to textbooks and other course material.

We expect capital expenditures related to continuing operations to be approximately $5.1 million in the current fiscal year, compared to $5.7 million in fiscal 2012. We expect that future requirements for capital expenditures will include capital expenditures incurred during the ordinary course of business. Emmis can, at its discretion, purchase up to an additional $4.0 million of preferred stock in Courseload, Inc. through November 2012. We expect to fund future investing activities with cash generated from operating activities and borrowings under our credit facility.

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Financing Activities

Cash provided by financing activities was $13.0 million for the three-month period ended May 31, 2012, versus cash used in financing activities of $2.5 million in the same period of the prior year. Cash used in financing activities in the three-month period ended May 31, 2011 primarily relates to the net debt repayments of $0.5 million under our Credit Agreement, $0.5 million of debt related costs incurred in connection with the Third Amendment to the Credit Agreement, and $1.4 million used to pay distributions to noncontrolling interests.

Cash provided by financing activities in the three-month period ended May 31, 2012 primarily relates to the net borrowings of $17.2 million under our Credit Agreement and the 98.7FM nonrecourse debt, which is partially offset by $3.4 million of debt related costs incurred in connection with the issuance of the 98.7FM nonrecourse debt, and $0.8 million used to pay distributions to noncontrolling interests.

As of May 31, 2012, Emmis had $138.8 million of borrowings under the Credit Agreement ($1.4 million current and $137.4 million long-term), $35.8 million of senior unsecured notes (entirely long-term), $82.2 million of 98.7FM nonrecourse debt ($4.1 million current and $78.1 million long-term) and $46.9 million of Preferred Stock outstanding (excluding Preferred Stock of which the Company has the right to direct the vote). Approximately $77.2 million of borrowings under the Credit Agreement bears interest pursuant to a grid under which 7.5% to 12.25% per annum is to be paid in cash and 7.0% to 0.0% per annum is to be paid in kind, subject to a minimum yield of 12.25% per annum. The remainder of the Credit Agreement debt bears interest, at our option, at a rate equal to the Eurodollar rate or an alternative Base Rate plus a margin. The senior unsecured notes compound quarterly at a rate of 22.95% per annum and is paid in kind, except that during the continuance of any event of default the rate will be 24.95% per annum payable on demand in cash. The 98.7FM nonrecourse debt bears interest at 4.1% per annum. As of May 31, 2012, our weighted average borrowing rate under our Credit Agreement was approximately 8.8%. Including the senior unsecured notes and 98.7FM nonrecourse debt, our weighted average borrowing rate at May 31, 2012 was 9.3%.

The debt service requirements of Emmis over the next twelve-month period are expected to be $1.4 million for mandatory repayment of term notes under our Credit Agreement, $7.1 million of mandatory principal and interest payments of the 98.7FM nonrecourse debt and a minimum of $5.8 million related to interest on the Extended Term Loans. The Company may, at its election, choose to pay a portion of the interest due on the Extended Term Loans in-kind. The remainder of the Credit Agreement debt bears interest at variable rates and is not included in the debt service requirements previously discussed.

The terms of Emmis’ Preferred Stock provide for a quarterly dividend payment of $.78125 per share on each January 15, April 15, July 15 and October 15. Emmis has not declared a preferred stock dividend since October 15, 2008. As of the filing date of this report, cumulative preferred dividends in arrears on shares of Preferred stock over which the Company does not have the right to direct the vote total $11.4 million. Failure to pay the dividend is not a default under the terms of the Preferred Stock. Amendments to our Credit Agreement prohibit the Company from paying dividends on the Preferred Stock during the Suspension Period (as defined in the Credit Agreement). Subject to the restrictions of the Credit Agreement, payment of future preferred stock dividends is at the discretion of the Company’s Board of Directors.

As of July 6, 2012, we had $9.5 million available for additional borrowing under our credit facility, which is net of $0.5 million in outstanding letters of credit. Our credit facility revolver matures on November 2, 2012. Availability under the credit facility depends upon our continued compliance with certain operating covenants and financial ratios. Emmis was in compliance with these covenants as of May 31, 2012. As part of our business strategy, we continually evaluate potential acquisitions of radio stations, publishing properties and other businesses that we believe hold promise for long-term appreciation in value and leverage our strengths. However, Emmis Operating Company’s Credit Agreement, as amended, substantially limits our ability to make acquisitions. We also regularly review our portfolio of assets and may opportunistically dispose of assets when we believe it is appropriate to do so.

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Intangibles

Approximately 65% of our total assets consisted of intangible assets, such as FCC broadcast licenses, foreign broadcasting licenses, and goodwill, the value of which depends significantly upon the operational results of our businesses. In the case of our U.S. radio stations, we would not be able to operate the properties without the related FCC license for each property. FCC licenses are renewed every eight years; consequently, we continually monitor our stations’ compliance with the various regulatory requirements. Historically, all of our FCC licenses have been renewed at the end of their respective periods, and we expect that all FCC licenses will continue to be renewed in the future. Our foreign broadcasting licenses expire during periods ranging from February 2021 to February 2026. While all of our international broadcasting licenses were recently extended, we will need to submit extension applications upon their expiration to continue our broadcast operations in these countries. While we expect to actively seek renewal of our foreign licenses, both of the countries in which we operate do not have the regulatory framework or history that we have with respect to license renewals in the United States. This makes the risk of non-renewal (or of renewal on less favorable terms) of foreign licenses greater than for United States licenses.

Regulatory, Legal and Other Matters

Emmis is a party to various legal proceedings arising in the ordinary course of business. In the opinion of management of the company, however, there are no legal proceedings pending against the company that we believe are likely to have a material adverse effect on the company.

Emmis has filed an answer denying the material allegations of the complaint, and has filed a counterclaim seeking a declaratory judgment that Emmis may legally direct the voting the Swap Shares and the Trust Shares in favor of the proposed amendments. Emmis is defending this lawsuit vigorously.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide this information.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, the Company evaluated the effectiveness of the design and operation of its “disclosure controls and procedures” (“Disclosure Controls”). This evaluation (the “Controls Evaluation”) was performed under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).

Based upon the Controls Evaluation, our CEO and CFO concluded that as of May 31, 2012 our Disclosure Controls are effective to provide reasonable assurance that information relating to Emmis Communications Corporation and Subsidiaries that is required to be disclosed by us in the reports that we file or submit, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the period covered by this quarterly report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

It should be noted that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

Refer to Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of various legal proceedings pending against the Company.

Item 3. Defaults Upon Senior Securities

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Item 6. Exhibits

(a) Exhibits.

The following exhibits are filed or incorporated by reference as a part of this report:


3.1		Second Amended and Restated Articles of Incorporation of Emmis Communications Corporation, as amended effective June 13, 2005 incorporated by reference from Exhibit 3.1 to the Company’s Form 10-K for the fiscal year ended February 28, 2006.

3.2		Second Amended and Restated Bylaws of Emmis Communications Corporation incorporated by reference from Exhibit 3.2 to the Company’s Form 8-K filed June 3, 2011 and Exhibit 3.2 from the Company’s Form 8-K filed on March 8, 2012.

10.1		Change in Control Severance Agreement, dated as of May 7, 2012, by and between Emmis Communications Corporation and Jeffrey H. Smulyan incorporated by reference from Exhibit 10.18 to the Company’s Form 10-K filed May 10, 2012.++

10.2		Change in Control Severance Agreement, dated as of March 8, 2012, by and between Emmis Operating Company and J. Scott Enright incorporated by reference from Exhibit 10.24 to the Company’s Form 10-K filed May 10, 2012.++

10.3		Employment Agreement, dated as of March 1, 2012, by and between Emmis Operating Company and J. Scott Enright incorporated by reference from Exhibit 10.25 to the Company’s Form 10-K filed May 10, 2012.++

10.4		Change in Control Severance Agreement, dated as of May 7, 2012, by and between Emmis Communications Corporation and Gregory T. Loewen incorporated by reference from Exhibit 10.27 to the Company’s Form 10-K filed May 10, 2012.++

10.5		Employment Agreement, dated as of March 1, 2012, by and between Emmis Operating Company and Richard F. Cummings incorporated by reference from Exhibit 10.1 to the Company’s Form 8-K filed March 12, 2012.++

10.6		Change in Control Severance Agreement, dated as of March 1, 2012, by and between Emmis Operating Company and Richard F. Cummings, incorporated by reference from Exhibit 10.2 to the Company’s Form 8-K filed on March 12, 2012.++

10.7		Local Programming and Marketing Agreement, dated as of April 26, 2012, between Emmis Radio License Corporation of New York and New York AM Radio, LLC incorporated by reference from Exhibit 10.1 to the Company’s Form 8-K filed April 26, 2012.

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10.8		Participation Agreement dated as of April 26, 2012, among Emmis New York Radio LLC, Emmis New York Radio License LLC, Wells Fargo Bank Northwest, National Association and Teachers Insurance and Annuity Association of America incorporated by reference from Exhibit 10.2 to the Company’s Form 8-K filed April 26, 2012.

10.9		Asset Purchase Agreement, dated as of April 5, 2012, among Emmis Radio, LLC, Emmis Radio License Corporation of New York, YMF Media LLC and certain other parties thereto incorporated by reference from Exhibit 10.3 to the Company’s Form 8-K filed April 26, 2012.

10.10		Fifth Amendment and Consent to Amended and Restated Revolving Credit and Term Loan Agreement incorporated by reference from Exhibit 10.6 to the Company’s Form 10-K filed May 10, 2012.

10.11		Sixth Amendment and Consent to Amended and Restated Revolving Credit and Term Loan Agreement incorporated by reference from Exhibit 10.7 to the Company’s Form 10-K filed May 10, 2012.

10.12		First Amendment and Consent to Note Purchase Agreement, dated March 20, 2012, by and between Zell Credit Opportunities Master Fund, L.P. and Emmis Communications Corporation incorporated by reference from Exhibit 10.9 to the Company’s Form 10-K filed May 10, 2012.

10.13		Second Amendment and Consent to Note Purchase Agreement, dated April 26, 2012, by and between Zell Credit Opportunities Master Fund, L.P. and Emmis Communications Corporation incorporated by reference from Exhibit 10.10 to the Company’s Form 10-K filed May 10, 2012.

10.14		First Amendment to the Put and Call Agreement, dated April 12, 2009, between KMVN, LLC, KMVN License, LLC, Grupo Radio Centro LA, LLC., 93.9 Holdings, Inc. and 93.9 License, LLC incorporated by reference from Exhibit 10.1 to the Company’s Form 8-K filed April 16, 2012.

10.15		Emmis Communications Corporation 2012 Retention Plan and Trust Agreement.*++

10.16		Voting and Transfer Restriction Agreement between Emmis Communications Corporation and Jeffrey H. Smulyan as Trustee for the 2012 Retention Plan and Trust.*++

10.17		Change in Control Severance Agreement, dated as of July 10, 2012, by and between Emmis Operating Company and Gregory T. Loewen.*++

10.18		Change in Control Severance Agreement, dated as of July 10, 2012, by and between Emmis Operating Company and Jeffrey H. Smulyan.*++

31.1		Certification of Principal Executive Officer of Emmis Communications Corporation pursuant to Rule 13a-14(a) under the Exchange Act.*

31.2		Certification of Principal Financial Officer of Emmis Communications Corporation pursuant to Rule 13a-14(a) under the Exchange Act.*

32.1		Section 1350 Certification of Principal Executive Officer of Emmis Communications Corporation.*

32.2		Section 1350 Certification of Principal Financial Officer of Emmis Communications Corporation.*

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101.INS		XBRL Instance Document**

101.SCH		XBRL Taxonomy Extension Schema Document**

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document**

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document**

++	Management contract or compensatory plan or arrangement

*	Filed with this report

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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Exhibit 10.15

EMMIS COMMUNICATIONS CORPORATION

2012 RETENTION PLAN AND TRUST AGREEMENT

ARTICLE I

ESTABLISHMENT OF THE PLAN AND TRUST

1.01 EMMIS COMMUNICATIONS CORPORATION (the “Company”) hereby establishes the 2012 Retention Plan (the “Plan”) and Trust (the “Trust”) upon the terms and conditions hereinafter stated in this 2012 Retention Plan and Trust Agreement (the “Agreement”).

1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust assets existing on the date of this Agreement and all additions and accretions thereto upon the terms and conditions hereinafter stated.

ARTICLE II

PURPOSE OF THE PLAN

The purpose of the Plan is to retain personnel of experience and ability in positions by providing Employees with a proprietary interest in the Company and its Subsidiaries as compensation for their contributions to the Company and the Subsidiaries and as an incentive to make such contributions in the future. Additionally, the Plan is intended to provide retention for Employees, in part due to prior reductions in base salaries, the lack of merit increases in base salaries for the current fiscal year and the increase of Employees’ share of benefits costs. Each Grantee of an Award hereunder is advised to consult with his or her personal tax advisor with respect to the tax consequences under federal, state, local and other tax laws of the receipt of an Award hereunder. Notwithstanding anything in this Plan to the contrary, it is the intention of Company that this Plan constitute a “Bonus Program” within the meaning of ERISA Regulation Section 2510.3-2(c) and therefore is exempt from the requirements of the Employee Retirement Income Security Act of 1974, as amended, and the Committee and the Board are expressly authorized to make any amendment necessary to comply with this intent.

ARTICLE III

DEFINITIONS

As used in the Plan, terms defined parenthetically immediately after their use have the respective meanings provided by such definitions and the terms set forth below have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

3.01 “Affiliate” means, with respect to a specified person, a person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the person specified.

3.02 “Award” means a right granted under this Plan to a Grantee to receive a Payout, subject to the service based requirement in Section 7 of the Plan and the other terms and conditions of the Plan.

3.03 “Beneficiary” means the person or persons designated by a Grantee to receive any benefits payable under the Plan in the event of such Grantee’s death. Such person or persons, if any, shall be designated in writing on forms provided for this purpose by the Committee and may be changed from time to time by similar written notice to the Committee. In the absence of a written designation, the Beneficiary shall be the Grantee’s surviving spouse, if any, or if none, his or her estate.

3.04 “Board” means the Board of Directors of the Company.

3.05 “Bonus Pool” means the 400,000 shares of Preferred Stock that are contributed to the Trust pursuant to Section 5.01.

3.06 “Change in Control” means any of the following: (i) any person or group (other than a Subsidiary or any employee benefit plan (or any related trust) of the Company or a Subsidiary, and other than Jeffrey H. Smulyan or an Affiliate of Mr. Smulyan) becomes after the Effective Date the beneficial owner of 35% or more of either the then outstanding Common Stock or the combined voting power of the then outstanding voting securities of the Company entitled to vote in the election of directors, except that (A) no such person or group shall be deemed to own beneficially any securities acquired directly from the Company pursuant to a written agreement with the Company unless such person or group subsequently becomes the beneficial owner of additional Common Stock or voting securities of the Company other than pursuant to a written agreement with the Company, and (B) no Change in Control shall be deemed to have occurred solely by reason of any such acquisition by a corporation with respect to which, after such acquisition, more than 60% of both the then outstanding common shares of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote in the election of directors are then beneficially owned, directly or indirectly, by the persons who were the beneficial owners of the Common Stock and voting securities of the Company immediately before such acquisition in substantially the same proportion as their ownership, immediately before such acquisition, of the outstanding Common Stock and the combined voting power of the then outstanding voting securities of the Company entitled to vote in the election of directors; (ii) individuals who, as of the Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided that any individual who becomes a director after the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote or written consent of at least two-thirds of the directors then comprising the Incumbent Directors shall be considered as though such individual were an Incumbent Director, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such terms are used in Rule 14a-11 under the Exchange Act); (iii) approval by the shareholders of the Company of (A) a merger, reorganization or consolidation with respect to which the individuals and entities who were the respective beneficial owners of the Common Stock and voting securities of the Company immediately before such merger, reorganization or consolidation do not, after such merger, reorganization or consolidation, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding common shares and the combined voting power of the then outstanding voting securities entitled to vote in the election of directors of the corporation resulting from such merger, reorganization or consolidation, (B) a liquidation or dissolution of the Company or (C) the sale or other disposition of all or substantially all of the assets of the Company; or (iv) such other event(s) or circumstance(s) as are determined by the Committee to constitute a Change in Control. Notwithstanding the foregoing provisions of this definition, a Change in Control of the Company shall be deemed not to have occurred with respect to any Grantee, if such Grantee is, by written agreement executed prior to such Change in Control, a participant on such Grantee’s own behalf in a transaction in which the persons (or their Affiliates) with whom such Grantee has the written agreement Acquire the Company (as defined below) and, pursuant to the written agreement, the Grantee has an equity interest in the resulting entity or a right to acquire such an equity interest. For the purposes of this definition, “Acquire the Company” means the acquisition of beneficial ownership by purchase, merger, or otherwise, of either more than 50% of the Common Stock (such percentage to be computed in accordance with Rule 13d-3(d)(1)(i) of the SEC under the Exchange Act) or substantially all of the assets of the Company or its successors; “person” means such term as used in Rule 13d-5 of the SEC under the Exchange Act; “beneficial owner” means such term as defined in Rule 13d-3 of the SEC under the Exchange Act; and “group” means such term as defined in Section 13(d) of the Exchange Act.

3.07 “Class A Common Stock” means the Class A Common Stock of the Company, par value $.01 per share.

3.08 “Class B Common Stock” means the Class B Common Stock of the Company, par value $.01 per share.

3.09 “Code” means the Internal Revenue Code of 1986, as amended, and regulations and rulings thereunder. References to a particular section of the Code shall include references to successor provisions.

3.10 “Committee” means the Compensation Committee of the Board or such other committee or subcommittee appointed by the Board or the Compensation Committee.

3.11 “Common Stock” means shares of the Company’s Class A Common Stock, or shares of the Company’s Class B Common Stock.

3.12 “Director” means a member of the Board of Directors of the Company.

3.13 “Eligible Compensation” means the annual base salary, as in effect on the Vesting Date with respect to a Grantee, provided that in no event shall Eligible Compensation be greater than $50,000 with respect to any Grantee. With respect to a Grantee that is compensated on a commission basis, annual base salary shall mean the average compensation which the employee received whether as base salary or commission during the 12 month period prior to the Effective Date.

3.14 “Total Eligible Compensation” means the Eligible Compensation, as in effect on the Vesting Date with respect to all Grantees (for the avoidance of doubt, Eligible Compensation shall not exceed $50,000 for any Grantee.

3.15 “Effective Date” means the day upon which a majority of the shareholders of the Company entitled to vote approve this Plan (and the related Trust).

3.16 “Employee” means any person who is employed by the Company or a Subsidiary, in each case in the United States, but excluding (i) any “executive officer” of the Company (as defined in Section 3b-7 of the Exchange Act) and (ii) any employee that works on a part –time basis for the Company.

3.17 “Exchange Act” means the Securities Exchange Act of 1934, as amended. References to a particular section of, or rule under, the Exchange Act shall include references to successor provisions.

3.18 “Grantee” means an Employee who receives an Award under the Plan.

3.19 “Insolvent” means (i) the inability of the Company to pay its debts as they become due or (ii) the Company being the subject to a pending proceeding as a debtor under the provisions of Title 11 of the United States Code (Bankruptcy Code).

3.20 “including” means “including, without limitation.”

3.21 “Non-Employee Director” means a Non-Employee Director as defined in Rule 16b-3(b)(3)(i) of the Exchange Act.

3.22 “Parent” means any corporation, partnership or limited liability company (other than the Company) in an unbroken chain of corporations, partnerships or limited liability companies ending with the Company, if at the time of the granting of an Award under the Plan, each of such corporations, partnerships or limited liability companies other than the Company owns stock, general partnership interests or membership interests, as the case may be, possessing a majority of the total combined voting power of all classes of stock, general partnership interests or membership interests, as the case may be (whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency), in one of the other corporations, partnerships or limited liability companies in such chain.

3.23 “Payout” means with respect to each Grantee, the product of (x) the Percentage multiplied by (y) the Bonus Pool. The Payout shall be paid solely in Stock.

3.24 “Percentage” means, with respect to each Grantee, the quotient of (x) Eligible Compensation divided by (y) Total Eligible Compensation.

3.25 “Preferred Stock” means shares of the Company’s 6.25% Series A Cumulative Convertible Preferred Stock, par value $0.01 per share.

3.26 “SEC” means the Securities and Exchange Commission.

3.27 “Stock” means Preferred Stock or Common Stock

3.28 “Subsidiary” means any corporation, partnership or limited liability company (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of an Award under the Plan, each of the corporations, partnerships or limited liability companies other than the last corporation, partnership or limited liability company in the unbroken chain owns stock, general partnership interests or membership interests, as the case may be, possessing a majority of the total combined voting power of all classes of stock, general partnership interests or membership interests, as the case may be (whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency), in one of the other corporations, partnerships or limited liability companies in such chain.

3.29 “Termination of Employment” means a cessation of a business relationship with the Company or its Subsidiaries which occurs with respect to an employee of the Company or a Subsidiary, the first day an individual is for any reason entitled to severance payments under the Company’s or any Subsidiary’s personnel policies or is no longer employed by the Company or any of its Subsidiaries, or, with respect to an individual who is an employee of a corporation constituting a Subsidiary, the first day such corporation is no longer a Subsidiary.

3.30 “Trustee” means such firm, entity or persons approved by the Board to hold legal title to the Plan and the Plan assets for the purposes set forth herein.

3.31 “Vesting Date” means the second anniversary of the Effective Date.

ARTICLE IV

ADMINISTRATION OF THE PLAN

4.01 Administration

(a) General . The Plan shall be administered by the Committee, which shall consist of persons who are appointed by the Board. Notwithstanding the requirements contained in the immediately preceding sentence, the Board or the Committee may, in its discretion, delegate to a committee or subcommittee of the Board or the Committee any or all of the authority and responsibility of the Committee. Such other committee or subcommittee may consist of two or more directors who may, but need not, be officers or employees of the Company or of any of its Subsidiaries. To the extent that the Board or the Committee has delegated to such other committee or subcommittee the authority and responsibility of the Committee pursuant to the foregoing, all references to the Committee in the Plan shall be to such other committee or subcommittee. Notwithstanding the foregoing, the Board shall at all times have the right to make Awards, administer the Plan, and otherwise exercise the authority of the Committee under the Plan, and to the extent the Board does so, references to the Committee in the Plan shall be to the Board.

(b) Authority of the Committee . The Committee shall have full power and final authority, in its discretion, but subject to the express provisions of the Plan, as follows: (i) to select Grantees, (ii) to grant Awards, (iii) to determine when Awards may be granted, (iv) to interpret the Plan and to make all determinations necessary or advisable for the administration of the Plan, (v) to prescribe, amend, and rescind rules relating to the Plan, including rules with respect to the nonforfeitability of Awards upon the Termination of Employment of a Grantee, (vi) to determine the terms and provisions of any written agreement by which an Award may be granted and, to modify any such Award at any time, with the consent of the Grantee when required, (vii) to accelerate the exercisability of, and to accelerate or waive any or all of the restrictions and conditions applicable to, any Award, (viii) to make such adjustments or modifications to Awards to Grantees working outside the United States as are necessary and advisable to fulfill the purposes of the Plan, and (ix) to impose such additional conditions, restrictions, and limitations upon the grant, or retention of Awards as the Committee may, before or concurrently with the grant thereof, deem appropriate.

(c) Determinations of the Committee; No Liability . The determination of the Committee on all matters relating to the Plan or any Award or Payout shall be conclusive and final. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award.

4.02 Role of the Board . The members of the Committee and the Trustee shall be appointed or approved by, and will serve at the pleasure of, the Board. The Board may in its discretion from time to time remove members from, or add members to, the Committee, and may remove or replace the Trustee, provided that any directors who are selected as members of the Committee shall be Non-Employee Directors.

4.03 Limitation on Liability . No member of the Board or the Committee shall be liable for any determination made in good faith with respect to the Plan or any Awards granted under it. If a member of the Board or the Committee is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of anything done or not done by him in such capacity under or with respect to the Plan, the Company shall, subject to the requirements of applicable laws and regulations, indemnify such member against all liabilities and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he reasonably believed to be in the best interests of the Company and any Subsidiaries and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In addition, the Company shall pay ongoing expenses incurred by such member if a majority of disinterested directors concludes that such member may ultimately be entitled to indemnification, provided, however, that before making advance payment of expenses, the Company shall obtain an agreement that the Company will be repaid if such member is later determined not to be entitled to such indemnification.

4.04 Compliance with Laws and Regulations; Securities Laws .

(a) Compliance . All Awards granted hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency or shareholders as may be required. The Company shall not be required to issue or deliver any certificates for shares of Stock prior to the completion of any registration or qualification of or obtaining of consents or approvals with respect to such shares under any federal or state law or any rule or regulation of any government body, which the Company shall, in its sole discretion, determine to be necessary or advisable.

(b) Legend and Investment Representation. If the Committee deems necessary to comply with the Securities Act of 1933, or any rules, regulations or other requirements of the SEC or any stock exchange or automated quotation system, the Committee may require a written investment intent representation by the Grantee and may require that a restrictive legend be affixed to certificates for shares of Stock, or that the Stock be subject to such stock transfer orders and other restrictions as the Committee may deem necessary or advisable.

(c) Postponement by Committee . If based upon the opinion of counsel for the Company, the Committee determines that the nonforfeitability of, or delivery of benefits pursuant to, any Award would violate any applicable provision of (i) federal or state securities law or (ii) the listing requirements of any national securities exchange or the requirements of any automated quotation system on which are listed or quoted any of the Company’s equity securities, then the Committee may postpone any such nonforfeitability or delivery, as the case may be, but the Company shall use reasonable and good faith efforts to cause such nonforfeitability or delivery to comply with all such provisions at the earliest practicable date.

(d) No Obligation to Register or List. The Company shall be under no obligation to register the Stock with the SEC or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company shall have no liability for any inability or failure to do so.

ARTICLE V

CONTRIBUTIONS

5.01 Amount of Contributions . On or prior to the Effective Date, the Company shall contribute 400,000 shares of Preferred Stock to the Trust established under this Plan. No contributions by Employees shall be permitted.

5.02 Investment of Trust Assets ;. Subject to Section 8.02 hereof, the Trustee shall invest all of the Trust’s assets primarily in Stock.

ARTICLE VI

ELIGIBILITY; ALLOCATIONS

6.01 Awards . Awards may be made to such Employees as may be selected by the Board or the Committee.

6.02 Form of Allocation . The Board or the Committee shall promptly notify the Grantee in writing of the grant of the Award, and the terms of the Award. The Board or the Committee shall maintain records as to all grants of Awards under the Plan. For the avoidance of doubt, prior to the Vesting Date, the Committee can grant Awards to Grantees and such grants will dilute and therefore reduce the potential Payouts of existing Grantees.

6.03 Allocations Not Required to any Specific Employee . No Employee shall have any right or entitlement to receive an Award hereunder, with such Awards being at the total discretion of the Board or the Committee.

ARTICLE VII

EARNING AND DISTRIBUTION OF PAYOUT; NO VOTING RIGHTS

7.01 Earning Payouts; Forfeitures .

(a) General Rules . Subject to the terms hereof, Awards shall be earned by a Grantee on the Vesting Date, subject to the Grantee’s continued employment with the Company on the Vesting Date. If the Grantee has a Termination of Employment prior to the Vesting Date for any reason or no reason, Grantee shall forfeit the right to any Award and shall not receive a Payout.

(b) Exception for Change in Control; Death/Disability, Sale . Notwithstanding the general rule contained in Section 7.01(a), if there is a Change in Control prior to the Vesting Date, the Committee may, in its sole discretion, determine that the date of the Change in Control shall be deemed the Vesting Date. Notwithstanding the general rule contained in Section 7.01(a) if there is a sale or other disposition by the Company of a radio station, magazine or other business unit, or the Grantee dies or is disabled, in each case prior to the Vesting Date, the Committee, in its sole discretion may provide for accelerated vesting and/or an accelerated Payout, in each case to the extent such accelerated vesting and/or Payout does not result in adverse tax consequences under Code Section 409A, as further set forth in Section 9.13 hereof.

7.02 Distribution of Payout .

(a) Timing of Distributions: General Rule . Subject to the provisions of Section 7.03 hereof, Payouts earned shall be distributed to the Grantee or his or her Beneficiary, as the case may be, as soon as practicable after they have been earned, but in no event later than 30 days after the Vesting Date.

(b) Form of Distributions . All Payouts, shall be distributed in the form of Stock; provided that no fractional shares shall be distributed pursuant to this Plan and any such fractional shares shall be paid in cash.

7.03 Mandatory Withholding .

(a) The Trustee shall be entitled to require as a condition of delivery (i) that the Grantee remit an amount sufficient to satisfy all federal, state and local withholding tax requirements related to the Payout, (ii) the withholding of such sums from compensation otherwise due to the Grantee or from any shares of Stock due to the Grantee under the Plan, or (iii) any combination of the foregoing. The Trustee shall pay over to the Company or any Subsidiary which employs or employed such Grantee any such amount withheld from or paid by the Grantee or Beneficiary.

(b) Elective Withholding .

(i) Election by Grantee . Subject to Section 7.03(b)(ii), if the Trustee does not require withholding pursuant to Section 7.03(a)(ii), then a Grantee may elect the withholding (“Share Withholding”) by the Company of a portion of the shares of Stock otherwise deliverable to such Grantee upon the Payout becoming nonforfeitable (each a “Taxable Event”) equal to: (i) the minimum amount necessary to satisfy required federal, state, or local withholding tax liability attributable to the Taxable Event; or (ii) with the Committee’s prior approval, a greater amount, not to exceed the estimated total amount of such Grantee’s tax liability with respect to the Taxable Event.

(ii) Restrictions . Each Share Withholding election by a Grantee shall be made in writing in a form acceptable to the Committee and shall be subject to the following restrictions: (i) a Grantee’s right to make such an election shall be subject to the Committee’s right to revoke such right at any time before the Grantee’s election or before the Vesting Date ; (ii) the Grantee’s election must be made before the date (the “Tax Date”) on which the amount of tax to be withheld is determined; (iii) the Grantee’s election shall be irrevocable by the Grantee; and (iv) in the event that the Tax Date is deferred until six months after the delivery of Stock under Section 83(b) of the Code, the Grantee shall receive the full amount of Stock with respect to which the exercise occurs, but such Grantee shall be unconditionally obligated to tender back to the Company the proper number of shares of Stock on the Tax Date.

7.04 NonAlienation; Restrictions . Awards (and rights to Payouts) may not be sold, assigned, alienated, anticipated, pledged, transferred, encumbered, gifted, hypothecated or otherwise disposed of prior to the time that they are earned and distributed pursuant to the terms of this Plan. Upon distribution, the Board or the Committee may require the Grantee or his or her Beneficiary, as the case may be, to agree not to sell or otherwise dispose of his distributed Payout except in accordance with all then applicable federal and state securities laws, and the Board or the Committee may cause a legend to be placed on the stock certificate(s) representing the distributed Payout in order to restrict the transfer of the distributed Payout for such period of time or under such circumstances as the Board or the Committee, upon the advice of counsel, may deem appropriate. No Grantee or Beneficiary shall have any right in or claim to any assets of the Plan or Trust, nor shall the Company or any Subsidiary be subject to any claim for benefits hereunder.

7.05 Voting . All shares of Stock held by the Trust shall be voted by the Trustee in its discretion. Grantees of Awards shall have no voting rights until the Payout is earned and distributed pursuant to the terms of the Award. The Trustee shall comply with any voting agreement that is made by the Company in connection with the contribution of the 400,000 shares of Preferred Stock, as set forth in Section 5.01.

ARTICLE VIII

TRUST

8.01 Trust . The Trustee shall receive, hold, administer, invest and make distributions and disbursements from the Trust in accordance with the provisions of this Plan and Trust and the applicable directions, rules, regulations, procedures and policies established by the Committee pursuant to this Plan.

8.02 Management of Trust . It is the intent of this Plan and Trust that the Trustee shall have complete authority and discretion with respect to the arrangement, control and investment of the Trust, and that the Trustee shall invest all assets of the Trust in Stock to the fullest extent practicable, except to the extent that the Trustee determines that the holding of monies in cash or cash equivalents is appropriate to meet the obligations of the Trust. In performing its duties, the Trustee shall have the power to do all things and execute such instruments as may be deemed necessary or proper, including the following powers:

(a) To invest up to one hundred percent (100%) of all Trust assets in Stock without regard to any law now or hereafter in force limiting investments for trustees or other fiduciaries. The investment authorized herein may constitute the only investment of the Trust, and in making such investment, the Trustee is authorized to purchase Stock from the Company or from any other source, and such Stock so purchased may be outstanding, newly issued, or treasury shares.

(b) To invest any Trust assets not otherwise invested in accordance with (a) above, in such deposit accounts, and certificates of deposit, obligations of the United States Government or its agencies or such other investments as shall be considered the equivalent of cash.

(c) To cause stocks, bonds or other securities to be registered in the name of a nominee, without the addition of words indicating that such security is an asset of the Trust (but accurate records shall be maintained showing that such security is an asset of the Trust).

(d) To hold cash without interest in such amounts as may in the opinion of the Trustee be reasonable for the proper operation of the Plan and Trust.

(e) To employ brokers, agents, custodians, consultants and accountants.

(f) To hire counsel to render advice with respect to its rights, duties and obligations hereunder, and such other legal services or representation as it may deem desirable.

(g) To hold funds and securities representing the amounts to be distributed to a Grantee or his Beneficiary as a consequence of a dispute as to the disposition thereof, whether in a segregated account or held in common with other assets of the Trust.

Notwithstanding anything herein contained to the contrary, the Trustee shall not be required to make any inventory, appraisal or settlement or report to any court, or to secure any order of court for the exercise of any power herein contained, or give bond.

8.03 Records and Accounts . The Trustee shall maintain accurate and detailed records and accounts of all transactions of the Trust, which shall be available at all reasonable times for inspection by any legally entitled person or entity to the extent required by applicable law, or any other person determined by the Board or the Committee.

8.04 Expenses . All costs and expenses incurred in the operation and administration of this Plan shall be borne by the Company or, in the discretion of the Company, the Trust.

8.05 Indemnification . Subject to the requirements of applicable laws and regulations, the Company shall indemnify, defend and hold the Trustee harmless against all claims, expenses and liabilities arising out of or related to the exercise of the Trustee’s powers and the discharge of its duties hereunder, unless the same shall be due to its gross negligence or willful misconduct.

8.06 Trust Fund Subject to Claims of Creditors . Notwithstanding anything to the contrary, the Trust shall at all times remain subject to the claims of the Company’s general creditors under federal and state law in the event the Company becomes Insolvent. Unless the Trustee has actual knowledge that the Company is Insolvent or has received notice from the Company or a person claiming to be a creditor of the Company alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent.

ARTICLE IX

MISCELLANEOUS

9.01 Substituted Awards . If the Committee cancels any Award (granted under this Plan), and a new Award is substituted for the canceled Award, then the Committee may, in its discretion, determine the terms and conditions of the new Award; provided that (i) the new Award shall not contain any terms or conditions that would cause the Award to constitute deferred compensation under Code Section 409A, and (ii) no Award shall be canceled without the consent of the Grantee if the terms and conditions of the new Award to be substituted are not at least as favorable as the terms and conditions of the Award to be canceled.

9.02 Nature of Payments . Unless otherwise determined by the Committee, any and all grants, or deliveries of shares of Stock hereunder, including the Payout, shall constitute special incentive payments to the Grantee and shall not be taken into account in computing the amount of salary or compensation of the Grantee for the purposes of determining any pension, retirement, death or other benefits under (i) any pension, retirement, profit-sharing, bonus, life insurance or other employee benefit plan of the Company or any of its Subsidiaries, or (ii) any agreement between the Company or any Subsidiary, on the one hand, and the Grantee, on the other hand, except as such plan or agreement shall otherwise expressly provide.

9.03 Non-Uniform Determinations . The Committee’s determinations under the Plan need not be uniform and may be made by the Committee selectively among persons who receive, or are eligible to receive, Awards (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations and to enter into non-uniform and selective Awards as to (i) the identity of the Grantees, (ii) the terms and provisions of Awards, and (iii) the treatment upon Terminations of Employment for Grantees. Notwithstanding the foregoing, the Committee’s interpretation of Plan provisions shall be uniform as to similarly situated Grantees.

9.04 Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board, the submission of the Plan to the shareholders of the Company for approval, nor any provision of the Plan shall be construed as creating any limitations on the power of the Board or the Committee to adopt such additional compensation arrangements as it may deem desirable, including the granting of stock options and bonuses otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

9.05 Adjustments . The Committee may make equitable adjustment of all matters relating to the Plan and any Awards, including the type of securities or property, if any, to be paid in connection with any Award, all in such manner as may be determined by the Committee in its discretion in order to prevent dilution or enlargement of the rights of any Grantee pursuant to any Award under the Plan, to reflect a stock dividend, stock split, reverse stock split, share combination, recapitalization, reclassification, merger, consolidation, asset spin-off, reorganization, or similar event of or by the Company.

9.06 Amendment and Termination of Plan . The Board may, by resolution, at any time amend or terminate the Plan, subject to any required shareholder approval or any shareholder approval which the Board may deem to be advisable for any reason, such as for the purpose of obtaining or retaining any statutory or regulatory benefits under tax, securities or other laws or satisfying any applicable stock exchange listing requirements. Termination of this Plan shall not affect Awards previously granted, and such Awards shall remain valid and in effect until they have been fully earned or expire or are forfeited in accordance with their terms.

9.07 No Employment Rights . Neither the establishment of the Plan, nor the granting of any Award or Payout shall be construed to (i) give any Grantee the right to remain employed by or affiliated with the Company or any of its Subsidiaries or to any benefits not specifically provided by the Award, or (ii) in any manner modify the right of the Company or any of its Subsidiaries to modify, amend, or terminate this Plan or any of its employee benefit plans. No obligation of the Company or any of its Subsidiaries as to the length of any Grantee’s employment by or affiliation with the Company or any Subsidiary shall be implied by the terms of the Plan, any grant of an Award hereunder or any Payout. The Company and its Subsidiaries reserve the same rights to terminate employment of or sever its relationship with any Grantee as existed before the Grant Date.

9.08 Applicable Law . The validity, construction, interpretation and administration of the Plan and Trust and of any determinations or decisions made thereunder, and the rights of all persons having or claiming to have any interest therein or thereunder, shall be governed by, and determined exclusively in accordance with, the laws of the State of Indiana, but without giving effect to the principles of conflicts of laws thereof. Without limiting the generality of the foregoing, the period within which any action arising under or in connection with the Plan must be commenced shall be governed by the laws of the State of Indiana, without giving effect to the principles of conflicts of laws thereof, irrespective of the place where the act or omission complained of took place and of the residence of any party to such action and irrespective of the place where the action may be brought.

9.09 Construction. The use of the masculine gender shall also include within its meaning the feminine. The use of the singular shall include within its meaning the plural and vice versa.

9.10 Headings. The headings contained in this Plan are for reference purposes only and shall not affect the meaning or interpretation of this Plan.

9.11 Effective Date . This Plan shall be effective as of the Effective Date, and Awards may be granted hereunder no earlier than the date this Plan is approved by the shareholders of the Company and prior to the termination of the Plan.

9.12 Term of Plan . This Plan shall remain in effect until the earlier of (i) five (5) years from the Effective Date, (ii) termination by the Board, or (iii) the distribution to Grantees and Beneficiaries of all the assets of the Trust.

9.13 Code Section 409A . All Awards under the Plan are intended to be exempt from the provisions of Code Section 409A. Every provision of the Plan shall be administered, interpreted, and construed to carry out such intention, and any provision that cannot be so administered, interpreted, and construed shall to that extent be disregarded. In the event that, notwithstanding such intent, an Award granted hereunder constitutes “deferred compensation” within the meaning of Code Section 409A, then, notwithstanding any other provision of the Plan or the applicable Award, (i) any amount that is payable under such Award on account of separation from service to a “specified employee,” as defined in Code Section 409A(a)(2)(B)(i), will not be paid earlier than the date that is six (6) month’s following the specified employee’s separation from service; (ii) the determination of which individuals are “specified employees” will be made in accordance with such rules and practices, consistent with Code Section 409A and interpretive regulations, as are established from time to time by the Board , or its designee, in its discretion (iii) the Grantee will not be treated as having terminated employment or service until that individual has incurred a separation from service within the meaning of Code Section 409A; (iv) no event will be treated as a Change in Control with respect to that Award unless it constitutes a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Code Section 409A(a)(2)(A)(v); (v) no acceleration of payment will be permitted with respect to the Award to the extent it would result in taxes or penalties under Code Section 409A; and (vi) to the extent any other terms of the Plan or the applicable Award would subject the Grantee to gross income inclusion, interest, or additional tax pursuant to Code Section 409A, those terms are to that extent superseded by, and shall be adjusted to the minimum extent necessary to satisfy, the applicable Code Section 409A standards. Notwithstanding the foregoing, each Grantee is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Grantee in connection with this Plan including any taxes and penalties under Code Section 409A, and the Company shall not have any obligation to indemnify or otherwise hold such Grantee harmless from any or all of such taxes or penalties

9.14 Tax Status of Trust . It is intended that the Trust established hereby be treated as a Grantor Trust of the Company under the provisions of Section 671 et seq. of the Code, as the same may be amended from time to time.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF , the Company has caused this Agreement to be executed by its duly authorized officers and the initial Trustee of the Trust established pursuant hereto have duly and validly executed this Agreement, all on this 2nd day of April 2012.


EMMIS COMMUNICATIONS CORPORATION		TRUSTEE:

By:	/s/ J. Scott Enright	By:	/s/ Jeffrey H. Smulyan
	Name: J. Scott Enright		Jeffrey H. Smulyan
	Title: Executive Vice President,
	General Counsel and Secretary

Signature Page to 2012 Retention Plan and Trust Agreement

Exhibit 10.16

VOTING AND TRANSFER RESTRICTION AGREEMENT

This VOTING AND TRANSFER RESTRICTION AGREEMENT (this “Agreement”) is made as of April 2, 2012, by and among Emmis Communications Corporation, an Indiana corporation (the “ Company ”), J. Scott Enright (the “ Employee Shareholder ”), the trust (the “ Trust ”) established pursuant to the 2012 Retention Plan (as defined below) and Jeffrey H. Smulyan, as trustee (the “ Trustee ”) of the Trust.

(a) The Company has approved and adopted, and the Company’s shareholders have approved, the Emmis Communications Corporation 2012 Retention Plan and Trust Agreement, dated as of April 2, 2012 (as the same may be amended or modified from time to time in accordance with its terms, the “ 2012 Retention Plan ” and, together with this Agreement, the “ Transaction Documents ”) relating to the contribution by the Company of 400,000 shares (the “ Contributed Shares ”) of 6.25% Series A Cumulative Convertible Preferred Stock of the Company, par value $0.01 per share (the “ Preferred Stock ”), to the Trust pursuant to the 2012 Retention Plan.

(b) In accordance with Section 23-1-31-2 ( Agreements Authorized ) of the Indiana Business Corporation Law, the Company, the Employee Shareholder and the Trustee have agreed, on the terms and conditions contained herein, to enter into this Agreement which sets forth the agreements of the Company, the Employee Shareholder and, for so long as the 2012 Retention Plan has not been terminated as contemplated by Section 9.06 thereof, the Trustee with respect to, among other things, the voting of the Subject Shares (as defined below).

Accordingly, in consideration of the mutual representations, warranties, covenants and agreements contained in this Agreement, the parties to this Agreement, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

1.1 General . Capitalized terms used but not defined in this Agreement have the meanings ascribed to them in the 2012 Retention Plan.

1.2 Certain Defined Terms . For purposes of this Agreement, the following capitalized terms shall have the following meanings:

“ Articles ” means Second Amended and Restated Articles of Incorporation of the Company.

“ Beneficial Owner ” means, with respect to any security, any person who owns, directly or indirectly, through any Contract, arrangement, understanding, relationship or otherwise, has or shares (a) voting power which includes the power to vote, or to direct the voting of, such security, and/or (b) investment power which includes the power to dispose, or to direct the disposition, of such security; and such term shall otherwise be interpreted consistently with the correlative term “beneficial ownership” as defined in Rule 13d-3 adopted by the Securities and Exchange Commission under the Exchange Act.

“ Class A Shares ” means Class A Common Stock of the Company, par value $0.01 per share.

“ Contract ” means any indenture, agreement, contract, commitment, license, permit, authorization or other binding understanding, whether written or oral.

“ Conversion Shares ” means the Class A Shares which have been converted from Contributed Shares in accordance with the Articles.

“ Encumbrances ” means any lien, mortgage, pledge, charge, security interest, pledge, restriction on transferability, defect of title or other claim, charge or encumbrance of any nature whatsoever.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Subject Shares ” means, with respect to the Trustee, the Contributed Shares, together with any shares of Preferred Stock or other voting securities of the Company acquired by the Trustee after the date of this Agreement pursuant to the 2012 Retention Plan in respect of the Contributed Shares, including by way of a stock dividend or distribution, split-up, recapitalization, combination, exchange of shares or similar transaction, and, with respect to the Employee Shareholder, all shares of the Company’s stock with voting rights owned beneficially by him.

“ Vote ” means (a) voting in person or by proxy in favor of or against any action, approval or agreement, (b) consenting to or withholding consent from any action, approval or agreement (whether or not such consent is in writing) and (c) taking any similar action in favor of or against any action, approval or agreement; and “ Voting ” shall have the correlative meaning.

ARTICLE II

VOTING

2.1 Agreement to Vote . If a Vote is solicited in relation to the Preferred Stock, the Trustee and the Employee Shareholder agree that each of them (a) shall not take (or refrain from taking) any action with respect to the Subject Shares other than in accordance with the prior written instructions of the Company and (b) shall take (or refrain from taking) any action with respect to the Subject Shares in accordance with the prior written instructions of the Company; provided , that the Trustee and the Employee Shareholder shall not be required to take any action or refrain from taking any action if such action is prohibited under applicable law, rule or order; provided further , and notwithstanding the above, the Company shall have the right to effect any Vote on behalf of the Trustee pursuant to the terms of the proxy coupled with an interest attached hereto as Exhibit A . The voting rights granted pursuant to this Section 2.1 shall be irrevocable and coupled with an interest.

2.2 No Ownership Interest . Except as expressly provided in this Agreement, nothing contained in this Agreement shall be deemed to vest in the Company any direct or indirect ownership or incidence of ownership of, or with respect to, any Subject Shares. All rights, ownership and economic benefits of and relating to the Subject Shares shall remain vested in and belong to the Employee Shareholder or the Trustee, as applicable, subject to the terms of the other Transaction Documents.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Trustee represents and warrants to the Company as follows:

3.1 Ownership . As of the date of this Agreement and except as provided in this Agreement or the 2012 Retention Plan, the Trustee is the sole Beneficial Owner of the Contributed Shares.

3.2 Voting . Other than as provided in this Agreement or the Transaction Documents, the Trustee has the sole power to Vote or direct the Vote of and issue instructions with respect to the Subject Shares, and the sole power to agree to all of the matters set forth in this Agreement, with no limitations, qualifications or restrictions on such powers, subject to applicable United States federal securities laws and this Agreement. Other than the 2012 Retention Plan, the Trustee: (a) is not a party to any Contract (including any voting agreement) with respect to any of the Subject Shares; (b) has not deposited any of the Subject Shares into any voting trust; and (c) has not granted any proxy or power of attorney with respect to any of the Subject Shares, in each case inconsistent with the Trustee’s obligations under the Transaction Documents.

ARTICLE IV

OTHER COVENANTS

4.1 Option to Repurchase . The Trustee hereby unconditionally and irrevocably grants the Company the right to repurchase any or all of the Contributed Shares from the Trustee for consideration consisting of the number of Class A Shares into which the Contributed Shares (or repurchased portion thereof) are then convertible pursuant to the Articles as in effect from time to time. The Company may exercise its repurchase right by giving written notice to the Trustee, and the closing of such repurchase shall occur on the date proposed by the Company or as soon as reasonably practicable thereafter. At such closing, the Trustee shall deliver duly executed instruments of transfer and other documents that are reasonably necessary or advisable to effect the transfer of title to the Contributed Shares to the Company or its designee, free and clear of all Encumbrances, and the Company shall deliver or cause to be delivered (or cause to be delivered) the consideration contemplated by this Section 5.1, including documents reasonably necessary or advisable to terminate the Trustee’s obligations under this Agreement.

4.2 No Inconsistent Agreements . The Trustee covenants and agrees that the Trustee shall not: (a) enter into any Contract (including any voting agreement) with respect to any of the Subject Shares; (b) deposit any Subject Shares into any voting trust; or (c) grant any proxy or power of attorney with respect to any of the Subject Shares, in each case inconsistent with the Trustee’s obligations under the Transaction Documents.

4.3 No Transfers . The Trustee agrees that, other than in accordance with the Transaction Documents, it shall not directly or indirectly: (a) sell, assign, give, tender, offer, exchange or otherwise transfer any of the Subject Shares, including, without limitation, pursuant to any distribution or “Payout” of the Subject Shares to “Grantees” of the Trust (as such terms are defined in the 2012 Retention Plan); (b) encumber, pledge, hypothecate or otherwise permit (including by omission) the creation or imposition of any Encumbrance on any of the Subject Shares; or (c) enter into any Contract with respect to any of the foregoing, in each case without the prior written consent of the Company.

4.4 No Registrations of Transfers . The Trustee (a) agrees that it shall not request that the Company or its transfer agent register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of the Subject Shares and (b) consents to the entry of stop transfer instructions by the Company of any transfer of the Subject Shares, unless such transfer is made in compliance with Section 4.2 hereof.

4.5 Further Assurances . From time to time, at the Company’s request and without further consideration, the Trustee agrees that it shall execute and deliver such additional documents and take all such further action as may be necessary or desirable to consummate the transactions contemplated by this Agreement.

ARTICLE V

MISCELLANEOUS

5.1 Term . This Agreement shall terminate automatically and be of no further force or effect upon the vesting of the Contributed Shares and the distribution of the Payout by the Company as contemplated by Sections 7.01 and 7.02 of the 2012 Retention Plan.

5.2 Expenses . Each party shall bear its own costs and expenses in connection with this Agreement, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties.

5.3 Successors and Assigns . All of the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.

5.4 Governing Law . This Agreement shall be governed by and interpreted and enforced in accordance with the Laws of the State of Indiana, without giving effect to any choice of law or conflict of laws rules or provisions (whether of the State of Indiana or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Indiana.

5.5 Consent to Jurisdiction . The courts of the State of Indiana shall have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement. Any proceedings in connection with such dispute shall be brought in the courts of the State of Indiana sitting in Marion County, Indiana, the court of the United States of America for the Southern District of Indiana, and appellate courts having jurisdiction of appeals from any of the foregoing. Each party hereto waives (and agrees not to raise) any objection, on the ground of forum non conveniens or on any other ground, to the taking of proceedings in such State of Indiana courts. Each party hereto also agrees that a judgment against it in proceedings brought in the State of Indiana shall be conclusive and binding upon it and may be enforced in any other jurisdiction. Each party hereto irrevocably submits and agrees to submit to the jurisdiction of the courts of the State of Indiana sitting in Marion County, Indiana, the court of the United States of America for the Southern District of Indiana and appellate courts having jurisdiction of appeals from any of the foregoing.

5.6 Waiver of Jury Trial . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS.

5.7 Counterparts . This Agreement may be executed in counterparts, and either party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and both of which counterparts taken together shall constitute but one and the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. The parties agree that the delivery of this Agreement may be effected by means of an exchange of electronically transferred signatures.

5.8 Notices . All statements, requests, notices and agreements hereunder shall be in writing, and shall be delivered or sent by mail, overnight courier or facsimile transmission to Emmis Communications Corporation, One Emmis Plaza, 40 Monument Circle, Suite 700, Indianapolis, Indiana 46204 (Facsimile No: 317-684-5583), Attention: J. Scott Enright, Esq., with a copy to Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, NY 10019, Attention: James M. Dubin, Esq. (Facsimile No: (212) 492-0026).

5.9 Confidentiality . Except as may be required by applicable law, rule or regulation or legal process, until the Company has made public disclosure of this Agreement, the Trustee shall not disclose the existence of or the terms of this Agreement or any of the other Transaction Documents without the prior written consent of the Company, provided , however, that a Trustee may disclose the contents of this Agreement or any Transaction Document without such written consent (i) to any professionals employed or engaged by the Trustee who have a need to know such information, (ii) to the extent requested by any governmental authority or self-regulatory entity having or asserting jurisdiction over it (after the Company has had a reasonable opportunity to prevent such disclosure) or (iii) to enforce its rights and remedies hereunder.

5.10 Third Party Beneficiaries . No provision of this Agreement is intended to confer upon any person or entity other than the parties hereto any rights or remedies hereunder.

5.11 Entire Agreement . This Agreement, the 2012 Retention Plan and each other written agreement entered into on the date hereof in connection with this Agreement and/or the 2012 Retention Plan set forth the entire understanding of the parties hereto with respect to the subject matter hereof. Any and all previous agreements and understandings between or among the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement and the other Transaction Documents.

5.12 Captions . All captions contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.

5.13 Severability . Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof; and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

5.14 Specific Performance . The Company, the Employee Shareholder and the Trustee agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by them in accordance with the terms hereof and that each party shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

5.15 Interpretation . Any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party by virtue of the authorship of this Agreement shall not apply to the construction and interpretation hereof.

[Signature pages follow]

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties to this Agreement or other authorized person as of the date first written above.


EMMIS COMMUNICATIONS CORPORATION

By:
		Name:
		Title:


J. Scott Enright

2012 RETENTION PLAN TRUST

By:
		Name: Jeffrey H. Smulyan
		Title: Trustee

Acknowledged and Agreed:

Jeffrey H. Smulyan, Trustee

Signature page to Voting and Transfer Restriction Agreement

EXHIBIT A

Irrevocable Proxy

The undersigned hereby irrevocably constitutes and appoints the duly-appointed Secretary of Emmis Communications Corporation, an Indiana corporation (the “ Company ”), from time to time (the “ Proxy Holder ”) as the sole and exclusive proxy for the undersigned, with full power of substitution, resubstitution and revocation, to attend all meetings of stockholders of the Company, to cast all votes that the undersigned is entitled to cast with respect to any amendments to the Second Amended and Restated Articles of Incorporation of the Company, and to otherwise represent the undersigned with respect to the Contributed Shares (as defined in the Voting and Transfer Restriction Agreement, dated the date hereof, by and among the Company, J. Scott Enright and the undersigned (the “ Voting and Transfer Restriction Agreement ”), with all powers that the undersigned would have if personally present at any meeting of stockholders of the Company, in each case, in a manner that is proportionate to the manner in which all holders of shares of voting securities vote in respect of any given matter.

The undersigned irrevocably appoints the Proxy Holder, with full power of substitution, appointment and revocation, in its name, place and stead, as the undersigned’s true and lawful representative, attorney-in-fact and agent, to make, execute, sign, acknowledge, verify, swear to and deliver any consent of stockholders of the Company with respect to the Contributed Shares held by the undersigned to do and perform each and every act and thing as fully as the undersigned might or could do as a holder of the Contributed Shares, in each case, in a manner that is proportionate to the manner in which all holders of shares of voting securities vote in respect of any given matter. This proxy and power-of-attorney are expressly limited to the Contributed Shares, and no rights are granted with respect to any shares other than the Contributed Shares.

The undersigned affirms that the foregoing proxy and power-of-attorney are given in connection with the Voting and Transfer Restriction Agreement and that the proxy and power-of-attorney are each coupled with an interest. Such proxy and power of attorney each will be irrevocable and be effective for so long as permitted under the laws of the State of Indiana.


2012 RETENTION PLAN TRUST

By:		/s/ Jeffrey H. Smulyan
		Name: Jeffrey H. Smulyan
		Title: Trustee

Acknowledged and Agreed:

/s/ J. Scott Enright

J. Scott Enright

Exhibit 10.17

EMMIS OPERATING COMPANY

CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS EMMIS OPERATING COMPANY CHANGE IN CONTROL SEVERANCE AGREEMENT (the “Agreement”) is entered into, effective July 10, 2012 (the “Effective Date”), by and between EMMIS OPERATING COMPANY, an Indiana corporation (the “Company”), and Gregory T. Loewen (“Executive”).

W I T N E S S E T H

WHEREAS, Executive is an officer and employee of the Company and also an officer of the Company’s sole shareholder, Emmis Communications Corporation (“Parent”) and that the Company derives a material benefit from compensation to executives that is provided by Parent; and

WHEREAS, as a material inducement to Executive’s continued employment with the Company, Parent and Executive entered into a certain Emmis Communications Corporation Change in Control Severance Agreement effective May 7, 2012 (the “Parent CIC Agreement”); and

WHEREAS, on August 19, 2009, the Company’s Amended and Restated Revolving Credit and Term Loan Agreement, to which both the Company and Parent are parties (the “Credit Agreement”), was amended to prohibit Parent from paying compensation to officers or employees of Parent or the Company, and such amendment may have prohibited Parent from performing certain of its obligations under the Parent CIC Agreement; and

WHEREAS, the Company considers the establishment and maintenance of sound and vital management to be essential to protecting and enhancing the best interests of the Company; and

WHEREAS, the Company recognizes that, as is the case with many operating subsidiaries of publicly held corporations, the possibility of a change in control may arise and that such possibility may result in the departure or distraction of management personnel to the detriment of the Company; and

WHEREAS, the Company has determined that it is in the best interests of the Company to secure Executive’s continued services and to ensure Executive’s continued and undivided dedication to his duties in the event of any threat or occurrence of a “Change in Control” (as defined in Section 1) and that it is in the best interests of the Company to eliminate the unnecessary level of uncertainty due to the potential inability of Parent to perform its obligations under Parent CIC Agreement; and

WHEREAS, Executive and Parent have informed the Company that the Parent CIC Agreement will be terminated upon execution of this Agreement in order to ensure Executive does not receive unintended, duplicative benefits in connection with the occurrence of a Change in Control.

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows:

1. Definitions . As used in this Agreement, the following terms shall have the respective meanings set forth below:

(a) “Affiliate” means, with respect to a specified person, a person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the person specified.

(b) “Base Salary” means Executive’s gross base salary, regardless of whether payable directly by the Company in cash or the stock compensation program or a similar program.

(c) “Board” means the Board of Directors of Parent. The board of directors of the Company agree to cause the Company to implement any and all directions of the Board hereunder.

(d) “Bonus Amount” means the greater of (i) the highest annual incentive bonus earned by Executive from the Company (and/or its Affiliates) during the last three (3) completed fiscal years of the Company immediately preceding Executive’s Date of Termination (annualized in the event Executive was not employed by the Company (or its Affiliates) for the whole of any such fiscal year), or (ii) if the Date of Termination occurs before Executive has been employed for a full fiscal year and before the date on which the Company generally pays bonuses to its executives for the fiscal year in which Executive’s employment commenced, 25% of Executive’s Base Salary for the fiscal year of the Company which includes the Executive’s Date of Termination.

(e) “Cause” means (i) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from Executive’s incapacity due to physical or mental illness or any such failure subsequent to Executive being delivered a notice of Termination without Cause by the Company or delivering a notice of Termination for Good Reason to the Company) after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive’s duties; provided that Executive has not cured such failure or commenced such performance within 30 days after such demand is given to Executive, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company or its Affiliates. For purpose of the preceding sentence, no act or failure to act by Executive shall be considered “willful” unless done or omitted to be done by Executive in bad faith and without reasonable belief that Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, based upon the advice of counsel for the Company (or upon the instructions of the Company’s chief executive officer or another senior officer of the Company) shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. Cause shall not exist unless and until the Company has delivered to Executive a copy of a resolution duly adopted by three-quarters (3/4) of the entire Board (excluding Executive if Executive is a Board member) at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board an event set forth in clause (i) or (ii) has occurred and specifying the particulars thereof in detail. The Company must notify Executive of any event constituting Cause within ninety (90) days following the Company’s knowledge of its existence or such event shall not constitute Cause under this Agreement.

(f) “Change in Control” means any of the following: (i) any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than an Affiliate or any employee benefit plan (or any related trust) of Parent or an Affiliate, and other than Jeffrey H. Smulyan or an Affiliate of Mr. Smulyan) (a “Person”) becomes after the date hereof the beneficial owner of 35% or more of either the then outstanding Stock or the combined voting power of the then outstanding voting securities of Parent entitled to vote in the election of directors, except that no Change in Control shall be deemed to have occurred solely by reason of any such acquisition by a corporation with respect to which, after such acquisition, more than 60% of both the then outstanding common shares of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote in the election of directors are then beneficially owned, directly or indirectly, by the persons who were the beneficial owners of the Stock and voting securities of Parent immediately before such acquisition in substantially the same proportion as their ownership, immediately before such acquisition, of the outstanding Stock and the combined voting power of the then outstanding voting securities of Parent entitled to vote in the election of directors; (ii) individuals who, as of the Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided that any individual who becomes a director after the Effective Date whose election, or nomination for election by Parent’s shareholders, was approved by a vote or written consent of at least two-thirds of the directors then comprising the Incumbent Directors shall be considered as though such individual were an Incumbent Director, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Parent (as such terms are used in Rule 14a-11 under the Exchange Act); (iii) the consummation of (A) a merger, reorganization or consolidation with respect to which the individuals and entities who were the respective beneficial owners of the Stock and voting securities of Parent immediately before such merger, reorganization or consolidation do not, after such merger, reorganization or consolidation, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding common shares and the combined voting power of the then outstanding voting securities entitled to vote in the election of directors of the corporation resulting from such merger, reorganization or consolidation, or (B) the sale or other disposition (or series of sales and/or other dispositions over time resulting in a sale and/or other disposition) of all or substantially all of the assets of the Company or Parent to any Person or Persons as part of the Company’s or Parent’s plan to sell or otherwise dispose of all or substantially all of such assets; (iv) the approval by the shareholders of the Company or Parent of a liquidation or dissolution of the Company or Parent; (v) Parent ceasing to own at least a majority of the common stock of the Company; or (vi) such other event(s) or circumstance(s) as are determined by the Board to constitute a Change in Control. Notwithstanding the foregoing provisions of this definition, a Change in Control shall be deemed not to have occurred with respect to Executive, if he is, by written agreement executed prior to such Change in Control, a participant on his own behalf in a transaction in which the persons with whom he has the written agreement (and/or their Affiliates) Acquire Parent (as defined below) and, pursuant to the written agreement, Executive has (or has the right to acquire) an equity interest in the resulting entity.

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person acquires beneficial ownership of more than 35% of the then outstanding Stock as a result of the acquisition of the Stock by Parent which reduces the number of shares of Stock outstanding; provided , that if after such acquisition by Parent such person becomes the beneficial owner of additional Stock that increases the percentage of outstanding Stock beneficially owned by such person, a Change in Control shall then occur.

For the purposes of this definition, “Acquire Parent” means the acquisition of beneficial ownership by purchase, merger, or otherwise, of either more than 50% of the Stock (such percentage to be computed in accordance with Rule 13d-3(d)(1)(i) of the SEC under the Exchange Act) or substantially all of the assets of Parent or its successors; “person” means such term as used in Rule 13d-5 of the SEC under the Exchange Act; “beneficial owner” means such term as defined in Rule 13d-3 of the SEC under the Exchange Act; and “group” means such term as defined in Section 13(d) of the Exchange Act.

(g) “Code” means the Internal Revenue Code of 1986, as amended, and regulations and rulings thereunder. References to a particular section of the Code shall include references to successor provisions.

(h) “Date of Termination” means the effective date of the Termination of Executive’s Employment.

(i) “Disability” means Termination of Executive’s Employment by the Company (A) on account of Executive’s disability or incapacity in accordance with Executive’s written employment agreement with the Company, if such agreement contains provisions relating to Termination of Employment for disability or incapacity, or (B) except as provided in clause (A), on account of Executive’s disability or incapacity in accordance with the Company’s policies applicable to salaried employees without a written employment agreement, as in effect immediately before the Change in Control.

(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended. References to a particular section of, or rule under, the Exchange Act shall include references to successor provisions.

(k) “Good Reason” means, without Executive’s express written consent, the occurrence of any of the following events after a Change in Control:

(i) a material diminution in Executive’s authority, duties, or responsibilities; provided, however, Good Reason shall not be deemed to occur upon a change in duties or responsibilities (other than reporting responsibilities) that is solely and directly a result of Parent no longer being a publicly traded entity that does not involve another event described in this Subsection (l);

(ii) a material breach by the Company or an Affiliate of the Company of this Agreement or an employment agreement to which the Executive and the Company or an Affiliate of the Company are parties;

(iii) a material reduction by the Company in Executive’s rate of annual Base Salary, as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter (with a reduction or series of reductions exceeding 5% of Base Salary being deemed material);

(iv) any requirement of the Company that Executive (A) be based anywhere more than thirty-five (35) miles from the office where Executive is based at the time of the Change in Control, if such relocation increases Executive’s commute by more than twenty (20) miles, or (B) travel on Company business to an extent materially greater than the travel obligations of Executive immediately prior to such Change in Control;

(v) the failure of the Company to obtain the assumption and, if applicable, guarantee, agreement from any successor (and parent corporation) as contemplated in Section 9(b).

Notwithstanding the preceding, an event described above shall not be considered an event of Good Reason, unless the Executive provides notice to the Company of the existence of such event of Good Reason within ninety (90) days after its first occurrence and the Company fails to cure such event within thirty (30) days after receiving Executive’s notice. Executive’s right to Terminate Employment for Good Reason shall not be affected by Executive’s incapacity due to mental or physical illness, and Executive’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason; provided , however , that Executive must Terminate Employment within ninety (90) days following the end of the thirty (30) day cure period specified above, or such event shall not constitute a termination for Good Reason under this Agreement. Notwithstanding any other provision of this Agreement to the contrary, Termination of Employment by Executive for any reason during the thirty (30)-day period beginning one (1) year after the date of a Change in Control shall constitute a Termination of Employment for Good Reason.

(l) “Qualifying Termination” means a Termination of Executive’s Employment (i) by the Company other than for Cause or (ii) by Executive for Good Reason. Termination of Executive’s employment on account of death, Disability, or Retirement shall not be treated as a Qualifying Termination.

(m) “Retirement” means Executive’s Termination of Employment by reason of retirement (not including any mandatory early retirement) in accordance with the Company’s retirement policy generally applicable to its salaried employees, as in effect immediately prior to the Change in Control, or in accordance with any retirement arrangement established with respect to Executive with Executive’s written consent; provided , however , that under no circumstances shall a resignation with Good Reason be deemed a Retirement.

(n) “SEC” means the Securities and Exchange Commission.

(o) “Stock” means the Class A Common Stock and the Class B Common Stock of Parent, par value $.01 per share.

(p) “Termination of Employment”, “Terminates Employment”, or any variation thereof means Executive’s separation from service within the meaning of Code Section 409A(a)(2)(A)(i).

(q) “Termination Period” means the period of time beginning with a Change in Control and ending two (2) years following such Change in Control. Notwithstanding anything in this Agreement to the contrary, if (i) Executive’s Employment is Terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control; (ii) Executive reasonably demonstrates that such termination (or Good Reason event) was at the request of a Person who had indicated an intention or taken steps reasonably calculated to effect a Change in Control, or was otherwise made in connection with a Change in Control; and (iii) a Change in Control involving such third party or an Affiliate of such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then for purposes of this Agreement, the date immediately prior to the date of such Termination of Employment or event constituting Good Reason shall be treated as a Change in Control. For purposes of determining the timing of payments and benefits to Executive under Section 4, the date of the actual Change in Control shall be treated as Executive’s Date of Termination under Section l(h).

2. Obligation of Executive . In the event of a tender or exchange offer, proxy contest, or the execution of any agreement which, if consummated, would constitute a Change in Control, Executive agrees not to voluntarily leave the employ of the Company, other than as a result of Disability, Retirement or an event which would constitute Good Reason if a Change in Control had occurred, until the Change in Control occurs or, if earlier, such tender or exchange offer, proxy contest, or agreement is terminated or abandoned.

3. Term of Agreement . This Agreement shall be effective on the date hereof and shall continue in effect until the Company shall have given three (3) years’ written notice of cancellation; provided , that , notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of two (2) years after a Change in Control, if such Change in Control shall have occurred during the term of this Agreement. Moreover, if Executive is party to a written employment agreement with the Company at the time of a Change in Control, and such agreement would otherwise expire during the Termination Period, the term of such agreement shall automatically be extended to the end of the Termination Period or, if earlier, Executive’s Retirement. Notwithstanding anything in this Section to the contrary, except as provided in the second sentence of Section 1(r), this Agreement shall terminate if Executive or the Company Terminates Executive’s Employment prior to a Change in Control.

4. Payments Upon Termination of Employment .

(a) Qualifying Termination—Severance . If during the Termination Period, the Employment of Executive shall Terminate pursuant to a Qualifying Termination, the Company shall provide to Executive:

(i) within ten (10) days following the Date of Termination a lump-sum cash amount equal to the sum of (A) Executive’s Base Salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, (B) an amount equal to (I) sixty percent (60%) of Executive’s Base Salary at the rate in effect on the Change in Control (or, if higher, the rate in effect on Termination of Employment), multiplied by (II) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is three hundred sixty-five (365), and (C) any accrued vacation pay, in each case to the extent not theretofore paid; plus

(ii) within ten (10) days following the Date of Termination, a lump-sum cash amount equal to (i) one and one-half (1.5) times Executive’s highest annual rate of Base Salary during the 36-month period immediately prior to Executive’s Date of Termination plus (ii) one and one-half (1.5) times Executive’s Bonus Amount.

(b) Qualifying Termination—Benefits . If during the Termination Period, the Employment of Executive shall Terminate pursuant to a Qualifying Termination, the Company shall:

(i) for a period of three (3) years following Executive’s Date of Termination, continue to provide Executive (and Executive’s dependents, if applicable) with the same level of accident and life insurance benefits upon substantially the same terms and conditions (including contributions required by Executive for such benefits) as existed immediately prior to Executive’s Date of Termination (or, if more favorable to Executive, as such benefits and terms and conditions existed immediately prior to the Change in Control); provided , that , if Executive cannot continue to participate in the Company plans providing such benefits, the Company shall otherwise provide such benefits on the same after-tax basis as if continued participation had been permitted;

(ii) for the period beginning on Executive’s Date of Termination and continuing for up to 18 months thereafter, reimburse Executive for COBRA premiums paid by Executive for continuation coverage for Executive (and Executive’s dependents, if applicable) under the Company’s medical and dental benefits plan, with such reimbursement being taxable to Executive (any reimbursement required by this paragraph (ii) may be accomplished by the Company’s direct payment of such premium, with such payment taxable to Executive, or by Company reimbursing Executive for such premium within thirty (30) days after Executive’ s payment thereof);

(iii) for the period beginning 19 months after Executive’s Date of Termination and ending 36 months after Executive’s Date of Termination, reimburse Executive for the cost of purchasing coverage substantially similar to that purchased under the Company’s medical and dental benefits plan pursuant to paragraph (ii) above (with no additional pre-existing condition exclusion), with such reimbursement being taxable to Executive (any reimbursement required by this paragraph (iii) may be accomplished by the Company’s direct payment of such premium, with such payment taxable to Executive, or by Company reimbursing Executive for such premium within thirty (30) days after Executive’ s payment thereof);

Notwithstanding the foregoing, (A) in the event Executive (or, if applicable, Executive’s dependent) becomes ineligible for COBRA continuation coverage during the first 18 months following Executive’s Date of Termination, such person shall not be eligible for further coverage under paragraph (ii) or (iii), and (B) subject to the limitations in clause (A), in the event Executive becomes employed by another employer and becomes eligible to receive welfare benefits from such employer, the welfare benefits described in paragraphs (i) through (iii) shall be secondary to such benefits during the period of Executive’s eligibility, but only to the extent that the Company reimburses Executive for any increased cost and provides any additional benefits necessary to give Executive the benefits provided hereunder;

(iv) for two years following the Executive’s Date of Termination (or such shorter period ending upon the subsequent employment of Executive at a level of service commensurate with Executive’s positions with the Company on the Date of Termination), provide outplacement services for Executive from a provider selected by the Company and at the Company’s expense;

(v) make such additional payments and provide such additional benefits to Executive as the Company and Executive may agree in writing, or to which Executive may be entitled under the compensation and benefit plans, policies, and arrangements of the Company.

(c) Nonqualifying Termination . If during the Termination Period the Employment of Executive shall Terminate other than by reason of a Qualifying Termination, the Company shall pay to Executive within thirty (30) days following the Date of Termination, a lump-sum cash amount equal to the sum of Executive’s Base Salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, and any accrued vacation pay, to the extent not theretofore paid. The Company may make such additional payments and provide such additional benefits to Executive as the Company and Executive may agree in writing, and the Company shall provide Executive with those payments and benefits to which Executive may be entitled under the compensation and benefit plans, policies, and arrangements of the Company or any employment agreement with the Company or an Affiliate of the Company.

(d) Stock Rights . In the event of a Change in Control, all restricted Stock and all options, stock appreciation rights, and/or other stock rights held by Executive with respect to Stock that are exempt from Section 409A (“Stock Rights”) which are not fully vested (and exercisable, if applicable) shall become fully vested and exercisable as of a time established by the Board, which shall be no later than a time preceding the Change in Control which allows Executive to exercise the Stock Rights and cause the stock acquired thereby to participate in the Change in Control transaction. If the Change in Control transaction is structured so that stock participating therein at one time is or may be treated differently from stock participating therein at a different time ( e.g. , a tender offer followed by a squeeze-out merger), the Board shall interpret this Subsection (d) to provide for the required vesting acceleration in a manner designed to allow Executive to exercise the Stock Rights and cause the stock acquired thereby to participate in the earliest portion of the Change in Control transaction. If the consummation of a Change in Control transaction is uncertain ( e.g. , a tender offer in which the tender of a minimum number of shares is a condition to closing, or a voted merger or proxy contest in which a minimum number of votes is a condition to closing), the Board shall apply this Subsection (d) by using its best efforts to determine if and when the Change in Control transaction is likely to close, and proceeding accordingly. To the extent necessary to implement this Subsection d), each agreement reflecting a Stock Right, and each plan, if any, pursuant to which a Stock Right is issued, if any, shall be deemed amended.

(e) Delay in Payments to Specified Employees . Notwithstanding any other provision of this Agreement, if Executive is a specified employee within the meaning of Code Section 409A(a)(2)(B)(i), distributions pursuant to this Section shall be delayed to the earliest day on which such payments are permitted by Code Section 409A(a)(2)(B)(i) and the regulations thereunder.

5. Certain Additional Payments by the Company .

(a) If it is determined (as hereafter provided) that any payment or distribution by the Company or any Affiliate to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”), then (i) if reduction of the amount payable pursuant to paragraph 4(a)(ii) by no more than ten percent (10%) would result in no Excise Tax being imposed, the amount in paragraph 4(a)(ii) shall be reduced to the minimum extent necessary to result in no Excise Tax being imposed, and (ii) if clause (i) does not apply, Executive will be entitled to receive an additional payment or payments (a “Gross-Up Payment”) in an amount such that, after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

(b) Subject to the provisions of Section 5(f) hereof, all determinations required to be made under this Section 5, including whether an Excise Tax is payable by Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, will be made by a nationally recognized firm of certified public accountants (the “Accounting Firm”) selected by Executive in his sole discretion. Executive will direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and Executive within 15 calendar days after the date of Executive’s termination of employment, if applicable, and any other such time or times as may be requested by the Company or Executive. If the Accounting Firm determines that any Excise Tax is payable by Executive, the Company will pay the required Gross-Up Payment to Executive within five business days after receipt of such determination and calculations. If the Accounting Firm determines that no Excise Tax is payable by Executive, it will, at the same time as it makes such determination, furnish Executive with an opinion that he has substantial authority not to report any Excise Tax on his federal, state, local income or other tax return. Subject to the provisions of this Section 5, any determination by the Accounting Firm as to the amount of the Gross-Up Payment will be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event that an Underpayment is made and the Company exhausts or fails to pursue its remedies pursuant to Section 5(f) hereof and Executive thereafter is required to make a payment of any Excise Tax, Executive will direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and Executive as promptly as possible. Any such Underpayment will be promptly paid by the Company to, or for the benefit of, Executive within five business days after receipt of such determination and calculations.

(c) The Company and Executive will each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company, Parent or Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by Section 5(b) hereof.

(d) The federal, state and local income or other tax returns filed by Executive will be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by Executive. Executive will make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of Executive’s federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, Executive will within five business days pay to the Company the amount of such reduction.

(e) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 5(b) and (d) hereof will be borne by the Company. If such fees and expenses are initially advanced by Executive, the Company will reimburse Executive the full amount of such fees and expenses within five business days after receipt from Executive of a statement therefor and reasonable evidence of his payment thereof.

(f) Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification will be given as promptly as practicable but no later than 10 business days after Executive actually receives notice of such claim and Executive will further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by Executive). Executive will not pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day period following the date on which he gives such notice to the Company and (ii) the date that any payment of amount with respect to such claim is due. If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive will:

(i) provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company;

(ii) take such action in connection with contesting such claim as the Company will reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company;

(iii) cooperate with the Company in good faith in order effectively to contest such claim; and

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

provided, however, that the Company will bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and will indemnify and hold harmless Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 5(f), the Company will control all proceedings taken in connection with the contest of any claim contemplated by this Section 5(f) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided that Executive may participate therein at his own cost and expense) and may, at its option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine; provided, however, that if the Company directs Executive to pay the tax claimed and sue for a refund, the Company will advance the amount of such payment to Executive on an interest-free basis and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of any such contested claim will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(g) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(f) hereof, Executive receives any refund with respect to such claim, Executive will (subject to the Company’s complying with the requirements of Section 5(f) hereof) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(f) hereof, a determination is made that Executive will not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance will be forgiven and will not be required to be repaid and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid pursuant to this Section 5.

(h) To the extent that earlier payment is not required by the preceding provisions of this Section, the Company shall pay amounts required to be paid pursuant to this Section not later than the end of the calendar year next following the calendar year in which Executive remits the related taxes.

6. Withholding Taxes . The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom. In the case of the withholding of an Excise Tax, such withholding shall be consistent with any determination made under Section 5.

7. Reimbursement of Expenses . If any contest or dispute shall arise under this Agreement involving termination of Executive’s employment with the Company or involving the failure or refusal of the Company and/or Parent to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all reasonable legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof); provided , however , Executive shall be required to repay any such amounts to the Company to the extent that a court or an arbitration panel issues a final order from which no appeal can be taken, or with respect to which the time period to appeal has expired, setting forth that Executive has not wholly or partially prevailed on at least one material issue in dispute. The amount of expenses eligible for reimbursement in one year pursuant to this Section shall not affect the amount of expenses eligible for reimbursement in any following year. Under no circumstances shall the Company’s reimbursement for expenses incurred in a calendar year be made later than the end of the next following calendar year; provided, however, this requirement shall not alter the Company’s obligation to reimburse Executive for eligible expenses on a current basis.

8. Scope of Agreement . Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or any Affiliate of the Company, and if Executive’s employment with the Company shall terminate prior to a Change in Control, Executive shall have no further rights under this Agreement (except as otherwise provided hereunder); provided , however , that any Termination of Executive’s Employment during the Termination Period shall be subject to all of the provisions of this Agreement.

9. Successors; Binding Agreement .

(a) This Agreement shall not be terminated by any Change in Control or other merger, consolidation, statutory share exchange, sale of substantially all the assets or similar form of corporate transaction involving the Company (a “Business Combination”). In the event of any Business Combination, the provisions of this Agreement shall be binding upon the surviving corporation, and such surviving corporation shall be treated as the Company hereunder. For purposes of clarity only, a corporation acquiring substantially all of the assets of the Company shall be a “surviving corporation” for purposes of the preceding sentence.

(b) The Company agrees that in connection with any Business Combination, it will cause any successor entity to the Company unconditionally to assume (and for any parent corporation in such Business Combination to guarantee), by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company and Parent hereunder. Failure of the Company to obtain such assumption and guarantee prior to the effectiveness of any such Business Combination that constitutes a Change in Control, shall be a breach of this Agreement and shall constitute Good Reason hereunder, with the event of Good Reason occurring on the date on which such Business Combination becomes effective.

(c) This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive’s estate.

10. Notice . (a) For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when actually received or, if mailed, three days after mailing by registered or certified mail, return receipt requested, or one business day after mailing by a nationally recognized express mail delivery service with instructions for next-day delivery, addressed as follows:

If to the Executive, to the Executive’s principal residence as reflected in the records of the Company.

If to the Company or Parent:

Emmis Operating Company

40 Monument Circle

Suite 700

Indianapolis, Indiana 46204

Attn.: Legal Department

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

(b) A written notice of Executive’s Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for Termination of Executive’s Employment under the provision so indicated and (iii) specify the termination date (which date shall be not less than fifteen (15) (thirty (30), if termination is by the Company for Disability) nor more than sixty (60) days after the giving of such notice). The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder.

11. Full Settlement; Resolution of Disputes . The Company’s obligation to make any payments and provide any benefits pursuant to this Agreement and otherwise to perform its obligations hereunder shall be in lieu and in full settlement of all other severance payments to Executive under any other severance or employment agreement between Executive and the Company, and any severance plan of the Company; provided , however , that if any such other agreement or plan would provide Executive with a greater payment or more or longer benefits in respect of any particular item described hereunder (e.g., severance, welfare benefits), then Executive shall receive such particular item of payment and/or benefit pursuant to such other agreement or plan, in lieu of receiving that particular item pursuant to this Agreement; and provided further , retention bonuses and/or completion bonuses shall not be considered severance pay for purposes of this Section. The Company’s obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable and benefits provided to Executive under any of the provisions of this Agreement and, except as provided in Section 4(b), such amounts shall not be reduced whether or not Executive obtains other employment. The parties agree that any controversy or claim of either party hereto arising out of or in any way relating to this Agreement, or breach thereof, shall be settled by final and binding arbitration in Indianapolis, Indiana by three arbitrators in accordance with the applicable rules of the American Arbitration Association, and that judgment upon any award rendered may be entered by the prevailing party in any court having jurisdiction thereof. The Company shall bear all costs and expenses arising in connection with any arbitration proceeding pursuant to this Section.

12. Employment by Affiliates of the Company . Employment by the Company for purposes of this Agreement shall include employment by any Affiliate.

13. Survival . The respective obligations and benefits afforded to the Company and Executive as provided in Sections 4 (to the extent that payments or benefits are owed as a result of a Termination of Employment that occurs during the term of this Agreement), 5 (to the extent that Payments are made to Executive as a result of a Change in Control that occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.

14. GOVERNING LAW; VALIDITY . THE INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF INDIANA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF, OF SUCH PRINCIPLES OF ANY OTHER JURISDICTION WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF INDIANA. THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.

15. Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

16. Miscellaneous . No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by Executive and by a duly authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including, without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. Except as otherwise specifically provided herein, the rights of, and benefits payable to, Executive, his estate or his beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, Executive, his estate or his beneficiaries under any other employee benefit plan or compensation program of the Company.

17. Termination of Parent CIC Agreement; Replacement . The Parent CIC Agreement is hereby terminated and replaced in its entirely by this Agreement; and the Parent CIC Agreement shall be of no further force and effect.

[signatures appear on the following page(s)]

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and Executive has executed this Agreement as of the day and year first above written.


EMMIS OPERATING COMPANY

By:		/s/ Ian D. Arnold
Title:		VP, Associate General Counsel
Date:		July 10, 2012

EXECUTIVE

/s/ Gregory T. Loewen
Date: July 10, 2012

Parent hereby acknowledges and agrees to (i) perform all of its obligations hereunder, including without limitation obligations with respect to the Board hereunder and with respect to Stock and all options, stock appreciation rights, and/or other stock rights held by Executive; and (ii) termination of the Parent CIC Agreement.


EMMIS COMMUNICATIONS CORPORATION

By:		/s/ Ian D. Arnold
Title:		VP, Associate General Counsel
Date:		July 10, 2012

Exhibit 10.18