OTHER SIGNIFICANT TRANSACTIONS

Next Radio LLC - Sprint Agreement

On August 9, 2013, NextRadio LLC, a wholly-owned subsidiary of Emmis, entered into an agreement with Sprint whereby Sprint agreed to pre-load theCompany's smartphone application, NextRadio, in a minimum of 30 million FM-enabled wireless devices on the Sprint wireless network over a three-year period. In return, NextRadio LLC agreed to pay Sprint $15 million per year in equal quarterly installments over the three year term and to share with Sprint certain revenue generated by the NextRadio app. Emmis has not guaranteed NextRadio LLC's performance under this agreement and Sprint does not have recourse to any Emmis related entity other than NextRadio LLC. Additionally, the agreement does not limit the ability of NextRadio LLC to place the NextRadio app on FM-enabled devices on other wireless networks. Through February 28, 2014, the NextRadio app had not generated a material amount of revenue.

Nearly all of the largest radio broadcasters and many smaller radio broadcasters have expressed support for NextRadio LLC's agreement with Sprint. Accordingly, NextRadio LLC has entered into a number of funding agreements with radio broadcasters and other participants in the radio industry to collect and remit cash to Sprint to fulfill the quarterly payment

obligation. As part of some of these funding agreements, Emmis agreed to certain limitations on the operation of its NextRadio and TagStation businesses, including assurances of access to the NextRadio app and to TagStation (the cloud-based engine that provides data to the NextRadio app), and limitations on sale of the businesses to potential competitors of the U.S. radio industry. Emmis also granted the U.S. radio industry (as defined in the funding agreements) a call option on substantially all of the assets used in the NextRadio and TagStation businesses in the United States. The call option may be exercised in August 2017 or August 2019 by paying Emmis a purchase price equal to the greater of (i) the appraised fair market value of the NextRadio and TagStation businesses, or (ii) two times Emmis' cumulative investments in the development of the businesses. If the call option is exercised, the businesses will continue to be subject to the operating limitations applicable today, and no radio operator will be permitted to own more than 30% of the NextRadio and TagStation businesses.

Emmis determined that NextRadio LLC is a variable interest entity (VIE) and that Emmis is the primary beneficiary because the Company has the power to direct substantially all of the activities of NextRadio LLC, and because the Company may absorb certain losses and receive certain benefits from the operations of the VIE. Emmis does not record any revenue or expense related to the amounts that are collected and remitted to Sprint except the portion of any payment to Sprint that was actually contributed to NextRadio LLC by Emmis, which is recorded as station operating expenses, excluding depreciation and amortization expense. NextRadio LLC made the first $3.75 million quarterly payment to Sprint on August 9, 2013. Emmis paid $0.8 million of the first quarterly payment amount, which was expensed over the three-month period ending November 8, 2013. On various dates in December 2013 and January 2014, NextRadio LLC remitted the second $3.75 million quarterly payment to Sprint. Emmis paid $0.4 million of the second quarterly installment, which was expensed during the three-month period ending February 8, 2014. As of February 28, 2014, the carrying value of assets within NextRadio LLC totaled $0.8 million, which represents cash collected by NextRadio LLC from other broadcasting companies and other companies in the radio industry, which is considered restricted for the purpose of the third quarterly payment. NextRadio LLC had $0.8 million of liabilities at February 28, 2014, which represents the obligation to remit cash received from radio industry participants to Sprint. NextRadio LLC remitted the third quarterly payment to Sprint in March 2014, and Emmis paid $0.1 million of the third quarterly installment. Total expense recognized by Emmis during the year ended February 28, 2014 was $1.1 million.

LMA of 98.7FM in New York, NY and Related Financing Transaction

On April 26, 2012 Emmis entered into an LMA with a subsidiary of Disney Enterprises, Inc., pursuant to which the Disney subsidiary purchased the right to provide programming for 98.7FM in New York, NY until August 24, 2024. Emmis retains ownership and control of 98.7FM, including the related FCC license during the term of the LMA and receives an annual fee from from the Disney subsidiary. The fee, initially $8.4 million annually, increases by 3.5% annually until the LMA's termination.

As discussed in Note 5, Emmis, through newly-created subsidiaries, issued $82.2 million of notes, which are nonrecourse to the rest of the Company's subsidiaries and are secured by the assets of the newly-created subsidiaries including the payments made in connection with the 98.7FM LMA. See Notes 1e and 5 for more discussion of the LMA payments and nonrecourse debt.

The following table summarizes certain operating results of 98.7FM for all periods presented. Emmis programmed 98.7FM until the LMA commenced on April 26, 2012. Results of operations for the period that Emmis programmed the station are included in the operating results presented below. 98.7FM is a part of our radio segment.



	For the year ended February 28 (29),
	2012		2013		2014
Net revenues	$	11,276	$	10,589	$	10,331
Station operating expenses, excluding depreciation and amortization expense	10,279		4,410		1,009
Depreciation and amortization	125		112		—
Interest expense	—		2,689		3,416

Assets and liabilities of 98.7FM as of February 28, 2013 and 2014 were as follows:



	As of February 28,
	2013		2014
Current assets:
Restricted cash	$	1,426	$	1,407
Prepaid expenses	673		614
Total current assets	2,099		2,021
Noncurrent assets:
Indefinite lived intangibles	60,525		60,525
Deferred debt issuance costs, net	3,024		2,759
Deposits and other	1,432		3,082
Total noncurrent assets	64,981		66,366
Total assets	$	67,080	$	68,387
Current liabilities:
Accounts payable and accrued expenses	$	26	$	56
Current maturities of long-term debt	4,126		4,541
Deferred revenue	703		728
Other current liabilities	270		256
Total current liabilities	5,125		5,581
Noncurrent liabilities:
Long-term debt, net of current portion	74,942		70,401
Other noncurrent liabilities	—		24
Total noncurrent liabilities	74,942		70,425
Total liabilities	$	80,067	$	76,006

Sale of WRKS-FM Intellectual Property

On April 5, 2012, the Company entered into an Asset Purchase Agreement with YMF in which 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 (frequently known as WRKS-FM), 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 was reflected in gain on sale of assets in the consolidated statements of operations. 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 2006 Credit Agreement.

In connection with the agreement to purchase WBLS-FM and WLIB-AM from YMF as discussed in Note 8, Emmis and YMF agreed to modify the quarterly earn-out payments. Effective upon the first closing of the purchase of WBLS-FM and WLIB-AM, quarterly earn-out payments will be fixed at $0.5 million per quarter, retroactive to the first calendar quarter of 2014. Emmis will continue to collect earn-out payments until the second closing of the purchase of WBLS-FM and WLIB-AM, at which time all future earn-out payments in the three-year term are accelerated and settled at closing.