10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

for the Fiscal Year Ended February 28, 2006

o Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

for the Transition Period from                      to                     .

EMMIS COMMUNICATIONS CORPORATION

(Exact name of registrant as specified in its

charter)

INDIANA
(State of incorporation or organization)

0-23264
(Commission file number)

35-1542018
(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)

     SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

     SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Class A common stock, $.01 par value of Emmis Communications Corporation; 6.25% Series A Cumulative Convertible Preferred Stock, $.01 par value of Emmis Communications Corporation.

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933. Yes o No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes o No þ

     Indicate by check mark whether the registrant (1) has filed all documents and 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 þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

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

     The aggregate market value of the voting stock held by non-affiliates of the registrant, as of August 31, 2005, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $746,501,000.

     The number of shares outstanding of each of Emmis Communications Corporation’s classes of common stock, as of May 1, 2006, was:

32,255,572	Class A Common Shares, $.01 par value
4,929,881	Class B Common Shares, $.01 par value
0	Class C Common Shares, $.01 par value

DOCUMENTS INCORPORATED BY REFERENCE

Documents	Form 10-K Reference
Proxy Statement for 2006 Annual Meeting	Part III

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

FORM 10-K

TABLE OF CONTENTS

			Page
PART I				3
	Item 1.	Business		3
	Item 1A.	Risk Factors		16
	Item 1B.	Unresolved Staff Comments		23
	Item 2.	Properties		23
	Item 3.	Legal Proceedings		25
	Item 4.	Submission of Matters to a Vote of Security Holders		26
	Executive Officers of the Registrant			26
PART II				26
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		26
	Item 6.	Selected Financial Data		28
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation		30
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.		57
	Item 8.	Financial Statements and Supplementary Data		58
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		114
	Item 9A.	Controls and Procedures		114
	Item 9B.	Other Information		114
PART III				114
	Item 10.	Directors and Executive Officers of the Registrant		114
	Item 11.	Executive Compensation		114
	Item 12.	Security Ownership of Certain Beneficial Owners, and Management, and Related Stockholder Matters		115
	Item 13.	Certain Relationships and Related Transactions		115
	Item 14.	Principal Accountant Fees and Services		115
PART IV				116
	Item 15.	Exhibits and Financial Statement Schedules		116
Signatures				121
2nd Amended and Restated Articles of Incorporation
Change in Control Severance Agreement
Ratio of Earnings to Fixed Charges
Subsidiaries
Consent of Independent Registered Public Accountants
Powers of Attorney
Certificaion of Principal Executive Officer
Certificaion of Principal Financial Officer
Certificaion of Principal Executive Officer Pursuant to Section 906
Certificaion of Principal Financial Officer Pursuant to Section 906

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PART I

ITEM 1. BUSINESS.

GENERAL

     We are a diversified media company, principally focused on radio broadcasting. We operate the ninth largest publicly traded radio portfolio in the United States based on total listeners. We own and operate seven FM radio stations serving the nation’s top three markets — New York, Los Angeles and Chicago. Additionally, we own and operate fifteen FM and two AM radio stations with strong positions in Phoenix, St. Louis, Austin (we have a 50.1% controlling interest in our radio stations located there), Indianapolis and Terre Haute, IN, although we recently entered into an agreement to sell our remaining radio station in Phoenix.

     Our operational focus is on maintaining our leadership position in broadcasting by continuing to enhance the operating performance of our broadcast properties. We have created top performing radio stations that rank, in terms of primary demographic target audience share, among the top ten stations in the New York, Los Angeles and Chicago radio markets according to the Fall 2005 Arbitron Survey. We believe that this strong large-market radio presence and our diversity of station formats make us attractive to a broad base of radio advertisers and reduces our dependence on any one economic sector or specific advertiser.

     In addition to our domestic radio properties, we operate an international radio business, publish several city and regional magazines and operate television stations that are held for sale. Our publishing operations consist of Texas Monthly, Los Angeles, Atlanta, Indianapolis Monthly, Cincinnati, Tu Ciudad, and Country Sampler and related magazines. Internationally, we own and operate a network of radio stations in the Flanders region of Belgium, a national radio network in Slovakia, have a 59.5% interest in a national radio station in Hungary and have a 66.5% interest in a national radio network in Bulgaria. We also own and operate three television stations in New Orleans, Honolulu and Orlando, respectively. The Company has previously announced that it intends to sell these television stations in the next three to twelve months and recently entered into an agreement to sell its television station in Orlando. As of February 28, 2006 the operations of these three television stations have been classified as discontinued operations. We also engage in various businesses ancillary to our broadcasting business, such as consulting, broadcast tower leasing and operating a news information radio network in Indiana.

BUSINESS STRATEGY

     We are committed to maintaining our leadership position in radio broadcasting, enhancing the performance of our radio and publishing properties, and distinguishing ourselves through the quality of our operations. Our strategy is focused on the following operating principles:

Develop Innovative Local Programming. We believe that knowledge of local markets and innovative programming developed to target specific demographic groups are the most important determinants of individual radio station success. We conduct extensive market research to identify underserved segments of our markets and to ensure that we are meeting the needs of our target audience. Utilizing the research results, we concentrate on providing a focused programming format carefully tailored to the demographics of our markets and our audiences’ preferences. As we look to invest in our core properties, we will continue to emphasize the development of innovative local programming. Our sales efforts focus on maximizing our net revenues from local advertising. Historically, local advertising revenues have been a more stable revenue source for the broadcast industry, and we believe local sales will continue to be less susceptible to economic swings than national sales.

Deliver Results to Advertisers. We seek to become marketing partners with our advertisers by offering innovative solutions for reaching and connecting with consumers. We realize that the ultimate success of our business depends on our ability to deliver results for our advertisers. Radio broadcasting is a highly-targeted advertising medium and we are able to deliver niche audiences for advertisers in a cost efficient manner. Where applicable, we offer integrated marketing solutions to our advertisers that combine traditional on-air commercials with title sponsorship of concerts or events on our stations’ websites. We will continue to explore and invest in new, effective means of delivering results for our advertisers.

Pursue Strategic Acquisitions. We have built our portfolio by selectively acquiring underdeveloped media properties in desirable markets at reasonable purchase prices where our experienced management team has been able to enhance value. We have been successful in acquiring these types of media properties and improving their ratings, revenues and cash flow with our marketing focus and innovative programming expertise. We find underdeveloped properties particularly attractive because they offer greater

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potential for revenue and cash flow growth than mature properties through the application of our operational experience. We intend to continue to evaluate potential acquisitions of radio stations and publishing properties. We also intend to explore acquisitions of other businesses that we believe hold promise for long-term appreciation in value and leverage our strengths.

Encourage a Performance-Based, Entrepreneurial Management Approach. We believe that broadcasting is primarily a local business and that much of its success is the result of the efforts of regional and local management and staff. We have attracted and retained an experienced team of broadcast professionals who understand the viewing and listening preferences, demographics and competitive opportunities of their particular market. Our decentralized approach to station management gives local management oversight of station spending, long-range planning and resource allocation at their individual stations, and our approach also rewards all employees based on those stations’ performance. In addition, we encourage our managers and employees to own a stake in the Company, and most of our full-time employees have an equity ownership position in Emmis. We believe that our performance-based, entrepreneurial management approach has created a distinctive corporate culture, making Emmis a highly desirable employer in the broadcasting industry and significantly enhancing our ability to attract and retain experienced and highly motivated employees and management. In 2005, Fortune magazine recognized Emmis as one of the “100 Best Companies to Work For.”

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RADIO STATIONS

     In the following table, “Market Rank by Revenue” is the ranking of the market revenue size of the principal radio market served by the station among all radio markets in the United States. Market revenue and ranking figures are from BIA’s Investing in Radio 2005 (4^th Edition). “Ranking in Primary Demographic Target” is the ranking of the station within its designated primary demographic target among all radio stations in its market based on the Fall 2005 Arbitron Survey. A “t” indicates the station tied with another station for the stated ranking. “Station Audience Share” represents a percentage generally computed by dividing the average number of persons over age 12 listening to a particular station during specified time periods by the average number of such persons for all stations in the market area as determined by Arbitron.

				RANKING IN
	MARKET		PRIMARY	PRIMARY	STATION
STATION AND	RANK BY		DEMOGRAPHIC	DEMOGRAPHIC	AUDIENCE
MARKET	REVENUE	FORMAT	TARGET AGES	TARGET	SHARE
Los Angeles, CA	1
KPWR-FM		Hip-Hop	18-34	1t	3.5
KZLA-FM		Country	25-54	22t	1.7
New York, NY	2
WRKS-FM		Classic Soul/Today’s R&B	25-54	3	4.5
WQHT-FM		Hip-Hop	18-34	1	4.3
WQCD-FM		Smooth Jazz	25-54	14t	3.1
Chicago, IL	3
WLUP-FM		Classic Rock	25-54	13	2.0
WKQX-FM		Alternative Rock	18-34	6t	1.9
Phoenix, AZ	14
KKFR-FM		Hip-Hop	18-34	3	3.6
St. Louis, MO	21
KPNT-FM		Alternative Rock	18-34	1	4.3
KSHE-FM		Album Oriented Rock	25-54	3	4.1
KIHT-FM		Classic Hits	25-54	6t	2.9
KFTK-FM		Talk	25-54	12	2.8
Indianapolis, IN	32
WIBC-AM		News/Talk/Sports	35-64	3	7.2
WYXB-FM		Soft Adult Contemporary	25-54	6t	5.3
WLHK-FM		Country	25-54	8	4.7
WNOU-FM		Contemporary Hit Radio	18-34	4t	3.7
Austin, TX	37
KLBJ-AM		News/Talk	25-54	5	5.4
KDHT-FM		Hip-Hop	18-34	1	4.5
KBPA-FM		Adult Hits	25-54	2	4.2
KLBJ-FM		Album Oriented Rock	25-54	7t	3.1
KGSR-FM		Adult Album Alternative	25-54	7t	3.0
KROX-FM		Alternative Rock	18-34	11	2.4
Terre Haute, IN	233
WTHI-FM		Country	25-54	1	22.9
WWVR-FM		Classic Rock	25-54	3	10.1

In addition to our other domestic radio broadcasting operations, we own and operate Network Indiana, a radio network that provides news and other programming to nearly 70 affiliated radio stations in Indiana. Internationally, we own and operate a network of radio

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stations in the Flanders region of Belgium, a national radio network in Slovakia, have a 59.5% interest in a national top-ranked radio station in Hungary and have a 66.5% interest in a national radio network in Bulgaria. We also engage in various businesses ancillary to our broadcasting business, such as consulting and broadcast tower leasing.

     TELEVISION STATIONS

     On May 10, 2005, Emmis announced that it had engaged advisors to assist in evaluating strategic alternatives for its television assets. As of February 28, 2006, the Company has sold thirteen of its sixteen television stations including two stations that are being operated pursuant to local programming and marketing agreements while we await FCC approval of the sales. The following discussion relates to the three remaining television stations, which are classified as discontinued operations in the accompanying financial statements. In May 2006, Emmis entered into an agreement to sell WKCF-TV in Orlando.

     In the following table, “DMA Rank” is estimated by the Nielsen Media Research, Inc. (“Nielsen”) as of January 2006. Rankings are based on the relative size of a station’s market among the 210 generally recognized Designated Market Areas (“DMAs”), as defined by Nielsen. “Number of Stations in Market” represents the number of television stations (“Reportable Stations”) designated by Nielsen as “local” to the DMA, excluding public television stations and stations which do not meet minimum Nielsen reporting standards (i.e., a weekly cumulative audience of less than 2.5%) for reporting in the Sunday through Saturday, 7:00 a.m. to 1:00 a.m. time period. “Station Rank” reflects the station’s rank relative to other Reportable Stations based upon the DMA rating as reported by Nielsen from 9:00 a.m. to midnight, Sunday through Saturday. A “t” indicates the station tied with another station for the stated ranking. “Station Audience Share” reflects an estimate of the share of DMA households viewing television received by a local commercial station in comparison to other local commercial stations in the market as measured from 9:00 a.m. to midnight, Sunday through Saturday.

				NUMBER OF				STATION
TELEVISION	METROPOLITAN	DMA	AFFILIATION/	STATIONS		STATION		AUDIENCE		AFFILIATION
STATION	AREA SERVED	RANK	CHANNEL	IN MARKET(1)		RANK(1)		SHARE(1)		EXPIRATION
WKCF-TV	Orlando, FL	20	WB/18		13		5		5	December 31, 2009 (2)
WVUE-TV	New Orleans, LA	43	Fox/8		8		3		8	March 5, 2006 (3)
KGMB-TV	Honolulu, HI	72	CBS/9		8		3t		10	September 18, 2006

(1)	Number of stations in market, station rank and station audience share for WKCF-TV and KGMB-TV are as of February 2006, the most recent period reported by Nielsen for these markets. Data reported for WVUE-TV is as of May 2005 as Nielsen has not issued any ratings information for the New Orleans market since Hurricane Katrina in August 2005.
(2)	On January 24, 2006, Warner Bros. Entertainment announced that the WB network will cease operations in September 2006. On the same day, Warner Bros. Entertainment and CBS Corporation announced that they will launch a new network, The CW Television Network, which is expected to commence operations in September 2006. WKCF-TV has been named the CW affiliate in the Orlando market.
(3)	We are currently in negotiations to extend or renew this affiliation agreement and expect the extension or renewal to be on terms that are reasonably acceptable to us.

     Emmis also owns and operates two satellite stations that primarily re-broadcast the signal of KGMB-TV. A local station and its satellite stations are considered one station for FCC and multiple ownership purposes, provided that the stations are in the same market.

     WKCF-TV and KGMB-TV are affiliated with WB and CBS (each, together with the CW and Fox, a “Network”), respectively, pursuant to a written network affiliation agreement. WKCF-TV will be affiliated with the CW Network when the CW commences operations in the fall. WVUE-TV is currently in negotiations with the Fox Network regarding an extension of their affiliation agreement which expired on March 5, 2006. Each affiliation agreement provides the affiliated television station with the right to rebroadcast all programs transmitted by the Network with which the television station is affiliated. In return, the Network has the right to sell a substantial portion of the advertising time during such broadcasts. Emmis does not receive any network compensation payments for any of its remaining television stations.

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PUBLISHING OPERATIONS

     We publish the following magazines through our publishing division:

	Monthly
	Paid
	Circulation(a)
Regional Magazines:
Texas Monthly		310,000
Los Angeles		153,000
Atlanta		70,000
Indianapolis Monthly		47,000
Cincinnati Magazine		34,000
Tu Ciudad		—	(b)
Specialty Magazines (c):
Country Sampler		302,000
Country Sampler Decorating Ideas		101,000
Country Marketplace		118,000
Country Business		27,000

(a)	Source: Publisher’s Statement subject to audit by the Audit Bureau of Circulations
(b)	Tu Ciudad launched in June 2005 and has minimal paid circulation
(c)	Our specialty magazines are circulated bimonthly

INTERNET AND NEW TECHNOLOGIES

     We believe that the development and explosive growth of the Internet present not only a challenge, but an opportunity for broadcasters and publishers. The primary challenge is increased competition for the time and attention of our listeners and readers. The opportunity is to further enhance the relationships we already have with our listeners and readers by expanding products and services offered by our stations and magazines. For that reason, we have individuals at many of our properties dedicated to website maintenance and generating revenues from the properties’ websites and we expect to further explore expansion of Internet opportunities.

COMMUNITY INVOLVEMENT

     We believe that to be successful, we must be integrally involved in the communities we serve. To that end, each of our stations participates in many community programs, fundraisers and activities that benefit a wide variety of organizations. Charitable organizations that have been the beneficiaries of our contributions, marathons, walkathons, dance-a-thons, concerts, fairs and festivals include, among others, Give2Asia, The March of Dimes, American Cancer Society, Riley Children’s Hospital, The Salvation Army and research foundations seeking cures for ALS, cystic fibrosis, leukemia and AIDS and helping to fight drug abuse. In addition to our planned activities, our stations and magazines take leadership roles in community responses to natural disasters, such as commercial-free news broadcasts covering Hurricane Katrina and special fundraisers for victims of Hurricane Katrina and the tsunami disaster. The National Association of Broadcasters Education Foundation honored us with the Hubbard Award, honoring a broadcaster “for extraordinary involvement in serving the community.” Emmis was only the second broadcaster to receive this prestigious honor.

INDUSTRY INVOLVEMENT

     We have an active leadership role in a wide range of industry organizations. Our senior managers have served in various capacities with industry associations, including as directors of the National Association of Broadcasters, the Radio Advertising Bureau, the Radio Futures Committee, the Arbitron Advisory Council, and as founding members of the Radio Operators Caucus. Our chief executive has been honored with the National Association of Broadcasters’ “National Radio Award” and as Radio Ink’s “Radio Executive of the Year.” At various times we have been voted Most Respected Broadcaster in polls of radio industry chief executive officers and managers, and our management and on-air personalities have won numerous prestigious industry awards.

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COMPETITION

     Radio and television broadcasting stations compete with the other broadcasting stations in their respective market areas, as well as with other advertising media such as newspapers, cable, magazines, outdoor advertising, transit advertising, the Internet and direct mail marketing. Competition within the broadcasting industry occurs primarily in individual market areas, so that a station in one market (e.g., New York) does not generally compete with stations in other markets (e.g., Chicago). In each of our markets, our stations face competition from other stations with substantial financial resources, including stations targeting the same demographic groups. In addition to management experience, factors that are material to competitive position include the station’s rank in its market in terms of the number of listeners or viewers, authorized power, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other stations in the market area. We attempt to improve our competitive position with programming and promotional campaigns aimed at the demographic groups targeted by our stations. We also seek to improve our position through sales efforts designed to attract advertisers that have done little or no radio advertising by emphasizing the effectiveness of radio advertising in increasing the advertisers’ revenues. The policies and rules of the FCC permit certain joint ownership and joint operation of local stations. Those stations taking advantage of these joint arrangements (including our New York, Los Angeles, Chicago, St. Louis, Indianapolis, Austin and Terre Haute clusters) may in certain circumstances have lower operating costs and may be able to offer advertisers more attractive rates and services. Although we believe that each of our stations can compete effectively in its market, there can be no assurance that any of our stations will be able to maintain or increase its current audience ratings or advertising revenue market share.

     Although the broadcasting industry is highly competitive, barriers to entry exist. The operation of a broadcasting station in the United States requires a license from the FCC. Also, the number of stations that can operate in a given market is limited by the availability of the frequencies that the FCC will license in that market, as well as by the FCC’s multiple ownership rules regulating the number of stations that may be owned and controlled by a single entity and cross ownership rules which limit the types of media properties in any given market that can be owned by the same person or company.

     The broadcasting industry historically has grown in terms of total revenues despite the introduction of new technology for the delivery of entertainment and information, such as cable television, the Internet, MP3 players, satellite radio, satellite television, audio tapes and compact discs. We believe that radio’s portability in particular makes it less vulnerable than other media to competition from new methods of distribution or other technological advances. There can be no assurance, however, that the development or introduction in the future of any new media technology will not have an adverse effect on the radio industry.

ADVERTISING SALES

     Our stations and magazines derive their advertising revenue from local and regional advertising in the marketplaces in which they operate, as well as from the sale of national advertising. Local and most regional sales are made by a station’s or magazine’s sales staff. National sales are made by firms specializing in such sales which are compensated on a commission-only basis. We believe that the volume of national advertising revenue tends to adjust to shifts in a station’s audience share position more rapidly than does the volume of local and regional advertising revenue. During the year ended February 28, 2006, approximately 21% of our total advertising revenues were derived from national sales and 79% were derived from local and regional sales. For the year ended February 28, 2006, our radio stations derived a higher percentage of their advertising revenues from local and regional sales (83%) than our publishing entities (59%).

EMPLOYEES

     As of February 28, 2006 Emmis had approximately 1,500 full-time employees and approximately 440 part-time employees. We have approximately 200 employees at various radio and television stations represented by unions. We consider relations with our employees to be good.

INTERNET ADDRESS AND INTERNET ACCESS TO SEC REPORTS

     Our Internet address is www.emmis.com. You may obtain through our Internet website, free of charge, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. These reports will be available the same day we electronically file such material with, or furnish such material to, the SEC. We have been making such reports available on the same day they are filed during the period covered by this report.

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FEDERAL REGULATION OF BROADCASTING

     Radio broadcasting is subject to the jurisdiction of the Federal Communications Commission (the “FCC”) under the Communications Act of 1934, as amended [in part by the Telecommunications Act of 1996 (the “1996 Act”)] (the “Communications Act”). Radio broadcasting is prohibited except in accordance with a license issued by the FCC upon a finding that the public interest, convenience and necessity would be served by the grant of such license. The FCC has the power to revoke licenses for, among other things, false statements made in applications or willful or repeated violations of the Communications Act or of FCC rules. In general, the Communications Act provides that the FCC shall allocate broadcast licenses for radio stations in such a manner as will provide a fair, efficient and equitable distribution of service throughout the United States. The FCC determines the operating frequency, location and power of stations; regulates the equipment used by stations; and regulates numerous other areas of radio broadcasting pursuant to rules, regulations and policies adopted under authority of the Communications Act. The Communications Act, among other things, prohibits the assignment of a broadcast license or the transfer of control of an entity holding such a license without the prior approval of the FCC. Under the Communications Act, the FCC also regulates certain aspects of the operation of cable television systems and other electronic media that compete with broadcast stations.

     The following is a brief summary of certain provisions of the Communications Act and of specific FCC regulations and policies. Reference should be made to the Communications Act as well as FCC rules, public notices and rulings for further information concerning the nature and extent of federal regulation of radio stations. Other legislation has been introduced from time to time which would amend the Communications Act in various respects, and the FCC from time to time considers new regulations or amendments to its existing regulations. We cannot predict whether any such legislation will be enacted or whether new or amended FCC regulations will be adopted or what their effect would be on Emmis.

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     LICENSE RENEWAL. Radio and television stations operate pursuant to broadcast licenses that are ordinarily granted by the FCC for maximum terms of eight years and are subject to renewal upon approval by the FCC. Our licenses currently have the following expiration dates, until renewed¹:

Continuing operations:

WIBC(AM) (Indianapolis)	August 1, 2004	Renewal application pending
WLHK(FM) (Indianapolis)	August 1, 2004	Renewal application pending
WNOU(FM) (Indianapolis)	August 1, 2004	Renewal application pending
WTHI(FM) (Terre Haute)	August 1, 2004	Renewal application pending
WWVR(FM) (Terre Haute)	August 1, 2004	Renewal application pending
WYXB(FM) (Indianapolis)	August 1, 2004	Renewal application pending
WKQX(FM) (Chicago)	December 1, 2004	Renewal application pending
KFTK(FM) (St. Louis)	February 1, 2013
KPNT(FM) (St. Louis)	February 1, 2005	Renewal application pending
KSHE(FM) (St. Louis)	February 1, 2013
KBPA(FM) (Austin)	August 1, 2013
KDHT(FM) (Austin)	August 1, 2013
KGSR(FM) (Austin)	August 1, 2013
KLBJ(AM) (Austin)	August 1, 2013
KLBJ(FM) (Austin)	August 1, 2013
KROX(FM) (Austin)	August 1, 2013
KPWR(FM) (Los Angeles)	December 1, 2013
KZLA(FM) (Los Angeles)	December 1, 2013
WQCD(FM) (New York)	June 1, 2006	Renewal application pending
WQHT(FM) (New York)	June 1, 2006	Renewal application pending
WRKS(FM) (New York)	June 1, 2006	Renewal application pending
WLUP(FM) (Chicago)	December 1, 2012
KIHT(FM) (St. Louis)	February 1, 2013
Discontinued operations:
WKCF(TV) (Orlando)	February 1, 2013
WBPG(TV) (Mobile)	April 1, 2005	Renewal application pending
WVUE(TV) (New Orleans)	June 1, 2013
KMTV(TV) (Omaha)	June 1, 2006	Renewal application pending
KGMB(TV) (Honolulu)	February 1, 2007
KGMD(TV) (Hawaii)	February 1, 2007
KGMV(TV) (Maui)	February 1, 2007
KKFR(FM) (Phoenix)	October 1, 2013

¹ Under the Communications Act, a license expiration date is extended automatically pending action on the renewal application.

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     Under the Communications Act, at the time an application is filed for renewal of a station license, parties in interest, as well as members of the public, may apprise the FCC of the service the station has provided during the preceding license term and urge the denial of the application. If such a petition to deny presents information from which the FCC concludes (or if the FCC concludes on its own motion) that there is a “substantial and material” question as to whether grant of the renewal application would be in the public interest under applicable rules and policy, the FCC may conduct a hearing on specified issues to determine whether the renewal application should be granted. The Communications Act provides for the grant of a renewal application upon a finding by the FCC that the licensee:

• has served the public interest, convenience and necessity;

• has committed no serious violations of the Communications Act or the FCC rules; and

• has committed no other violations of the Communications Act or the FCC rules which would constitute a pattern of abuse.

     If the FCC cannot make such a finding, it may deny the renewal application, and only then may the FCC consider competing applications for the same frequency. In a vast majority of cases, the FCC renews a broadcast license even when petitions to deny have been filed against the renewal application.

     Petitions to deny have been filed against the renewal applications for WKQX and KPNT, and an informal objection has been filed against the renewal applications of the Company’s Indiana radio stations. See “PROGRAMMING AND OPERATION.”

     REVIEW OF OWNERSHIP RESTRICTIONS. The 1996 Act required the FCC to review all of its broadcast ownership rules every two years and to repeal or modify any of its rules that are no longer “necessary in the public interest.” Pursuant to recent congressional appropriations legislation, these reviews now must be conducted once every four years.

     On June 2, 2003, the FCC adopted its most recent broadcast ownership review decision, in which it modified several of its regulations governing the ownership of radio stations in local markets. On June 24, 2004, however, the United States Court of Appeals for the Third Circuit released a decision rejecting much of the Commission’s 2003 decision. While affirming the FCC in certain respects, the Third Circuit found fault with the proposed new limits on media combinations, remanded them to the agency for further proceedings and extended a stay on the implementation of the new rules that it had imposed in September 2003. As a result, the restrictions that were in place prior to the FCC’s 2003 decision generally continue to govern media transactions, pending completion of the agency proceedings on remand, possible legislative intervention and/or further judicial review. The discussion below reviews the changes contemplated in the FCC’s 2003 decision and the Third Circuit’s response to the revised ownership regulations that the Commission adopted.

     Local Radio Ownership:

     The local radio ownership rule limits the number of commercial radio stations that may be owned by one entity in a given radio market based on the number of radio stations in that market:

• if the market has 45 or more radio stations, one entity may own up to eight stations, not more than five of which may be in the same service (AM or FM);

• if the market has between 30 and 44 radio stations, one entity may own up to seven stations, not more than four of which may be in the same service;

• if the market has between 15 and 29 radio stations, a single entity may own up to six stations, not more than four of which may be in the same service; and

• if the market has 14 or fewer radio stations, one entity may own up to five stations, not more than three of which may be in the same service, however one entity may not own more than 50% of the stations in the market.

     Each of the markets in which our radio stations are located has at least 15 commercial radio stations.

     The FCC has also adopted rules with respect to so-called local marketing agreements, or “LMAs”, by which the licensee of one radio station provides programming for another licensee’s radio station in the same market and sells all of the advertising within that programming. Under these rules, an entity that owns one or more radio stations in a market and programs more than 15% of the broadcast time on another radio station in the same market pursuant to an LMA is generally required to count the LMA station toward its media ownership limits even though it does not own the station. As a result, in a market where we own one or more radio stations,

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we generally cannot provide programming under an LMA to another radio station in the market if we could not acquire that station under the local radio ownership rule.

     Although the FCC’s June 2, 2003 decision did not change the numerical caps under the local radio rule, the Commission adjusted the rule by deciding that both commercial and noncommercial stations could be counted in determining the number of stations in a radio market. The decision also altered the definition of the relevant local market for purposes of the rule. Further, the agency determined that in addition to LMAs, radio station Joint Sales Agreements (“JSAs”) would be attributable under the local ownership rule where the brokering party sells more than 15% of the brokered station’s advertising time per week and owns or has an attributable interest in another station in the same market. The Third Circuit upheld each of these changes to the local radio rule. In response to a rehearing request from the Commission, the court lifted its stay with respect to these modifications, allowing them to go into effect. However, the court questioned the FCC’s decision to maintain the pre-existing numerical caps listed above, and remanded them to the agency for further consideration.

     Cross-Media Ownership:

     Pre-Existing Radio/Television Cross-Ownership Rule: The FCC’s radio/television cross-ownership rule generally permits the common ownership of the following combinations in the same market, to the extent permitted under the FCC’s television duopoly rule:

• up to two commercial television stations and six commercial radio stations or one commercial television station and seven commercial radio stations in a market where at least 20 independent media voices will remain post-merger;

• up to two commercial television stations and four commercial radio stations in a market where at least 10 independent media voices will remain post-merger; and

• two commercial television stations and one commercial radio station in a market with less than 10 independent media voices that will remain post-merger.

For purposes of this rule, the FCC counts as “voices” commercial and non-commercial broadcast television and radio stations as well as some daily newspapers and cable operators. The Commission will consider permanent waivers of its revised radio/television cross-ownership rule only if one of the stations is a “failed station.”

     Pre-Existing Newspaper/Broadcast Cross-Ownership Rule: The FCC rules also prohibit common ownership of a daily newspaper and a radio or television station in the same local market.

     New Cross-Media Limits: The cross-media limits adopted in the June 2003 decision would replace both the newspaper/broadcast cross-ownership restriction and the radio/television cross-ownership limits as follows:

• In DMAs with three or fewer commercial and noncommercial television stations, the FCC will not permit cross-ownership between TV stations, radio stations, and daily newspapers.

• In DMAs with 4 to 8 television stations, the FCC will permit parties to have one of the three following combinations: (a) one or more daily newspaper(s), one TV station, and up to 50% of the radio stations that would be permissible under the local radio ownership limits; (b) one or more daily newspaper(s) and as many radio stations as can be owned pursuant to the local radio ownership limits (but no television stations); or (c) two television stations (so long as ownership would be permissible under the local television ownership rule) and as many radio stations as the local radio ownership limits permit (but no daily newspapers).

• In DMAs with nine or more television stations, the FCC will permit any newspaper and broadcast cross-media combinations so long as they comply with the local television ownership rule and local radio ownership limits.

     The Third Circuit remanded the new cross-media limits to the Commission for further consideration, and the pre-existing radio/television and newspaper/broadcast cross-ownership rules were left in place in the meantime.

     We cannot predict the ultimate outcome of the proceedings described above, future biennial reviews or other agency or legislative initiatives or the impact, if any, that they will have on our business.

     ALIEN OWNERSHIP. Under the Communications Act, no FCC license may be held by a corporation if more than one-fifth of its capital stock is owned or voted by aliens or their representatives, a foreign government or representative thereof, or an entity organized

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under the laws of a foreign country (collectively, “Non-U.S. Persons”). Furthermore, the Communications Act provides that no FCC license may be granted to an entity directly or indirectly controlled by another entity of which more than one-fourth of its capital stock is owned or voted by Non-U.S. Persons if the FCC finds that the public interest will be served by the denial of such license. The FCC staff has interpreted this provision to require an affirmative public interest finding to permit the grant or holding of a license, and such a finding has been made only in limited circumstances. The foregoing restrictions on alien ownership apply in modified form to other types of business organizations, including partnerships and limited liability companies. Our Second Amended and Restated Articles of Incorporation and Amended and Restated Code of By-Laws authorize the Board of Directors to prohibit such restricted alien ownership, voting or transfer of capital stock as would cause Emmis to violate the Communications Act or FCC regulations.

     ATTRIBUTION OF OWNERSHIP INTERESTS. In applying its ownership rules, the FCC has developed specific criteria in order to determine whether a certain ownership interest or other relationship with a Commission licensee is significant enough to be “attributable” or “cognizable” under its rules. Specifically, among other relationships, certain stockholders, officers and directors of a broadcasting company are deemed to have an attributable interest in the licenses held by that company, such that there would be a violation of the Commission’s rules where the broadcasting company and such a stockholder, officer or director together hold attributable interests in more than the permitted number of stations or a prohibited combination of outlets in the same market. The FCC’s regulations generally deem the following relationships and interests to be attributable for purposes of its ownership restrictions:

• all officer and director positions in a licensee or its direct/indirect parent(s);

• voting stock interests of at least 5% (or 20%, if the holder is a passive institutional investor, i.e., a mutual fund, insurance company or bank);

• any equity interest in a limited partnership or limited liability company where the limited partner or member is “materially involved” in the media-related activities of the LP or LLC and has not been “insulated” from such activities pursuant to specific FCC criteria;

• equity and/or debt interests which, in the aggregate, exceed 33% of the total asset value of a station or other media entity (the “equity/debt plus policy”), if the interest holder supplies more than 15% of the station’s total weekly programming (usually pursuant to a time brokerage, local marketing or network affiliation agreement) or is a same-market media entity (i.e., broadcast company or newspaper).

     To assess whether a voting stock interest in a direct or indirect parent corporation of a broadcast licensee is attributable, the FCC uses a “multiplier” analysis in which non-controlling voting stock interests are deemed proportionally reduced at each non-controlling link in a multi-corporation ownership chain.

     Under existing FCC policy, in the case of corporations having a “single majority shareholder”, the interests of minority shareholders are generally not deemed attributable. Inasmuch as Jeffrey H. Smulyan’s voting interest in the Company currently exceeds 50%, this exemption appears to apply to the Company. The exemption may, however, be eliminated by the FCC. If the exemption if eliminated, or if Mr. Smulyan’s voting interest falls to or below 50%, then the interests of any minority shareholders that meet or exceed the thresholds described above will become attributable and will be combined with the Company’s interests for purposes of determining compliance with FCC ownership rules.

     Ownership rule conflicts arising as a result of aggregating the media interests of the Company and its attributable shareholders could require divestitures by either the Company or the affected shareholders. Any such conflicts could result in Emmis being unable to obtain FCC consents necessary for future acquisitions. Conversely, Emmis’ media interests could operate to restrict other media investments by shareholders having or acquiring an interest in Emmis.

     ASSIGNMENTS AND TRANSFERS OF CONTROL. The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant such approval, the FCC considers a number of factors, including compliance with the various rules limiting common ownership of media properties, the “character” of the licensee and those persons holding attributable interests therein and compliance with the Communications Act’s limitations on alien ownership as well as other statutory and regulatory requirements. When evaluating an assignment or transfer of control application, the FCC is prohibited from considering whether the public interest might be served by an assignment of the broadcast license or transfer of control of the licensee to a party other than the assignee or transferee specified in the application.

     PROGRAMMING AND OPERATION. The Communications Act requires broadcasters to serve the “public interest.” Since the late 1970s, the FCC gradually has relaxed or eliminated many of the more formalized procedures it had developed to promote the broadcast

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of certain types of programming responsive to the needs of a station’s community of license. However, licensees continue to be required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness.

     Federal law prohibits the broadcast of obscene material at any time and the broadcast of indecent material during specified time periods; these prohibitions are subject to enforcement action by the FCC. The agency recently has engaged in more aggressive enforcement of its indecency regulations than has generally been the case in the past. In addition to imposing more stringent fines, the Commission has indicated that it may begin license revocation procedures for “serious” violations of the indecency law. Furthermore, Congress is considering legislation that would substantially increase the current per-violation maximum fine for indecency violations and would mandate license revocation proceedings for licensees with multiple violations.

     In August of 2004, Emmis entered into a Consent Decree with the FCC, pursuant to which (i) the Company adopted a compliance plan intended to avoid future indecency violations, (ii) the Company admitted, solely for purposes of the Decree, that certain prior broadcasts were “indecent,” (iii) the Company agreed to make a voluntary payment of $300,000 to the U.S. Treasury, (iv) the FCC rescinded its prior enforcement actions against the Company based on allegedly indecent broadcasts, and agreed not to use against the Company any indecency violations based on complaints within the FCC’s possession as of the date of the Decree or “similar” complaints based on pre-Decree broadcasts, and (v) the FCC found that neither the alleged indecency violations nor the circumstances surrounding a civil suit filed by a WKQX announcer raised any substantial and material questions concerning the Company’s qualifications to hold FCC licenses. A petition requesting that the FCC reconsider its approval of the Decree has been filed and remains pending. If the petition were to be granted by the FCC, or if a court appeal were taken and the court were to invalidate the Decree, then any indecent broadcasts that may have occurred on the Company’s stations could be considered by the FCC, which could have an adverse impact on the Company’s FCC licenses. In addition, petitions have been filed against the license renewal applications of stations WKQX and KPNT, and an informal objection has been filed against the license renewals of the Company’s Indiana radio stations, in each case based primarily on the matters covered by the Decree. Consequently, any invalidation of the Decree could result in the petitions and objections being considered in connection with those and possibly other license renewals, which could have an adverse affect on the Company’s FCC licenses.

     Stations also must pay regulatory and application fees and follow various rules promulgated under the Communications Act that regulate, among other things, political advertising, sponsorship identification, contest and lottery advertisements and technical operations, including limits on radio frequency radiation.

     Failure to observe FCC rules and policies can result in the imposition of various sanctions, including monetary fines, the grant of “short-term” (less than the maximum term) license renewals or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license.

     ADDITIONAL DEVELOPMENTS AND PROPOSED CHANGES. The Commission has adopted rules implementing a new low power FM (“LPFM”) service. The FCC has begun accepting applications for LPFM stations and has granted some of those applications. We cannot predict whether any LPFM stations will interfere with the coverage of our radio stations.

     The FCC also has authorized two companies to launch and operate satellite digital audio radio service (“SDARS”) systems. Both companies—Sirius Satellite Radio, Inc. and XM Radio—are now providing nationwide service. In addition, Sirius and XM recently have launched channels providing local traffic and weather information in major cities. Broadcasters have objected to these local services, contending that the provision of local programming conflicts with the FCC’s intent to license satellite radio solely as a national service. XM and Sirius contend, in response, that the services are not in contravention of their FCC authorizations because the channels offering local information are being offered nationwide, not on a local basis. We cannot predict the impact of SDARS on our radio stations’ listenership.

     In October 2002, the FCC issued an order selecting a technical standard for terrestrial digital audio broadcasting (“DAB”). The in-band, on-channel (“IBOC”) technology chosen by the agency allows AM and FM radio broadcasters to introduce digital operations and permits existing stations to operate on their current frequencies in either full analog mode, full digital mode, or a combination of both (at reduced power). In March of 2005, the FCC announced that pending adoption of final rules, it would allow stations on an interim basis to broadcast multiple digital channels. DAB operation by AM stations is currently prohibited during nighttime hours pending further testing relating to interference.

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     In January 2001, the D.C. Circuit concluded that the FCC’s Equal Employment Opportunity (“EEO”) regulations were unconstitutional. The FCC adopted new EEO rules in November 2002, which went into effect in March 2003.

     Congress and the FCC have under consideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and profitability of our broadcast stations, result in the loss of audience share and advertising revenues for our broadcast stations and/or affect our ability to acquire additional broadcast stations or finance such acquisitions. Such matters include, but are not limited to:

• proposals to impose spectrum use or other fees on FCC licensees;

• proposals to repeal or modify some or all of the FCC’s multiple ownership rules and/or policies;

• proposals to change rules relating to political broadcasting;

• technical and frequency allocation matters;

• AM stereo broadcasting;

• proposals to permit expanded use of FM translator stations;

• proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages;

• proposals to tighten safety guidelines relating to radio frequency radiation exposure;

• proposals permitting FM stations to accept formerly impermissible interference;

• proposals to reinstate holding periods for licenses;

• changes to broadcast technical requirements, including those relative to the implementation of SDARS and DAB;

• proposals to limit the tax deductibility of advertising expenses by advertisers.

     We cannot predict whether any proposed changes will be adopted, what other matters might be considered in the future, or what impact, if any, the implementation of any of these proposals or changes might have on our business.

     The foregoing is only a brief summary of certain provisions of the Communications Act and of specific FCC regulations. Reference should be made to the Communications Act as well as FCC regulations, public notices and rulings for further information concerning the nature and extent of federal regulation of broadcast stations.

GEOGRAPHIC FINANCIAL INFORMATION

     The Company’s segments operate primarily in the United States with one national radio station located in Hungary, a network of radio stations located in Belgium and national radio networks in Slovakia and Bulgaria. The following tables summarize relevant financial information by geographic area. Net revenues related to discontinued operations are excluded for all periods presented.

	2004		2005		2006
Net Revenues:
Domestic	$	314,996	$	334,354	$	359,886
International		11,622		17,466		27,495
Total	$	326,618	$	351,820	$	387,381

	2004		2005		2006
Noncurrent Assets:
Domestic	$	2,116,536	$	1,645,766	$	1,231,071
International		17,220		12,811		26,424
Total	$	2,133,756	$	1,658,577	$	1,257,495

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ITEM 1A. RISK FACTORS.

     The risk factors listed below, in addition to those set forth elsewhere in this report, could affect the business and future results of the Company. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

Decreased spending by advertisers or a decrease in our market ratings or market share can adversely affect our advertising revenues.

     We believe that advertising is a discretionary business expense. Spending on advertising tends to decline disproportionately during an economic recession or downturn as compared to other types of business spending. Consequently, a downturn in the United States economy would likely have an adverse effect on our advertising revenue and, therefore, our results of operations. A recession or downturn in the economy of any individual geographic market, particularly a major market such as Los Angeles or New York, in which we own and operate sizeable stations, could have a significant effect on us.

     Even in the absence of a general recession or downturn in the economy, an individual business sector (such as the automotive industry) that tends to spend more on advertising than other sectors might be forced to reduce its advertising expenditures if that sector experiences a downturn. If that sector’s spending represents a significant portion of our advertising revenues, any reduction in its advertising expenditures may affect our revenue.

We may lose audience share and advertising revenue to competing radio stations or other types of media competitors.

     We operate in highly competitive industries. Our radio stations compete for audiences and advertising revenue with other radio stations and station groups, as well as with other media. Shifts in population, demographics, audience tastes and other factors beyond our control could cause us to lose market share. Any adverse change in a particular market, or adverse change in the relative market positions of the stations located in a particular market, could have a material adverse effect on our revenue or ratings, could require increased promotion or other expenses in that market, and could adversely affect our revenue in other markets. Other radio broadcasting companies may enter the markets in which we operate or may operate in the future. These companies may be larger and have more financial resources than we have. Our radio stations may not be able to maintain or increase their current audience ratings and advertising revenue in the face of such competition.

     In addition, from time to time, other stations may change their format or programming, a new station may adopt a format to compete directly with our stations for audiences and advertisers, or stations might engage in aggressive promotional campaigns. These tactics could result in lower ratings and advertising revenue or increased promotion and other expenses and, consequently, lower earnings and cash flow for us. Any failure by us to respond, or to respond as quickly as our competitors, could also have an adverse effect on our business and financial performance.

     Because of the competitive factors we face, we cannot assure investors that we will be able to maintain or increase our current audience ratings and advertising revenue.

We must respond to the rapid changes in technology, services and standards that characterize our industry in order to remain competitive.

     The radio broadcasting industries are subject to rapid technological change, evolving industry standards and the emergence of competition from new media technologies and services. We cannot assure you that we will have the resources to acquire new technologies or to introduce new services that could compete with these new technologies. Various new media technologies and services are being developed or introduced, including:

- satellite-delivered digital audio radio service, which has resulted in the introduction of new subscriber-based satellite radio services with numerous niche formats;

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- audio programming by cable systems, direct-broadcast satellite systems, personal communications systems, Internet content providers and other digital audio broadcast formats;

- MP3 players and other personal audio systems that create new ways for individuals to listen to music and other content of their own choosing;

- in-band on-channel digital radio (i.e., HD digital radio), which provides multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services;

- low-power FM radio, which could result in additional FM radio broadcast outlets; and

     We cannot predict the effect, if any, that competition arising from new technologies or regulatory change may have on the radio broadcasting industries or on our financial condition and results of operations. We also cannot ensure that our investments in HD digital radio and other technologies will produce the desired returns.

Our substantial indebtedness could adversely affect our financial health.

     We have a significant amount of indebtedness. At February 28, 2006, our total indebtedness was approximately $797.1 million, and our shareholders’ equity was approximately $271.7 million. Our substantial indebtedness could have important consequences to investors. For example, it could:

- make it more difficult for us to satisfy our obligations with respect to our indebtedness;

- increase our vulnerability to general adverse economic and industry conditions;

- require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

- result in higher interest expense in the event of increases in interest rates because some of our debt is at variable rates of interest;

- limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate;

- place us at a competitive disadvantage compared to our competitors that have less debt; and

- limit, along with the financial and other restrictive covenants in our credit facility and our other debt instruments, our ability to borrow additional funds. Failing to comply with those covenants could result in an event of default, which if not cured or waived, could have a material adverse effect on our businesses.

The terms of our indebtedness and the indebtedness of our direct and indirect subsidiaries may restrict our current and future operations, particularly our ability to respond to changes in market conditions or to take some actions.

     Our credit facility and our bond indenture impose significant operating and financial restrictions on us. These restrictions significantly limit or prohibit, among other things, our ability and the ability of our subsidiaries to incur additional indebtedness, issue preferred stock, incur liens, pay dividends, enter into asset sale transactions, merge or consolidate with another company, dispose of all or substantially all of our assets or make certain other payments or investments.

     These restrictions currently limit our ability to grow our business through acquisitions and could limit our ability to respond to market conditions or meet extraordinary capital needs. They also could restrict our corporate activities in other ways. These restrictions could adversely affect our ability to finance our future operations or capital needs.

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To service our indebtedness and other obligations, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

     Our ability to make payments on and to refinance our indebtedness, to pay dividends and to fund capital expenditures will depend on our ability to generate cash in the future. This ability to generate cash, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Our businesses might not generate sufficient cash flow from operations. We might not be able to complete future offerings, and future borrowings might not be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure investors that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

Our operating results have been and may again be adversely affected by acts of war and terrorism.

     Acts of war and terrorism against the United States, and the country’s response to such acts, may negatively affect the U.S. advertising market, which could cause our advertising revenues to decline due to advertising cancellations, delays or defaults in payment for advertising time, and other factors. In addition, these events may have other negative effects on our business, the nature and duration of which we cannot predict.

     For example, after the September 11, 2001 terrorist attacks, we decided that the public interest would be best served by the presentation of continuous commercial-free coverage of the unfolding events on our stations. This temporary policy had a material adverse effect on our advertising revenues and operating results for the month of September 2001. Future events like those of September 11, 2001 may cause us to adopt similar policies, which could have a material adverse effect on our advertising revenues and operating results.

     Additionally, the attacks on the World Trade Center on September 11, 2001 resulted in the destruction of the transmitter facilities that were located there. Although we had no transmitter facilities located at the World Trade Center, broadcasters that had facilities located in the destroyed buildings experienced temporary disruptions in their ability to broadcast. Since we tend to locate transmission facilities for stations serving urban areas on tall buildings or other significant structures, such as the Empire State Building in New York, further terrorist attacks or other disasters could cause similar disruptions in our broadcasts in the areas affected. If these disruptions occur, we may not be able to locate adequate replacement facilities in a cost-effective or timely manner or at all. Failure to remedy disruptions caused by terrorist attacks or other disasters and any resulting degradation in signal coverage could have a material adverse effect on our business and results of operations.

We may not be able to complete the disposition of our remaining three television stations

     In May 2005, we announced that we had engaged advisors to assist us in evaluating strategic alternatives for our television assets. As of February 28, 2006, we have sold thirteen of our original sixteen television stations, including two stations being operated under local programming and marketing agreements pending FCC approval of the sales. On May 5, 2006 we entered into an agreement to sell WKCF-TV in Orlando. The transaction contains customary representations, warranties and covenants, and is subject to standard closing conditions, including but not limited to approvals by the Federal Communications Commission. We have not sold WVUE-TV in New Orleans, LA and KGMB-TV (plus its satellites) in Honolulu, HI. We remain committed to selling these television stations, but we cannot guarantee that we will find a buyer willing to pay an acceptable price.

     Additionally, WVUE was adversely affected by Hurricane Katrina in August 2005, which caused significant damage to the New Orleans area and our facilities at WVUE. This has complicated the sales process for the station.

To continue to grow our business, we will require significant additional capital.

     The continued development, growth and operation of our businesses will require substantial capital. In particular, additional acquisitions will require large amounts of capital. We intend to fund our growth, including acquisitions, if any, with cash generated from operations, borrowings under our new credit facility and proceeds from future issuances of debt and equity both public and private.

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Our ability to raise additional debt or equity financing is subject to market conditions, our financial condition and other factors. If we cannot obtain financing on acceptable terms when needed, our results of operations and financial condition could be adversely impacted.

Our ability to grow through acquisitions may be limited by competition for suitable properties or other factors we cannot control.

     We intend to selectively pursue acquisitions of radio stations, publishing properties and other businesses we believe hold promise for long-term appreciation in value, when appropriate, in order to grow. To be successful with this strategy, we must be effective at quickly evaluating markets, obtaining financing on satisfactory terms and obtaining the necessary regulatory approvals, sometimes including, as discussed below, approvals of the FCC and the Department of Justice. We also must accomplish these tasks at reasonable costs. The radio industry in particular has rapidly consolidated. In general, we compete with many other buyers for radio stations as well as publishing properties. These other buyers may be larger and have more resources. We cannot predict whether we will be successful in buying stations or publishing properties, or whether we will be successful with any station or publishing property we acquire. Our strategy is generally to buy underperforming properties and use our experience to improve their performance. Thus, the benefits resulting from the properties we buy may not manifest themselves immediately, and we may need to pay large initial costs for these improvements.

If we are not able to obtain regulatory approval for future acquisitions, our growth may be impaired.

     Although part of our growth strategy is the acquisition of additional radio stations, we may not be able to complete all the acquisitions that we agree to make. Station acquisitions are subject to the approval of the FCC and, potentially, other regulatory authorities. Also, the FCC sometimes undertakes review of transactions to determine whether they would result in excessive concentration, even where the transaction complies with the numerical ownership limits. Specifically, the staff has had a policy of “flagging” for closer scrutiny the anticompetitive impact of any transactions that will put one owner in a position to earn 50% or more of the market’s radio advertising revenues or will result in the two largest owners receiving 70% or more of those revenues. While the FCC has noted “flagging” in public notices in the past, current transactions may be “flagged” internally by the FCC without public notice. As discussed below, the FCC’s new rules with respect to media ownership are under court review. We cannot predict how the FCC’s approval process will change based on the outcome of the FCC’s media ownership proceeding or whether such changes would adversely impact us.

     Additionally, since the passage of the Telecommunications Act of 1996, the U.S. Department of Justice has become more involved in reviewing proposed acquisitions of radio stations and radio station networks. The Justice Department is particularly concerned when the proposed buyer already owns one or more radio stations in the market of the station it is seeking to buy. Recently, the Justice Department has challenged a number of radio broadcasting transactions. Some of those challenges ultimately resulted in consent decrees requiring, among other things, divestitures of certain stations. In general, the Justice Department has more closely scrutinized radio broadcasting acquisitions that result in local market shares in excess of 40% of radio advertising revenue.

We may not be able to integrate acquired stations successfully, which could affect our financial performance.

     Our ability to operate our Company effectively depends, in part, on our success in integrating acquired stations into our operations. These efforts may impose significant strains on our management and financial resources. The pursuit and integration of acquired stations will require substantial attention from our management and will limit the amount of time they can devote to other important matters. Successful integration of acquired stations will depend primarily on our ability to manage our combined operations. If we fail to successfully integrate acquired stations or manage our growth or if we encounter unexpected difficulties during expansion, it could have a negative impact on the performance of acquired stations as well as on our Company as a whole.

An accounting principle that affects the accounting treatment of goodwill and FCC licenses could cause future losses due to asset impairment.

     In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets,” that requires companies to cease amortizing goodwill and certain other indefinite-lived intangible assets, including broadcast licenses. Under SFAS 142, goodwill and some indefinite-lived intangibles will not be amortized into results of

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operations, but instead will be tested for impairment at least annually, with impairment being measured as the excess of the carrying value of the goodwill or intangible over its fair value. In addition, goodwill and intangible assets will be tested more often for impairment as circumstances warrant. Intangible assets that have finite useful lives will continue to be amortized over their useful lives and will be measured for impairment in accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” After initial adoption, any impairment losses under SFAS 142 or 144 will be recorded as operating expenses. In connection with the adoption of SFAS 142 effective March 1, 2002, we recorded an impairment loss of $148.6 million, net of tax, related to our television division that is reflected in loss from discontinued operations and an impairment loss of $18.8 million related to radio stations and a publishing entity that is reflected as the cumulative effect of an accounting change. The adoption of this accounting standard reduced our amortization of goodwill and intangibles by approximately $54.6 million in the year ended February 28, 2003. We also incurred a $12.4 million impairment loss related to our television division in the fiscal year ended February 29, 2004 as a result of our annual SFAS 142 review. This loss is reflected as a loss from discontinued operations in the accompanying consolidated income statements. Although we did not recognize any impairment losses in the year ended February 28, 2005, we incurred a $37.4 million impairment in the fiscal year ended February 28, 2006 ($31.4 million relating to our radio assets and $6.0 million related to our publishing assets) related to SFAS 142. Our future impairment reviews could result in additional write-downs.

One shareholder controls a majority of the voting power of our common stock, and his interest may conflict with investors’.

     As of April 30, 2006, our Chairman of the Board of Directors, Chief Executive Officer and President, Jeffrey H. Smulyan, beneficially owned shares representing approximately 67% of the outstanding combined voting power of all classes of our common stock, as calculated pursuant to Rule 13d-3 of the Exchange Act. He therefore is in a position to exercise substantial influence over the outcome of most matters submitted to a vote of our shareholders, including the election of directors.

The FCC has recently begun more vigorous enforcement of its indecency rules against the broadcast industry, which could have a material adverse effect on our business.

     The FCC’s rules prohibit the broadcast of obscene material at any time and indecent material between the hours of 6 a.m. and 10 p.m. Broadcasters risk violating the prohibition on the broadcast of indecent material because of the FCC’s broad definition of such material, coupled with the spontaneity of live programming.

     Recently, the FCC has begun more vigorous enforcement of its indecency rules against the broadcasting industry as a whole. Two Congressional committees have recently conducted hearings relating to indecency. Legislation has also been introduced in Congress that would increase the penalties for broadcasting indecent programming, and depending on the number of violations engaged in, would automatically subject broadcasters to license revocation, renewal or qualifications proceedings in the event that they broadcast indecent material. The FCC has indicated that it is stepping up its enforcement activities as they apply to indecency, and has threatened to initiate license revocation proceedings against broadcast licensees for future “serious indecency violations.” The FCC has found on a number of occasions recently that the content of radio broadcasts has contained indecent material. The FCC issued fines to the offending licensees. Moreover, the FCC has recently begun imposing separate fines for each allegedly indecent “utterance,” in contrast with its previous policy, which generally considered all indecent words or phrases within a given program as constituting a single violation.

     In August of 2004, Emmis entered into a Consent Decree with the FCC, pursuant to which (i) the Company adopted a compliance plan intended to avoid future indecency violations, (ii) the Company admitted, solely for purposes of the Decree, that certain prior broadcasts were “indecent,” (iii) the Company agreed to make a voluntary payment of $300,000 to the U.S. Treasury, (iv) the FCC rescinded its prior enforcement actions against the Company based on allegedly indecent broadcasts and agreed not to use against the Company any indecency violations based on complaints within the FCC’s possession as of the date of the Decree or “similar” complaints based on pre-Decree broadcasts, and (v) the FCC found that neither the alleged indecency violations nor the circumstances surrounding a civil suit filed by a WKQX announcer raised any substantial and material questions concerning the Company’s qualifications to hold FCC licenses. A petition requesting that the FCC reconsider its approval of the Decree has been filed and remains pending. If the petition were to be granted by the FCC, or if a court appeal were taken and the court were to invalidate the decree, then any indecent broadcasts that may have occurred on the Company’s stations could be considered by the FCC, which could have an adverse impact on the Company’s FCC licenses. In addition, petitions have been filed against the license renewal applications of stations WKQX and KPNT, and an informal objection has been filed against the license renewals of the Company’s Indiana radio stations, in each case based primarily on the matters covered by the Decree. Consequently, any invalidation of the Decree could result in the petitions and objections being considered in connection with those and possibly other license renewals.

20

     The Communications Act provides that the FCC must renew a broadcast license if (i) the station involved has served the “public interest, convenience and necessity” and (ii) there have been no “serious violations” of the Act or FCC rules, and no “other violations” of the Act or rules which “taken together, would constitute a pattern of abuse.” If the Commission were to determine that indecency or other violations by one or more of our stations fall within either or both of those definitions, the agency could (x) grant the license renewal applications of the stations with burdensome conditions, such as requirements for periodic reports, (y) grant the applications for less than the full eight-year term in order to allow an early reassessment of the stations, or (z) order an evidentiary hearing before an administrative law judge to determine whether renewal of the stations’ licenses should be denied. If a station’s license renewal were ultimately denied, the station would be required to cease operation permanently. As a result of these developments, we have implemented measures to reduce the risk of broadcasting indecent material in violation of the FCC’s rules. These and other future modifications to our programming to reduce the risk of indecency violations could have an adverse effect on our competitive position.

     Legislation is pending in Congress which would, among other things, (i) increase very substantially the fines for indecent broadcasts, (ii) specify that all indecency violations are “serious” violations for license renewal purposes and (iii) mandate an evidentiary hearing on the license renewal application of any station that has had three indecency violations during its license term.

Our need to comply with comprehensive, complex and sometimes unpredictable federal regulations could have an adverse effect on our businesses.

     We are dependent on licenses from the FCC, which regulates the radio and television broadcasting industries in the United States. The radio and television broadcasting industries in the United States are subject to extensive and changing regulation by the FCC. Among other things, the FCC is responsible for the following:

- assigning frequency bands for broadcasting;

- determining the particular frequencies, locations and operating power of stations;

- issuing, renewing, revoking and modifying station licenses;

- determining whether to approve changes in ownership or control of station licenses;

- regulating equipment used by stations; and

- adopting and implementing regulations and policies that directly affect the ownership, operation, programming and employment practices of stations.

     The FCC has the power to impose penalties for violation of its rules or the applicable statutes. While in the vast majority of cases licenses are renewed by the FCC, we cannot be sure that any of our United States stations’ licenses will be renewed at their expiration date. Even if our licenses are renewed, we cannot be sure that the FCC will not impose conditions or qualifications that could cause problems in our businesses.

     The FCC regulations and policies also affect our growth strategy because the FCC has specific regulations and policies about the number of stations, including radio and television stations, and daily newspapers that an entity may own in any geographic area. As a result of these rules, we may not be able to acquire more properties in some markets

     FCC regulations also limit the ability of non-U.S. persons to own our capital stock and to participate in our affairs, which could limit our ability to raise equity. Our articles of incorporation contain provisions which place restrictions on the ownership, voting and transfer of our capital stock in accordance with the law.

     Finally, a number of federal rules governing broadcasting have changed significantly in recent years and additional changes may occur, particularly with respect to the rules governing digital audio broadcasting, satellite radio services, multiple ownership and attribution. We cannot predict the effect that these regulatory changes may ultimately have on our operations.

21

Any changes in current FCC ownership regulations may negatively impact our ability to compete or otherwise harm our business operations.

     In June of 2003, the FCC substantially modified its rules governing ownership of broadcast stations. The new rules (i) allow, for the first time in many years, common ownership of broadcast stations and daily newspapers in most markets, (ii) generally allow common ownership of television and radio stations within a given market, and (iii) change the definition of “market” for purposes of the rules restricting the number of radio stations that may be commonly owned within a given market. The new rules were appealed in federal court, and in September of 2003, the court stayed the effectiveness of the new rules, pending a decision in the appeal. As a result of the stay, the former ownership rules were reinstated. We cannot predict the outcome of the appeal.

     We cannot predict the impact of these developments on our business. In particular, we cannot predict the outcome of FCC’s media ownership proceeding or its effect on our ability to acquire broadcast stations in the future or to continue to own and freely transfer stations that we have already acquired.

     In 2003, we acquired a controlling interest in five FM stations and one AM station in the Austin, Texas market. Under the method of defining radio markets contained in the new ownership rules, it appears that we would be permitted to own or control only four FM stations in the Austin market (ownership of one AM station would continue to be allowed). The new rules do not require divestiture of existing non-conforming station combinations, but do provide that such clusters may be transferred only to defined small business entities. Consequently, if the new rules go into effect and we wish to sell our interest in the Austin stations, we will have to either sell to an entity that meets the FCC definition or exclude at least one FM station from the transaction.

Our business strategy and our ability to operate profitably depends on the continued services of our key employees, the loss of whom could materially adversely affect our business.

     Our ability to maintain our competitive position depends to a significant extent on the efforts and abilities of our senior management team and certain key employees. Although our executive officers are typically under employment agreements, their managerial, technical and other services would be difficult to replace if we lose the services of one or more of them or other key personnel. Our business could be seriously harmed if one of them decides to join a competitor or otherwise competes directly or indirectly against us.

     Our radio stations employ or independently contract with several on-air personalities and hosts of syndicated radio programs with significant loyal audiences in their respective broadcast areas. These on-air personalities are sometimes significantly responsible for the ranking of a station and, thus, the ability of the station to sell advertising. These individuals may not remain with our radio stations and may not retain their audiences.

Our current and future operations are subject to certain risks that are unique to operating in a foreign country.

     We currently have several international operations, including operations in Hungary, Slovakia, Belgium and Bulgaria, and, therefore, we are exposed to risks inherent in international business operations. We may pursue opportunities to buy additional broadcasting properties in other foreign countries. The risks of doing business in foreign countries include the following:

- changing regulatory or taxation policies;

- currency exchange risks;

- changes in diplomatic relations or hostility from local populations;

- seizure of our property by the government or restrictions on our ability to transfer our property or earnings out of the foreign country;

- potential instability of foreign governments, which might result in losses against which we are not insured; and

- difficulty of enforcing agreements and collecting receivables through some foreign legal systems.

Our failure to comply under the Sarbanes-Oxley Act of 2002 could cause a loss of confidence in the reliability of our financial statements.

22

     We have undergone a comprehensive effort to comply with Section 404 of the Sarbanes-Oxley Act of 2002. This effort included documenting and testing our internal controls. As of February 28, 2006, we did not identify any material weaknesses in our internal controls as defined by the Public Company Accounting Oversight Board. In future years, there are no assurances that we will not have material weaknesses that would be required to be reported or that we will be able to comply with the reporting deadline requirements of Section 404. A reported material weakness or the failure to meet the reporting deadline requirements of Section 404 could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. This loss of confidence could cause a decline in the market price of our stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

     The following table sets forth information as of February 28, 2006 with respect to offices, studios and broadcast towers of stations and publishing operations currently owned by Emmis. Management believes that the properties are in good condition and are suitable for Emmis’ operations, with the exception of the Company’s New Orleans facility, which is being renovated following damage caused by Hurricane Katrina.

			OWNED	EXPIRATION
	YEAR PLACED		OR	DATE
PROPERTY	IN SERVICE		LEASED	OF LEASE
Corporate and Publishing Headquarters/		1998	Owned		—
WLHK-FM/ WIBC-AM/WNOU-FM/
WYXB-FM/ Indianapolis Monthly
One Emmis Plaza
40 Monument Circle
Indianapolis, IN
WLHK-FM Tower		1985	Owned		—
WNOU-FM Tower		1979	Owned		—
WIBC-AM Tower		1966	Owned		—
WYXB-FM Tower		2003	Owned		—
KFTK-FM/KIHT-FM/KPNT-FM/KSHE-FM		1998	Leased	December 2007
800 St. Louis Union Station
St. Louis, MO
KFTX-FM Tower		1987	Leased	August 2009 with option to March 2023
KIHT-FM Tower		1995	Leased	August 2010
KPNT-FM Tower		1987	Owned		—
KSHE-FM Tower		1985	Leased	August 2010
KPWR-FM		1988	Leased	October 2017
KZLA-FM		2002	Leased	October 2017
2600 West Olive Ave, 8th Floor
Burbank, CA
KPWR-FM Tower		1993	Leased	October 2012
KZLA-FM tower		1991	Leased	March 2006
WQHT-FM/WRKS-FM/WQCD-FM		1996	Leased	January 2013
395 Hudson Street, 7th Floor
New York, NY
WQHT-FM Tower		1984	Leased	October 2018
WRKS-FM Tower		1984	Leased	November 2020
WQCD-FM Tower		1984	Leased	February 2007
KKFR-FM
4745 North 7th Street
Phoenix, AZ		2005	Leased	October 2011
KKFR-FM Tower		1998	Leased	January 2010 (1)
WKQX-FM/WLUP-FM		2000	Leased	December 2015 with 5 year option
230 Merchandise Mart Plaza

23

			OWNED	EXPIRATION
	YEAR PLACED		OR	DATE
PROPERTY	IN SERVICE		LEASED	OF LEASE
Chicago, IL
WKQX-FM Tower		1975	Leased	September 2009
WLUP-FM Tower		1977	Leased	September 2009
KLBJ-AM/FM/KDHT-FM/KGSR-FM/KROX-FM/
KBPA-FM
8309 N. IH 35
Austin, TX		1998	Leased	March 2008
KLBJ-AM Tower		1963	Owned		—
KLBJ-FM Tower		1972	Leased	July 2008
KDHT-FM Tower		1986	Owned		—
KGSR-FM Tower		1997	Owned		—
KROX-FM Tower		1999	Leased	September 2008
KEYI-FM Tower		1985	Leased	August 2010
Atlanta Magazine Office		2003	Leased	July 2013
260 Peachtree St, Suite 300
Atlanta, GA
Cincinnati Magazine		1996	Leased	May 2007
705 Central Ave., Suite 175
Cincinnati, OH
Texas Monthly		1989	Leased	August 2009
701 Brazos, Suite 1600
Austin, TX
Emmis Books		2003	Leased	June 2006
1700 Madison Rd.
Cincinnati, OH
WBPG-TV Tower		2001	Leased	July 2010
WTHI-FM/WWVR-FM		1954	Owned		—
918 Ohio Street
Terre Haute, IN
WTHI-FM Tower		1954	Owned		—
WWVR-FM Tower		1966	Owned		—
WVUE-TV		1972	Owned		—
1025 South Jefferson Davis Highway
New Orleans, LA
WVUE-TV Tower		1963	Owned		—
WKCF-TV		1998	Owned		—
31 Skyline Drive
Lake Mary, FL
WKCF-TV Tower		2001	Leased	April 2016
Los Angeles Magazine
5900 Wilshire Blvd., Suite 1000
Los Angeles, CA		2000	Leased	November 2010
Tu Ciudad
5900 Wilshire Blvd., Suite 2100
Los Angeles, CA		2005	Leased	June 2011
Country Sampler
707 Kautz Road
St. Charles, IL		1988	Owned		—
RDS/Co-Opportunities
324 Campus Lane, Suite B
Fairfield, CA		1989	Leased	March 2007
Emmis West (Corporate)
3500 West Olive Avenue, Suite 1450
Burbank, CA		2004	Leased	February 20141

24

			OWNED	EXPIRATION
	YEAR PLACED		OR	DATE
PROPERTY	IN SERVICE		LEASED	OF LEASE
Slager Radio
1011
Budapest
Fo u. 14-18		2005	Leased	March 2010
Slager Tower		1998	Leased	October 2009
Emmis Belgium
Assesteenweg 65
B-1740 Ternat		2003	Leased	April 2013
BeOneTower		2004	Owned		—
D, Expres		2004	Owned		—
Lamacska cesta 3
841 04 Bratislava
D. Expres Tower (Various)	Various 1999-2005		Leased	Various 2007-2019
FM+ Group		2005	Owned		—
51 Jerusalem Blvd
Miadost - 1
Sofia, Bulgaria
KGMB-TV
1534 Kapiolani Blvd.
Honolulu, HI		1952	Owned		—
KGMB-TV Tower		1962	Owned		—

¹ Emmis has the right to terminate 5 years from inception of the lease

ITEM 3. LEGAL PROCEEDINGS.

     The Company 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 likely to have a material adverse effect on the Company.

     During the Company’s fiscal quarter ended August 31, 2004, Emmis entered into a consent decree with the Federal Communications Commission to settle all outstanding indecency-related matters. Terms of the agreement call for Emmis to make a voluntary contribution of $0.3 million to the U.S. Treasury, with the FCC terminating all then-current indecency-related inquiries and fines against Emmis. Certain individuals and groups have requested that the FCC reconsider the adoption of the consent decree and have challenged applications for renewal of the licenses of certain of the Company’s stations based primarily on the matters covered by the decree. These challenges are currently pending before the Commission, but Emmis does not expect the challenges to result in any changes to the consent decree or in the denial of any license renewals. See “Federal Regulation of Broadcasting” for further discussion.

     In January 2005, we received the first of several subpoenas from the Office of Attorney General of the State of New York, as have some of the other radio broadcasting companies operating in the State of New York. The subpoenas were issued in connection with the New York Attorney General’s investigation of record company promotional practices. We are cooperating with this investigation. We do not expect that the outcome of this matter would have a material impact on our financial position, results of operations or cash flows.

     In January 2005, a third party threatened claims against our radio station in Hungary seeking damages of approximately $4.6 million. Emmis has investigated the matter, and based on information gathered to date, Emmis believes the claims are without merit. Litigation has not been initiated and Emmis intends to defend itself vigorously in the matter.

     In March 2005, we received a subpoena from the Office of Attorney General of the State of New York in connection with the New York Attorney General’s investigation of a contest at one of our radio stations in New York City. This matter was settled for $0.3 million in our quarter ended August 31, 2005.

     In May 2006, two lawsuits were filed in Marion County (Indiana) Superior Court on behalf of Emmis shareholders seeking injunctive relief and damages in connection with Emmis Chairman and CEO Jeffrey H. Smulyan’s offer to purchase the outstanding common equity of the Company, as well as class action status for the lawsuits. The Company is in the process of evaluating these lawsuits.

25

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

     Listed below is certain information about the executive officers of Emmis or its affiliates who are not directors or nominees to be directors.

		AGE AT		YEAR FIRST
		FEBRUARY 28,		ELECTED
NAME	POSITION	2006		OFFICER
Richard F. Cummings	Radio Division President		54		1984
Michael Levitan	Executive Vice President of Human Resources		48		2002
Gary Thoe	Publishing Division President		49		1998
Paul W. Fiddick	International Division President		55		2002
David Newcomer	Interim Chief Financial Officer		44		1998

     Set forth below is the principal occupation for the last five years of each executive officer of the Company or its affiliates who is not also a director.

     Richard F. Cummings was the Program Director of WLHK (formerly WENS) from 1981 to March 1984, when he became the National Program Director and a Vice President of Emmis. He became Executive Vice President of Programming in 1988 and became Radio Division President in December 2001.

     Michael Levitan was the Senior Vice President of Human Resources from September 2000 to March 2004 when he became the Executive Vice President of Human Resources. Prior to joining Emmis, Mr. Levitan served as Director of Human Resources for Apple Computer and as Executive Director of Organizational Effectiveness and Assistant to the President of Cummins Engine.

     Gary Thoe has been employed as President of Emmis Publishing since February 1998. Prior to February 1998, Mr. Thoe served as President and part owner of Mayhill Publications, Inc.

     Paul Fiddick has been employed as President of Emmis International since September 2002. Prior to joining Emmis, Mr. Fiddick served as Assistant Secretary for Administration of the U.S. Department of Agriculture from November 1999 until May 2001.

     David Newcomer has served as the Company’s Interim Chief Financial Officer since December 2005. From 1999 to 2005, Mr. Newcomer was Vice President of Finance and Radio Division Controller.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

     Emmis’ Class A common stock is traded in the over-the-counter market and is quoted on the National Association of Securities Dealers Automated Quotation (NASDAQ) National Market System under the symbol EMMS. There is no established public trading market for Emmis’ Class B common stock or Class C common stock.

26

     The following table sets forth the high and low bid prices of the Class A common stock for the periods indicated. No dividends were paid during any such periods.

QUARTER ENDED	HIGH		LOW
May 2004		25.95		20.84
August 2004		21.96		18.90
November 2004		20.01		17.40
February 2005		19.43		17.08
May 2005		19.99		15.29
August 2005		24.18		17.29
November 2005		24.49		18.86
February 2006		21.10		16.32

     At May 1, 2006 there were 5,505 record holders of the Class A common stock, and there was one record holder of the Class B common stock.

     Emmis intends to retain future earnings for use in its business and does not anticipate paying any dividends on shares of its common stock in the foreseeable future.

     Emmis made no purchases of its equity securities during the fourth quarter of its fiscal year ended February 28, 2006.

27

ITEM 6. SELECTED FINANCIAL DATA

Emmis Communications Corporation
FINANCIAL HIGHLIGHTS

	YEAR ENDED FEBRUARY 28 (29)
	(in thousands, except per share data)
	2002			2003			2004			2005			2006
OPERATING DATA:
Net revenues	$	301,139		$	299,039		$	326,618		$	351,820		$	387,381
Station operating expenses, excluding noncash compensation		188,022			183,200			201,693			220,473			253,158
Corporate expenses, excluding noncash compensation		20,283			21,359			24,105			30,792			32,686
Depreciation and amortization (1)		40,653			13,614			15,270			15,870			17,335
Noncash compensation		6,504			15,067			14,821			11,300			8,906
Restructuring fees		768			—			—			—			—
Impairment losses and other (2)		9,063			—			—			—			37,372
(Gain) loss on disposal of assets		200			(1,076	)		78			795			94
Operating income		35,646			66,875			70,651			72,590			37,830
Interest expense		128,625			103,459			62,950			39,690			70,586
Loss on debt extinguishment (3)		1,748			13,506			—			97,248			6,952
Other income (loss), net		(3,813	)		4,686			(795	)		2,196			3,040
Income (loss) before income taxes, discontinued operations minority interest and cumulative effect of accounting change		(98,540	)		(45,404	)		6,906			(62,152	)		(36,668	)
Loss from continuing operations		(69,180	)		(33,444	)		(651	)		(65,459	)		(24,239	)
Net income (loss) (4)		(64,108	)		(164,468	)		2,256			(304,368	)		357,771
Net loss available to common shareholders		(73,092	)		(173,452	)		(6,728	)		(313,352	)		348,787
Net income (loss) per share available to common shareholders:
Basic:
Continuing operations	$	(1.65	)	$	(0.80	)	$	(0.18	)	$	(1.33	)	$	(0.78	)
Discontinued operations, net of tax		0.11			(2.12	)		0.06			1.15			8.91
Cumulative effect of accounting change, net of tax		—			(0.35	)		—			(5.40	)		—
Net loss available to common shareholders	$	(1.54	)	$	(3.27	)	$	(0.12	)	$	(5.58	)	$	8.13
Diluted:
Continuing operations	$	(1.65	)	$	(0.80	)	$	(0.18	)	$	(1.33	)	$	(0.78	)
Discontinued operations, net of tax		0.11			(2.12	)		0.06			1.15			8.91
Cumulative effect of accounting change, net of tax		—			(0.35	)		—			(5.40	)		—
Net loss available to common shareholders	$	(1.54	)	$	(3.27	)	$	(0.12	)	$	(5.58	)	$	8.13
Weighted average common shares outstanding:
Basic		47,334			53,014			54,716			56,129			42,876
Diluted		47,334			53,014			54,716			56,129			42,876

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	FEBRUARY 28 (29),
	(Dollars in thousands)
	2002		2003		2004		2005		2006
BALANCE SHEET DATA:
Cash (5)	$	6,362	$	16,079	$	19,970	$	16,054	$	140,822
Working capital (6)		19,828		28,024		10,532		51,144		33,303
Net intangible assets (7)		717,454		750,556		891,477		1,000,277		972,596
Total assets		2,559,069		2,165,413		2,300,569		1,823,035		1,512,701
Long-term credit facility, senior subordinated debt, senior discount notes and liquidation preference of preferred stock (8)		1,487,257		1,338,539		1,367,929		1,317,558		808,174
Shareholders’ equity		735,557		704,705		748,946		452,592		271,729

	YEAR ENDED FEBRUARY 28 (29),
	(Dollars in thousands)
	2002			2003			2004			2005			2006
OTHER DATA:
Cash flows from (used in):
Operating activities	$	69,377		$	95,149		$	118,165		$	122,804		$	69,177
Investing activities		(175,105	)		106,301			(146,359	)		54,349			860,268
Financing activities		52,191			(191,733	)		32,085			(181,069	)		(804,677	)
Capital expenditures		6,906			9,890			9,942			10,519			12,833
Cash paid for taxes		1,281			887			1,143			286			5,045

(1)	Included in depreciation and amortization expense for fiscal 2002 is $26.2 million related to amortization of our goodwill and FCC licenses. We ceased amortization of our goodwill and FCC licenses in fiscal 2003 in connection with our adoption of SFAS No. 142, “Goodwill and Other Intangible Assets.”
(2)	The loss in the fiscal year ended February 28, 2002 resulted from a $9.1 million asset impairment charge in connection with the planned sale of a radio station. The loss in the fiscal year ended February 28, 2006 resulted from our annual SFAS No. 142 review.
(3)	Loss on debt extinguishment in the fiscal years ended February 28, 2002 and 2006 relates to the write-off of deferred debt fees associated with early debt extinguishments. Loss on debt extinguishment in the fiscal years ended February 28, 2003 and 2005 relates to the write-off of deferred debt fees and redemption premiums paid for the early retirement of outstanding debt obligations.
(4)	The net loss in the fiscal year ended February 28, 2003 includes a charge of $167.4 million, net of tax, to reflect the cumulative effect of an accounting change in connection with our adoption of SFAS No. 142, “Goodwill and Other Intangible Assets.” The net loss in the fiscal year ended February 28, 2005 includes a charge of $303.0 million, net of tax, to reflect the cumulative effect of an accounting change in connection with our adoption of Emerging Issues Task Force (EITF) Topic D-108, “Use of the Residual Method to Value Acquired Assets other than Goodwill.” Net income in the fiscal year ended February 28, 2006 includes discontinued operations income of $382.0 million, principally related to our television division, including $367.0 million of gains on sales.
(5)	February 28, 2006 balance includes $121.4 million of cash received from television station asset sales used to redeem senior floating rate notes and senior discount notes in March 2006.
(6)	February 28, 2002 balance excludes assets held for sale of $123.4 million and credit facility debt to be repaid with proceeds of assets held for sale of $135.0 million.
(7)	Excludes intangibles of our two Argentina radio stations sold in May 2004, our three Phoenix radio stations exchanged in January 2005, thirteen of our television stations sold at various dates throughout fiscal 2006, and the three remaining television stations and our radio station in St. Louis that are classified as assets held for sale as of February 28, 2006.
(8)	February 28, 2002 balance excludes $135.0 million of credit facility debt to be repaid with proceeds of assets held for sale.

29

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

GENERAL

     The following discussion pertains to Emmis Communications Corporation and its subsidiaries (collectively, “Emmis” or the “Company”).

     We own and operate radio, television and publishing properties located primarily in the United States. In the quarter ended August 31, 2005, we classified our television assets as held for sale (see Note 1k to the accompanying consolidated financial statements for more discussion). The results of operations of our television division have been classified as discontinued operations in the accompanying consolidated financial statements. Our revenues are mostly affected by the advertising rates our entities charge, as advertising sales represent more than 80% 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. Broadcast entities’ ratings are measured principally four times a year by Arbitron Radio Market Reports for radio stations and by A.C. Nielsen Company for television stations. Because audience ratings in a station’s local market are critical to the station’s financial success, our strategy is to use market research, 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. Our television division’s revenues (classified as discontinued operations) typically fluctuate from year to year due to political spending, which is the highest in our odd-numbered fiscal years.

     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 each of the past three years. 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.

	Year ended February 28 (29),
	2004		% of Total			2005		% of Total			2006		% of Total
Net revenues:
Local	$	197,609		60.5	%	$	227,054		64.5	%	$	252,482		65.2	%
National		63,770		19.5	%		59,523		16.9	%		67,941		17.5	%
Political		84		0.0	%		954		0.3	%		102		0.0	%
Publication Sales		21,765		6.7	%		18,762		5.3	%		17,656		4.6	%
Non Traditional		27,646		8.5	%		28,893		8.2	%		28,947		7.5	%
Other		15,744		4.8	%		16,634		4.8	%		20,253		5.2	%
Total net revenues	$	326,618				$	351,820				$	387,381

     A significant portion of our expenses varies in connection with changes in revenue. These variable expenses primarily relate to costs in our sales department, such as salaries, commissions, and bad debt. Our costs that do not vary as much in relation to revenue are mostly in our programming and general and administrative departments, such as talent costs, syndicated programming fees, utilities and office salaries. Lastly, our costs that are highly discretionary are costs in our marketing and promotions department, which we primarily incur to maintain and/or increase our audience and market share.

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KNOWN TRENDS AND UNCERTAINTIES

     Domestic radio revenue growth has been anemic for several years. Management believes this is principally the result of four factors: (1) lack of inventory and pricing discipline by radio operators, (2) a more focused newspaper advertising sales force that has slowed the market share gains radio was making vis-à-vis newspapers, (3) the emergence of new media, such as Internet advertising and cable interconnects, which are gaining advertising share against radio and other traditional media, and (4) the perception of investors and advertisers that satellite radio and MP3 players diminish the effectiveness of radio advertising.

     The radio industry has begun several initiatives to address these issues. First, the radio industry has begun the rollout of high-definition (HD) radio. Music transmitted in HD sounds noticeably better than the current analogue broadcasts. Further, compression technology will enable radio operators to offer second and possibly third or fourth channels within each operator’s existing allotted bandwidth. This will essentially increase the number of radio stations available to listeners in each radio market and enable radio operators to offer a broader selection of free music choices. 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 to coordinate the programming on secondary channels in each radio market to ensure a more diverse consumer offering and to accelerate the rollout of HD receivers, particularly in automobiles. Second, the radio industry is reminding listeners of the relevance of radio through its “Radio: You Hear It Here First” promotional campaign. Artists, such as Madonna and the Rolling Stones, have recorded promotional advertisements that highlight the strengths of free, local radio and these advertisements are being aired on radio stations around the U.S. These industry efforts are in addition to the independent decisions of many radio operators to dramatically reduce the number of commercials aired per hour, which serves the dual purpose of creating a more enjoyable experience for listeners plus creating a more favorable pricing environment due to a reduction in the supply of commercials.

     Our two radio stations in Los Angeles have suffered significant ratings declines, which has led to a decline in revenues of the stations. This is primarily due to increased competition in the format of one of the stations. We intend to invest resources in promoting the stations to strengthen the stations’ ratings and recapture lost revenues.

     Emmis is in the process of divesting of all of its television stations. The decision to sell its television stations stemmed from the Company’s desire to lower its debt, coupled with the Company’s view that its television stations needed to be aligned with a company that was larger and more singularly focused on the challenges of American television, including digital video recorders and the industry’s relationship with cable and satellite providers. As of February 28, 2006 Emmis has closed on thirteen of its sixteen television stations, receiving gross proceeds of approximately $921 million. On May 5, 2006, Emmis entered into an agreement to sell one of the remaining television stations, WKCF-TV. Emmis expects to sell its remaining television stations in the next three to twelve months.

     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.

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CRITICAL ACCOUNTING POLICIES

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

     Impairment of Goodwill and Indefinite-lived Intangibles

          The annual impairment tests for goodwill and indefinite-lived intangibles under SFAS No. 142 require us to make certain assumptions in determining fair value, including assumptions about the cash flow growth rates of our businesses. Additionally, the fair values are significantly impacted by macro-economic factors, including market multiples at the time the impairment tests are performed. Accordingly, we may incur additional impairment charges in future periods under SFAS No. 142 to the extent we do not achieve our expected cash flow growth rates, or to the extent that market values decrease.

     Allocations for Purchased Assets

          We typically engage an independent appraisal firm to value assets acquired in a material acquisition. We use the appraisal report to help us allocate the purchase price of the acquisition among different categories of assets. To the extent that purchased assets are not allocated appropriately, depreciation and amortization expense could be materially different.

     Deferred Taxes and Effective Tax Rates

          We estimate the effective tax rates and associated liabilities or assets for each legal entity in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”. 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 experts in the various tax jurisdictions to evaluate our position and to assist in our calculation of our tax expense and related liabilities.

     Insurance Claims and Loss Reserves

          The Company is self-insured for most healthcare claims, subject to stop-loss limits. Claims incurred but not reported are recorded based on historical experience and industry trends, and accruals are adjusted when warranted by changes in facts and circumstances. The Company had $2.8 million and $2.2 million accrued for employee healthcare claims as of Febraury 28, 2005 and 2006, respectively. The Company also maintains large deductible programs (ranging from $250 thousand to $500 thousand per occurrence) for workers compensation claims, automotive liability losses and media liability.

     Valuation of Stock Options

          The Company determines the fair value of its employee stock options at the date of grant using a Black-Scholes option-pricing model. The Black-Scholes option pricing model was developed for use in estimating the value of exchange-traded options that have no vesting restrictions and are fully transferable. The Company’s employee stock options have characteristics significantly different than these traded options. In addition, option pricing models require the input of highly subjective assumptions, including the expected stock price volatility and expected term of the options granted. The Company relies heavily upon historical data for its stock price when determining expected volatility, but each year the Company reassesses whether or not historical data is representative of expected results.

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ACQUISITIONS, DISPOSITIONS AND INVESTMENTS

     During the three year period ended February 28, 2006, we acquired one television station, a network of international radio stations in Belgium, a controlling interest in six domestic radio stations, a national radio network in Slovakia and a controlling interest in a national radio network in Bulgaria for an aggregate cash purchase price of $137.0 million. We also disposed of two international radio stations, one television production company, thirteen television stations and we exchanged three domestic radio stations for one domestic radio station, collectively receiving net cash proceeds of $982.7 million. A recap of the transactions completed during the three years ended February 28, 2006 is summarized hereafter. These transactions impact the comparability of operating results year over year.

     On January 27, 2006, Emmis sold substantially all of the assets of television stations KOIN in Portland, OR, and KHON in Honolulu, HI, and also sold the stock of the corporation that owns KSNW in Wichita, KS and KSNT in Topeka, KS, to SJL Broadcast Group, LLC for $253.0 million of gross cash proceeds and a $6.0 million note receivable. Emmis recorded a gain on sale of $88.2 million, net of tax, which is reflected in discontinued operations in the accompanying statements of operations. Emmis used the proceeds to repay outstanding debt obligations.

     On December 5, 2005, Emmis sold substantially all of the assets of television stations WFTX in Ft. Myers, FL and KGUN in Tucson, AZ, and the tangible assets and many of the intangible assets (excluding, principally, the FCC license) of KMTV in Omaha, NE to Journal Communications for $225.0 million of gross cash proceeds. Emmis recorded a gain on sale of $92.6 million, net of tax, which is reflected in discontinued operations in the accompanying statements of operations. Emmis used the proceeds to repay outstanding debt obligations. The FCC did not consent to the transfer of the FCC license for KMTV due to Journal’s existing radio station ownership in the Omaha market. Journal must divest of some of its radio holdings before the FCC will approve the transfer of KMTV’s FCC license from Emmis to Journal. On December 5, 2005, Emmis entered into a Local Programming and Marketing Agreement (LMA) with Journal for KMTV. Pursuant to the LMA, Journal began programming the station on December 5, 2005 and records all of the revenues and expenses of the station. Journal makes no monthly payments to Emmis under the LMA, but reimburses Emmis for substantially all of Emmis’ costs to operate the station. Journal paid a portion of the purchase price of KMTV on December 5, 2005 and will pay an additional $5 million on October 15, 2007 and an additional $5 million on October 15, 2008 if closing on KMTV has not occurred.

     On November 30, 2005, Emmis sold substantially all of the assets of television station WSAZ in Huntington/Charleston, WV to Gray Television for $186.0 million of gross cash proceeds. Also on November 30, 2005, Emmis sold substantially all of the assets of four television stations (plus regional satellite stations) to LIN Television Corporation (“LIN”) (WALA in Mobile, AL/Pensacola, FL, WTHI in Terre Haute, IN, WLUK in Green Bay, WI, and KRQE in Albuquerque, NM) for $248.0 million of gross cash proceeds. In connection with these sales to Gray Television and LIN, Emmis recorded a gain on sale of $186.2 million, net of tax, which is reflected in discontinued operations in the accompanying statements of operations. Emmis also entered into a LMA with LIN for WBPG in Mobile, AL/Pensacola, FL. Emmis transferred to LIN all of the assets of WBPG except the FCC license, the WB affiliation agreement and a tower lease. LIN paid $9.0 million of the agreed-upon $12.0 million value of WBPG on November 30, 2005, with the remaining $3.0 million due upon the transfer of the remaining assets, which will terminate the LMA. The Company receives $0.2 million per year payable in monthly installments related to this LMA. Pursuant to the LMA, LIN began programming the station on November 30, 2005 and records all of the revenues and expenses of the station.

     On November 14, 2005, Emmis acquired a 66.5% (economic and voting) majority ownership in Radio FM Plus AD, a national network of radio stations in Bulgaria for a cash purchase price of approximately $3.3 million. This acquisition allowed Emmis to expand its international radio portfolio within Emmis’ Euro-centric international acquisition strategy. The acquisition was financed with cash on hand. The Company has recorded $0.5 million of goodwill, none of which is deductible for income tax purposes. Consistent with the Company’s other foreign subsidiaries, Radio FM Plus reports on a fiscal year ending December 31, which Emmis consolidates into its fiscal year ending February 28 (29).

     On September 23, 2005, Emmis signed a definitive agreement to sell radio station WRDA-FM in St. Louis, MO to Radio One, Inc. for $20 million. Radio One, Inc. began operating this station pursuant to a LMA effective October 1, 2005. Radio One, Inc. made no monthly payments to Emmis, but reimbursed Emmis for substantially all of Emmis’ costs to operate the station. Closing of this sale occurred May 5, 2006 and Emmis used the proceeds to repay outstanding debt obligations. Emmis expects to record a gain on sale of approximately $4 million, net of tax, in its quarter ended May 31, 2006, which will be reflected in discontinued operations.

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     On March 10, 2005, Emmis completed its acquisition of D.EXPRES, a.s., a Slovakian company that owns and operates Radio Expres, a national radio network in Slovakia, for a cash purchase price of approximately $12.6 million. This acquisition allowed Emmis to expand its international portfolio on the European continent and enter one of the world’s fastest growing economies. The acquisition was financed through borrowings under the credit facility. The Company has recorded $1.9 million of goodwill, none of which is deductible for income tax purposes. The operating results from March 10, 2005 through December 31, 2005 are included in the accompanying consolidated financial statements. Consistent with the Company’s other foreign subsidiaries, Radio Expres reports on a fiscal year ending December 31, which Emmis consolidates into its fiscal year ending February 28 (29).

     On January 14, 2005, Emmis completed its exchange with Bonneville International Corporation (“Bonneville”) whereby Emmis swapped three of its radio stations in Phoenix (KTAR-AM, KMVP-AM and KKLT-FM) for Bonneville’s WLUP-FM located in Chicago and $74.8 million in cash including payments for working capital items. Emmis used the cash to repay amounts outstanding under its senior credit facility. Emmis has long sought a second radio station in Chicago to complement its existing station in the market, WKQX-FM. This transaction achieves that goal by marrying the heritage alternative rock format (WKQX) with the heritage classic rock format (WLUP). Emmis began programming WLUP-FM and Bonneville began programming KTAR-AM, KMVP-AM and KKLT-FM under LMAs on December 1, 2004. The assets and liabilities of the three radio stations in Phoenix and their results of operations have been classified as discontinued operations in the accompanying consolidated financial statements. These three radio stations had historically been included in the radio reporting segment. The Company recorded $13.0 million of goodwill associated with the asset swap, but none of this goodwill is deductible for tax purposes.

     On May 12, 2004, Emmis sold to its minority partners for $7.3 million in cash its entire 75% interest in Votionis, S.A. (“Votionis”), which owns and operates two radio stations in Buenos Aires, Argentina. In connection with the sale, Emmis recorded a loss from discontinued operations of $10.0 million in fiscal 2004. In fiscal 2005, Emmis recorded income from discontinued operations of $4.2 million, consisting of operational losses of $0.5 million, offset by tax benefits of $4.7 million. The Argentine peso substantially devalued relative to the U.S. dollar early in 2002. The $10.0 million loss in fiscal 2004 was primarily attributable to the devaluation of the peso and resulting non-cash write-off of cumulative currency translation adjustments. Votionis had historically been included in the radio reporting segment.

     On December 19, 2003, the Flemish Government awarded licenses to operate nine FM radio stations in the Flanders region of Belgium to several not-for-profit entities that have granted Emmis the exclusive right to provide the programming and sell the advertising on the stations for the duration that the not-for-profit entities retain the licenses. Five of these licenses are for the stations that Emmis began programming in August 2003 and the remaining four related to new stations that Emmis began operating in May 2004. The licenses and Emmis’ exclusive right are for an initial term of nine years and do not require the payment of any license fees to the Flemish Government. Subsequently, Emmis has acquired the exclusive right to provide programming and sell advertising on a couple of additional stations.

     On July 1, 2003, Emmis effectively acquired a controlling interest of 50.1% in a partnership that owns six radio stations in the Austin, Texas metropolitan area for a cash purchase price of approximately $106.5 million, including transaction costs of $1.0 million. These six stations are KLBJ-AM, KLBJ-FM, KDHT-FM, (formerly KXMG-FM), KROX-FM, KGSR-FM and KBPA-FM (formerly KEYI-FM). This acquisition allowed Emmis to diversify its radio portfolio and participate in another large, high-growth radio market. The acquisition was financed through borrowings under the credit facility and was accounted for as a purchase. The Company recorded $35.3 million of goodwill, all of which is deductible for income tax purposes, but $25.7 million of this goodwill was written-off in connection with the Company’s fiscal 2006 SFAS No. 142 annual impairment review (See Note 8 to the accompanying consolidated financial statements). Emmis has the option, but not the obligation, to purchase our 49.9% partner’s interest in the partnership in December 2007 based on an 18-multiple of trailing 12-month cash flow. If the option is excercised by Emmis, the minority partner has the right to defer this option for one year, to December 2008.

     Effective March 1, 2003, Emmis completed its acquisition of substantially all of the assets of television station WBPG-TV in Mobile, AL-Pensacola, FL from Pegasus Communications Corporation for approximately $11.7 million, including transaction costs of $0.2 million. We financed the acquisition through borrowings under the credit facility, and the acquisition was accounted for as a purchase. This acquisition allowed us to achieve duopoly efficiencies in the market, such as lower programming acquisition costs and consolidation of general and administrative functions, since we already owned a television station in the market, WALA. As discussed above, Emmis entered into a Local Marketing Agreement with LIN for WBPG-TV on November 30, 2005.

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RESULTS OF OPERATIONS

YEAR ENDED FEBRUARY 28, 2005 COMPARED TO YEAR ENDED FEBRUARY 28, 2006

Net revenue pro forma reconciliation:

     Since March 1, 2004, we have acquired a radio station in Chicago and radio networks in Slovakia and Bulgaria. The results of our television division, two radio stations sold in Argentina, three radio stations exchanged in Phoenix and WRDA-FM in St. Louis have been included in discontinued operations and are not included in reported results below. The following table reconciles actual results to pro forma results.

	Year ended February 28,
	2005		2006		$ Change		% Change
	(amounts in thousands)
Reported net revenues						26,400
Radio	$	274,145	$	300,545	$	26,400		9.6	%
Publishing		77,675		86,836		9,161		11.8	%
Total		351,820		387,381		35,561		10.1	%
Plus: Net revenues from stations acquired
Radio		18,178		2,383
Publishing		—		—
Total		18,178		2,383
Less: Net revenues from stations disposed
Radio		—		—
Publishing		—		—
Total		—		—
Pro forma net revenues
Radio		292,323		302,928		10,605		3.6	%
Publishing		77,675		86,836		9,161		11.8	%
Total	$	369,998	$	389,764	$	19,766		5.3	%

For further disclosure of segment results, see Note 12 to the accompanying consolidated financial statements. For additional pro forma results, see Note 7 to the accompanying consolidated financial statements. Consistent with management’s review of the Company, the pro forma results above include the impact of all consummated acquisitions and dispositions through February 28, 2006, irrespective of materiality.

Net revenues discussion:

     Radio net revenues increased principally as a result of our acquisitions of WLUP-FM in Chicago in January 2005 and a radio network in Slovakia in March 2005. On a pro forma basis (assuming WLUP-FM and the radio networks in Slovakia and Bulgaria had been purchased on March 1, 2004), radio net revenues for the year ended February 28, 2006 would have increased $10.6 million, or 3.6%. We typically monitor the performance of our stations against the aggregate performance of the markets in which we operate based on reports for the periods prepared by the independent accounting firm Miller, Kaplan, Arase & Co., LLP (“Miller, Kaplan”). For the year ended February 28, 2006, on a pro forma basis, net revenues of our domestic radio stations were up 2.9%, whereas Miller, Kaplan reported that net revenues of our domestic radio markets were up 1.6%. We believe we were able to outperform the markets in which we operate due to our commitment to training and developing local sales forces, as well as generally consistent ratings, resulting,

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in part, from our commitment to reinvest in our properties, such as promotional spending, recruiting and retaining compelling on-air talent, and extensive research. The ratings strength allowed us to charge, on average, an increase of 5% for the advertisements we sold. Our advertising inventory sellout percentage decreased 2% year over year.

     Publishing net revenues increased due to higher local and national advertising revenues, especially at our Texas Monthly and Los Angeles Magazine publications. Automotive and more specifically luxury automotives have been a very strong category for our city and regional magazines. Other strong categories include home furnishings and medical.

     On a consolidated basis, pro forma net revenues for the year ended February 28, 2006 increased $19.8 million, or 5.3% due to the effect of the items described above.

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Station operating expenses, excluding noncash compensation pro forma reconciliation:

     Since March 1, 2004, we have acquired a radio station in Chicago and radio networks in Slovakia and Bulgaria. The results of our television division, two radio stations sold in Argentina, three radio stations exchanged in Phoenix and WRDA-FM in St. Louis have been included in discontinued operations and are not included in reported results below. The following table reconciles actual results to pro forma results.

	Year ended February 28),
	2005		2006		$ Change		% Change
	(amounts in thousands)
Reported station operating expenses, excluding noncash compensation
Radio	$	152,603	$	174,321	$	21,718		14.2	%
Publishing		67,870		78,837		10,967		16.2	%
Total		220,473		253,158		32,685		14.8	%
Plus: Station operating expenses, excluding noncash compensation from stations acquired:
Radio		11,859		2,160
Publishing		—		—
Total		11,859		2,160
Less: Station operating expenses, excluding noncash compensation from stations disposed:
Radio		—		—
Publishing		—		—
Total		—		—
Pro forma station operating expenses, excluding noncash compensation
Radio		164,462		176,481		12,019		7.3	%
Publishing		67,870		78,837		10,967		16.2	%
Total	$	232,332	$	255,318	$	22,986		9.9	%

For further disclosure of segment results, see Note 12 to the accompanying consolidated financial statements. For additional pro forma results, see Note 7 to the accompanying consolidated financial statements. Consistent with management’s review of the Company, the pro forma results above include the impact of all consummated acquisitions and dispositions through February 28, 2006, irrespective of materiality.

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Station operating expenses, excluding noncash compensation discussion:

     Radio station operating expenses, excluding noncash compensation increased as a result of higher music licensing fees, higher sales-related costs and higher programming and marketing costs in our New York, Los Angeles and Chicago markets. The increase also relates to our acquisition of WLUP-FM in January 2005 and a radio network in Slovakia in March 2005, as well as an incremental $1.3 million of cash compensation in the year ended February 28, 2006 due to the corresponding reduction in our noncash compensation expense (see noncash compensation discussion below).

     Publishing station operating expenses, excluding noncash compensation increased principally due to higher paper costs and start-up costs related to our new magazine in Los Angeles, Tu Ciudad. The increase also relates to the incremental $0.8 million of cash compensation in the year ended February 28, 2006 due to the corresponding reduction in our noncash compensation expense (see noncash compensation discussion below).

     On a consolidated basis, pro forma station operating expenses, excluding noncash compensation, for the year ended February 28, 2006 increased $23.0 million, or 9.9% due to the effect of the items described above.

Noncash compensation expenses:

	For the years ended February 28,
	2005		2006		$ Change			% Change
	(As reported, amounts in thousands)
Noncash compensation expense:
Radio	$	4,749	$	3,481	$	(1,268	)		(26.7	)%
Publishing		2,007		1,240		(767	)		(38.2	)%
Corporate		4,544		4,185		(359	)		(7.9	)%
Total noncash compensation expense	$	11,300	$	8,906	$	(2,394	)		(21.2	)%

     Noncash compensation includes compensation expense associated with restricted common stock issued under employment agreements, common stock issued to employees at our discretion, Company matches of common stock in our 401(k) plans and common stock issued to employees pursuant to our stock compensation program. Effective January 1, 2005, we curtailed our stock compensation program by eliminating mandatory participation for employees making less than $180,000 per year. For calendar 2005, this change resulted in a $3.1 million decrease in the Company’s noncash compensation expense and a corresponding increase in the Company’s cash operating expense. Effective January 1, 2006, participation in our stock compensation program became entirely voluntary.

     On March 1, 2005, Emmis granted approximately 0.2 million shares of restricted stock or restricted stock units to certain of its employees in lieu of stock options, which significantly reduced the Company’s annual stock option grant. Although Emmis did not begin expensing stock options until March 1, 2006 (pursuant to Statement No. 123R), it expenses the value of these restricted stock grants over their applicable vesting period, which ranges from 2 to 3 years. The noncash compensation expense associated with this grant reflected in continuing operations was approximately $1.1 million for the year ended February 28, 2006. On March 1, 2006, Emmis granted an additional 0.2 million shares of restricted stock or restricted stock units and 0.5 million stock options to certain of its employees. The anticipated noncash compensation expense to be recognized in fiscal 2007 associated with these March 1, 2006 grants is approximately $2.6 million. The Company accelerated the vesting of certain “out-of-the-money” options during fiscal 2006 and the option expense in fiscal 2007 that relates to grants prior to March 1, 2006 will be immaterial.

     In its quarter ended February 28, 2006, the Company reversed approximately $1.2 million of noncash compensation expense previously accrued as the service conditions of certain awards were not satisfied.

     In accordance with SAB No. 107, the Company will cease segregating noncash compensation expense in the presentation of its income statement beginning with its quarter ending May 31, 2006. Instead, these costs will be included within station operating expenses and corporate expenses.

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Corporate expenses, excluding noncash compensation:

	For the years ended February 28,
	2005		2006		$ Change		% Change
	(As reported, amounts in thousands)
Corporate expenses, excluding noncash compensation	$	30,792	$	32,686	$	1,894		6.2	%

     In the twelve months ended February 28, 2005, we incurred approximately $4.0 million of professional fees associated with our television digital spectrum initiative. In addition, we donated $1.0 million to tsunami relief efforts. In the twelve months ended February 28, 2006, we incurred approximately $6.1 million of corporate bonus and severance payments associated with the sale of thirteen of our sixteen television stations.

Depreciation and amortization:

	For the years ended February 28,
	2005		2006		$ Change			% Change
	(As reported, amounts in thousands)
Depreciation and amortization:
Radio	$	8,508	$	10,480	$	1,972			23.2	%
Publishing		858		713		(145	)		(16.9	)%
Corporate		6,504		6,142		(362	)		(5.6	)%
Total depreciation and amortization	$	15,870	$	17,335	$	1,465			9.2	%

     Substantially all of the increase in radio depreciation and amortization expense for the year ended February 28, 2006 is attributable to our Slovakia and WLUP acquisitions.

Operating income:

	For the years ended February 28,
	2005			2006			$ Change			% Change
	(As reported, amounts in thousands)
Operating income:
Radio	$	108,026		$	80,896		$	(27,130	)		(25.1	)%
Publishing		6,851			45			(6,806	)		(99.3	)%
Corporate		(42,287	)		(43,111	)		(824	)		1.9	%
Total operating income	$	72,590		$	37,830		$	(34,760	)		(47.9	)%

     Radio operating income decreased due to a $31.4 million impairment charge incurred in connection with our annual SFAS No. 142 impairment review. Excluding the impairment charge, radio operating income would have increased due to our Slovakia and WLUP radio acquisitions and higher net revenues at our existing stations, partially offset by the expenses associated with Slovakia and WLUP and higher expenses at our existing stations. As discussed above, the net revenue growth of our domestic stations exceeded the revenue growth of the markets in which we operate. However, given the ratings challenges we face in our Los Angeles radio market, it will be difficult for us to outperform the markets in which we operate in fiscal 2007.

     Publishing operating income decreased due to a $6.0 million impairment charge incurred in connection with our annual SFAS No. 142 impairment review, higher operating expenses associated with rising paper costs, start-up costs related to Tu Ciudad and increased cash compensation costs as discussed above, partially offset by an increase in sales at our city and regional magazines.

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     On a consolidated basis, operating income decreased due to the declines in radio and publishing operating income, as discussed above. In our fiscal 2007 and beyond, we expect to take a longer-term view of our businesses and expect to make strategic investments in certain properties where we believe the investments in marketing and programming will result in acceptable returns. These investments may result in significant fluctuations in our operating income from quarter to quarter.

Interest expense:

	For the years ended February 28,
	2005		2006		$ Change		% Change
	(As reported, amounts in thousands)
Interest expense:	$	39,690	$	70,586	$	30,896		77.8	%

     Interest expense increased as a result of higher interest rates paid on the floating portion of our senior credit facility debt, the addition of approximately $400 million of indebtedness to finance our Dutch Auction Tender Offer in June 2005, and a lower allocation of interest to discontinued operations in fiscal 2006 as compared to fiscal 2005. Certain debt was required to be repaid as a result of the disposition of the Company’s television assets. The Company allocated interest expense associated with this portion of debt to the television operations in accordance with Emerging Issues Task Force Issue 87-24 “Allocation of Interest to Discontinued Operations,” as modified. The Company allocated $27.0 million and $22.0 million of interest expense to discontinued operations in fiscal 2005 and fiscal 2006, respectively.

Income (loss) before income taxes, minority interest, discontinued operations and accounting change:

	For the years ended February 28,
	2005			2006			$ Change		% Change
	(As reported, amounts in thousands)
Income (loss) before income taxes, minority interest, discontinued operations and accounting change:	$	(62,152	)	$	(36,668	)	$	25,484		(41.0	)%

     In connection with our debt refinancing activities completed on May 10, 2004, we recorded a loss on debt extinguishment of $97.3 million in the year ended February 28, 2005, primarily consisting of tender premiums and the write-off of deferred debt costs for the debt issuances redeemed. In addition to the items noted above, in the year ended February 28, 2006, we recorded a $7.0 million loss on debt extinguishment associated with the write-off of deferred debt costs for debt issuances redeemed. We also recorded approximately $3.5 million of interest income related to television station asset sale proceeds that were invested until debt was redeemed.

Minority interest expense, net of tax:

	For the year ended February 28,
	2005		2006		$ Change		% Change
	(As reported, amounts in thousands)
Minority interest expense, net of tax	$	2,486	$	3,026	$	540		21.7	%

     Our minority interest expense principally relates to our partnership in Austin (we own 50.1%).

40

Income from discontinued operations, net of tax:

	For the year ended February 28,
	2005		2006		$ Change		% Change
	(As reported, amounts in thousands)
Income from discontinued operations, net of tax	$	64,091	$	382,010	$	317,919		496.0	%

     Our television division, three radio stations in Phoenix, one radio station in St. Louis and two radio stations in Buenos Aires, Argentina have been classified as discontinued operations in the accompanying condensed consolidated statements. The financial results of these stations and related discussions are fully described in Note 1k to the accompanying condensed consolidated financial statements. Below is a summary of the components of discontinued operations.

	Year ended February 28,
	2005			2006
Income (loss) from operations:
Television	$	38,249		$	24,869
WRDA-FM		(1,373	)		(777	)
Phoenix radio stations		7,650			440
Votionis		(490	)		—
Total		44,036			24,532
Less: Provision for income taxes		13,587			9,562
Income from operations, net of tax		30,449			14,970
Gain on sale of discontinued operations:
Television		—			572,975
Phoenix radio stations		57,012			—
Less: Provision for income taxes		23,370			205,935
Gain on sale of discontinued operations, net of tax		33,642			367,040
Income from discontinued operations, net of tax	$	64,091		$	382,010

     On January 27, 2006, Emmis sold substantially all of the assets of television stations KOIN in Portland, OR, and KHON in Honolulu, HI, and also sold the stock of the corporation that owns KSNW in Wichita, KS and KSNT in Topeka, KS, to SJL Broadcast Group, LLC and recorded a gain on sale of $88.2 million, net of tax.

     On December 5, 2005, Emmis sold substantially all of the assets of television stations WFTX in Ft. Myers, FL and KGUN in Tucson, AZ, and the tangible assets and many of the intangible assets (excluding, principally, the FCC license) of KMTV in Omaha, NE to Journal Communications and recorded a gain on sale of $92.6 million, net of tax.

     On November 30, 2005, Emmis sold substantially all of the assets of television station WSAZ in Huntington/Charleston, WV to Gray Television. Also on November 30, 2005, Emmis sold substantially all of the assets of four television stations (plus regional satellite stations) to LIN Television Corporation (“LIN”) (WALA in Mobile, AL/Pensacola, FL, WTHI in Terre Haute, IN, WLUK in Green Bay, WI, and KRQE in Albuquerque, NM). Emmis recorded a gain on sale of stations to Gray Television and LIN of $186.2 million, net of tax.

     All of these gains are reflected in discontinued operations in the accompanying statements of operations. See “Acquisitions, Dispositions and Investments” above for further discussion.

41

     Our television station in New Orleans, Louisiana, WVUE, was significantly affected by Hurricane Katrina and the subsequent flooding. The flooding of New Orleans caused extensive property damage at WVUE. Although the extent of the property damage is estimated to be approximately $11.5 million, Emmis believes that it is insured (subject to applicable deductibles) for substantially all property losses resulting from Katrina and subsequent flooding as it maintained Federal flood insurance and private flood insurance. Since Emmis believes recovery of insurance proceeds under its relevant policies is probable, no adjustments to the carrying values of WVUE property were made as of February 28, 2006. Additionally, the Company recorded a $0.6 million reserve against WVUE accounts receivable due to the impact of the flooding on the local economy. The charge is reflected in the year ended February 28, 2006 in the preceding table. WVUE did not broadcast its signal for an extended period of time as a result of Katrina and the general disruption of the local economy will negatively affect ongoing advertising revenue. The Company maintains business interruption insurance and expects to be reimbursed for lost net income as a result of Katrina. However, unlike property and casualty, Emmis has not accrued for business interruption insurance proceeds. Business interruption insurance proceeds will only be recognized upon receipt. The Company estimates that the negative revenue impact of the hurricane was approximately $7.0 million for the year ended February 28, 2006

Net income (loss):

	For the years ended February 28,
	2005			2006		$ Change		% Change
	(As reported, amounts in thousands)
Net income (loss):	$	(304,368	)	$	357,771	$	662,139	Not Applicable

     The increase in net income for the year ended February 28, 2006 is primarily attributable to the gain on the sale of television properties discussed above and the prior year’s adoption of EITF Topic D-108, which resulted in a $303.0 million charge, and loss on debt extinguishment discussed above, net of tax benefits. Approximately $59.3 million of the loss on debt extinguishment was not deducted for purposes of calculating the provision (benefit) for income taxes.

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RESULTS OF OPERATIONS

YEAR ENDED FEBRUARY 29, 2004 COMPARED TO YEAR ENDED FEBRUARY 28, 2005

Net revenue pro forma reconciliation:

     During the two fiscal years ended February 28, 2005, we acquired a 50.1% controlling interest in six radio stations in Austin, Texas, sold two radio stations in Argentina, and exchanged three radio stations in Phoenix for cash and one radio station in Chicago (see Note 6 in the accompanying Notes to Consolidated Financial Statements). The results of our television division, two radio stations sold in Argentina, three radio stations exchanged in Phoenix and WRDA-FM in St. Louis have been included in discontinued operations and are not included in reported results below. The following table reconciles actual results to pro forma results.

	Year ended February 28 (29),
	2004		2005		$ Change		% Change
	(amounts in thousands)
Reported net revenues
Radio	$	250,510	$	274,145	$	23,635		9.4	%
Publishing		76,108		77,675		1,567		2.1	%
Total		326,618		351,820		25,202		7.7	%
Plus: Net revenues from assets acquired
Radio		22,924		8,623
Publishing		—		—
Total		22,924		8,623
Less: Net revenues from stations disposed
Radio		—		—
Publishing		—		—
Total		—		—
Pro forma net revenues
Radio		273,434		282,768		9,334		3.4	%
Publishing		76,108		77,675		1,567		2.1	%
Total	$	349,542	$	360,443	$	10,901		3.1	%

For further disclosure of segment results, see Note 12 to the accompanying consolidated financial statements. For additional pro forma results, see Note 7 to the accompanying consolidated financial statements. Consistent with management’s review of the Company, the pro forma results above include the impact of all consummated acquisitions and dispositions in the years ended February 28 (29), 2004 and 2005, irrespective of materiality.

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Net revenues discussion:

     Radio net revenues increased principally as a result of our acquisition of six radio stations in Austin in July 2003. On a pro forma basis (assuming the Austin radio stations had been purchased on March 1, 2003 and the Phoenix — Chicago radio station swap had occurred on March 1, 2003), radio net revenues for the year ended February 29, 2004 would have increased $9.3 million, or 3.4%. We monitor the performance of our stations against the aggregate performance of the markets in which we operate. On a pro forma basis, for the year ended February 28, 2005 net revenues of our domestic radio stations were up 1.3%, whereas net revenues in the domestic radio markets in which we operate were up only 0.5%, based on reports for the periods prepared by Miller, Kaplan, Arase & Co., LLP. The pro forma effect of including WLUP in our results reduced our domestic radio growth by 1.6%. We believe we were able to outperform the markets in which we operate due to our commitment to training and developing local sales forces, as well as higher ratings, resulting, in part, from increased promotional spending in prior quarters. The higher ratings allowed us to charge higher rates for the advertisements we sold in the current period versus the same period in the prior year. Our advertising inventory sellout decreased slightly year over year.

     Our publishing division has experienced slow, steady growth, as our magazines are generally mature properties with limited direct competition.

     On a consolidated basis, net revenues for the year ended February 28, 2005 increased due to the effect of the items described above. On a pro forma basis, net revenues for the year ended February 28, 2005 increased $10.9 million, or 3.1% due to the effect of the items described above.

44

Station operating expenses, excluding noncash compensation pro forma reconciliation:

     Since March 1, 2003, we have acquired a 50.1% controlling interest in six radio stations in Austin, Texas, sold two radio stations in Argentina, and exchanged three radio stations in Phoenix for cash and one radio station in Chicago (see Note 6 in the accompanying Notes to Consolidated Financial Statements). The results of our television division, two radio stations sold in Argentina, three radio stations exchanged in Phoenix and WRDA-FM in St. Louis have been included in discontinued operations and are not included in reported results below. The following table reconciles actual results to pro forma results.

	Year ended February 28 (29),
	2004		2005		$ Change		% Change
	(amounts in thousands)
Reported station operating expenses, excluding noncash compensation
Radio	$	135,884	$	152,603	$	16,719		12.3	%
Publishing		65,809		67,870		2,061		3.1	%
Total		201,693		220,473		18,780		9.3	%
Plus: Station operating expenses, excluding noncash compensation from assets acquired:
Radio		13,636		5,882
Publishing		—		—
Total		13,636		5,882
Less: Station operating expenses, excluding noncash compensation from stations disposed:
Radio		—		—
Publishing		—		—
Total		—		—
Pro forma station operating expenses, excluding noncash compensation
Radio		149,520		158,485		8,965		6.0	%
Publishing		65,809		67,870		2,061		3.1	%
Total	$	215,329	$	226,355	$	11,026		5.1	%

For further disclosure of segment results, see Note 12 to the accompanying consolidated financial statements. For additional pro forma results, see Note 7 to the accompanying consolidated financial statements. Consistent with management’s review of the Company, the pro forma results above include the impact of all consummated acquisitions and dispositions in the years ended February 28 (29), 2004 and 2005, irrespective of materiality.

45

Station operating expenses, excluding noncash compensation discussion:

     Radio station operatine expenses, excluding noncash compensation increased as a result of our acquisition of six radio stations in Austin in July 2003 and WLUP-FM in Chicago in the fourth quarter fiscal 2005. The increase also relates to higher music license fees, higher sales-related costs, higher insurance and health-related costs, higher programming costs in our New York and Los Angeles markets and an incremental $2.0 million of cash compensation in the year ended February 28, 2005 due to the corresponding reduction in our noncash compensation expense (see noncash compensation discussion below).

     Publishing station operating expenses, excluding noncash compensation increased due to an incremental $0.8 million of cash compensation in the year ended February 28, 2005 due to the corresponding reduction in our noncash compensation expense (see noncash compensation discussion below) as well as higher insurance and health-related costs.

     On a consolidated basis, pro forma station operating expenses, excluding noncash compensation, for the year ended February 28, 2005 increased $11.0 million, or 5.1%, due to the effect of the items described above.

Noncash compensation expenses:

	For the years ended February 28 (29),
	2004		2005		$ Change			% Change
	(As reported, amounts in thousands)
Noncash compensation expense:
Radio	$	6,768	$	4,749	$	(2,019	)		(29.8	)%
Publishing		2,780		2,007		(773	)		(27.8	)%
Corporate		5,273		4,544		(729	)		(13.8	)%
Total noncash compensation expense	$	14,821	$	11,300	$	(3,521	)		(23.8	)%

     Noncash compensation includes compensation expense associated with restricted common stock issued under employment agreements, common stock issued to employees in lieu of cash bonuses, Company matches of common stock in our 401(k) plans and common stock issued to employees in exchange for cash compensation pursuant to our stock compensation program. Efective January 1, 2004, we curtailed our stock compensation program by eliminating mandatory participation for employees making less than $52,000 per year. For calendar 2004, this change resulted in a $1.9 million decrease in the Company’s noncash compensation expense and a corresponding increase in the Company’s cash operating expense. The remaining decrease of $1.6 million is primarily attributable to a higher portion of bonuses and incentive awards being paid in cash at the election of the Company as opposed to being paid in the form of stock in the prior periods.

Corporate expenses, excluding noncash compensation:

	For the years ended February 28 (29),
	2004		2005		$ Change		% Change
	(As reported, amounts in thousands)
Corporate expenses, excluding noncash compensation	$	24,105	$	30,792	$	6,687		27.7	%

     Approximately $4.0 million of the increase in corporate expenses, excluding noncash compensation in the year ended February 28, 2005 consists of professional fees associated with our television digital spectrum initiative. An additional $1.0 million of the increase relates to our donation to tsunami relief efforts. The remaining increase is due to higher insurance and health care costs, as well as higher corporate governance costs associated with compliance with the Sarbanes-Oxley Act and related regulations.

46

Depreciation and amortization:

	For the years ended February 28 (29),
	2004		2005		$ Change			% Change
	(As reported, amounts in thousands)
Depreciation and amortization:
Radio	$	8,307	$	8,508	$	201			2.4	%
Publishing		873		858		(15	)		(1.7	)%
Corporate		6,090		6,504		414			6.8	%
Total depreciation and amortization	$	15,270	$	15,870	$	600			3.9	%

     The increase in corporate depreciation and amortization is primarily related to the depreciation of computer software and equipment added in recent years.

Operating income:

	For the years ended February 28 (29),
	2004			2005			$ Change			% Change
	(As reported, amounts in thousands)
Operating income:
Radio	$	99,525		$	108,026		$	8,501			8.5	%
Publishing		6,594			6,851			257			3.9	%
Corporate		(35,468	)		(42,287	)		(6,819	)		19.2	%
Total operating income	$	70,651		$	72,590		$	1,939			2.7	%

     Radio operating income increased due to our Austin radio acquisition and higher net revenues at our existing stations, partially offset by higher expenses at our existing stations. As discussed above, the net revenue growth of our stations exceeded the revenue growth of the markets in which we operate.

     Publishing operating income increased slightly. As previously stated, our publishing division has experienced slow, steady growth as our magazines are generally mature properties with limited direct competition. In the third quarter of fiscal 2005, we initiated the launch of a new magazine targeting acculturated, bilingual, affluent Hispanics in Los Angeles.

     Corporate operating loss increased due to the items discussed in corporate operating expenses, excluding noncash compensation as discussed above.

     On a consolidated basis, operating income increased due to the changes in radio, television and publishing operating income, partially offset by higher corporate expenses, as discussed above.

Interest expense:

	For the years ended February 28 (29),
	2004			2005			$ Change		% Change
	(As reported, amounts in thousands)
Interest expense:	$	(62,950	)	$	(39,690	)	$	23,260		(36.9	)%

     Interest expense decreased as a result of lower interest rates paid on a portion of our senior credit facility debt and interest savings realized with our debt refinancing activity completed in the quarter ended May 31, 2004. During the year ended February 29, 2004, we had interest rate swap agreements outstanding with an aggregate notional amount ranging from $40 million to $230 million that fixed

47

LIBOR at a weighted-average rate of 4.76% to 5.13%. We had no interest rate swap agreements outstanding in the year ended February 28, 2005, and one-month LIBOR as of February 28, 2005 was approximately 2.6%. On May 10, 2004, we completed several debt refinancing transactions that significantly lowered our future interest expense. The Company has allocated interest expense associated with this portion of debt to the television operations in accordance with Emerging Issues Task Force Issue 87-24 “Allocation of Interest to Discontinued Operations,” as modified. The Company allocated $22.9 million and $27.0 million of interest expense to discontinued operations in fiscal 2004 and fiscal 2005, respectively.

Income (loss) before income taxes, minority interest, discontinued operations and accounting change:

	For the years ended February 28 (29),
	2004		2005			$ Change			% Change
	(As reported, amounts in thousands)
Income (loss) before income taxes, minority interest, discontinued operations and accounting change:	$	6,906	$	(62,152	)	$	(69,058	)	Not Applicable

     In connection with our debt refinancing activities completed on May 10, 2004, we recorded a loss on debt extinguishment of $97.2 million, primarily consisting of tender premiums and the write-off of deferred debt costs for the debt redeemed. Higher operating income and lower interest expense in the year ended February 28, 2005 were more than offset by this loss on debt extinguishment.

Minority interest expense, net of tax:

	For the year ended February 28 (29),
	2004		2005		$ Change		% Change
	(As reported, amounts in thousands)
Minority interest expense, net of tax	$	1,878	$	2,486	$	608		32.4	%

     Minority interest expense increased principally due to our acquisition of six radio stations in Austin in July 2003. We own 50.1% of the Austin properties.

Income from discontinued operations, net of tax:

	For the year ended February 28 (29),
	2004		2005		$ Change		% Change
	(As reported, amounts in thousands)
Income from discontinued operations, net of tax	$	2,907	$	64,091	$	61,184		2104.7	%

     Our television division, three radio stations in Phoenix, one radio station in St. Louis and two radio stations in Buenos Aires, Argentina have been classified as discontinued operations in the accompanying consolidated statements. The financial results of these stations and related discussions are fully described in Note 1k to the accompanying consolidated financial statements. Below is a summary of the components of discontinued operations.

48

	Year ended February 28 (29),
	2004			2005
Income (loss) from operations:
Television	$	12,837		$	38,249
WRDA-FM		(1,400	)		(1,373	)
Phoenix radio stations		9,411			7,650
Votionis		909			(490	)
Total		21,757			44,036
Less: Provision for income taxes		7,922			13,587
Income from operations, net of tax		13,835			30,449
Gain on sale of discontinued operations:
Television		—			—
Phoenix radio stations		—			57,012
Less: Provision for income taxes		—			23,370
Gain on sale of discontinued operations, net of tax		—			33,642
Other:
Cumulative currency translation loss - Votionis		(10,928	)		—
Less: Provision for income taxes		—			—
Other, net of tax		(10,928	)		—
Income from discontinued operations, net of tax	$	2,907		$	64,091

Net income (loss):

	For the years ended February 28 (29),
	2004		2005			$ Change			% Change
	(As reported, amounts in thousands)
Net income (loss):	$	2,256	$	(304,368	)	$	(306,624	)	Not Applicable

     The net loss available to common shareholders in the year ended February 28, 2005 is attributable to the loss on debt extinguishment discussed above, net of tax benefits, coupled with the adoption of EITF Topic D-108, which resulted in a $303.0 million charge, net of tax. Approximately $59.3 million of the loss on debt extinguishment was not deducted for purposes of calculating the provision for income taxes. In our third quarter we completed our evaluation of our statutory tax rate due to changes in our income dispersion in the various tax jurisdictions in which we operate. As a result of this review, we increased the statutory rate we use for our income tax provision from 38% to 41%.

LIQUIDITY AND CAPITAL RESOURCES

     OFF-BALANCE SHEET FINANCINGS AND LIABILITIES

     Other than lease commitments, legal contingencies incurred in the normal course of business, agreements for future barter and program rights not yet available for broadcast at February 28, 2006, and employment contracts for key employees, all of which are discussed in Note 9 to the consolidated financial statements, the Company does not have any off-balance sheet financings or liabilities. The Company does not have any majority-owned and controlled subsidiaries that are not included in the consolidated financial statements, nor does the Company have any interests in or relationships with any “special-purpose entities” that are not reflected in the consolidated financial statements or disclosed in the Notes to Consolidated Financial Statements.

49

SUMMARY DISCLOSURES ABOUT CONTRACTUAL CASH OBLIGATIONS

     The following table reflects a summary of our contractual cash obligations as of February 28, 2006:

	PAYMENTS DUE BY PERIOD (AMOUNTS IN THOUSANDS)
			Less than		1 to 3		4 to 5		After 5
Contractual Cash Obligations:	Total		1 Year		Years		Years		Years
Long-term debt	$	797,119	$	129,175	$	15,540	$	277,404	$	375,000
Operating leases		64,117		8,782		16,747		13,491		25,097
Radio broadcast agreements		7,295		2,114		3,272		1,909		—
Purchase obligations (1)		33,972		10,956		14,792		6,879		1,345
Fixed interest payments (2)		160,129		25,781		51,562		51,562		31,224
Employment agreements		34,364		19,226		14,442		696		—
Discontinued operations (3)		75,213		21,434		27,491		18,572		7,716
Total Contractual Cash Obligations	$	1,172,209	$	217,468	$	143,846	$	370,513	$	440,382

(1)	Includes contractual commitments to purchase goods and services, including audience measurement information and music license fees.
(2)	In addition to the Company’s fixed interest payments, the Company has preferred stock outstanding and the annual dividend is $9.0 million.
(3)	Includes TV program rights payable, future TV program rights payable, office space agreements, employment agreements and other obligations of our discontinued operations. TV program rights payable represents payments to be made to various program syndicators and distributors in accordance with current contracts for the rights to broadcast programs. TV program rights payable are included in discontinued operations in the accompanying consolidated balance sheets. Future TV program rights payable represents commitments for program rights not available for broadcast as of February 28, 2006.

We expect to fund these payments primarily with cash flows from operations, but we may also issue additional debt or equity or sell assets.

SOURCES OF LIQUIDITY

     Our primary sources of liquidity are cash provided by operations and cash available through revolving loan borrowings under our credit facility. Our primary uses of capital have been historically, and are expected to continue to be, capital expenditures, working capital, debt service, funding acquisitions and preferred stock dividend requirements. We also have used, and may continue to use, capital to repurchase our common stock. Since we manage cash on a consolidated basis, any cash needs of a particular segment or operating entity are met by intercompany transactions. See Investing Activities below for discussion of specific segment needs.

     At February 28, 2006, we had cash and cash equivalents of $140.8 million and net working capital of $33.3 million. At February 28, 2005, we had cash and cash equivalents of $16.1 million and net working capital of $51.1 million. The increase in cash and cash equivalents relates to $120.0 million of cash invested, from television asset sale proceeds, to be used for the redemption of the remaining floating rate senior notes that were outstanding at February 28, 2006. Emmis gave notice to redeem the floating rate notes on February 7, 2006 and the notes were redeemed on March 9, 2006 at par. The decrease in net working capital primarily relates to the sale of thirteen of the Company’s sixteen television stations during the year.

     During the year, Emmis entered into definitive agreements with four companies to sell thirteen of its sixteen television stations: (A) five television stations (plus regional satellite stations) to LIN Television Corporation (WALA and WBPG in Mobile,

50

AL/Pensacola, FL; WTHI in Terre Haute, IN; WLUK in Green Bay, WI; and KRQE in Albuquerque, NM) for $260 million, (B) three television stations to Journal Communications (WFTX in Ft. Myers FL; KMTV in Omaha, NE; and KGUN in Tucson, AZ) for $235 million, (C) one television station (WSAZ in Huntington/Charleston, WV) to Gray Television for $186 million, and (D) four television stations (plus regional satellite stations) to SJL Broadcast Group and affiliates of The Blackstone Group (KOIN in Portland, OR; KHON in Honolulu, HI; KSNW in Wichita, KS and KSNT in Topeka, KS) for $259 million. Emmis closed on the sale of its stations to LIN Television Corporation and Gray Television on November 30, 2005, receiving $430.9 million of net proceeds. Emmis closed on the sale of its stations to Journal Communications on December 5, 2005 and received net proceeds of $220.0 million. Lastly, on January 27, 2006 Emmis closed on the sale of its stations to SJL Broadcast Group (“SJL”) and affiliates of The Blackstone Group and received net proceeds of $245.8 million. After the closing of the sale of the four stations to SJL, Emmis made a special payment to television employees of approximately $16.7 million and to corporate employees (other than executive officers) of approximately $0.9 million. These costs were expensed in the Company’s quarter ended February 28, 2006, commensurate with the closing of these four stations to SJL, as the special payment was conditioned on the closing (or commencement of an LMA) on thirteen of the original sixteen television stations and the closing of the sale of the four stations to SJL satisfied that requirement. (See Note 6 in the accompanying consolidated financial statements for discussion of the television asset sales.) Emmis used the aggregate net proceeds to repay $540.9 million of debt under its credit facility, of which $333.0 million was permanent reductions in amounts outstanding under the term loan. Since repayments under the term loan permanently reduce borrowing availability, we wrote-off approximately $1.9 million of unamortized deferred debt costs as a loss on debt extinguishment in the quarter ended February 28, 2006. In January 2006, Emmis also used $230.0 million of the television sale proceeds to redeem a pro rata portion of its floating rate senior notes at par. In connection with the redemption, Emmis wrote off approximately $5.1 million of unamortized deferred debt costs as a loss on debt extinguishment in the quarter ended February 28, 2006. As indicated above, $120.0 million of cash on hand at February 28, 2006 was used to redeem the remaining outstanding balance of the floating rate senior notes on March 9, 2006. Notice of the redemption was given on February 7, 2006. Emmis will write-off the remaining unamortized deferred debt issue costs of $2.6 million during the quarter ended May 31, 2006. The remaining net cash proceeds were used to fund other costs associated with the television sale (including severance) and general corporate purposes.

     On May 5, 2006, Emmis signed a definitive agreement to sell the assets of WKCF-TV in Orlando to Hearst-Argyle Television Inc. for $217.5 million. The transaction contains customary representations, warranties and covenants, and is subject to standard closing conditions, including but not limited to approvals by the Federal Communications Commission. Emmis hopes to close this transaction by the end of its quarter ended August 31, 2006 and plans to use the proceeds to repay outstanding debt obligations, to fund acquisitions or for other general corporate purposes. Emmis continues to explore the sale of its remaining television stations and expects to effect such sales in the spring and summer of 2006.

     On May 5, 2006, Emmis signed an agreement to sell the assets of KKFR-FM in Phoenix to Bonneville International Corporation for $77.5 million. The transaction provides for customary representations, warranties and covenants, and is subject to standard closing conditions, including but not limited to approvals by the Federal Communications Commission. Emmis hopes to close this transaction by the end of its quarter ended August 31, 2006 and plans to use the proceeds to repay outstanding debt obligations, to fund acquisitions or for other general corporate purposes.

     In accordance with the asset sale provisions of its 6 7/8% senior subordinated notes, by late 2006, Emmis must either (1) make a par offer to redeem $350 million of the notes, (2) repay $350 million of additional debt under its credit facility or (3) make a $350 million permitted investment in a related business, as defined in the agreement. Emmis is evaluating its options under this requirement, including a combination of the above, as well as the financing of the resulting transaction.

     On September 23, 2005, Emmis signed a definitive agreement to sell radio station WRDA-FM in St. Louis, MO to Radio One, Inc. for $20 million. Radio One, Inc. began operating this station pursuant to a LMA effective October 1, 2005. Radio One, Inc. made no monthly payments to Emmis, but reimbursed Emmis for substantially all of Emmis’ costs to operate the station. Closing of this sale occurred May 5, 2006 and Emmis used the proceeds to repay outstanding debt obligations.

     On May 16, 2005, Emmis launched a “Dutch Auction” tender offer (the “Tender Offer”) to purchase up to 20.25 million shares of its Class A common stock for a price not greater than $19.75 per share nor less than $17.25 per share. The Tender Offer expired on June 13, 2005, and on June 20, 2005 Emmis purchased 20.25 million shares of its Class A common stock at a price of $19.50 per share, for an aggregate purchase price of $394.9 million, and incurred related fees and expenses of approximately $3.4 million.

     In connection with the Tender Offer, on June 6, 2005, Emmis Operating Company amended its credit facility to (i) permit the Tender Offer and related transactions, (ii) reset financial covenants, and (iii) allow for payments on Emmis Communications Corporation’s floating rate senior notes discussed below. In order to finance the aggregate purchase price of the Tender Offer and to

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pay related fees and expenses, totaling $398.3 million, on June 13, 2005 Emmis Operating Company borrowed $100 million under the revolving portion of its amended credit facility and Emmis issued $300 million of its floating rate senior notes in a private placement (the “Interim Notes”). On June 21, 2005, Emmis issued $350 million of its floating rate senior notes (the “Notes”) in exchange for (i) the $300 million aggregate principal amount of Interim Notes issued on June 13, 2005, and (ii) $50 million in cash. The Interim Notes were retired on June 21, 2005. Emmis used approximately $40 million of the cash proceeds from the notes transactions to repay borrowings it had incurred under its revolving credit facility on June 13, 2005, approximately $10.6 million of cash proceeds from the notes transactions to pay debt issuance fees and approximately $1.1 million for interest and other.

     On December 23, 2005 and February 7, 2006 Emmis gave notice to redeem $230.0 million and $120.0 million, respectively of the Notes. The Notes were redeemed on January 23, 2006 and March 9, 2006 at par. Interest on the Notes accrued at a floating rate per annum, reset quarterly, equal to LIBOR plus 5.875% (approximately 10.4% at February 28, 2006).

     Operating Activities

     Net cash flows provided by operating activities were $69.1 million for the year ended February 28, 2006, compared to $122.8 million for the same period of the prior year. The decrease in cash flows provided by operating activities for the year ended February 28, 2006, as compared to the same period in the prior year, is due to the loss of approximately $29.1 million in net political revenues in the current year as compared to the prior year, coupled with higher interest costs and bonus and severance amounts incurred in connection with the sale of thirteen of the Company’s sixteen television stations. Cash flows provided by operating activities are historically the highest in our third and fourth fiscal quarters, as a significant portion of our accounts receivable collections is derived from revenues recognized in our second and third fiscal quarters, which are our highest revenue quarters.

     Investing Activities

     Cash flows provided by investing activities were $860.3 million for the year ended February 28, 2006, compared to $54.3 million in the same period of the prior year. The increase is primarily attributable to cash received from the sale of thirteen of the Company’s sixteen television stations, as discussed in Sources of Liquidity above. Investing activities include capital expenditures and business acquisitions and dispositions.

     As discussed in results of operations above and in Note 6 to the accompanying consolidated financial statements, we have consummated numerous acquisitions and divestitures in the three years ended February 28, 2006. We expect to continue to pursue acquisitions of radio stations and publishing properties, as well as corollary businesses and businesses outside of radio and publishing that leverage our strengths. Conversely, as evidenced by our plans to sell our television stations, KKFR-FM in Phoenix, and WRDA-FM in St. Louis, we continually evaluate our portfolio and we will monetize assets when others see greater value in selected assets than we do.

     In the years ended February 28 (29), 2004, 2005 and 2006, we had capital expenditures of $9.9 million, $10.5 million and $12.8 million, respectively. These capital expenditures primarily relate to leasehold improvements to various office and studio facilities, broadcast equipment purchases, tower upgrades and costs associated with our conversion to high-definition (HD) radio technology. We expect that future requirements for capital expenditures will include capital expenditures incurred during the ordinary course of business and equipment upgrades in connection with our rollout of HD radio. We expect to fund such capital expenditures with cash generated from operating activities and borrowings under our credit facility.

     Emmis has entered into an agreement with Ibiquity Digital Corporation to employ high-definition (HD) radio technology at nineteen of our radio stations by June 30, 2007. Under the agreement, the Company incurred approximately $0.4 million and $1.8 million to implement HD radio at eleven of its stations during the years ended February 28, 2005 and 2006, respectively. The Company expects to incur approximately $1.1 million beyond fiscal 2006 to convert the remaining eight stations. Amounts related to our digital radio build-out are included in contractual cash obligations under the heading “Purchase obligations.”

     Our television station in New Orleans, Louisiana, WVUE, was significantly affected by Hurricane Katrina and the subsequent flooding. The flooding of New Orleans caused extensive property damage at WVUE. Although the extent of the property damage is estimated to be approximately $11.5 million, Emmis believes that it is insured (subject to applicable deductibles) for substantially all property losses resulting from Katrina and subsequent flooding as it maintained Federal flood insurance and private flood insurance. Through April 30, 2006, the Company has received $1.0 million in Federal flood insurance proceeds and $5.0 million in private flood insurance proceeds.

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     Financing Activities

     Cash flows used in financing activities were $181.1 million and $804.7 million for the years ended February 28, 2005 and 2006, respectively. The increase is primarily attributable to debt repayment of $770.9 million with cash received from the sale of thirteen of the Company’s sixteen television stations, as discussed in Sources of Liquidity above.

     Also discussed in Sources of Liquidity above, Emmis purchased 20,250,000 shares of its Class A common stock at a price of $19.50 per share, for an aggregate purchase price of $394.9 million. In addition, the Board of Directors authorized a share repurchase program to be made effective after the completion of the tender offer. The share repurchase program would permit Emmis to purchase Class A shares equal to 5% of the total outstanding shares after the tender offer. Whether or to what extent Emmis chooses to make such purchases will depend upon market conditions and Emmis’ capital needs, and there is no assurance that Emmis will conclude such purchases for any or all of the authorized amounts remaining.

     On June 21, 2005, Emmis issued $350 million of its floating rate senior notes in exchange for (i) the $300 million aggregate principal amount of Interim Notes issued on June 13, 2005, and (ii) $50 million in cash. The Interim Notes were retired on June 21, 2005. Emmis used approximately $40 million of the cash proceeds from the notes transactions to repay borrowings it had incurred under its revolving credit facility on June 13, 2005, approximately $10.6 million of cash proceeds from the notes transactions to pay debt issuance fees and approximately $1.1 million for interest and other. On December 23, 2005 and February 7, 2006 Emmis gave notice to redeem $230.0 million and $120.0 million, respectively of the Notes. The Notes were redeemed on January 23, 2006 and March 9, 2006 at par. Interest on the Notes accrued at a floating rate per annum, reset quarterly, equal to LIBOR plus 5.875% (approximately 10.4% at February 28, 2006).

     On May 10, 2004, Emmis refinanced substantially all of its long-term debt. Emmis received $368.4 million in proceeds from the issuance of its 6 ⁷/₈% senior subordinated notes due 2012 in the principal amount of $375 million, net of the initial purchasers’ discount of $6.6 million, and borrowed $978.5 million under a new $1.025 billion senior credit facility. The gross proceeds from these transactions and $2.9 million of cash on hand were used to (i) repay the $744.3 million remaining principal indebtedness under its former credit facility, (ii) repurchase $295.1 million aggregate principal amount of its 8 ¹/₈% senior subordinated notes due 2009, (iii) repurchase $227.7 million aggregate accreted value of its 12 ¹/₂% senior discount notes due 2011, (iv) pay $4.6 million in accrued interest, (v) pay $12.1 million in transaction fees and (vi) pay $72.6 million in prepayment and redemption fees.

     On May 10, 2004, Emmis gave notice to redeem the remaining $4.9 million of principal amount of its 8 ¹/₈% senior subordinated notes due 2009. These notes were redeemed on June 10, 2004 at 104.063% plus accrued and unpaid interest and the redemption was financed with additional borrowings on our new credit facility. The transaction resulted in an additional loss on debt extinguishment of $0.3 million, which Emmis recorded in its quarter ended August 31, 2004.

     The new senior credit facility provided for total borrowings of up to $1.025 billion, including (i) a $675.0 million term loan and (ii) a $350.0 million revolver, of which $100.0 million may be used for letters of credit. As discussed in Sources of Liquidity above, the term loan has been permanently reduced by repayments from television asset sale proceeds, as well as, one-half of the proceeds received from the radio station swap with Bonneville in January 2005 and quarterly amortization. The senior credit facility also provides for the ability to have incremental facilities of up to $675.0 million, of which up to $350.0 million may be allocated to a revolver. Emmis may access the incremental facility on one or more occasions, subject to certain provisions, including a potential market adjustment to pricing of the entire credit facility. All outstanding amounts under the new credit facility bear interest, at the option of Emmis, at a rate equal to the Eurodollar rate or an alternative base rate (as defined in the new credit facility) plus a margin. The margin over the Eurodollar rate or the alternative base rate varies under the revolver (ranging from 0% to 2.5%), depending on Emmis’ ratio of debt to consolidated operating cash flow, as defined in the agreement. The margins over the Eurodollar rate or the alternative base rate are 1.75% and 0.75%, respectively, for the term loan facility. Interest is due on a calendar quarter basis under the alternative base rate and at least every three months under the Eurodollar rate. Both the term loan and revolver mature on November 10, 2011. The borrowings due under the term loan are payable in equal quarterly installments in an annual amount equal to 1% of the term loan during each of the first six and one quarter years of the loan (beginning on February 28, 2005), with the remaining balance payable November 10, 2011.

     On August 5, 2004, Emmis exchanged the $375.0 million aggregate principal amount of its 6 ⁷/₈% senior subordinated notes for a new series of notes registered under the Securities Act. The terms of the new series of notes were substantially the same as the terms of the senior subordinated notes. The notes have no sinking fund requirement and are due in full on May 15, 2012. Interest is payable

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semi-annually on May 15 and November 15 of each year. Prior to May 15, 2008, Emmis may redeem the notes, in whole or in part, at a price of 100% of the principal amount thereof plus the payment of a make-whole premium. After May 15, 2008, Emmis can choose to redeem some or all of the notes at specified redemption prices ranging from 101.719% to 103.438% plus accrued and unpaid interest. On or after May 15, 2010, the notes may be redeemed at 100% plus accrued and unpaid interest. Upon a change of control (as defined), Emmis is required to make an offer to purchase the notes then outstanding at a purchase price equal to 101% plus accrued and unpaid interest. The payment of principal, premium and interest on the notes is fully and unconditionally guaranteed, jointly and severally, by Emmis and most of Emmis’ existing wholly-owned domestic subsidiaries that guarantee the new credit facility.

     As of February 28, 2006, Emmis had $667.9 million of long-term corporate indebtedness outstanding under its credit facility ($289.4 million), senior subordinated notes ($375.0 million) and an additional $3.5 million of other long-term indebtedness. Emmis also had $143.8 million of convertible preferred stock outstanding. In March 2006, Emmis redeemed the remaining outstanding amount of the senior floating rate notes ($120.0 million) and senior discount notes ($1.4 million) that was classified as short-term indebtedness at February 28, 2006 (see Note 15 to the accompanying consolidated financial statements for subsequent event information). All outstanding amounts under our credit facility bear interest, at our option, at a rate equal to the Eurodollar rate or an alternative base rate plus a margin. As of February 28, 2006, our weighted average borrowing rate under our credit facility was approximately 6.3%, and our overall weighted average borrowing rate, after taking into account amounts outstanding under our senior subordinated notes, senior floating rate notes and senior discount notes, was approximately 7.2%.

     Under the terms of Emmis’ credit facility, our total consolidated debt-to-EBITDA leverage ratio was 5.8x as of February 28, 2006, and the maximum debt-to-EBITDA leverage ratio permitted under our credit facility was 7.25x as of February 28, 2006.

     The debt service requirements of Emmis over the next twelve month period (net of interest under our credit facility) are expected to be $41.6 million. This amount is comprised of $25.8 million for interest under our senior subordinated notes, $6.8 million for repayment of term notes under our credit facility and $9.0 million in preferred stock dividend requirements. Although interest will be paid under the credit facility at least every three months, the amount of interest is not presently determinable given that the credit facility bears interest at variable rates. 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.

     At April 20, 2006, we had $144.5 million available under our credit facility, net of $2.6 million in outstanding letters of credit and exclusive of Term B Loan mandatory repayments of up to $202.9 million (see Note 4 of the accompanying consolidated financial statements). The Company expects to continue to use its significant cash flows from operations to primarily repay outstanding debt obligations. As part of our business strategy, we continually evaluate potential acquisitions of radio stations and publishing properties, as well as corollary businesses and businesses outside of radio and publishing that leverage our strengths. If we elect to take advantage of future acquisition opportunities, we may incur additional debt or issue additional equity or debt securities, depending on market conditions and other factors. In addition, Emmis has the option, but not the obligation, to purchase our minority partner’s entire interest in six radio stations in Austin, Texas after a period of approximately five years from the acquisition date based on an 18-multiple of trailing 12-month cash flow.

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INTANGIBLES

     At February 28, 2006, approximately 73% of our total assets consisted of intangible assets, such as FCC broadcast licenses, goodwill, subscription lists and similar assets, the value of which depends significantly upon the operational results of our businesses. In the case of our radio and television 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 the activities of our stations for compliance with regulatory requirements. Historically, all of our licenses have been renewed at the end of their respective eight-year periods, and we expect that all of our FCC licenses will continue to be renewed in the future.

NEW ACCOUNTING PRONOUNCEMENTS

     On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment [“SFAS No. 123(R)”]. SFAS No. 123(R) requires companies to measure all employee stock-based compensation awards, including employee stock options, using a fair-value method and record such expense in their consolidated financial statements. In addition, the adoption of SFAS No. 123(R) requires additional accounting and disclosure related to the income tax and cash flow effects resulting from share-based payment arrangements.

     Statement No. 123R provides two alternatives for adoption: (1) a “modified prospective” method in which compensation cost is recognized for all awards granted subsequent to the effective date of this statement as well as for the unvested portion of awards outstanding as of the effective date; or (2) a “modified retrospective” method which follows the approach in the “modified prospective” method, but also permits entities to restate prior periods to record compensation cost calculated under Statement No. 123 for the pro forma disclosure. The Company elected to follow the “modified prospective” method upon adoption of this pronouncement on March 1, 2006. Consequently, the Company began recognizing compensation cost as expense during its fiscal quarter ending May 31, 2006 for the portion of outstanding unvested awards, based on the grant-date fair value of those awards calculated using Black-Scholes option pricing model, which is the same option pricing model used to estimate grant date fair value for SFAS 123 for pro forma disclosures included in the table below. Although the Company did not have any significant unvested stock option awards outstanding as of February 28, 2006, it granted stock options to its employees on March 1, 2006 (See Note 15). The Company’s net income will be reduced by this grant and future grants of equity awards based on the fair value of those awards at the date of grant.

     On September 30, 2004, the EITF issued Topic D-108, “Use of the Residual Method to Value Acquired Assets Other than Goodwill.” For all of the Company’s acquisitions completed prior to its adoption of SFAS No. 141 on June 30, 2001, the Company allocated a portion of the purchase price to the acquisition’s tangible assets in accordance with a third party appraisal, with the remainder of the purchase price being allocated to the FCC license. This allocation method is commonly called the residual method and results in all of the acquisition’s intangible assets, including goodwill, being included in the Company’s FCC license value. Although the Company has directly valued the FCC license of stations acquired since its adoption of SFAS No. 141, the Company had retained the use of the residual method to perform its annual impairment tests in accordance with SFAS No. 142 for acquisitions effected prior to the adoption of SFAS No. 141. EITF Topic D-108 prohibits the use of the residual method and precludes companies from reclassifying to goodwill any goodwill that was originally included in the value of the FCC license, resulting in a write-off. Implementation of EITF Topic D-108 was required no later than Emmis’ fiscal year ended February 28, 2006, but the Company elected to adopt it as of December 1, 2004 and recorded a noncash charge of $303.0 million, net of tax, in its fourth quarter of fiscal 2005 as a cumulative effect of an accounting change. This loss has no impact on the Company’s cash flows or compliance with its debt covenants. Since its adoption of SFAS No. 142 on March 1, 2002, the Company no longer amortizes goodwill for financial statement purposes. Accordingly, reported and pro forma results reflecting the impact of this accounting pronouncement are the same for all periods presented in the accompanying consolidated financial statements.

SEASONALITY

     Our results of operations are usually subject to seasonal fluctuations, which result in higher second and third quarter revenues and operating income. For our radio operations, this seasonality is due to the younger demographic composition of many of our stations. Advertisers increase spending during the summer months to target these listeners. In addition, advertisers generally increase spending across all of our segments during the months of October and November, which are part of our third quarter, in anticipation of the holiday season.

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INFLATION

     The impact of inflation on our operations has not been significant to date. However, there can be no assurance that a high rate of inflation in the future would not have an adverse effect on our operating results, particularly since our senior bank debt is entirely floating-rate debt.

FORWARD-LOOKING STATEMENTS

     This report includes or incorporates forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these forward-looking statements by our use of words such as “intend,” “plan,” “may,” “will,” “project,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “opportunity” and similar expressions, whether in the negative or affirmative. We cannot guarantee that we actually will achieve these plans, intentions or expectations. All statements regarding our expected financial position, business and financing plans are forward-looking statements.

     Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important facts in various cautionary statements in this report that we believe could cause our actual results to differ materially from forward-looking statements that we make. These include, but are not limited to, the following:

• material adverse changes in economic conditions in the markets of our Company;

• the ability of our stations and magazines to attract and retain advertisers;

• loss of key personnel

• the ability of our stations to attract quality programming and our magazines to attract good editors, writers and photographers;

• uncertainty as to the ability of our stations to increase or sustain audience share for their programs and our magazines to increase or sustain subscriber demand;

• competition from other media and the impact of significant competition for advertising revenues from other media;

• future regulatory actions and conditions in the operating areas of our Company;

• the necessity for additional capital expenditures and whether our programming and other expenses increase at a rate faster than expected;

• increasingly hostile reaction of various individuals and groups, including the government, to certain content broadcast on radio and television stations in the United States;

• financial community and rating agency perceptions of our business, operations and financial condition and the industry in which we operate;

• the effects of terrorist attacks, political instability, war and other significant events;

• rapid changes in technology and standards in our industry;

• whether pending transactions, if any, are completed on the terms and at the times set forth, if at all;

• other risks and uncertainties inherent in the radio and television broadcasting and magazine publishing businesses.

The forward-looking statements do not reflect the potential impact of any future acquisitions, mergers or dispositions. We undertake no obligation to update or revise any forward-looking statements because of new information, future events or otherwise.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

GENERAL

     Market risk represents the risk of loss that may impact the financial position, results of operations or cash flows of Emmis due to adverse changes in financial and commodity market prices and rates. Emmis is exposed to market risk from changes in domestic and international interest rates (i.e. prime and LIBOR) and foreign currency exchange rates. To manage interest-rate exposure, Emmis periodically enters into interest-rate derivative agreements. Emmis does not use financial instruments for trading and is not a party to any leveraged derivatives. As of February 28, 2006, Emmis was not a party to any interest-rate derivative agreements.

INTEREST RATES

     At February 28, 2006, the entire outstanding balance under our credit facility and senior floating rate notes, approximately 53% of Emmis’ total outstanding debt (credit facility, senior subordinated debt, senior floating rate notes and senior discount notes), bears interest at variable rates. The credit facility requires Emmis to maintain fixed interest rates, for at least a two year period, on a minimum of 30% of Emmis’ total outstanding debt, as defined (including the senior subordinated debt, but excluding the senior floating rate notes and senior discount notes). This ratio of fixed to floating rate debt must be maintained if Emmis’ total leverage ratio, as defined, is greater than 6:1 at any quarter end. Emmis currently has no interest rate derivative arrangements, as its total leverage ratio, as defined, was less than 6:1 as of February 28, 2006.

     Based on amounts outstanding at February 28, 2006, if the interest rate on our variable debt were to increase by 1.0%, our annual interest expense would be higher by approximately $4.2 million. We redeemed the remaining $120 million of senior floating rate notes outstanding on March 9, 2006. After this redemption, if the interest rate on our variable debt were to increase by 1.0%, our annual interest expense would be higher by approximately $3.0 million.

FOREIGN CURRENCY

     Emmis owns a 59.5% interest in a Hungarian subsidiary which is consolidated in the accompanying financial statements. This subsidiary’s operations are measured in its local currency (forint). Emmis has a natural hedge against currency fluctuations between the forint and the U.S. dollar since most of the subsidiary’s long-term obligations are denominated in Hungarian forints. Emmis owns a network of radio stations in Belgium, which are consolidated in the accompanying financial statements, and its investment to date is approximately $11.2 million. These subsidiaries’ operations are measured in their local currency (Euro). Emmis owns and operates a national radio network in Slovakia, which was acquired in March 2005. This subsidiary is measured in its local currency (koruna). Emmis owns a 66.5% controlling interest in a national radio network in Bulgaria, which was acquired in November 2005. This subsidiary is measured in its local currency (leva). While Emmis management cannot predict the most likely average or end-of-period forint to dollar, Euro to dollar, koruna to dollar, or leva to dollar exchange rates for calendar 2006, we believe any devaluation of the forint, Euro, koruna or leva would have an immaterial effect on our financial statements taken as a whole, as the Hungarian, Belgian, Slovakian and Bulgarian stations accounted for approximately 7.1% of Emmis’ total revenues and approximately 2.6% of Emmis’ total assets as of, and for the year ended, February 28, 2006.

     At February 28, 2006 the Hungarian subsidiary had $0.4 million of U.S. dollar denominated loans outstanding. The Hungarian subsidiary repaid $0.2 million of U.S. dollar denominated loans during fiscal 2006. In the Company’s fiscal quarter ended February 28, 2006, it was determined that certain loans to its 59.5% owned Hungarian subsidiary were no longer deemed to be permanently invested. As of February 28, 2006, these loans total $5.7 million. The Company began recording foreign currency gains and losses related to these loans in its fiscal quarter ended February 28, 2006 and will continue to record foreign currency gains and losses until the loans are fully repaid. The Belgium, Bulgarian and Slovakian stations had no U.S. dollar denominated loans outstanding during fiscal 2006 or at February 28, 2006.

     Emmis currently does not maintain any derivative instruments to mitigate the exposure to foreign currency translation and/or transaction risk. However, this does not preclude the adoption of specific hedging strategies in the future.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     Emmis Communications Corporation’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, Emmis Communications Corporation’s principal executive and principal financial officers and effected by Emmis Communications Corporation’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

(1)	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Emmis Communications Corporation;
(2)	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Emmis Communications Corporation are being made only in accordance with authorizations of management and directors of Emmis Communications Corporation; and
(3)	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Emmis Communications Corporation’s assets that could have a material effect on the financial statements.

     Management has evaluated the effectiveness of its internal control over financial reporting as of February 28, 2006, based on the control criteria established in a report entitled Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, we have concluded that Emmis Communications Corporation’s internal control over financial reporting is effective as of February 28, 2006.

     The Company’s independent registered public accounting firm, Ernst & Young, LLP, has issued an attestation report on management’s assessment of Emmis Communications Corporation’s internal control over financial reporting as of February 28, 2006, which report is included herein.

/s/ Jeffrey H. Smulyan	/s/ David R. Newcomer
Jeffrey H. Smulyan	David R. Newcomer
President and Chief Executive Officer	Interim Chief Financial Officer

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Emmis Communications Corporation and Subsidiaries

We have audited management’s assessment, included in the accompanying “Management’s Report on Internal Control over Financial Reporting”, that Emmis Communications Corporation and Subsidiaries maintained effective internal control over financial reporting as of February 28, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Emmis Communication Corporation and Subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Emmis Communications Corporation and Subsidiaries maintained effective internal control over financial reporting as of February 28, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Emmis Communications Corporation and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of February 28, 2006, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Emmis Communications Corporation and Subsidiaries as of February 28, 2006 and 2005, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the three years in the period ended February 28, 2006 of Emmis Communications Corporation and Subsidiaries and our report dated May 8, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Indianapolis, Indiana
May 8, 2006

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Emmis Communications Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheets of Emmis Communications Corporation and Subsidiaries as of February 28, 2005 and 2006 and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the three years in the period ended February 28, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Emmis Communications Corporation and Subsidiaries at February 28, 2005 and 2006, and the consolidated results of their operations and their cash flows for each of the three years in the period ended February 28, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1w and Note 8 to the consolidated financial statements, effective December 1, 2004, the Company changed its method of accounting for goodwill and other intangible assets upon adoption of EITF Topic D-108, “Use of the Residual Method to Value Acquired Assets Other than Goodwill.”

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Emmis Communications Corporation and Subsidiaries’ internal control over financial reporting as of February 28, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 8, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Indianapolis, Indiana
May 8, 2006

60

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

	FOR THE YEARS ENDED FEBRUARY 28 (29),
	2004			2005			2006
NET REVENUES	$	326,618		$	351,820		$	387,381
OPERATING EXPENSES:
Station operating expenses, excluding noncash compensation		201,693			220,473			253,158
Corporate expenses, excluding noncash compensation		24,105			30,792			32,686
Depreciation and amortization		15,270			15,870			17,335
Noncash compensation		14,821			11,300			8,906
Impairment losses		—			—			37,372
Loss on disposal of assets		78			795			94
Total operating expenses		255,967			279,230			349,551
OPERATING INCOME		70,651			72,590			37,830
OTHER INCOME (EXPENSE):
Interest expense		(62,950	)		(39,690	)		(70,586	)
Interest income		119			1,037			3,532
Gain (loss) in unconsolidated affiliates		(178	)		97			8
Loss on debt extinguishment		—			(97,248	)		(6,952	)
Other income (expense), net		(736	)		1,062			(500	)
Total other income (expense)		(63,745	)		(134,742	)		(74,498	)
INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST, DISCONTINUED OPERATIONS AND ACCOUNTING CHANGE		6,906			(62,152	)		(36,668	)
PROVISION (BENEFIT) FOR INCOME TAXES		5,679			821			(15,455	)
MINORITY INTEREST EXPENSE, NET OF TAX		1,878			2,486			3,026
LOSS FROM CONTINUING OPERATIONS		(651	)		(65,459	)		(24,239	)
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX		2,907			64,091			382,010
INCOME (LOSS) BEFORE ACCOUNTING CHANGE		2,256			(1,368	)		357,771
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX OF $185,450		—			(303,000	)		—
NET INCOME (LOSS)		2,256			(304,368	)		357,771
PREFERRED STOCK DIVIDENDS		8,984			8,984			8,984
NET (INCOME) LOSS AVAILABLE TO COMMON SHAREHOLDERS	$	(6,728	)	$	(313,352	)	$	348,787

The accompanying notes to consolidated financial statements are an integral part of these statements.

In the years ended February 28 (29), 2004, 2005 and 2006, $9.5 million, $6.8 million and $4.7 million, respectively, of our noncash compensation was attributable to our stations, while $5.3 million, $4.5 million and $4.2 million was attributable to corporate, respectively.

61

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS — (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

BASIC NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS:
Continuing operations, before accounting change	$	(0.18	)	$	(1.33	)	$	(0.78	)
Discontinued operations, net of tax		0.06			1.15			8.91
Cumulative effect of accounting change, net of tax		—			(5.40	)		—
Net income (loss) available to common shareholders	$	(0.12	)	$	(5.58	)	$	8.13
DILUTED NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS:
Continuing operations, before accounting change	$	(0.18	)	$	(1.33	)	$	(0.78	)
Discontinued operations, net of tax		0.06			1.15			8.91
Cumulative effect of accounting change, net of tax		—			(5.40	)		—
Net income (loss) available to common shareholders	$	(0.12	)	$	(5.58	)	$	8.13

The accompanying notes to consolidated financial statements are an integral part of these statements.

62

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

	FEBRUARY 28,
	2005		2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	16,054	$	140,822
Accounts receivable, net of allowance for doubtful accounts of $1,525 and $2,080, respectively		63,353		67,120
Prepaid expenses		14,649		16,874
Other		9,275		10,239
Current assets — discontinued operations		63,754		20,151
Total current assets		167,085		255,206
PROPERTY AND EQUIPMENT:
Land and buildings		26,913		28,682
Leasehold improvements		14,539		17,516
Broadcasting equipment		47,612		55,364
Office equipment and automobiles		34,033		35,984
Construction in progress		3,357		4,571
		126,454		142,117
Less-Accumulated depreciation and amortization		63,934		75,771
Total property and equipment, net		62,520		66,346
INTANGIBLE ASSETS:
Indefinite lived intangibles		880,499		874,783
Goodwill		106,808		77,413
Other intangibles		35,996		47,749
		1,023,303		999,945
Less-Accumulated amortization		23,026		27,349
Total intangible assets, net		1,000,277		972,596
OTHER ASSETS:
Deferred debt issuance costs, net of accumulated amortization of $1,246 and $2,835, repectively		10,852		11,958
Investments		7,607		7,815
Deferred tax assets		78,583		—
Deposits and other		9,514		25,320
Total other assets, net		106,556		45,093
Noncurrent assets — discontinued operations		486,597		173,460
Total assets	$	1,823,035	$	1,512,701

The accompanying notes to consolidated financial statements are an integral part of these statements.

63

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS — (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

	FEBRUARY 28,
	2005			2006
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	19,848		$	25,221
Current maturities of long-term debt		7,688			129,175
Accrued salaries and commissions		10,244			12,109
Accrued interest		9,582			9,561
Deferred revenue		13,409			13,734
Other		5,696			6,070
Current liabilities — discontinued operations		49,474			26,033
Total current liabilities		115,941			221,903
CREDIT FACILITY AND SENIOR SUBORDINATED DEBT, NET OF CURRENT PORTION		1,172,563			664,424
SENIOR DISCOUNT NOTES, NET OF CURRENT PORTION		1,245			—
OTHER LONG-TERM DEBT, NET OF CURRENT PORTION		5,422			3,520
OTHER NONCURRENT LIABILITIES		1,804			3,341
MINORITY INTEREST		48,021			48,465
DEFERRED INCOME TAXES		—			127,228
NONCURRENT LIABILITIES — DISCONTINUED OPERATIONS		25,447			28,341
Total liabilities		1,370,443			1,097,222
COMMITMENTS AND CONTINGENCIES (NOTE 10)
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK, $0.01 PAR VALUE; $50.00 LIQUIDATION PREFERENCE; AUTHORIZED 10,000,000 SHARES; ISSUED AND OUTSTANDING 2,875,000 SHARES		—			143,750
SHAREHOLDERS’ EQUITY:
Series A cumulative convertible preferred stock, $0.01 par value; $50.00 liquidation preference; authorized 10,000,000 shares; issued and outstanding 2,875,000 shares		29			—
Class A common stock, $0.01 par value; authorized 170,000,000 shares; issued and outstanding 51,621,958 shares and 32,164,397 shares in 2005 and 2006, respectively		516			322
Class B common stock, $0.01 par value; authorized 30,000,000 shares; issued and outstanding 4,850,762 shares and 4,879,774 shares in 2005 and 2006, respectively		48			49
Additional paid-in capital		1,041,128			513,879
Accumulated deficit		(589,354	)		(240,567	)
Accumulated other comprehensive income (loss)		225			(1,954	)
Total shareholders’ equity		452,592			271,729
Total liabilities and shareholders’ equity	$	1,823,035		$	1,512,701

The accompanying notes to consolidated financial statements are an integral part of these statements.

64

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE THREE YEARS ENDED FEBRUARY 28, 2006
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

	Series A						Class A						Class B
	Preferred Stock						Common Stock						Common Stock
	Shares			Amount			Shares			Amount			Shares			Amount
BALANCE, FEBRUARY 28, 2003		2,875,000		$	29			48,874,017		$	489			5,011,348		$	50
Issuance of Class A Common Stock in exchange for Class B Common Stock		—			—			—			—			—			—
Issuance of common stock to employees and officers and related income tax benefits		—			—			657,857			6			—			—
Sale of Class A Common Stock via secondary offering		—			—			1,157,960			12			27,572			—
Preferred stock dividends		—			—			—			—			—			—
Comprehensive Income:
Net income (loss)		—			—			—			—			—			—
Cumulative translation adjustment		—			—			—			—			—			—
Change in fair value of hedged derivatives		—			—			—			—			—			—
Total comprehensive loss		—			—			—			—			—			—
BALANCE FEBRUARY 29, 2004		2,875,000			29			50,689,834			507			5,038,920			50
Issuance of Class A Common Stock in exchange for Class B Common Stock		—			—			200,000			2			(200,000	)		(2	)
Exercise of stock options and related income tax benefits		—			—			101,401			1			—			—
Issuance of Class A Common Stock to employees and officers and related income tax benefits		—			—			630,723			6			11,842			—
Preferred stock dividends		—			—			—			—			—			—
Comprehensive Income:
Net income (loss)		—			—			—			—			—			—
Cumulative translation adjustment		—			—			—			—			—			—
Total comprehensive loss		—			—			—			—			—			—
BALANCE, FEBRUARY 28, 2005		2,875,000			29			51,621,958			516			4,850,762			48
Issuance of Class A Common Stock in exchange for Class B Common Stock		—			—			—			—			—			—
Exercise of stock options and related income tax benefits		—			—			214,092			2			—			—
Issuance of Common Stock to employees and officers and related income tax benefits		—			—			578,347			6			29,012			1
Purchases of common stock		—			—			(20,250,000	)		(202	)		—			—
Reclass preferred stock to mezzanine		(2,875,000	)		(29	)		—			—			—			—
Preferred stock dividends		—			—			—			—			—			—
Comprehensive Income:
Net income (loss)		—			—			—			—			—			—
Cumulative translation adjustment		—			—			—			—			—			—
Total comprehensive income		—			—			—			—			—			—
BALANCE, FEBRUARY 28, 2006		—		$	—			32,164,397		$	322			4,879,774		$	49

The accompanying notes to consolidated financial statements are an integral part of these statements.

65

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — (CONTINUED)
FOR THE THREE YEARS ENDED FEBRUARY 28, 2006
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

							Accumulated
	Additional						Other			Total
	-in			Accumulated			Comprehensive			Shareholders’
	Capital			Deficit			Loss			Equity
BALANCE, FEBRUARY 28, 2003	$	990,770		$	(269,274	)	$	(17,359	)	$	704,705
Issuance of Class A Common Stock in exchange for Class B Common Stock		—			—			—			—
Issuance of common stock to employees and related income tax benefits		12,826			—			—			12,832
Sale of Class A Common Stock via secondary offering		21,887			—			—			21,899
Preferred stock dividends		—			(8,984	)		—			(8,984	)
Comprehensive Income:
Net income (loss)		—			2,256			—
Cumulative translation adjustment		—			—			13,859
Change in fair value of hedged derivatives		—			—			2,379
Total comprehensive loss		—			—			—			18,494
BALANCE, FEBRUARY 29, 2004		1,025,483			(276,002	)		(1,121	)		748,946
Issuance of Class A Common Stock in exchange for Class B Common Stock		—			—			—			—
Exercise of stock options and related income tax benefits		(20	)		—			—			(19	)
Issuance of Class A Common Stock to employees and officers and related income tax benefits		15,665			—			—			15,671
Preferred stock dividends		—			(8,984	)		—			(8,984	)
Comprehensive Income:
Net income (loss)		—			(304,368	)		—
Cumulative translation adjustment		—			—			1,346
Total comprehensive loss		—			—			—			(303,022	)
BALANCE, FEBRUARY 28, 2005		1,041,128			(589,354	)		225			452,592
Issuance of Class A Common Stock in exchange for Class B Common Stock		—			—			—			—
Exercise of stock options and related income tax benefits		4,675			—			—			4,677
Issuance of Common Stock to employees and officers and related income tax benefits		9,971			—			—			9,978
Purchases of common stock		(398,174	)		—			—			(398,376	)
Reclass preferred stock to mezzanine		(143,721	)		—			—			(143,750	)
Preferred stock dividends		—			(8,984	)		—			(8,984	)
Comprehensive Income:
Net income (loss)		—			357,771			—
Cumulative translation adjustment		—			—			(2,179	)
Total comprehensive income		—			—			—			355,592
BALANCE, FEBRUARY 28, 2006	$	513,879		$	(240,567	)	$	(1,954	)	$	271,729

The accompanying notes to consolidated financial statements are an integral part of these statements.

66

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

	FOR THE YEARS ENDED FEBRUARY 28 (29),
	2004			2005			2006
OPERATING ACTIVITIES:
Net income (loss)	$	2,256		$	(304,368	)	$	357,771
Adjustments to reconcile net income (loss) to net cash provided by operating activities -
Discontinued operations		(2,907	)		(64,091	)		(382,010	)
Impairment losses		—			—			37,372
Loss on debt extinguishment		—			97,248			6,952
Cumulative effect of accounting change, net		—			303,000			—
Depreciation and amortization		19,334			17,899			19,859
Accretion of interest on senior discount notes, including amortization of related debt costs		26,524			5,707			164
Minority interest expense, net		1,878			2,486			3,026
Provision for bad debts		1,862			1,924			3,228
Provision (benefit) for deferred income taxes		5,679			821			(15,588	)
Noncash compensation		14,821			11,300			8,906
Loss on disposal of assets		78			795			94
Tax benefits of exercise of stock options		2,775			(2,305	)		642
Other		3,640			1,070			(2,178	)
Changes in assets and liabilities —
Accounts receivable		(1,975	)		(3,709	)		(4,813	)
Prepaid expenses and other current assets		685			(77	)		2,209
Other assets		2,622			(5,664	)		(4,393	)
Accounts payable and accrued liabilities		(5,291	)		(4,280	)		3,658
Deferred revenue		(1,163	)		(489	)		325
Other liabilities		(12,699	)		(4,554	)		(11,074	)
Net cash provided by operating activities — discontinued operations		60,046			70,091			45,027
Net cash provided by operating activities		118,165			122,804			69,177
INVESTING ACTIVITIES:
Purchases of property and equipment		(9,942	)		(10,519	)		(12,833	)
Disposal of property and equipment		1,804			—			—
Cash paid for acquisitions		(109,470	)		—			(15,834	)
Proceeds from sale/exchange of stations, net		—			82,078			—
Deposits on acquisitions and other		(479	)		(861	)		(96	)
Net cash provided by (used in) investing activities — discontinued operations		(28,272	)		(16,349	)		889,031
Net cash provided by (used in) investing activities		(146,359	)		54,349			860,268

The accompanying notes to consolidated financial statements are an integral part of these statements.

67

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (CONTINUED)
(DOLLARS IN THOUSANDS)

	FOR THE YEARS ENDED FEBRUARY 28 (29),
	2004			2005			2006
FINANCING ACTIVITIES:
Payments on long-term debt		(105,066	)		(1,464,718	)		(889,638	)
Proceeds from long-term debt		138,000			1,376,500			501,500
Settlement of tax withholding obligations		(1,774	)		(1,586	)		(2,729	)
Purchases of the Company’s Class A Common Stock, including transaction costs		—			—			(398,376	)
Proceeds from exercise of stock options and employee stock purchases		10,555			2,581			4,135
Premiums paid to redeem outstanding obligations		—			(72,810	)		—
Payments for debt related costs		(646	)		(12,052	)		(10,585	)
Preferred stock dividends		(8,984	)		(8,984	)		(8,984	)
Net cash provided by (used in) financing activities		32,085			(181,069	)		(804,677	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		3,891			(3,916	)		124,768
CASH AND CASH EQUIVALENTS:
Beginning of period		16,079			19,970			16,054
End of period	$	19,970		$	16,054		$	140,822
SUPPLEMENTAL DISCLOSURES:
Cash paid for-
Interest	$	56,720		$	60,166		$	88,791
Income taxes		1,143			286			5,045
Non-cash financing transactions-
Value of stock issued to employees under stock compensation program and to satisfy accrued incentives		25,932			14,650			13,249
ACQUISITION OF WBPG-TV (Now Held for Sale)
Fair value of assets acquired	$	11,854
Cash paid		11,656
Liabilities recorded	$	198
ACQUISITION OF AUSTIN RADIO
Fair value of assets acquired	$	154,867
Cash paid		106,478
Liabilities recorded	$	48,389
ACQUISITION OF RADIO STATIONS IN BELGIUM
Fair value of assets acquired	$	2,992
Cash paid		2,992
Liabilities recorded	$	—
EXCHANGE OF ASSETS FOR WLUP-FM
Fair value of assets acquired				$	128,741
Basis in assets exchanged					147,169
Gain on exchange of assets					56,225
Cash received					(74,778	)
Liabilities recorded				$	125

The accompanying notes to consolidated financial statements are an integral part of these statements.

68

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (CONTINUED)
(DOLLARS IN THOUSANDS)

	FOR THE YEARS ENDED FEBRUARY 28 (29),
	2004	2005	2006
ACQUISITION OF RADIO STATIONS IN SLOVAKIA
Fair value of assets acquired			$	17,815
Cash paid				12,563
Liabilities recorded			$	5,252
ACQUISITION OF RADIO STATIONS IN BULGARIA
Fair value of assets acquired			$	4,814
Cash paid				3,271
Liabilities recorded			$	1,543

The accompanying notes to consolidated financial statements are an integral part of these statements.

69

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS UNLESS INDICATED OTHERWISE, EXCEPT SHARE DATA)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a. Principles of Consolidation

     The following discussion pertains to Emmis Communications Corporation (“ECC”) and its subsidiaries (collectively, “Emmis,” the “Company,” or “we”). Emmis’ foreign subsidiaries report on a fiscal year ending December 31, which Emmis consolidates into its fiscal year ending February 28 (29). All significant intercompany balances and transactions have been eliminated.

     b. Organization

     Emmis Communications Corporation is a diversified media company with radio broadcasting, television broadcasting and magazine publishing operations. In the quarter ended August 31, 2005, we classified our television assets as held for sale (see Note 1k for more discussion). The results of operations of our television division have been classified as discontinued operations in the accompanying consolidated financial statements for all periods presented. We own and operate seven FM radio stations serving the nation’s top three markets — New York, Los Angeles and Chicago. Additionally, we own and operate fifteen FM and two AM radio stations with strong positions in Phoenix, St. Louis, Austin (we have a 50.1% controlling interest in our radio stations located there), Indianapolis and Terre Haute. We have entered into an agreement to sell our remaining radio station in Phoenix (See Note 15). We also own and operate three television stations, each of which is affiliated with different networks. Our CBS, Fox and WB stations serve the markets of New Orleans, Honolulu and Orlando, respectively. We have entered into an agreement to sell our television station in Orlando (See Note 15). In addition to our domestic radio and TV broadcasting properties, we operate a radio news network in Indiana, publish Texas Monthly, Los Angeles, Atlanta, Indianapolis Monthly, Cincinnat, Tu Ciudad and Country Sampler and related magazines. Internationally, we own and operate a network of radio stations in the Flanders region of Belgium, a national radio network in Slovakia, have a 59.5% interest in a national radio station in Hungary and have a 66.5% interest in a national radio network in Bulgaria. We also engage in various businesses ancillary to our business, such as broadcast consulting and broadcast tower leasing.

     Substantially all of ECC’s business is conducted through its subsidiaries. The credit facility and senior subordinated notes indenture contain certain provisions that may restrict the ability of ECC’s subsidiaries to transfer funds to ECC in the form of cash dividends, loans or advances. See the accompanying condensed consolidating financial statements of Emmis Communications Corporation and subsidiaries (Note 14).

     c. Revenue Recognition

     Broadcasting revenue is recognized as advertisements are aired. Publication revenue is recognized in the month of delivery of the publication. Revenues presented in the financial statements are reflected on a net basis, after the deduction of advertising agency fees by the advertising agencies, usually at a rate of 15% of gross revenues.

     d. Allowance for Doubtful Accounts

     An allowance for doubtful accounts is recorded based on management’s judgement of the collectibility of receivables. When assessing the collectibility of receivables, management considers, among other things, historical loss activity and existing economic conditions. The activity in the allowance for doubtful accounts during the years ended February 2004, 2005 and 2006 was as follows:

	Balance At							Balance
	Beginning							At End
	Of Year		Provision		Write-Offs			Of Year
Year ended February 29, 2004	$	1,601		1,862		(1,732	)	$	1,731
Year ended February 28, 2005	$	1,731		1,924		(2,130	)	$	1,525
Year ended February 28, 2006	$	1,525		3,228		(2,673	)	$	2,080

70

     e. Television Programming

     Emmis has agreements with distributors for the rights to television programming over contract periods which generally run from one to five years. Each contract is recorded as an asset and a liability at an amount equal to its gross contractual commitment when the license period begins and the program is available for its first showing. The portion of program contracts which become payable within one year is reflected as a current liability — discontinued operations in the accompanying consolidated balance sheets.

     The rights to program materials are reflected in the accompanying consolidated balance sheets at the lower of unamortized cost or estimated net realizable value. Estimated net realizable values are based upon management’s expectation of future advertising revenues, net of sales commissions, to be generated by the program material. Amortization of program contract costs is computed under either the straight-line method over the contract period or based on usage, whichever yields the greater amortization for each program on a monthly basis. Program contract costs that management expects to be amortized in the succeeding year are classified as current assets — discontinued operations. Program contract liabilities are typically paid on a scheduled basis and are not affected by adjustments for amortization or estimated net realizable value. Certain program contracts provide for the exchange of advertising air time in lieu of cash payments for the rights to such programming. These contracts are recorded as the programs are aired at the estimated fair value of the programming received in the exchange. Although the asset and liability for programming not currently available for air are not reflected in the accompanying consolidated balance sheets, this programming is evaluated at least annually for impairment.

     f. Local Programming and Marketing Agreement Fees

     The Company often enters into Local Programming and Marketing Agreements (LMAs) in connection with acquisitions of radio and television stations, pending regulatory approval of transfer of the FCC licenses. Under the terms of these agreements, the Company makes specified periodic payments to the owner-operator in exchange for the right to program and sell advertising for a specified portion of the station’s inventory of broadcast time. The Company records revenues and expenses associated with the portion of the station’s inventory of broadcast time it manages. Nevertheless, as the holder of the FCC license, the owner-operator retains control and responsibility for the operation of the station, including responsibility over all programming broadcast on the station. The Company also enters into LMAs in connection with dispositions of radio and television stations. In such cases the Company may receive periodic payments in exchange for allowing the buyer to program and sell advertising for a portion of the station’s inventory of broadcast time.

     As discussed in Note 6, the Company entered into various LMAs during the three years ended February 28, 2006. The Company entered into a LMA on December 1, 2004 in connection with an exchange of radio stations that closed effective January 1, 2005. For the year ended February 28, 2005, Emmis recorded $0.8 million of LMA revenue, which is reflected in discontinued operations, and recorded $0.2 million of LMA expense, which is reflected in corporate expenses. For the year ended February 28, 2005, amounts reflected in the Company’s income from operations for the radio station operated under the LMA (excluding LMA fees) were net revenues of $0.6 million and station operating expenses of $0.4 million. The Company entered into a LMA on September 23, 2005 in connection with the sale of one of its St. Louis radio stations, which was consummated May 5, 2006 (See Note 15). The Company receives no compensation under the terms of the agreement. The Company entered into a LMA on November 30, 2005 in connection with the planned sale of its television station in Gulf Shores, AL. The Company received $9 million of the $12 million purchase price on November 30, 2005 with the remaining $3 million due upon the closing of the transaction. The Company receives $0.2 million per year payable in monthly installments related to this LMA. The Company entered into a LMA on December 5, 2005 in connection with the planned sale of its television station in Omaha, NE. Under the terms of the LMA, the buyer of the station will pay $5 million to the Company on October 15, 2007 and an additional $5 million on October 15, 2008 if closing on the station has not occurred. However, the Company receives no monthly compensation under the terms of the agreement.

     g. Noncash Compensation

     Noncash compensation includes compensation expense associated with restricted common stock issued under employment agreements, common stock issued to employees in lieu of cash bonuses or stock options, Company matches of common stock in the 401(k) plans and common stock issued to employees in exchange for cash compensation pursuant to our stock compensation program. The Company previously adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” and adopted SFAS No. 123(R), as revised, “Share Based Payments,” on March 1, 2006 (see Note 1w and 1x).

     In December 2001, Emmis instituted a 10% pay cut for substantially all of its non-contract employees and also began a stock compensation program under its 2001 Equity Incentive Plan. All Emmis employees who were affected by the pay cut were

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automatically eligible to participate in the stock compensation program, and all other employees are eligible to participate in the program by taking a voluntary pay cut. Each participant in the program could elect to receive the portion of their compensation that was cut in the form of stock that was issued every two weeks or in the form of restricted stock that vested and was issued after the end of the award year in January 2003. The stock that was issued every two weeks was awarded based on the fair market value of Emmis’ Class A Common Stock on the date it was issued. The restricted stock was awarded based on a discount off the initial fair market value of Emmis’ Class A Common Stock. The Company modified the plan in the calendar years 2003, 2004 and 2005, making the plan mandatory for a smaller group of employees. During the years ended February 2004, 2005 and 2006, the stock compensation program reduced cash compensation expense by approximately $9.0 million, $7.0 million and $4.0 million, respectively, but noncash compensation increased by the same amount. We issued approximately 0.8 million, 0.5 million and 0.3 million shares of common stock during the calendar 2003, 2004 and 2005 award years, respectively. Effective January 1, 2006, we further curtailed our stock compensation program by making the program elective for all employees.

     Emmis matches employee contributions to a 401(k) plan up to a maximum of $2 thousand per employee, with one-half of the contribution made in Emmis stock. Noncash compensation expense related to our 401(k) stock match was $0.6 million, $0.8 million and $0.9 million for the three year period ended February 28, 2006, respectively.

     On March 1, 2005 Emmis granted approximately 0.2 million shares of restricted stock or restricted stock units to certain of its employees in lieu of stock options, which significantly reduced the Company’s annual stock option grants. Although Emmis does not begin expensing stock options until March 1, 2006 [pursuant to SFAS No. 123(R)], it expenses the value of these restricted stock and restricted stock unit grants over their applicable vesting period, which ranges from 2 to 3 years. The Company recognized $1.1 million of noncash compensation expense related to the March 1, 2005 restricted stock and restricted stock unit grants in fiscal 2006.

     In its quarter ended February 28, 2006, the Company reversed approximately $1.2 million of noncash compensation expense previously accrued as the service conditions of certain awards were not satisfied.

     h. Cash and Cash Equivalents

     Emmis considers time deposits, money market fund shares and all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.

     i. Property and Equipment

     Property and equipment are recorded at cost. Depreciation is generally computed using the straight-line method over the estimated useful lives of the related assets which are 31.5 years for buildings, not more than 32 years or the life of the lease, whichever is lower for leasehold improvements, and 5 to 7 years for broadcasting equipment, office equipment and automobiles. Maintenance, repairs and minor renewals are expensed; improvements are capitalized. On a continuing basis, the Company reviews the carrying value of property and equipment for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” If events or changes in circumstances were to indicate that an asset carrying value may not be recoverable, a write-down of the asset would be recorded through a charge to operations. Depreciation expense for the years ended February 2004, 2005 and 2006 was $11.9 million, $12.5 million and $12.8 million, respectively.

     j. Intangible Assets and Goodwill

     Intangible assets are recorded at cost. The cost of the broadcast license for Slager Radio is being amortized over the five-year term of the license, which expires in November 2009. The cost of the broadcast licenses in Belgium is being amortized over the initial nine-year term of the licenses, which expire in December 2012. The cost of the broadcast license in Slovakia is being amortized over the initial 8 year term of the license, which expires in February 2013. The cost of the broadcast licenses in Bulgaria is being amortized over the initial 7 year term of the licenses, which expire in December 2012. Other definite-lived intangibles are amortized using the straight-line method over varying periods, none in excess of 40 years. Effective March 1, 2002, we ceased amortization of goodwill and FCC licenses in connection with our adoption of SFAS No. 142, “Goodwill and Other Intangible Assets” (See Note 8). FCC licenses are renewed every eight years for a nominal amount, and historically all of our FCC licenses have been renewed at the end of their respective eight-year periods. Since we expect that all of our FCC licenses will continue to be renewed in the future, we believe they have indefinite lives.

     Subsequent to the acquisition of an intangible asset, Emmis evaluates whether later events and circumstances indicate the remaining estimated useful life of that asset may warrant revision or that the remaining carrying value of such an asset may not be recoverable in

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accordance with SFAS No. 142, “Goodwill and other Intangible Assets.”

          Indefinite-lived Intangibles

     Under the guidance in Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“Statement No. 142”), the Company’s 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.

     Since its adoption of EITF Topic D-108 on December 1, 2004, the Company has used a direct-method valuation approach known as the greenfield income valuation method when it performs its annual impairment tests. Under this method, the Company projects the cash flows that would be generated by each of its units of accounting if the unit of accounting were commencing operations in each of its markets 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 was just beginning operations. 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. For its radio stations, the Company has determined the unit of accounting to be all of its stations in a local market.

          Goodwill

     Statement No. 142 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 conducted the two-step impairment test as of December 1, 2003, 2004 and 2005. 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. The multiple applied to each reporting unit is then adjusted up or down from this benchmark based upon characteristics of the reporting unit’s specific market, such as market size, market growth rate, and recently completed or announced transactions within the market. There are no publicly traded publishing companies that are focused predominantly on city and regional magazines as is our publishing segment. 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.

     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 in the statement of operations.

          Definite-lived Intangibles

     The Company has definite-lived intangible assets recorded that continue to be amortized in accordance with SFAS No. 142. These assets consist primarily of foreign broadcasting licenses, favorable office leases, customer lists and non-compete agreements, 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.

k. Discontinued operations and assets held for sale

     The Company records amounts in discontinued operations as required by the Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” In accordance with SFAS 144, the results of operations and related disposal costs, gains and losses for business units that the Company has eliminated or sold are classified in discontinued operations for all periods presented.

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Summary of Discontinued Operations Activity:

	Year ended February 28 (29),
	2004			2005			2006
Income (loss) from operations:
Television	$	12,837		$	38,249		$	24,869
WRDA-FM		(1,400	)		(1,373	)		(777	)
Phoenix radio stations		9,411			7,650			440
Votionis		909			(490	)		—
Total		21,757			44,036			24,532
Less: Provision for income taxes		7,922			13,587			9,562
Income from operations, net of tax		13,835			30,449			14,970
Gain on sale of discontinued operations:
Television		—			—			572,975
Phoenix radio stations		—			57,012			—
Less: Provision for income taxes		—			23,370			205,935
Gain on sale of discontinued operations, net of tax		—			33,642			367,040
Other:
Cumulative currency translation loss -
Votionis		(10,928	)		—			—
Income from discontinued operations, net of tax	$	2,907		$	64,091		$	382,010

Television Division

     On May 10, 2005, Emmis announced that it had engaged advisors to assist in evaluating strategic alternatives for its television assets. The decision to explore strategic alternatives for the Company’s television assets stemmed from the Company’s desire to lower its debt, coupled with the Company’s view that its television stations needed to be aligned with a company that was larger and more singularly focused on the challenges of American television, including digital video recorders and the industry’s relationship with cable and satellite providers. As of February 28, 2006 the Company has sold thirteen of its sixteen television stations (See Note 6). On May 5, 2006, the Company entered into an agreement to sell its television station in Orlando (See Note 15). The Company expects to enter into agreements to sell its remaining television stations in the next three to twelve months. The Company concluded its television assets were held for sale in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“Statement No. 144”) and the results of operations of the television division have been classified as discontinued operations in the accompanying consolidated financial statements for all periods presented. The television division had historically been presented as a separate reporting segment of Emmis. The following table summarizes certain operating results for the television division for all periods presented:

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	Year ended February 28 (29),
	2004		2005		2006
Net revenues	$	235,938	$	264,865	$	213,130
Station operating expenses, excluding noncash compensation		150,485		161,149		149,235
Depreciation and amortization		30,174		30,156		12,322
Noncash compensation		7,715		5,197		3,225
Interest expense		23,008		26,967		21,954
Income before taxes		12,837		38,249		24,869
Provision for income taxes		4,878		15,683		9,701
Gain on sale of stations, net of tax		—		—		367,040

     Net assets related to our television division are classified as discontinued operations in the accompanying balance sheets as follows:

	February 28, 2005		February 28, 2006
Current assets:
Accounts receivable, net	$	43,634	$	10,130
Current portion of TV program rights		16,562		7,988
Prepaid expenses		1,849		275
Other		1,617		1,690
Total current assets		63,662		20,083
Noncurrent assets:
Property and equipment, net		130,016		27,477
Intangibles, net		335,341		124,369
Other noncurrent assets		7,466		8,622
Total noncurrent assets		472,823		160,468
Total assets	$	536,485	$	180,551
Current liabilities:
Accounts payable and accrued expenses	$	8,686	$	3,360
Current portion of TV program rights		30,910		12,731
Accrued salaries and commissions		6,141		1,076
Deferred revenue		882		7,454
Other		2,697		1,412
Total current liabilities		49,316		26,033
Noncurrent liabilities:
TV program rights payable, net of current portion		18,634		9,845
Other noncurrent liabilities		6,806		18,496
Total noncurrent liabilities		25,440		28,341
Total liabilities	$	74,756	$	54,374

     Certain debt would be required to be repaid as a result of the disposition of the Company’s television assets. The Company has allocated interest expense associated with this portion of debt to the television operations in accordance with Emerging Issues Task Force Issue 87-24 “Allocation of Interest to Discontinued Operations,” as modified.

     Our television station in New Orleans, Louisiana, WVUE, was significantly affected by Hurricane Katrina and the subsequent flooding. The flooding of New Orleans caused extensive property damage at WVUE. Although the extent of the property damage is estimated to be approximately $11.5 million, Emmis believes that it is insured (subject to applicable deductibles) for substantially all property losses resulting from Katrina and subsequent flooding as it maintained Federal flood insurance and private flood insurance. Since Emmis believes recovery of insurance proceeds under its relevant policies is probable, no adjustments to the carrying values of

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WVUE property were made as of February 28, 2006. Additionally, the Company recorded a $0.6 million reserve against WVUE accounts receivable due to the impact of the flooding on the local economy. The charge is reflected in the year ended February 28, 2006 in the preceding table. WVUE did not broadcast its signal for an extended period of time as a result of Katrina and the general disruption of the local economy will negatively affect ongoing advertising revenue. The Company maintains business interruption insurance and expects to be reimbursed for lost net income as a result of Katrina. However, unlike property and casualty, Emmis has not accrued for business interruption insurance proceeds. Business interruption insurance proceeds will only be recognized upon receipt.

WRDA-FM

     On September 23, 2005, Emmis signed a definitive agreement to sell radio station WRDA-FM in St. Louis, MO to Radio One, Inc. for $20 million. Radio One, Inc. began operating this station pursuant to a LMA effective October 1, 2005. Radio One, Inc. made no monthly payments to Emmis, but reimbursed Emmis for substantially all of Emmis’ costs to operate the station. This sale closed May 5, 2006 (See Note 15). Emmis had tried various formats with the station over the past several years, but did not achieve an acceptable operating performance with any of the formats. After the most recent format change failed to meet expectations, Emmis elected to divest of the station. The assets and liabilities of WRDA-FM have been classified as held for sale as of February 28, 2005 and 2006 and its results of operations for the three years ended February 28, 2006 have been reflected as discontinued operations in the accompanying consolidated financial statements. WRDA-FM had historically been included in the radio segment.

     The following table summarizes certain operating results for WRDA-FM for all periods presented:

	Year ended February 28 (29),
	2004			2005			2006
Net revenues	$	2,598		$	1,775		$	851
Station operating expenses, excluding noncash compensation		3,554			2,900			1,497
Noncash compensation		186			73			19
Depreciation and amortization		257			175			51
Loss before taxes		(1,400	)		(1,373	)		(777	)
Benefit for income taxes		(532	)		(563	)		(319	)

     Net assets related to WRDA-FM are classified as discontinued operations in the accompanying consolidated balance sheets as follows:

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	February 28, 2005		February 28, 2006
Current assets:
Prepaid expenses	$	64	$	—
Other		28		68
Total current assets		92		68
Noncurrent assets:
Property and equipment, net		782		—
Intangibles, net		12,992		12,992
Total noncurrent assets		13,774		12,992
Total assets	$	13,866	$	13,060
Current liabilities:
Accounts payable and accrued expenses	$	61	$	—
Accrued salaries and commissions		49		—
Deferred revenue		44		—
Other		4		—
Total current liabilities		158		—
Noncurrent liabilities:
Other noncurrent liabilities		7		—
Total noncurrent liabilities		7		—
Total liabilities	$	165	$	—

Phoenix

     On January 14, 2005, Emmis completed its exchange with Bonneville International Corporation (“Bonneville”) whereby Emmis swapped three of its radio stations in Phoenix (KTAR-AM, KMVP-AM and KKLT-FM) for Bonneville’s WLUP-FM located in Chicago and $74.8 million in cash, including payments for working capital items. Emmis used the cash to repay amounts outstanding under its senior credit facility. Emmis has long sought a second radio station in Chicago to complement its existing station in the market, WKQX-FM. This transaction achieves that goal by marrying the heritage alternative rock format (WKQX) with the heritage classic rock format (WLUP). Emmis began programming WLUP-FM and Bonneville began programming KTAR-AM, KMVP-AM and KKLT-FM under LMAs on December 1, 2004. The assets and liabilities of the three radio stations in Phoenix and their results of operations have been classified as discontinued operations in the accompanying consolidated financial statements. These three radio stations had historically been included in the radio reporting segment. The Company recognized a gain on sale of $33.6 million, net of tax, which is included in income from discontinued operations for the year ended February 28, 2005 in the accompanying consolidated financial statements. The following table summarizes certain operating results for the three Phoenix stations for all periods presented:

	Year ended February 28 (29),
	2004		2005		2006
Net revenues	$	26,714	$	24,443	$	—
Station operating expenses, excluding noncash compensation		15,691		15,726		(440	)
Noncash compensation		728		468		—
Depreciation and amortization		767		592		—
Pre-tax income		9,411		7,650		440
Provision for income taxes		3,576		3,142		180

Votionis

     On May 12, 2004, Emmis sold to its minority partners for $7.3 million in cash its entire 75% interest in Votionis, S.A. (“Votionis”), which owns and operates two radio stations in Buenos Aires, Argentina. In connection with the sale, Emmis recorded a loss from discontinued operations of $10.0 million in fiscal 2004. In fiscal 2005, Emmis recorded income from discontinued operations of $4.2 million, consisting of operational losses of $0.5 million, offset by tax benefits of $4.7 million. The Argentine peso substantially devalued relative to the U.S. dollar early in 2002. The $10.0 million loss in fiscal 2004 was primarily attributable to the devaluation of

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the peso and resulting non-cash write-off of cumulative currency translation adjustments. Votionis had historically been included in the radio reporting segment. The following table summarizes certain operating results for Votionis for all periods presented:

	Year Ended February 28 (29),
	2004		2005			2006
Net revenues	$	4,703	$	1,693		$	—
Station operating expenses, excluding noncash compensation		3,656		2,019			—
Depreciation and amortization		372		164			—
Pre-tax income (loss)		909		(490	)		—
Provision (benefit) for income taxes		—		(4,675	)		—

     Votionis operating results were reported on a calendar year and consolidated into the Company’s fiscal year for reporting purposes. Accordingly, the results for its calendar quarter ended March 31, 2004 were consolidated into Emmis’ fiscal quarter ended May 31, 2004. The quarter ended May 31, 2004, includes the results of Votionis from January 1, 2004 to May 12, 2004, as the results of operations of Votionis for the period April 1, 2004 through May 12, 2004 were immaterial.

     l. Advertising and Subscription Acquisition Costs

     Advertising and subscription acquisition costs are expensed the first time the advertising takes place, except for certain direct-response advertising related to the identification of new magazine subscribers, the primary purpose of which is to elicit sales from customers who can be shown to have responded specifically to the advertising and that results in probable future economic benefits. These direct-response advertising costs are capitalized as assets and amortized over the estimated period of future benefit, ranging from six months to two years subsequent to the promotional event. As of February 28, 2005 and 2006, we had approximately $2.1 million and $1.7 million in direct-response advertising costs capitalized as assets. On an interim basis, the Company defers major advertising campaigns for which future benefits can be demonstrated. These costs are amortized over the shorter of the period benefited or the remainder of the fiscal year. Advertising expense for the years ended February 2004, 2005 and 2006 was $13.8 million, $12.2 million and $13.6 million, respectively.

     m. Investments

     Emmis has a 50% ownership interest (approximately $5,114 as of February 28, 2005 and 2006) in a partnership in which the sole asset is land on which a transmission tower is located. The other owner has voting control of the partnership. Emmis, through its investment in six radio stations in Austin, has a 25% ownership interest (approximately $1,306 and $1,298 as of February 28, 2005 and 2006, respectively) in a company that operates a tower site in Austin, Texas. These investments are accounted for using the equity method of accounting. Emmis has numerous other investments that are accounted for using the equity method of accounting, as Emmis does not control these entities, but none had a balance exceeding $0.5 million as of February 28, 2005 or 2006. Collectively, these investments totaled $0.5 million and $0.6 million, respectively, as of February 28, 2005 and 2006. In addition to the investments described above, Emmis’ ownership interests in various partnerships related to our television division as of February 28, 2005 and 2006 totaled $2.7 million and $0.7 million, respectively. These investments are classified as noncurrent assets — discontinued operations in the accompanying consolidated balance sheets.

     Emmis has numerous investments accounted for using the cost method of accounting and all are evaluated at least annually for impairment. No cost method investment balance exceeded $1.0 million as of February 28, 2005 or 2006. Collectively, these investments totaled $0.7 million and $0.8 million, respectively, as of February 28, 2005 and 2006. In fiscal 2004, Emmis reduced the carrying value of one of its cost method investments from approximately $1.0 million to zero as the decline in the value of the investment, as determined by management, was deemed to be other than temporary. This expense is reflected in other income (expense), net in the accompanying consolidated statements of operations.

     n. Acquisition-Related Deferred Costs

     Emmis defers third-party costs associated with acquisition-related activities when the Company believes it is probable the services will result in Emmis acquiring the target. No acquisition-related costs were deferred as of February 28, 2006, but as of February 28, 2005 Emmis had deferred $0.3 million of such costs.

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     o. Deferred Revenue and Barter Transactions

     Deferred revenue includes deferred magazine subscription revenue and deferred barter revenue. Magazine subscription revenue is recognized when the publication is shipped. Barter transactions are recorded at the estimated fair value of the product or service received. Broadcast revenue from barter transactions is recognized when commercials are broadcast or publication is delivered. The appropriate expense or asset is recognized when merchandise or services are used or received. Barter revenues for the years ended February 2004, 2005 and 2006 were $12.8 million, $10.7 million and $10.6 million, respectively, and barter expenses were $12.5 million, $10.8 million, and $9.9 million, respectively.

     p. Foreign Currency Translation

     The functional currency of our radio station in Hungary is the Hungarian forint. Slager Radio’s balance sheet has been translated from forints to the U.S. dollar using the current exchange rate in effect at the subsidiary’s balance sheet date (December 31). Slager Radio’s results of operations have been translated using an average exchange rate for the period. The translation adjustment resulting from the conversion of Slager Radio’s financial statements was ($1,197), $836 and $1,125 for the years ended February 2004, 2005, and 2006, respectively. This adjustment is reflected in shareholders’ equity in the accompanying consolidated balance sheets.

     The functional currency of our Belgium radio stations is the Euro. These stations’ balance sheets have been translated from the Euro to the U.S. dollar using the current exchange rate in effect at the subsidiary’s balance sheet date (December 31). The results of operations have been translated using an average exchange rate for the period. The translation adjustment resulting from the conversion of our Belgium radio stations’ financial statements was $510 and $672 for the years ended February 2005 and 2006. This adjustment is reflected in shareholders’ equity in the accompanying consolidated balance sheets.

     The functional currency of our national radio network in Slovakia is the koruna. The radio network’s balance sheets have been translated from the koruna to the U.S. dollar using the current exchange rate in effect at the subsidiary’s balance sheet date (December 31). The results of operations have been translated using an average exchange rate for the period. The translation adjustment resulting from the conversion of the Slovakian national radio network’s financial statements was $434 for the year ended February 2006. This adjustment is reflected in shareholders’ equity in the accompanying consolidated balance sheets.

     The functional currency of our national radio network in Bulgaria is the leva. The radio network’s balance sheets have been translated from the leva to the U.S. dollar using the current exchange rate in effect at the subsidiary’s balance sheet date (December 31). The results of operations have been translated using an average exchange rate for the period. The translation adjustment resulting from the conversion of the Bulgarian national radio network’s financial statements was ($52) for the year ended February 2006. This adjustment is reflected in shareholders’ equity in the accompanying consolidated balance sheets.

     The functional currency of the two stations in Argentina, which were sold in May 2004, is the Argentinean peso, which until January 2002 was tied to the U.S. dollar through the Argentine government’s convertibility plan. In January 2002, the Argentine government allowed the peso to devalue and trade against the U.S. dollar independently. These two stations’ balance sheets have been translated from pesos to U.S. dollars using the exchange rate in effect at the subsidiary’s balance sheet date. The results of operations have been translated using an average exchange rate for the period. The translation adjustment resulting from the conversion of their financial statements was ($12,662) for the year ended February 29, 2004. The 2004 adjustment relates primarily to the reclassification to loss on discontinued operations of translation losses previously reported in other comprehensive income.

     q. Earnings Per Share

     Statement of Financial Accounting Standards No. 128, “Earnings Per Share,” requires dual presentation of basic and diluted earnings per share (“EPS”) on the face of the income statement for all entities with complex capital structures. Basic EPS is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period (54,716,221, 56,128,590 and 42,876,229 shares for the years ended February 2004, 2005 and 2006, respectively). Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Potentially dilutive securities at February 2004, 2005 and 2006 consisted of stock options and the 6.25% Series A cumulative convertible preferred stock. The conversion of stock options and the preferred stock is not included in the calculation of diluted net income per common share for each of the three years ended February 28, 2006 as the effect of these conversions would be antidilutive. Thus, the weighted average common equivalent shares used for purposes of computing diluted EPS are the same as those used to compute basic EPS for all periods presented. Excluded from the calculation of diluted net income per share are 3.7 million weighted average shares that would

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result from the conversion of preferred shares for the years ended February 2004 and 2005, respectively, and 4.8 million weighted average shares that would result from the conversion of preferred shares for the year ended February 28, 2006. In the years ended February 2004, 2005 and 2006, approximately 0.3 million, 0.2 million and 0.4 million options, respectively, were excluded from the calculation of diluted net income per share as the effect of their conversion would be antidilutive.

     r. Income 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 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.

     s. Long-Lived Tangible Assets

     The Company periodically considers whether indicators of impairment of long-lived tangible assets are present. If such indicators are present, the Company determines whether the sum of the estimated undiscounted cash flows attributable to the assets in question are less than their carrying value. If less, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their respective fair values. Fair value is determined by discounted future cash flows, appraisals and other methods. If the assets determined to be impaired are to be held and used, the Company recognizes an impairment charge to the extent the asset’s carrying value is greater than the present value of anticipated future cash flows attributable to the asset. The fair value of the asset then becomes the asset’s new carrying value, which, if applicable, the Company depreciates or amortizes over the remaining estimated useful life of the asset. The Company records amounts in discontinued operations (see Note 1k for further discussion) as required by SFAS 144.

     t. Estimates

     The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements and in disclosures of contingent assets and liabilities. Actual results could differ from those estimates.

     u. Fair Value of Financial Instruments

     The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable and other current assets and liabilities approximate fair value because of the short maturity of these financial instruments. The Company had no interest-rate swap agreements outstanding as of February 28, 2005 and 2006. Except for the senior subordinated notes and senior discount notes, the carrying amounts of long-term debt approximate fair value due to the variable interest rate on such debt. On February 28, 2005 and 2006, the fair value of the senior subordinated notes was approximately $383.4 million and $364.7 million, respectively, and the fair value of the senior discount notes was approximately $1.4 million and $1.3 million, respectively. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument.

     v. Derivative Financial Instruments

     On March 1, 2001, Emmis adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 138, “Accounting for Derivative Instruments and Hedging Activities.” These statements establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts. These statements require that every derivative instrument be recorded in the balance sheet as either an asset or a liability measured at its fair value. Changes in the fair value of derivatives are to be recorded each period in earnings or comprehensive income, depending on whether the derivative is designated and effective as part of a hedged transaction, and on the type of hedge transaction. Gains or losses on derivative instruments reported in other comprehensive income must be reclassified as earnings in the period in which earnings are affected by the underlying hedged item, and the ineffective portion of all hedges must be recognized in earnings in the current period. These standards result in additional volatility in reported assets, liabilities, earnings and other comprehensive income. SFAS No. 133 further requires that the fair value and effectiveness of each hedging instrument must be measured quarterly. The result of each measurement could result in

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fluctuations in reported assets, liabilities, other comprehensive income and earnings as these changes in fair value and effectiveness are recorded to the financial statements.

     See footnote 4 for discussion of the interest rate swap agreements in effect during fiscal 2004.

     w. Recent Accounting Pronouncements

     On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment [“SFAS No. 123(R)”]. SFAS No. 123(R) requires companies to measure all employee stock-based compensation awards, including employee stock options, using a fair-value method and record such expense in their consolidated financial statements. In addition, the adoption of SFAS No. 123(R) requires additional accounting and disclosure related to the income tax and cash flow effects resulting from share-based payment arrangements.

     Statement No. 123R provides two alternatives for adoption: (1) a “modified prospective” method in which compensation cost is recognized for all awards granted subsequent to the effective date of this statement as well as for the unvested portion of awards outstanding as of the effective date; or (2) a “modified retrospective” method which follows the approach in the “modified prospective” method, but also permits entities to restate prior periods to record compensation cost calculated under Statement No. 123 for the pro forma disclosure. The Company elected to follow the “modified prospective” method upon adoption of this pronouncement on March 1, 2006. Consequently, the Company began recognizing compensation cost as expense during its fiscal quarter ending May 31, 2006 for the portion of outstanding unvested awards, based on the grant-date fair value of those awards calculated using Black-Scholes option pricing model, which is the same option pricing model used to estimate grant date fair value for SFAS 123 for pro forma disclosures included in the table below. Although the Company did not have any significant unvested stock option awards outstanding as of February 28, 2006, it granted stock options to its employees on March 1, 2006 (See Note 15). The Company’s net income will be reduced by this grant and future grants of equity awards based on the fair value of those awards at the date of grant.

     On September 30, 2004, the EITF issued Topic D-108, “Use of the Residual Method to Value Acquired Assets Other than Goodwill.” For all of the Company’s acquisitions completed prior to its adoption of SFAS No. 141 on June 30, 2001, the Company allocated a portion of the purchase price to the acquisition’s tangible assets in accordance with a third party appraisal, with the remainder of the purchase price being allocated to the FCC license. This allocation method is commonly called the residual method and results in all of the acquisition’s intangible assets, including goodwill, being included in the Company’s FCC license value. Although the Company has directly valued the FCC license of stations acquired since its adoption of SFAS No. 141, the Company had retained the use of the residual method to perform its annual impairment tests in accordance with SFAS No. 142 for acquisitions effected prior to the adoption of SFAS No. 141. EITF Topic D-108 prohibits the use of the residual method and precludes companies from reclassifying to goodwill any goodwill that was originally included in the value of the FCC license, resulting in a write-off. Implementation of EITF Topic D-108 is required no later than Emmis’ fiscal year ending February 28, 2006, but the Company elected to adopt it as of December 1, 2004 and recorded a noncash charge of $303.0 million, net of tax, in its fourth quarter as a cumulative effect of an accounting change. This loss has no impact on the Company’s compliance with its debt covenants or cash flows. Since its adoption of SFAS No. 142 on March 1, 2002, the Company no longer amortizes goodwill for financial statement purposes. Accordingly, reported and pro forma results reflecting the impact of this accounting pronouncement are the same for all periods presented in the accompanying consolidated financial statements.

     x. Pro Forma Information Related To Stock-Based Compensation

     As permitted under SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company measures compensation expense for its stock-based employee compensation plans using the intrinsic-value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and provides pro forma disclosures of net income and earnings per share as if the fair value-based method prescribed by SFAS No. 123 had been applied in measuring compensation expense. Options with pro rata vesting are expensed on a straight-line basis over the vesting periods.

     Had compensation cost for the Company’s grants of stock-based compensation plans been determined consistent with SFAS No. 123, the Company’s net loss available to common shareholders for these years would approximate the pro forma amounts below (in thousands, except per share data):

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	Year Ended February 28 (29),
	2004			2005			2006
Net Income (Loss) Available to Common Shareholders:
As Reported	$	(6,728	)	$	(313,352	)	$	348,787
Plus: Reported stock-based employee compensation costs, net of tax		14,539			9,776			7,169
Less: Stock-based employee compensation costs, net of tax, if fair value method had been applied to all awards		(26,483	)		(20,571	)		(22,425	)
Pro Forma	$	(18,672	)	$	(324,147	)	$	333,531
Basic EPS:
As Reported	$	(0.12	)	$	(5.58	)	$	8.13
Pro Forma	$	(0.34	)	$	(5.78	)	$	7.78
Diluted EPS:
As Reported	$	(0.12	)	$	(5.58	)	$	8.13
Pro Forma	$	(0.34	)	$	(5.78	)	$	7.78

     Stock-based employee compensation costs, net of tax, if fair value method had been applied to all awards for the years ended February 2004 and 2005 reflect an immaterial adjustment to include certain options previously excluded from the calculation.

     In its quarter ended February 28, 2006, the Company accelerated the vesting of certain “out-of-the-money” stock options to avoid recognizing the expense in future financial statements after the adoption of SFAS No. 123R, resulting in the recognition of approximately $10.6 million of additional pro forma stock option expense, which is reflected in the year ended February 28, 2006 in the table above.

     On February 28, 2006, the Company extended the period during which certain terminated employees could exercise their stock options. All of the options were “out-of-the-money” and resulted in the recognition of approximately $3.1 million of additional pro forma stock option expense, which is reflected in the year ended February 28, 2006 in the table above.

     y. Reclassifications

     Certain reclassifications have been made to the prior years’ financial statements to be consistent with the February 28, 2006 presentation. The reclassifications have no impact on net income (loss) previously reported.

2. COMMON STOCK

     Emmis has authorized 170,000,000 shares of Class A common stock, par value $.01 per share, 30,000,000 shares of Class B common stock, par value $.01 per share, and 30,000,000 shares of Class C common stock, par value $.01 per share. The rights of these three classes are essentially identical except that each share of Class A common stock has one vote with respect to substantially all matters, each share of Class B common stock has 10 votes with respect to substantially all matters, and each share of Class C common stock has no voting rights with respect to substantially all matters. Class B common stock is owned by our Chairman, CEO and President, Jeffrey H. Smulyan. All shares of Class B common stock convert to Class A common stock upon sale or other transfer to a party unaffiliated with Mr. Smulyan. At February 28, 2005 and 2006, no shares of Class C common stock were issued or outstanding. The financial statements presented reflect the issued and outstanding Class A and Class B common stock.

     On May 16, 2005, Emmis launched a “Dutch Auction” tender offer (the “Tender Offer”) to purchase up to 20.25 million shares of its Class A common stock for a price not greater than $19.75 per share nor less than $17.25 per share. The Tender Offer expired on June 13, 2005, and on June 20, 2005 Emmis purchased 20.25 million shares of its Class A common stock at a price of $19.50 per share, for

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an aggregate purchase price of $394.9 million, and incurred related fees and expenses of approximately $3.5 million. See Note 4 for discussion of financing related to the Tender Offer.

3. REDEEMABLE PREFERRED STOCK

     Emmis has authorized 10,000,000 shares of preferred stock, which may be issued with such designations, preferences, limitations and relative rights as Emmis’ Board of Directors may authorize.

     Emmis has 2.875 million shares of 6.25% Series A cumulative convertible preferred stock outstanding, which have a liquidation preference of $50 per share and a par value of $.01 per share. Each share of preferred stock is convertible into a number of shares of common stock, which is determined by dividing the liquidation preference of the share of preferred stock ($50.00 per share) by the conversion price. At February 28, 2005, the conversion price was $39.06, which resulted in a conversion ratio of 1.28 shares of common stock per share of preferred stock. Dividends are cumulative and payable quarterly in arrears on January 15, April 15, July 15, and October 15 of each year at an annual rate of $3.125 per preferred share. Emmis has paid all quarterly dividends through April 15, 2006. Emmis may redeem the preferred stock for cash at 100.893% of the liquidation preference per share, plus in each case accumulated and unpaid dividends, if any, whether or not declared to the redemption date. On or after October 15, 2006, the redemption premium drops to 100% of the liquidation preference per share.

     In connection with the Company’s “Dutch Auction” tender offer, on May 16, 2005, Emmis filed Articles of Correction with the Indiana Secretary of State to correct the anti-dilution adjustment provisions of its outstanding convertible preferred stock. The same day, Emmis also filed a related lawsuit in Indiana state court. On June 1, 2005, Emmis entered into settlement agreements with certain holders of its outstanding convertible preferred stock. The settlement resulted in the amendment of Emmis’ Second Amended and Restated Articles of Incorporation to change the terms of the Company’s outstanding convertible preferred stock so that (a) a special anti-dilution formula applied to the Company’s tender offer (completed on June 13, 2005) that reduced the conversion price of the convertible preferred stock proportionately based on the aggregate consideration paid in the tender offer; (b) a new customary anti-dilution adjustment provision would apply to all other tender and exchange offers triggering an adjustment based on the aggregate consideration paid in such tender or exchange offer, the Company’s overall market capitalization and the market value of the Company’s Class A common stock determined over a 10-day trading period ending on the date immediately preceding the first public announcement of Emmis’ intention to effect a tender or exchange offer and (c) the holders of Emmis’ convertible preferred stock were granted the right to require Emmis to redeem their shares on the first anniversary of a going private transaction in which Jeffrey H. Smulyan and his affiliates participate that is not otherwise a change of control under the terms of the convertible preferred stock. All other anti-dilution provisions remained unchanged. As a result of the application of the special anti-dilution adjustment in the June 2005 tender offer, the conversion price was adjusted from $39.06 to $30.10. Consequently, as of February 28, 2006, each share of preferred stock is convertible into 1.66 shares of common stock. As a result of the redemption right given to holders of preferred stock in the fiscal year ended February 28, 2006, the Company reclassified the preferred stock from equity to mezzanine.

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4. CREDIT FACILITY, SENIOR SUBORDINATED NOTES, SENIOR FLOATING RATE NOTES AND SENIOR DISCOUNT NOTES

     The credit facility, senior subordinated notes, senior floating rate notes and senior discount notes were comprised of the following at February 28, 2005 and 2006:

	2005		2006
Credit Facility
Revolver	$	131,000	$	—
Term Loan B		673,313		296,174
67/8% Senior Subordinated Notes Due 2012		375,000		375,000
Senior Floating Rate Notes Due 2012		—		120,000
121/2% Senior Discount Notes Due 2011		1,245		1,406
		1,180,558		792,580
Less: Current Maturities		6,750		128,156
	$	1,173,808	$	664,424

     In connection with the Tender Offer (see Note 2), on June 6, 2005, Emmis Operating Company amended its credit facility to (i) permit the Tender Offer and related transactions, (ii) reset financial covenants, and (iii) allow for payments on Emmis Communications Corporation’s floating rate senior notes discussed below. In order to finance the aggregate purchase price of the Tender Offer and to pay related fees and expenses, totaling $398.4 million, on June 13, 2005 Emmis Operating Company borrowed $100 million under the revolving portion of its amended credit facility and Emmis issued $300 million of its floating rate senior notes in a private placement (the “Interim Notes”). On June 21, 2005, Emmis issued $350 million of its floating rate senior notes (the “Notes”) in exchange for (i) the $300 million aggregate principal amount of Interim Notes issued on June 13, 2005, and (ii) $50 million in cash. The Interim Notes were retired on June 21, 2005. Emmis used approximately $40 million of the cash proceeds from the notes transactions to repay borrowings it had incurred under its revolving credit facility on June 13, 2005, approximately $10.6 million of cash proceeds from the notes transactions to pay debt issuance fees and approximately $1.1 million for interest and other. On August 9, 2005, Emmis exchanged the $350.0 million aggregate principal amount of the Notes for a new series of notes registered under the Securities Act. The terms of the new series of notes are identical to the terms of the Notes. On December 23, 2005 and February 7, 2006 Emmis gave notice to redeem $230.0 million and $120.0 million, respectively of the Notes. The Notes were redeemed on January 23, 2006 and March 9, 2006 at par, respectively. In connection with the redemption, Emmis wrote-off approximately $5.1 million of unamortized deferred debt costs as a loss on debt extinguishment in the quarter ended February 28, 2006 and will write-off the remaining unamortized deferred debt issuance costs of $2.6 million during the quarter ended May 31, 2006. Interest on the Notes accrued at a floating rate per annum, reset quarterly, equal to LIBOR plus 5.875% (approximately 10.4% at February 28, 2006).

     On May 10, 2004, Emmis refinanced substantially all of its long-term debt. Emmis received $368.4 million in proceeds from the issuance of its 6⁷/₈% senior subordinated notes due 2012 in the principal amount of $375 million, net of the initial purchasers’ discount of $6.6 million, and borrowed $978.5 million under a new $1.025 billion senior credit facility. The gross proceeds from these transactions and $2.9 million of cash on hand were used to (i) repay the $744.3 million remaining principal indebtedness under its former credit facility, (ii) repurchase $295.1 million aggregate principal amount of its 8¹/₈% senior subordinated notes due 2009, (iii) repurchase $227.7 million aggregate accreted value of its 12¹/₂% senior discount notes due 2011, (iv) pay $4.6 million in accrued interest, (v) pay $12.1 million in transaction fees and (vi) pay $72.6 million in prepayment and redemption fees. In connection with the transactions, Emmis incurred a loss of $97.0 million, consisting of (i) $72.6 million for the prepayment and redemption fees, (ii) $24.3 million for the write-off of deferred debt costs associated with the retired debt, and (iii) $0.1 million in expenses related to the repurchase of indebtedness existing at February 29, 2004. This charge is reflected in the accompanying consolidated statements of operations as loss on debt extinguishment in the year ended February 28, 2005. Approximately $59.3 million of this loss was not deducted for purposes of calculating the provision for income taxes.

     On May 10, 2004, Emmis gave notice to redeem the remaining $4.9 million of principal amount of its 8¹/₈% senior subordinated notes due 2009. These notes were redeemed on June 10, 2004 at 104.063% plus accrued and unpaid interest, and the redemption was

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financed with additional borrowings on its new credit facility. The transaction resulted in an additional loss on debt extinguishment of $0.3 million, which Emmis recorded in its year ended February 28, 2005.

CREDIT FACILITY

     Emmis’ credit facility provided for total borrowings of up to $1.025 billion, including (i) a $675 million term loan and (ii) a $350 million revolver, of which $100 million may be used for letters of credit. At February 28, 2005 and 2006, $2.7 million and $2.9 million, respectively, in letters of credit were outstanding. The term loan has been permanently reduced by repayments from television asset sale proceeds, one-half of the proceeds received from the radio station swap with Bonneville in January 2005 (see discussion below) and quarterly amortization. Since repayments under the term loan permanently reduce borrowing availability, we wrote-off approximately $1.8 million of unamortized deferred debt costs associated with the retired debt which is reflected as a loss on debt extinguishment in the accompanying consolidated statements of operations. The credit facility also provides for the ability to have incremental facilities of up to $675 million, of which up to $350 million may be allocated to a revolver. Emmis may access the incremental facility on one or more occasions, subject to certain provisions, including a potential market adjustment to pricing of the entire credit facility.

     All outstanding amounts under the credit facility bear interest, at the option of Emmis, at a rate equal to the Eurodollar Rate or an alternative base rate (as defined in the credit facility) plus a margin. The margin over the Eurodollar Rate or the alternative base rate varies under the revolver (ranging from 0% to 2.5%), depending on Emmis’ ratio of debt to consolidated operating cash flow, as defined in the agreement. The margins over the Eurodollar Rate or the alternative base rate are 1.75% and 0.75%, respectively, for the term loan facility. Interest is due on a calendar quarter basis under the alternative base rate and at least every three months under the Eurodollar Rate. Beginning one year after closing, the credit facility requires Emmis to maintain fixed interest rates, for at least a two year period, on a minimum of 30% of its total outstanding debt, as defined (including the senior subordinated debt, but excluding the senior discount notes). This ratio of fixed to floating rate debt must be maintained if Emmis’ total leverage ratio, as defined, is greater than 6:1 at any quarter end. The weighted-average interest rate on borrowings outstanding under the credit facility was 4.4% and 6.3% at February 28, 2005 and 2006, respectively. Due to its leverage at the time under the previous and current credit agreement, for the three years ended February 28, 2006, Emmis was only required to have interest-rate derivative agreements in place in fiscal 2004, although no such agreements were outstanding as of February 29, 2004. Interest paid under these swap arrangements was $3.4 million for the year ended February 2004. As indicated in Note 1v., Emmis accounts for interest rate swap agreements under SFAS No. 133 as amended by SFAS No. 138. As Emmis had designated these interest rate swap agreements as cash flow hedges, and the swaps were highly effective during the year ended February 29, 2004, the net liability was recorded as a component of comprehensive income and the ineffectiveness was not material. Net deferred debt costs of approximately $3.7 million and $3.1 million, respectively, relating to the credit facility are reflected in the accompanying consolidated balance sheets as of February 28, 2005 and 2006, and are being amortized over the life of the credit facility as a component of interest expense.

     Both the term loan and revolver mature on November 10, 2011. The borrowings due under the term loan are payable in equal quarterly installments in an annual amount equal to 1% of the term loan during each of the first six and one quarter years of the loan (beginning on February 28, 2005), with the remaining balance payable November 10, 2011. The annual amortization and reduction schedule for the credit facility, assuming the total facility is outstanding, is as follows:

SCHEDULED AMORTIZATION/REDUCTION OF CREDIT FACILITY

	Term Loan A/
Year Ended	Revolver		Term Loan B		Total
February 28 (29),	Amortization		Amortization		Amortization
2007		—		6,750		6,750
2008		—		6,750		6,750
2009		—		6,750		6,750
2010		—		6,750		6,750
2011		350,000		269,174		619,174
Total	$	350,000	$	296,174	$	646,174

     Proceeds from raising additional equity, issuing additional subordinated debt or from asset sales, as well as excess cash flow, may be required to be used to repay amounts outstanding under the credit facility. Whether these mandatory repayment provisions apply depends on Emmis’ total leverage ratio, as defined under the credit facility. As a result of the radio station swap with Bonneville in

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January 2005, Emmis received $74.8 million, which Emmis used to repay amounts outstanding under the revolver of its senior credit facility. Under the terms of its senior credit facility, Emmis had twelve months to identify acquisitions to redeploy one-half of these proceeds or to repay amounts outstanding under the term loan of its senior credit facility. During the quarter ended February 28, 2006, one-half of the proceeds were used to repay amounts outstanding under the term loan. As a result of the television asset sales (see Note 6), Emmis received $896.7 million in net proceeds during the year ended February 28, 2006, of which $333.0 million was used to repay amounts outstanding under the term loan and $207.9 million was used to repay amounts outstanding under the revolver. Under the terms of its senior credit facility, Emmis has twelve months (until December 2006) to identify acquisitions to redeploy these proceeds, or 100% of the $207.9 million will have to be used to repay amounts outstanding under the term loan. In March 2006, $5.0 million of these proceeds were used to repay amounts outstanding under the term loan.

     See discussion above for write-off of unamortized deferred debt issuance costs related to permanent reductions in borrowing availability under the term loan.

     Availability under the credit facility depends upon our continued compliance with certain operating covenants and financial ratios, including leverage, interest coverage and fixed charge coverage as specifically defined. Emmis was in compliance with these covenants at February 28, 2006. As of February 28, 2006, the Company’s total debt-to-EBITDA leverage ratio, as defined, was 5.8:1 and the maximum debt to EBITDA leverage ratio was 7.25:1. The operating covenants and other restrictions with which we must comply include, among others, restrictions on additional indebtedness, incurrence of liens, engaging in businesses other than our primary business, paying cash dividends on common stock, redeeming or repurchasing capital stock of Emmis, acquisitions and asset sales. No default or event of default has occurred or is continuing. The credit facility provides that an event of default will occur if there is a change of control of Emmis, as defined. The payment of principal, premium and interest under the credit facility is fully and unconditionally guaranteed, jointly and severally, by Emmis and most of its existing wholly-owned domestic subsidiaries. Substantially all of Emmis’ assets, including the stock of Emmis’ wholly-owned, domestic subsidiaries, are pledged to secure the credit facility.

SENIOR SUBORDINATED NOTES

     On May 10, 2004, Emmis issued $375 million of 6⁷/₈% senior subordinated notes. On August 5, 2004, Emmis exchanged the $375 million aggregate principal amount of its 6⁷/₈% senior subordinated notes for a new series of notes registered under the Securities Act. The terms of the new series of notes were identical to the terms of the senior subordinated notes.

     Prior to May 15, 2008, Emmis may redeem the notes, in whole or in part, at a price of 100% of the principal amount thereof plus the payment of a make-whole premium. After May 15, 2008, Emmis can choose to redeem some or all of the notes at specified redemption prices ranging from 101.719% to 103.438% plus accrued and unpaid interest. On or after May 15, 2010, the notes may be redeemed at 100% plus accrued and unpaid interest. Upon a change of control (as defined), Emmis is required to make an offer to purchase the notes then outstanding at a purchase price equal to 101% plus accrued and unpaid interest. Interest on the notes is payable semi-annually on May 15 and November 15 of each year. The notes have no sinking fund requirements and are due in full on May 15, 2012.

     The payment of principal, premium and interest on the notes is fully and unconditionally guaranteed, jointly and severally, by Emmis and most of Emmis’ existing wholly-owned domestic subsidiaries that guarantee the credit facility. The notes are expressly subordinated in right of payment to all existing and future senior indebtedness (as defined) of Emmis. The notes will rank pari passu with any future senior subordinated indebtedness (as defined) and senior to all subordinated indebtedness (as defined) of Emmis.

     The indenture governing the notes contains covenants limiting Emmis’ ability to, among other things, (1) incur additional indebtedness, (2) pay dividends or make other distributions to stockholders, (3) purchase or redeem capital stock or subordinated indebtedness, (4) make certain investments, (5) create restrictions on the ability of our subsidiaries to pay dividends or make payments to Emmis, (6) engage in certain transactions with affiliates, and (7) sell all or substantially all of the assets of Emmis and its subsidiaries, or consolidate or merge with or into other companies. Emmis was in compliance with these covenants at February 28, 2006.

     As a result of the television asset sales (see Note 6) and related repayment of the senior floating rate notes as discussed above, in accordance with the asset sale provisions of the senior subordinated notes, by late 2006, Emmis must either 1) make a par offer to redeem $350 million of the notes, or 2) repay $350 million of additional debt under its credit facility or 3) make a $350 million permitted investment in a related business, as defined in the agreement. Emmis is evaluating its options under this requirement, including a combination of the above, as well as the financing of the resulting transaction.

     Prior to May 10, 2004, Emmis had $300 million of 8¹/₈% senior subordinated notes outstanding. These notes were retired in connection with the issuance of the the 6⁷/₈% senior subordinated notes. Although the terms of the 8 1/8% senior subordinated notes were

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similar to the existing 6¹/₈% senior subordinated notes, the terms of the 6⁷/₈% senior subordinated notes are less restrictive.

SENIOR DISCOUNT NOTES

     On March 27, 2001, Emmis received $202.6 million of proceeds from the issuance of senior discount notes due 2011, less approximately $12.0 million of debt issuance costs. On July 1, 2002, Emmis redeemed approximately 22.6% of its senior discount notes. Approximately $60.1 million of the proceeds from the Company’s April 2002 equity offering were used to repay approximately $53.4 million of the carrying value of the discount notes at July 1, 2002 and pay approximately $6.7 million for a redemption premium. Substantially all of these notes were redeemed on May 10, 2004 in connection with our debt refinancing activities, which eliminated the restrictive covenants contained in the indenture. On February 7, 2006 notice to redeem the remaining outstanding notes were given and on March 9, 2006, the remaining outstanding notes ($1,406 million) were redeemed (see subsequent event Note 15). The notes accreted interest at a rate of 12¹/₂% per year, compounded semi-annually to an aggregate principal amount of $1.4 million on March 15, 2006, after considering the July 2002 and May 2004 redemptions.

5. OTHER LONG-TERM DEBT

     Other long-term debt was comprised of the following at February 28, 2005 and 2006:

	2005		2006
Hungary:
License Obligation	$	5,653	$	3,940
Loans Payable		657		426
Other		50		173
Total Other Long-Term Debt		6,360		4,539
Less: Current Maturities		938		1,019
Other Long-Term Debt, Net of Current Maturities	$	5,422	$	3,520

     Our 59.5% owned Hungarian subsidiary, Slager Radio Rt., has certain obligations which are consolidated in our financial statements due to our majority ownership interest. However, Emmis is not a guarantor of or required to fund these obligations. Subsequent to the license restructuring completed in December 2002, Slager Radio must pay, in Hungarian forints, five equal annual installments that commenced in November 2005 and end in November 2009, for a radio broadcast license to the Hungarian government. The obligation is non-interest bearing; however, in accordance with the license purchase agreement, a Hungarian cost of living adjustment is calculated annually and is payable, concurrent with the principal payments, on the outstanding obligation. The cost of living adjustment is estimated each reporting period and is included in interest expense. The license obligation has been discounted at an imputed interest rate of approximately 7% to reflect the obligation at its fair value. The total license obligation of $3.9 million (in U.S. dollars) as of February 28, 2006, is reflected net of an unamortized discount of $0.7 million.

     In addition, Slager Radio is obligated to pay certain loans to its shareholders. At February 28, 2006, loans payable to the minority shareholders were (in U.S. dollars) approximately $0.4 million. The loans are due at maturity in September 2009 and bear interest at LIBOR plus 4% (9.2% at February 28, 2006). Interest payments on the loans are made quarterly.

     During the quarter ended August 31, 2003, the partners in our Hungarian subsidiary, including Emmis, agreed to forgive certain indebtedness and accrued interest owed to the partners by the subsidiary. The activity relating to Emmis eliminates in consolidation. The forgiveness of debt by our minority partners was accounted for as a capital transaction. Since the accrued interest was charged to expense by the Hungarian subsidiary, reversal of the portion of accrued interest attributable to the minority partners of $1.3 million was credited to income and is reflected in other income (expense), net in the accompanying consolidated statements of operations during the year ended February 29, 2004.

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6. ACQUISITIONS, DISPOSITIONS AND INVESTMENTS

Sale of television stations to SJL Broadcast Group, LLC

     On January 27, 2006, Emmis sold substantially all of the assets of television stations KOIN in Portland, OR, and KHON in Honolulu, HI, and also sold the stock of the corporation that owns KSNW in Wichita, KS and KSNT in Topeka, KS, to SJL Broadcast Group, LLC (“SJL”) for $253.0 million of gross cash proceeds and a $6.0 million note receivable, which is reflected in deposits and other in the accompanying consolidated balance sheets. Emmis recorded a gain on sale of $88.2 million, net of tax, which is reflected in discontinued operations in the accompanying statements of operations. Emmis used the proceeds to repay outstanding debt obligations. After the closing of the sale of these four stations, Emmis made a special payment to television employees of approximately $16.7 million and to corporate employees (other than executive officers) of approximately $0.9 million. These costs were expensed in the Company’s quarter ended February 28, 2006, commensurate with the closing of these four stations to SJL, as the special payment was conditioned on the closing (or commencement of an LMA) on thirteen of the original sixteen television stations and the closing of the sale of these four stations to SJL satisfied that requirement.

Sale of television stations to Journal Communications

     On December 5, 2005, Emmis sold substantially all of the assets of television stations WFTX in Ft. Myers, FL and KGUN in Tucson, AZ, and the tangible assets and many of the intangible assets (excluding, principally, the FCC license) of KMTV in Omaha, NE to Journal Communications for $225.0 million of gross cash proceeds. Emmis recorded a gain on sale of $92.6 million, net of tax, which is reflected in discontinued operations in the accompanying statements of operations. Emmis used the proceeds to repay outstanding debt obligations. The FCC did not consent to the transfer of the FCC license for KMTV due to Journal’s existing radio station ownership in the Omaha market. Journal must divest of some of its radio holdings before the FCC will approve the transfer of KMTV’s FCC license from Emmis to Journal. On December 5, 2005, Emmis entered into a LMA with Journal for KMTV. Pursuant to the LMA, Journal began programming the station on December 5, 2005 and records all of the revenues and expenses of the station. Journal makes no monthly payments to Emmis under the LMA, but reimburses Emmis for substantially all of Emmis’ costs to operate the station. Journal paid a portion of the purchase price of KMTV on December 5, 2005 and will pay an additional $5 million on October 15, 2007 and an additional $5 million on October 15, 2008 if closing on KMTV has not occurred. This $10 million due from Journal is reflected in deposits and other in the accompanying consolidated balance sheets.

Sale of television stations to Gray Television and LIN Television Corporation

     On November 30, 2005, Emmis sold substantially all of the assets of television station WSAZ in Huntington/Charleston, WV to Gray Television for $186.0 million of gross cash proceeds. Also on November 30, 2005, Emmis sold substantially all of the assets of four television stations (plus regional satellite stations) to LIN Television Corporation (“LIN”) (WALA in Mobile, AL/Pensacola, FL, WTHI in Terre Haute, IN, WLUK in Green Bay, WI, and KRQE in Albuquerque, NM) for $248.0 million of gross cash proceeds and entered into a LMA with LIN for WBPG in Mobile, AL/Pensacola, FL. Emmis transferred to LIN all of the assets of WBPG except the FCC license, the WB affiliation agreement and a tower lease. LIN paid $9.0 million of the agreed-upon $12.0 million value of WBPG on November 30, 2005, with the remaining $3.0 million due upon the transfer of the remaining assets, which will terminate the LMA. The Company receives $0.2 million per year payable in monthly installments related to this LMA. Pursuant to the LMA, LIN began programming the station on November 30, 2005 and records all of the revenues and expenses of the station. In connection with these sales to Gray Television and LIN, Emmis recorded a gain on sale of $186.2 million, net of tax, which is reflected in discontinued operations in the accompanying statements of operations.

Acquisition of Radio Network in Bulgaria

     On November 14, 2005, Emmis acquired a 66.5% (economic and voting) majority ownership in Radio FM Plus AD, a national network of radio stations in Bulgaria for a cash purchase price of approximately $3.3 million. This acquisition allowed Emmis to expand its international radio portfolio within Emmis’ Euro-centric international acquisition strategy. The acquisition was financed with cash on hand. The Company has recorded $0.5 million of goodwill, none of which is deductible for income tax purposes. Consistent with the Company’s other foreign subsidiaries, Radio FM Plus reports on a fiscal year ending December 31, which Emmis consolidates into its fiscal year ending February 28 (29). The purchase price allocation is as follows:

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Asset Description	Amount			Asset Lives
Accounts receivable	$	205		Less than one year
Other current assets		16		Less than one year
Broadcasting equipment		571		5 years
International broadcast license		3,378		87 months
Goodwill		525		Non-amortizing
Investment and other long-term assets		119
Less: current liabilities		(370	)
Less: deferred tax liabilities		(525	)
Less: minority interest		(648	)
Total purchase price	$	3,271

WRDA-FM Disposition

     On September 23, 2005, Emmis signed a definitive agreement to sell radio station WRDA-FM in St. Louis, MO to Radio One, Inc. for $20 million. Radio One, Inc. began operating this station pursuant to a LMA effective October 1, 2005. Radio One, Inc. made no monthly payments to Emmis, but reimbursed Emmis for substantially all of Emmis’ costs to operate the station. This sale closed May 5, 2006 (See Note 15).

Acquisition of Radio Network in Slovakia

     On March 10, 2005, Emmis completed its acquisition of D.EXPRES, a.s., a Slovakian company that owns and operates Radio Expres, a national radio network in Slovakia, for a cash purchase price of approximately $12.6 million. This acquisition allowed Emmis to expand its international portfolio on the European continent and enter one of the world’s fastest growing economies. The acquisition was financed through borrowings under the credit facility. The Company has recorded $1.9 million of goodwill, none of which is deductible for income tax purposes. The operating results from March 10, 2005 through December 31, 2005 are included in the accompanying consolidated financial statements. Consistent with the Company’s other foreign subsidiaries, Radio Expres reports on a fiscal year ending December 31, which Emmis consolidates into its fiscal year ending February 28 (29). The purchase price allocation is as follows:

Asset Description	Amount			Asset Lives
Accounts receivable	$	2,126		Less than one year
Other current assets		1,486		Less than one year
Broadcasting equipment		2,649		5 years
Customer list		1,155		1 year
International broadcast license		8,632		94 months
Goodwill		1,865		Non-amortizing
Investment and other long-term assets		160		14 months
Less: current liabilities		(3,645	)
Less: deferred tax liabilities		(1,865	)
Total purchase price	$	12,563

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Phoenix-Chicago Radio Station Exchange

     On January 14, 2005, Emmis completed its exchange with Bonneville International Corporation (“Bonneville”) whereby Emmis swapped three of its radio stations in Phoenix (KTAR-AM, KMVP-AM and KKLT-FM) for Bonneville’s WLUP-FM located in Chicago and $74.8 million in cash, including payments for working capital items. Emmis used the cash to repay amounts outstanding under its senior credit facility. Emmis has long sought a second radio station in Chicago to complement its existing station in the market, WKQX-FM. This transaction achieves that goal by marrying the heritage alternative rock format (WKQX) with the heritage classic rock format (WLUP). Emmis began programming WLUP-FM and Bonneville began programming KTAR-AM, KMVP-AM and KKLT-FM under LMAs on December 1, 2004. The assets and liabilities of the three radio stations in Phoenix and their results of operations have been classified as discontinued operations in the accompanying consolidated financial statements. These three radio stations had historically been included in the radio reporting segment. The Company recorded $13.0 million of goodwill, which is not deductible for tax purposes. The fair value of WLUP-FM was determined by Emmis and Bonneville to be $128.0 million. This amount, plus transaction costs of $0.7 million, was allocated as follows:

Asset Description	Amount			Asset Lives
Broadcasting equipment		171		5 to 7 years
Office equipment		5		5 to 7 years
Total tangible assets		176
Customer list		636		1 year
FCC license (Indefinite-lived intangible)		114,851		Non-amortizing
Goodwill		12,959		Non-amortizing
Total intangible assets		128,446
Investment and other long-term assets		244
Less: current liabilities		(125	)
Total purchase price	$	128,741

Sale of Radio Stations in Argentina

     On May 12, 2004, Emmis sold to its minority partners for $7.3 million in cash its entire 75% interest in Votionis, S.A. (“Votionis”), which owns and operates two radio stations in Buenos Aires, Argentina. In connection with the sale, Emmis recorded a loss from discontinued operations of $10.0 million in fiscal 2004. In fiscal 2005, Emmis recorded income from discontinued operations of $4.2 million, consisting of operational losses of $0.5 million, offset by tax benefits of $4.7 million. The Argentine peso substantially devalued relative to the U.S. dollar early in 2002. The $10.0 million loss in fiscal 2004 was primarily attributable to the devaluation of the peso and resulting non-cash write-off of cumulative currency translation adjustments. Votionis had historically been included in the radio reporting segment. See Note 1k for further discussion.

Belgium radio licenses

     On December 19, 2003, the Flemish Government awarded licenses to operate nine FM radio stations in the Flanders region of Belgium to several not-for-profit entities that have granted Emmis the exclusive right to provide the programming and sell the advertising on the stations for the duration that the not-for-profit entities retain the licenses. Five of these licenses are for the stations that Emmis began programming in August 2003, and the remaining four related to new stations that Emmis began operating in May 2004. The licenses and Emmis’ exclusive right are for an initial term of nine years and do not require the payment of any license fees to the Flemish Government. Subsequently, Emmis has acquired the exclusive right to provide programming and sell advertising on a couple of additional stations. Emmis consolidates all of these stations for financial reporting purposes.

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Austin Radio Acquisition

     On July 1, 2003, Emmis effectively acquired a controlling interest of 50.1% in a partnership that owns six radio stations in the Austin, Texas metropolitan area for a cash purchase price of approximately $106.5 million, including transaction costs of $1.0 million. These six stations are KLBJ-AM, KLBJ-FM, KDHT-FM (formerly KXMG-FM), KROX-FM, KGSR-FM and KEYI-FM. This acquisition allowed Emmis to diversify its radio portfolio and participate in another large, high-growth radio market. The acquisition was financed through borrowings under the credit facility and was accounted for as a purchase. The Company recorded $35.3 million of goodwill, all of which is deductible for income tax purposes, but $25.7 million of this goodwill was written-off in connection with the Company’s fiscal 2006 SFAS No. 142 annual impairment review (see Note 8). In addition, Emmis has the option, but not the obligation, to purchase its partner’s entire 49.9% interest in the partnership after December 2007 based on an 18-multiple of trailing 12-month cash flow.

     For this transaction, the aggregate purchase price, including transaction costs of $1.0 million, was allocated as follows:

Asset Description	Amount			Asset Lives
Accounts receivable	$	4,893		Less than one year
Other current assets		85		Less than one year
Land and buildings		757		31.5 years for buildings
Broadcasting equipment		4,031		5 to 7 years
Office equipment		568		5 to 7 years
Vehicles		117		5 to 7 years
Other		176		Various
Total noncurrent tangible assets		5,649
Customer list		2,974		1 year
Talent contract		456		3.5 years
Lease rights		389		5 to 9 years
Affiliation agreement		189		15 years
FCC license (Indefinite-lived intangible)		103,291		Non-amortizing
Goodwill		35,329		Non-amortizing
Total intangible assets		142,628
Investment and other long-term assets		1,612
Less: minority interest		(47,894	)
Less: current liabilities		(495	)
Total purchase price	$	106,478

Sale of Mira Mobile

     Effective June 5, 2003, Emmis sold its mobile television production company, Mira Mobile Television, to Shooters Production Services, Inc. for $3.9 million in cash, plus payments for working capital. Emmis received $3.3 million of the purchase price at closing and received the remaining $0.6 million by December 2005. Emmis had acquired this business in connection with an acquisition in October 2000. The book value of the long-lived assets as of May 31, 2003 was $3.1 million, and the operating performance of Mira Mobile was not material to the Company. Emmis recorded a gain on the sale of these assets of approximately $0.9 million in the accompanying consolidated statements of operations.

WBPG-TV Acquisition

     Effective March 1, 2003, the Company acquired substantially all of the assets of television station WBPG-TV in Mobile, AL – Pensacola, FL from Pegasus Communications Corporation for a cash purchase price of approximately $11.7 million, including transaction costs of $0.2 million. This acquisition allowed the Company to achieve duopoly efficiencies in the market, such as lower

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programming acquisition costs and consolidation of general and administrative functions, since Emmis already owned the Fox-affiliated television station in the market, WALA. The acquisition was financed through borrowings under the credit facility and was accounted for as a purchase. The Company recorded $0.2 million of goodwill, all of which was deductible for income tax purposes.

     For this transaction, the aggregate purchase price, including transaction costs of $0.2 million, was allocated as follows:

Asset Description	Amount			Asset Lives
Accounts Receivable	$	154		Less than one year
Prepaids		35		Less than one year
Broadcasting equipment		2,458		5 to 7 years
Office equipment		97		5 to 7 years
Vehicles		42		5 to 7 years
Total noncurrent tangible assets		2,597
Customer list		229		1 year
Affiliation agreement		559		3.5 years
FCC license (Indefinite-lived intangible)		7,971		Non-amortizing
Goodwill		150		Non-amortizing
Total intangible assets		8,909
Programming acquired		159
Less: Programming liabilities assumed		(198	)
Total purchase price	$	11,656

     LIN Television Corporation began operating this station pursuant to a LMA on November 30, 2005 (see Sale of television stations to Gray Television and LIN Television Corporation above).

7. PRO FORMA FINANCIAL INFORMATION

     Unaudited pro forma summary information is presented below for the years ended February 28, 2005 and 2006, assuming the acquisition (and related net borrowings) of (i) a national radio network in Slovakia, (ii) a controlling interest of 66.5% in a national radio network in Bulgaria and (iii) WLUP-FM in January 2005 as discussed in Note 6 had occurred on the first day of the pro forma periods presented below.

     Preparation of the pro forma summary information was based upon assumptions deemed appropriate by the Company’s management. The pro forma summary information presented below is not necessarily indicative of the results that actually would have occurred if the transactions indicated above had been consummated at the beginning of the periods presented, and it is not intended to be a projection of future results.

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	Pro Forma
	2005			2006
Net revenues	$	369,998		$	389,764
Net income from continuing operations and before accounting change	$	(62,343	)	$	(24,967	)
Net income available to common shareholders from continuing operations and before accounting change	$	(71,327	)	$	(33,951	)
Net income per share available to common shareholders from continuing operations and before accounting change:
Basic	$	(1.27	)	$	(0.79	)
Diluted	$	(1.27	)	$	(0.79	)
Weighted average shares outstanding:
Basic		56,129			42,876
Diluted		56,129			42,876

8. INTANGIBLE ASSETS AND GOODWILL

     Effective March 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” which requires the Company to cease amortizing goodwill and certain intangibles. Instead, these assets are reviewed at least annually for impairment, and will be written down and charged to results of operations in periods in which the recorded value of goodwill and certain intangibles is more than its fair value. FCC licenses are renewed every eight years for a nominal amount, and historically all of our FCC licenses have been renewed at the end of their respective eight-year periods. Since we expect that all of our FCC licenses will continue to be renewed in the future, we believe they have indefinite lives.

     Effective December 1, 2004, the Company adopted EITF Topic D-108, “Use of the Residual Method to Value Acquired Assets Other than Goodwill.” EITF Topic D-108 prohibits the use of the residual method and precludes companies from reclassifying to goodwill any goodwill that was originally included in the value of the FCC license. The Company elected to adopt EITF Topic D-108 as of December 1, 2004 and recorded a non-cash charge of $303.0 million, net of tax, in the year ended February 28, 2005 as a cumulative effect of an accounting change. This loss has no impact on the Company’s compliance with its debt covenants or cash flows.

          Indefinite-lived Intangibles

     As of February 28, 2005 and 2006, the carrying amounts of the Company’s FCC licenses were $880.5 million and $874.8 million, respectively. This amount is entirely attributable to our radio division.

     In connection with our fiscal 2006 annual impairment review, we recognized an impairment loss of $5.7 million, which related to radio stations in Phoenix, St. Louis and Terre Haute. This impairment loss principally related to lower than expected market growth in Phoenix, St. Louis and Terre Haute in our fiscal 2006, which led us to reduce our growth estimates for these markets in future years. The annual required impairment tests may result in future periodic write-downs.

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     Upon adopting EITF Topic D-108 and applying the direct-valuation method valuation, the Company recorded a noncash charge of $303.0 million, net of $185.5 million in tax benefit. Approximately $5.5 million, net of $3.8 million in tax benefit, related to our radio segment and the remaining $297.5 million, net of $181.7 million in tax benefit, related to our television segment. The charge is recorded as a cumulative effect of an accounting change in the year ended February 28, 2005.

     In connection with our fiscal 2004 annual impairment review, we recognized an impairment loss of $12.4 million, which related to two stations in our television division. Although our television division as a whole performed well in fiscal 2004, one of our television stations underperformed its market and experienced a decline in its cash flows. We replaced certain management personnel at this station. Also, a contemplated transaction in a market in which we operate led us to re-evaluate the value we had assigned to our station. This impairment loss is reflected in discontinued operations in the accompanying consolidated statements of operations.

          Goodwill

     As of February 28, 2005 and 2006, the carrying amount of the Company’s goodwill was $106.8 million and $77.4 million, respectively. As of February 28, 2005 approximately $48.6 million and $58.2 million of our goodwill was attributable to our radio and publishing divisions, respectively. As of February 28, 2006 approximately $25.2 million and $52.2 million of our goodwill was attributable to our radio and publishing divisions, respectively.

     In connection with our fiscal 2006 annual impairment review, we recognized an impairment loss of $31.7 million, which related to our controlling ownership of a cluster in Austin and one of our publications. We purchased a controlling interest in six radio stations in Austin, Texas in July 2003. Since 2003, public market multiples for radio assets have declined and the Company determined that $25.7 million of the original $35.3 million of goodwill was impaired. We also recorded a $6.0 million goodwill impairment at one of our magazines due to a decline in the profitability of the magazine. We have taken steps to improve the magazine’s profitability, including staff reductions and the discontinuation of unprofitable ancillary products. The annual required impairment tests may result in future periodic write-downs.

     Our impairment tests on December 1, 2003 and 2004 resulted in no impairment charges.

          Definite-lived intangibles

     In accordance with the transitional requirements of SFAS No. 142, the Company reassessed the useful lives of these intangibles and determined that no changes to their useful lives were necessary. The following table presents the weighted-average remaining life, gross carrying amount and accumulated amortization for each major class of definite-lived intangible asset at February 28, 2005 and 2006 (dollars in thousands):

			February 28, 2005						February 28, 2006
	Weighted Average		Gross				Net		Gross				Net
	Useful Life		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	(in years)		Amount		Amortization		Amount		Amount		Amortization		Amount
Foreign Broadcasting Licenses		7.4	$	24,443	$	13,486	$	10,957	$	34,975	$	16,043	$	18,932
Favorable Office Leases		7.3		689		179		510		914		286		628
Customer Lists		1.0		3,610		3,054		556		4,765		4,549		216
Non-Compete Agreements		1.3		5,738		5,681		57		5,738		5,717		21
Other		24.6		1,516		626		890		1,357		754		603
TOTAL			$	35,996	$	23,026	$	12,970	$	47,749	$	27,349	$	20,400

     Total amortization expense from definite-lived intangibles for the years ended February, 2004, 2005 and 2006 was $3.4 million, $3.3 million and $4.4 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 recorded as of February 28, 2006 (dollars in thousands):

YEAR ENDED FEBRUARY,
2007	$	3,685
2008		3,353
2009		3,317
2010		3,186
2011		1,954

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9. EMPLOYEE BENEFIT PLANS

     a. Equity Incentive Plans

     The Company has stock options, restricted stock and restricted stock unit grants outstanding that were issued to employees or non-employee directors under one or more of the following plans: Non-Employee Director Stock Option Plan, 1997 Equity Incentive Plan, 1999 Equity Incentive Plan, 2001 Equity Incentive Plan and 2002 Equity Incentive Plan. These outstanding grants continue to be governed by the terms of the applicable plan. However, all unissued awards under the 1999 Equity Incentive Plan, the 2001 Equity Incentive Plan and the 2002 Equity Incentive Plan were transferred in June 2004 to the Company’s 2004 Equity Compensation Plan (discussed below) and no further awards will be issued from these plans. Furthermore, cancelled and expired shares from the 1999 Equity Incentive Plan, 2001 Equity Incentive Plan and 2002 Equity Incentive Plan are transferred to the 2004 Equity Incentive Plan.

     2004 Equity Incentive Plan

     At the 2004 annual meeting, the shareholders of Emmis approved the 2004 Equity Compensation Plan. Under this plan, awards equivalent to 4.0 million shares of common stock may be granted. Furthermore, any unissued awards from the 1999 Equity Incentive Plan, the 2001 Equity Incentive Plan and the 2002 Equity Compensation Plan (or shares subject to outstanding awards that would again become available for awards under these plans) increase the number of shares of common stock available for grant. The awards, which have certain restrictions, may be for incentive stock options, nonqualified stock options, shares of restricted stock, restricted stock units, stock appreciation rights or performance units. Under this Plan, all awards are granted with a purchase price equal to at least the fair market value of the stock except for shares of restricted stock and restricted stock units, which may be granted with any purchase price (including zero). No more than 1.0 million shares of Class B common stock are available for grant and issuance from the 4.0 million additional shares of stock originally authorized for delivery under this Plan. The stock options under this Plan generally expire not more than 10 years from the date of grant. Under this Plan, awards equivalent to approximately 7.3 million shares of common stock were available for grant at February 28, 2006. Certain stock awards remained outstanding as of February 28, 2006. On March 1, 2006, options vesting over three years were granted to employees under the 2004 Equity Compensation Plan to purchase an additional 0.5 million shares of Emmis Communications Corporation common stock at $16.34 per share and an additional 0.2 million shares of restricted stock or restricted stock units vesting over a period of two to three years were issued to employees.

     b. Other Disclosures Related to Stock Option and Equity Incentive Plans

     A summary of the status of options, restricted stock and restricted stock units at February 2004, 2005 and 2006 and the related activity for the year is as follows:

	2004					2005					2006
	Number of			Weighted		Number of			Weighted		Number of			Weighted
	Options/			Average		Options/			Average		Options/			Average
	Restricted			Exercise		Restricted			Exercise		Restricted			Exercise
	Stock/Units			Price		Stock/Units			Price		Stock/Units			Price
Outstanding at Beginning of Year		5,259,479			26.53		5,289,902			25.77		6,057,857			25.75
Options Granted		1,109,209			16.75		1,436,836			25.33		664,392			18.70
Restricted Stock/Units Granted		1,180,706			—		642,506			—		929,191			—
Exercised		(657,857	)		15.74		(101,883	)		16.64		(208,810	)		18.20
Lapsing of restrictions on stock awards		(1,180,706	)		—		(642,506	)		—		(627,107	)		—
Expired and other		(420,929	)		22.69		(566,998	)		23.69		(937,481	)		23.91
Outstanding at End of Year		5,289,902			25.77		6,057,857			25.75		5,878,042			23.95
Exercisable at End of Year		2,754,389			27.78		3,197,755			27.01		5,016,980			25.15
Total Available for Grant		2,726,000					5,070,000					7,337,623

     During the years ended February 2004, 2005 and 2006, all options were granted with an exercise price equal to the fair market value of the stock on the date of grant. During the years ended February 2004, 2005 and 2006, the Company granted nonvested restricted stock of 57,500, 8,325 and 185,500 shares, respectively, at a weighted average fair value of $17.29, $20.48, and $18.79, respectively. In the year ended February 2006, the Company granted nonvested restricted stock units of 210,634 at a weighted average fair value of $18.83.

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     The following information relates to options, restricted stock and restricted stock units outstanding and exercisable at February 28, 2006:

	Shares/Options Outstanding										Shares/Options Exercisable
							Weighted		Weighted				Weighted
Range of	Number of		Number of		Total		Average		Average				Average
Exercise	Vested		Unvested		Number of		Exercise		Remaining		Number of		Exercise
Prices	Shares/Options		Shares/Options		Shares/Options		Price		Contract Life		Shares/Options		Price
$0-$3.80		749		261,821		262,570		—		8.9		749		—
3.80-7.60		—		—		—		—		—		—		—
7.60-11.40		—		—		—		—		—		—		—
11.40-15.20		—		—		—		—		—		—		—
15.20-19.00		1,149,502		195,909		1,345,411		17.48		6.8		1,149,502		17.66
19.00-22.80		487,583		—		487,583		20.69		2.8		487,583		20.69
22.80-26.60		1,180,488		3,332		1,183,820		25.52		6.8		1,180,488		25.52
26.60-30.40		1,844,184		400,000		2,244,184		28.70		4.2		1,844,184		28.80
30.40-34.20		—		—		—		—		—		—		—
34.20-38.00		354,474		—		354,474		35.41		3.9		354,474		35.41
Totals		5,016,980		861,062		5,878,042		23.95		5.4		5,016,980		25.15

     The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model utilizing the following weighted average assumptions:

	Year Ended February 28 (29),
	2004	2005	2006
Risk-Free Interest Rate:	3.4% - 4.5%	3.5% - 4.4%	4.0% - 4.1%
Expected Dividend Yield:	0%	0%	0%
Expected Life (Years):	8.6 - 9.2	6.8	6.0
Expected Volatility:	57.8% - 58.1%	55.7% - 56.4%	60.8%

     In addition to the benefit plans noted above, Emmis has the following employee benefit plans:

     c. Profit Sharing Plan

     In December 1986, Emmis adopted a profit sharing plan that covered all nonunion employees with six months of service. Contributions to the plan were at the discretion of the Emmis Board of Directors and were made in the form of newly issued Emmis common stock. The profit sharing plan was closed in August 2005 and all outstanding assets in the plan were transferred to the 401(k) plan. No contributions were made to the profit sharing plan in the three years ended February 28, 2006.

     d. 401(k) Retirement Savings Plan

     Emmis sponsors two Section 401(k) retirement savings plans. One is available to substantially all nonunion employees age 18 years and older who have at least 30 days of service and the other is available to certain union employees that meet the same qualifications. Employees may make pretax contributions to the plans up to 50% of their compensation, not to exceed the annual limit prescribed by the Internal Revenue Service. Emmis may make discretionary matching contributions to the plans in the form of cash or shares of the Company’s Class A common stock. Effective March 1, 2003, Emmis elected to double its annual 401(k) match to $2 thousand per employee, with one-half of the contribution made in Emmis stock. The increased 401(k) match was made instead of making a contribution to the Company’s profit sharing plan. Emmis’ contributions to the plans for continuing operations totaled $1,293, $1,613 and $1,810 for the years ended February 2004, 2005 and 2006, respectively.

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     e. Defined Contribution Health and Retirement Plan

     Emmis contributes to a multi-employer defined contribution health and retirement plan for employees who are members of a certain labor union. Amounts charged to expense for continuing operations related to the multi-employer plan were approximately $459, $566 and $677 for the years ended February 2004, 2005 and 2006, respectively.

     f. Employee Stock Purchase Plan

     The Company has in place an employee stock purchase plan that allows employees to purchase shares of the Company’s Class A common stock at the lesser of 90% of the fair value of such shares at the beginning or end of each semi-annual offering period. Purchases are subject to a maximum limitation of $22.5 thousand annually per employee. The Company did not record compensation expense pursuant to this plan in the years ended February 2004, 2005 and 2006 as it is designed to meet the requirements of Section 423(b) of the Internal Revenue Code. However, effective March 1, 2006, Emmis began recording compensation expense pursuant to this plan under SFAS No. 123R.

10. OTHER COMMITMENTS AND CONTINGENCIES

     a. TV Program Rights

     The Company has obligations to various program syndicators and distributors in accordance with current contracts for the rights to broadcast programs. These obligations are classified as liabilities – discontinued operations in the accompanying consolidated balance sheets. Future payments scheduled under contracts for programs available as of February 28, 2006, are as follows:

Fiscal year ended February 28 (29),
2007	$	12,731
2008		5,178
2009		3,402
2010		1,265
2011		—
Thereafter		—
		22,576
Less: Current Portion		12,731
TV Program Rights, Net of Current Portion	$	9,845

     In addition, the Company has entered into commitments for future program rights (programs not available as of February 28, 2006). Future payments scheduled under these commitments are summarized as follows: Year ended February 2007 — $3,873; 2008 — $5,449; 2009 — $6,906; 2010 - $7,698; 2011 — $7,892; and thereafter — $5,060.

     b. Commitments Related to Radio Broadcast Agreements

     The Company has entered into agreements to broadcast certain syndicated programs and sporting events. Future payments scheduled under these agreements are summarized as follows: Year ended February 2007 — $2,114; 2008 — $1,788; 2009 — $1,484; 2010 — $1,425; 2011 — $484. Expense related to these broadcast rights totaled $1,993, $1,894 and $1,998 for the years ended February 2004, 2005 and 2006, respectively.

     c. Commitments Related to Operating Leases

     The Company leases certain office space, tower space, equipment, an airplane and automobiles under operating leases expiring at various dates through November 2020. Some of the lease agreements contain renewal options and annual rental escalation clauses (generally tied to the Consumer Price Index or increases in the lessor’s operating costs), as well as provisions for payment of utilities and maintenance costs. Maintenance costs are recorded using the accrual method.

     Future minimum rental payments (exclusive of future escalation costs) required by non-cancelable operating leases, with an initial term of one year or more as of February 28, 2006, are as follows:

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	Continuing		Discontinued
Fiscal year ended February 28 (29),	Operations		Operations
2007	$	8,782	$	515
2008		8,581		561
2009		8,166		573
2010		7,603		586
2011		5,888		482
Thereafter		25,097		2,480
	$	64,117	$	5,197

     Rent expense charged to continuing operations totaled $8,330 $7,259 and $7,258 for the years ended February 2004, 2005 and 2006, respectively. No sublease income was recorded during the three years ended February 28, 2006.

     d. Commitments Related to Employment Agreements

     The Company regularly enters into employment agreements with various officers and employees. These agreements generally specify base salary, along with bonuses and grants of stock and/or stock options based on certain criteria. Future minimum cash payments, consisting of primarily of base salary, scheduled under terms of these agreements are summarized as follows:

	Continuing		Discontinued
Fiscal year ended February 28 (29),	Operations		Operations
2007	$	19,226	$	1,905
2008		9,341		1,711
2009		5,101		885
2010		508		260
2011		188		—
Thereafter		—		—
	$	34,364	$	4,761

     In addition to future cash payments, at February 28, 2006, 0.1 million shares of common stock and options to purchase 1.0 million shares of common stock have been granted in connection with current employment agreements. Additionally, up to 0.2 million shares, and options to purchase up to 0.6 million shares of common stock, may be granted (or have been granted subject to forfeiture) under the agreements in the next three years.

     e. Litigation

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

     In January 2005, we received a subpoena from the Office of Attorney General of the State of New York, as have some of the other radio broadcasting companies operating in the State of New York. The subpoenas were issued in connection with the New York Attorney General’s investigation of record company promotional practices. We are cooperating with this investigation. We do not expect that the outcome of this matter would have a material impact on our financial position, results of operations or cash flows.

     In March, 2005, we received a subpoena from the Office of Attorney General of the State of New York in connection with the New York Attorney General’s investigation of a contest at one of our radio stations in New York City. This matter was settled for $0.3 million in our quarter ended August 31, 2005.

     During the Company’s fiscal quarter ended August 31, 2004, Emmis entered into a consent decree with the Federal Communications Commission to settle all outstanding indecency-related matters. Terms of the agreement call for Emmis to make a voluntary contribution of $0.3 million to the U.S. Treasury, with the FCC terminating all then-current indecency-related inquiries and fines against Emmis. Certain individuals and groups have requested that the FCC reconsider the adoption of the consent decree and have challenged applications for renewal of the licenses of certain of the Company’s stations based primarily on the matters covered by the decree.

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These challenges are currently pending before the Commission, but Emmis does not expect the challenges to result in any changes to the consent decree or in the denial of any license renewals. See “Federal Regulation of Broadcasting” for further discussion.

     In January 2005, a third party threatened claims against our radio station in Hungary seeking damages of approximately $4.6 million. Emmis is currently investigating this matter, but based on information gathered to date, Emmis believes the claims are without merit. Litigation has not been initiated and Emmis intends to defend itself vigorously in the matter.

11. INCOME TAXES

     The provision (benefit) for income taxes for the years ended February 2004, 2005 and 2006, consisted of the following:

	2004			2005			2006
Current:
Federal	$	—		$	—		$	—
State		—			—			—
Foreign		—			—			133
		—			—			133
Deferred:
Federal		5,231			755			(13,108	)
State		448			66			(2,143	)
Foreign		—			—			(337	)
		5,679			821			(15,588	)
Provision (benefit) for income taxes	$	5,679		$	821		$	(15,455	)
Other Tax Related Information:
Tax benefit of minortiy interest income (expense)		(1,151	)		(1,725	)		(2,087	)
Tax provision of discontinued operations		7,922			36,956			215,497
Tax benefit of accounting change		—			(185,450	)		—

United States and foreign income (loss) before income taxes for the years ended February 2004, 2005 and 2006 was as follows:

	2004		2005			2006
United States	$	6,765	$	(62,691	)	$	(37,198	)
Foreign		141		539			530
Income (loss) before income taxes	$	6,906	$	(62,152	)	$	(36,668	)

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     The provision (benefit) for income taxes for the years ended February 2004, 2005 and 2006 differs from that computed at the Federal statutory corporate tax rate as follows:

	2004			2005			2006
Computed income taxes at 35%	$	2,417		$	(21,754	)	$	(12,834	)
State income tax		448			66			(2,143	)
Nondeductible foreign losses		(54	)		(189	)		(405	)
Nondeductible interest		716			142			4
Nondeducted redemption premium on senior discount notes		—			20,755			—
Other		2,152			1,801			(77	)
Provision (benefit) for income taxes	$	5,679		$	821		$	(15,455	)

     During its year ended February 28, 2005, Emmis completed an evaluation of its statutory tax rate due to changes in its income dispersion in the various tax jurisdictions in which it operates. As a result of this review, Emmis increased the statutory rate it uses for its income tax provision from 38% to 41%.

     The components of deferred tax assets and deferred tax liabilities at February 28, 2005 and 2006 are as follows:

	2005			2006
Deferred tax assets:
Net operating loss carryforwards	$	125,188		$	19,637
Compensation relating to stock options		2,263			2,367
Noncash interest expense		175			240
Deferred revenue		3,142			710
Television sale deferred credits		—			10,770
Tax credits		1,129			5,988
Other		2,195			3,270
Valuation allowance		(14,800	)		(8,792	)
Total deferred tax assets		119,292			34,190
Deferred tax liabilities
Intangible assets		(31,458	)		(148,960	)
Fixed Assets		(14,615	)		(6,375	)
Other		—			—
Total deferred tax liabilities		(46,073	)		(155,335	)
Net deferred tax assets (liabilities)	$	73,219		$	(121,145	)

     A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. A valuation allowance has been provided for the net operating loss carryforwards related to the Company’s Belgium subsidiary. Additionally a valuation allowance has been provided for the net operating loss carryforwards related to certain state net operating losses as it is more likely than not that a portion of the state net operating losses will expire unutilized. Emmis does not have a valuation allowance related to the Federal net operating loss carryforward as management believes that the recovery from future taxable income is likely. Consolidated Federal net operating loss carryforwards, excluding those at the Company’s Belgium subsidiary, which do not expire, total approximately $16,688 and expire in 2025.

     Emmis is subject to regular audits by the taxing authorities in the jurisdictions in which the Company conducts or had previously conducted significant operations. Accordingly, the Company maintains reserves associated with various federal, state and foreign tax exposures that may arise in connection with such audits. As of February 28, 2006, Emmis had $26.0 million accrued for these exposures. If the reserves are less than amounts ultimately assessed by the taxing authorities, Emmis must record additional income tax expense in the period in which the assessments is determined. To the extent the Company had favorable settlements, or determines that

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reserves are no longer needed, such reserves are reversed as a reduction of income tax expense, or in some cases through discontinued operations, in the period such determination is made.

     The $6 million of tax credits at February 28, 2006 related to alternative minimum tax carryforwards that can be carried forward indefinitely.

     United States Federal and state deferred income taxes have not been recorded on undistributed earnings of foreign subsidiaries because such earnings are intended to be indefinitely reinvested in these foreign operations. Determination of the deferred tax liability should the Company remit a portion of these earnings is not feasible because such liability is dependent on the circumstances if a future remittance were to occur.

12. SEGMENT INFORMATION

     Subsequent to the reclassification of television to discontinued operations, the Company’s operations are aligned into two business segments: Radio and Publishing. These business segments are consistent with the Company’s management of these businesses and its financial reporting structure. Corporate represents expense not allocated to reportable segments.

     The Company’s segments operate primarily in the United States, with one radio station located in Hungary and a network of radio stations in Belgium and a national radio network in Slovakia and Bulgaria. We sold our two radio stations in Argentina in May 2004. Results form operations for these two stations have been classified as discontinued operations in the accompanying consolidated statements of operations (see Note 1k and Note 6 for further discussion). The following table summarizes the net revenues and long lived assets of our international properties included in our consolidated financial statements.

	Net Revenues for the Year Ended February 28 (29),						Long-lived Assets as of February 28 (29),
	2004		2005		2006		2004		2005		2006
Hungary		11,621		17,363		19,214		8,482		8,193		5,541
Belgium		N/M		103		610		3,000		2,843		2,210
Slovakia		N/A		N/A		7,360		N/A		N/A		9,920
Bulgaria		N/A		N/A		311		N/A		N/A		4,091

     In the quarter ended August 31, 2005, Emmis concluded its television assets were held for sale in accordance with Statement No. 144. Accordingly, the results of operations of the television division have been classified as discontinued operations in the accompanying consolidated financial statements and excluded from the segment disclosures below (see Note 1k and Note 6 for more discussion).

YEAR ENDED FEBRUARY 28, 2006	Radio			Publishing		Corporate			Consolidated
Net revenues	$	300,545		$	86,836	$	—		$	387,381
Station operating expenses, excluding noncash compensation		174,321			78,837		—			253,158
Corporate expenses, excluding noncash compensation		—			—		32,686			32,686
Depreciation and amortization		10,480			713		6,142			17,335
Noncash compensation		3,481			1,240		4,185			8,906
Impairment loss		31,372			6,000					37,372
(Gain) loss on disposal of assets		(5	)		1		98			94
Operating income (loss)	$	80,896		$	45	$	(43,111	)	$	37,830
Assets — continuing operations	$	1,049,886		$	80,626	$	188,578		$	1,319,090
Assets — discontinued operations		13,060			—		180,551			193,611
Total assets	$	1,062,946		$	80,626	$	369,129		$	1,512,701

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YEAR ENDED FEBRUARY 28, 2005	Radio		Publishing		Corporate			Consolidated
Net revenues	$	274,145	$	77,675	$	—		$	351,820
Station operating expenses, excluding noncash compensation		152,603		67,870		—			220,473
Corporate expenses, excluding noncash compensation		—		—		30,792			30,792
Depreciation and amortization		8,508		858		6,504			15,870
Noncash compensation		4,749		2,007		4,544			11,300
(Gain) loss on disposal of assets		259		89		447			795
Operating income (loss)	$	108,026	$	6,851	$	(42,287	)	$	72,590
Assets — continuing operations	$	1,055,704	$	84,480	$	132,500		$	1,272,684
Assets — discontinued operations		13,866				536,485			550,351
Total assets	$	1,069,570	$	84,480	$	668,985		$	1,823,035

YEAR ENDED FEBRUARY 29, 2004	Radio		Publishing		Corporate			Consolidated
Net revenues	$	250,510	$	76,108	$	—		$	326,618
Station operating expenses, excluding noncash compensation		135,884		65,809		—			201,693
Corporate expenses, excluding noncash compensation		—		—		24,105			24,105
Depreciation and amortization		8,307		873		6,090			15,270
Noncash compensation		6,768		2,780		5,273			14,821
(Gain) loss on disposal of assets		26		52		—			78
Operating income (loss)	$	99,525	$	6,594	$	(35,468	)	$	70,651
Assets — continuing operations	$	933,126	$	82,983	$	81,349		$	1,097,458
Assets — discontinued operations		163,903				1,039,208			1,203,111
	$	1,097,029	$	82,983	$	1,120,557		$	2,300,569

13. RELATED PARTY TRANSACTIONS

     No loans were made to directors, officers or employees during periods covered by these financial statements. However, one loan to Jeffrey H. Smulyan remains outstanding. The approximate amount of such loan at February 28, 2005 and 2006 was $1,042 and $912, respectively. This loan bears interest at the Company’s average borrowing rate, which was approximately 4.4% and 6.3% as of February 28, 2005 and 2006, respectively.

     Prior to 2002, the Company had made certain life insurance premium payments for the benefit of Mr. Smulyan. The Company discontinued making such payments in 2001; however, pursuant to a Split Dollar Life Insurance Agreement and Limited Collateral Assignment dated November 2, 1997, the Company retains the right, upon the death, resignation or termination of Mr. Smulyan’s employment, to recover all of the premium payments it has made, which total $1.1 million.

     Emmis leases a plane for business use and has a time-share agreement with Mr. Smulyan for personal use. Under the time-share agreement, whenever Mr. Smulyan uses the plane for non-business purposes, he pays Emmis for the aggregate incremental cost to Emmis of operating the plane up to the maximum amount permitted by Federal Aviation Authority regulations (which maximum generally approximates the total direct cost). Under the time-share agreement, Mr. Smulyan paid $51 and $72 in expenses for the years ending February 28, 2005 and 2006, respectively. In addition, under Internal Revenue Service regulations, to the extent Mr. Smulyan allows non-business guests to travel on the plane on a business trip or takes the plane on a non-business detour as part of a business trip, additional compensation is attributed to Mr. Smulyan. Generally, these trips on which compensation is assessed pursuant to IRS regulations do not result in any material additional cost or expense to Emmis. The Company believes that the terms of these transactions were no less favorable to the Company than terms available from independent third parties.

     Also, during the years ended February 28, 2005 and 2006, Emmis purchased approximately $186 and $124, respectively, of corporate gifts and specialty items from a company owned by the sister of Richard Leventhal, one of our directors.

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14. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND SUBSIDIARY NON-GUARANTORS

     Included in long-term debt and current maturities of long-term debt, is $375 million of senior subordinated notes and $120 million of senior floating rate notes. Both notes are fully and unconditionally guaranteed, jointly and severally, by certain direct and indirect subsidiaries of Emmis (the “Subsidiary Guarantors”). As of February 28, 2006, subsidiaries holding Emmis’ interest in its radio stations in Austin, Texas, Hungary, Slovakia, Bulgaria and Belgium, as well as certain other subsidiaries (such as those conducting joint ventures with third parties), did not guarantee the senior subordinated notes (the “Subsidiary Non-Guarantors”). The claims of creditors of the Subsidiary Non-Guarantors have priority over the rights of Emmis to receive dividends or distributions from such subsidiaries.

     Presented below is condensed consolidating financial information for the Emmis Communications Corporation (ECC) Parent Company Only (issuer of the senior floating rate notes), Emmis Operating Company (EOC) Parent Company Only (issuer of the senior subordinated notes), the Subsidiary Guarantors and the Subsidiary Non-Guarantors as of February 28, 2005 and 2006 and for each of the three years in the period ended February 28, 2006.

     Emmis uses the equity method in both of its Parent Company only information with respect to investments in subsidiaries when preparing the financial information for subsidiary guarantors and subsidiary non-guarantors. Separate financial statements for Subsidiary Guarantors are not presented based on management’s determination that they do not provide additional information that is material to investors.

103

Emmis Communications Corporation and Subsidiaries
Condensed Consolidating Balance Sheet
As of February 28, 2006

												Eliminations
	ECC Parent			EOC Parent					Subsidiary			and
	Company			Company			Subsidiary		Non-			Consolidating
	Only			Only			Guarantors		Guarantors			Entries			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	—		$	129,701		$	3,714	$	7,407		$	—		$	140,822
Accounts receivable, net		—			—			56,364		10,756			—			67,120
Prepaid expenses		—			1,197			14,760		917			—			16,874
Program rights		—			—			—		—			—			—
Other		—			931			2,402		823			—			4,156
Deferred tax assets — current		—			6,083			—		—			—			6,083
Current assets — discontinued operations		—			—			20,151		—			—			20,151
Total current assets		—			137,912			97,391		19,903			—			255,206
Property and equipment, net		—			24,469			31,112		10,765			—			66,346
Intangible assets, net		—			—			837,502		135,094			—			972,596
Investment in affiliates		618,267			1,146,540			—		—			(1,764,807	)		—
Other assets, net		2,672			54,762			3,843		1,565			(17,749	)		45,093
Noncurrent assets — discontinued operations		—			—			173,460		—			—			173,460
Total assets	$	620,939		$	1,363,683		$	1,143,308	$	167,327		$	(1,782,556	)	$	1,512,701
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	—		$	10,520		$	8,312	$	18,401		$	(12,012	)	$	25,221
Current maturities of long-term debt		121,406			6,750			—		1,385			(366	)		129,175
Current portion of TV program rights payable		—			—			—		—			—			—
Accrued salaries and commissions		—			4,092			7,174		843			—			12,109
Accrued interest		1,279			8,282			—		—			—			9,561
Deferred revenue		—			—			13,734		—			—			13,734
Other		1,123			3,263			1,360		324			—			6,070
Current liabilities — discontinued operations		—			—			26,033		—			—			26,033
Total current liabilities		123,808			32,907			56,613		20,953			(12,378	)		221,903
Long-term debt, net of current maturities		—			664,424			—		—			—			664,424
Other long-term debt, net of current maturities		—			—			20		8,871			(5,371	)		3,520
TV program rights payable, net of current portion		—			—			—		—			—			—
Other noncurrent liabilities		—			2,509			792		40			—			3,341
Minority Interest		—			—			—		48,465			—			48,465
Deferred income taxes		—			127,228			—		—			—			127,228
Noncurrent liabilities — discontinued operations		—			—			28,341		—			—			28,341
Total liabilities		123,808			827,068			85,766		78,329			(17,749	)		1,097,222
PREFERRED STOCK		143,750			—			—		—			—			143,750
SHAREHOLDERS’ EQUITY:
Common stock		371			618,267			—		—			(618,267	)		371
Additional paid-in capital		513,879			—			—		—			—			513,879
Subsidiary investment		—			—			275,907		128,089			(403,996	)		—
Retained earnings/(accumulated deficit)		(160,869	)		(79,698	)		781,635		(35,469	)		(746,166	)		(240,567	)
Accumulated other comprehensive loss		—			(1,954	)		—		(3,622	)		3,622			(1,954	)
Total shareholders’ equity		353,381			536,615			1,057,542		88,998			(1,764,807	)		271,729
Total liabilities and shareholders’ equity	$	620,939		$	1,363,683		$	1,143,308	$	167,327		$	(1,782,556	)	$	1,512,701

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Emmis Communications Corporation and Subsidiaries
Condensed Consolidating Statement of Operations
For the Year Ended February 28, 2006

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
Net revenues	$	—		$	989		$	329,903		$	56,489		$	—		$	387,381
Operating expenses:
Station operating expenses, excluding noncash compensation		—			758			210,628			41,772			—			253,158
Corporate expenses, excluding noncash compensation		—			32,686			—			—			—			32,686
(Gain) loss on disposal of assets		—			98			(4	)		—			—			94
Noncash compensation		—			4,185			4,547			174			—			8,906
Depreciation and amortization		—			6,142			5,887			5,306			—			17,335
Impairment losses and other		—			—			11,714			25,658			—			37,372
Total operating expenses		—			43,869			232,772			72,910			—			349,551
Operating income (loss)		—			(42,880	)		97,131			(16,421	)		—			37,830
Other income (expense)
Interest expense		(23,207	)		(46,939	)		(4	)		(1,591	)		1,155			(70,586	)
Loss on debt extinguishment		(5,116	)		(1,836	)		—			—			—			(6,952	)
Other income (expense), net		339			1,727			774			(3,124	)		3,324			3,040
Total other income (expense)		(27,984	)		(47,048	)		770			(4,715	)		4,479			(74,498	)
Income (loss) before income taxes, minority interest and discontinued operations		(27,984	)		(89,928	)		97,901			(21,136	)		4,479			(36,668	)
Provision (benefit) for income taxes		(11,469	)		6,003			—			(9,989	)		—			(15,455	)
Minority interest expense, net of tax		—			—			—			3,026			—			3,026
Income (loss) from continuing operations		(16,515	)		(95,931	)		97,901			(14,173	)		4,479			(24,239	)
Income (loss) from discontinued operations, net of tax		—			—			382,010			—			—			382,010
Equity in earnings (loss) of subsidiaries		—			470,217			—			—			(470,217	)		—
Net income (loss)		(16,515	)		374,286			479,911			(14,173	)		(465,738	)		357,771
Preferred stock dividends		8,984			—			—			—			—			8,984
Net income (loss) available to common shareholders	$	(25,499	)	$	374,286		$	479,911		$	(14,173	)	$	(465,738	)	$	348,787

105

Emmis Communications Corporation and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Year Ended February 28, 2006

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
OPERATING ACTIVITIES:
Net income (loss)	$	(16,515	)	$	374,286		$	479,911		$	(14,173	)	$	(465,738	)	$	357,771
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities -
Depreciation and amortization		798			7,866			5,889			5,306			—			19,859
Impairment losses		—			—			11,714			25,658			—			37,372
Accretion of interest on senior discount notes, including amortization of related debt costs		164			—			—			—			—			164
Provision for bad debts		—			—			3,228			—			—			3,228
Provision (benefit) for deferred income taxes		(11,469	)		6,163			(293	)		(9,989	)		—			(15,588	)
Noncash compensation		—			4,185			4,547			174			—			8,906
Discontinued operations		—			—			(382,010	)		—			—			(382,010	)
Net cash provided by operating activities — discontinued operations		—			—			45,027			—			—			45,027
Minority interest expense		—			—			—			3,026			—			3,026
Loss on debt extinguishment		5,116			1,836			—			—			—			6,952
Equity in earnings of subsidiaries		—			(470,217	)		—			—			470,217			—
Loss on disposal of assets		—			—			94			—			—			94
Other		643			—			—			2,300			(4,479	)		(1,536	)
Changes in assets and liabilities -
Accounts receivable		—			—			(3,523	)		(1,290	)		—			(4,813	)
Prepaid expenses and other current assets		—			1,251			(1,056	)		2,014			—			2,209
Other assets		—			(14,136	)		8,575			143			1,025			(4,393	)
Accounts payable and accrued liabilities		1,279			3,048			656			(5,107	)		3,782			3,658
Deferred liabilities		—			—			325			—			—			325
Other liabilities		—			1,814			(8,808	)		727			(4,807	)		(11,074	)
Net cash provided by (used in) operating activities		(19,984	)		(83,904	)		164,276			8,789			—			69,177
INVESTING ACTIVITIES:
Purchases of property and equipment		—			(739	)		(11,015	)		(1,079	)		—			(12,833	)
Net cash provided by investing activities — discontinued operations		—			—			889,031			—			—			889,031
Cash paid for acquisitions		—			—			—			(15,834	)		—			(15,834	)
Deposits on acquisitions and other		—			(96	)		—			—			—			(96	)
Net cash provided by (used in) investing activities		—			(835	)		878,016			(16,913	)		—			860,268
FINANCING ACTIVITIES:
Payments on long-term debt		(230,000	)		(659,638	)		—			—			—			(889,638	)
Proceeds from long-term debt		350,000			151,500			—			—			—			501,500
Purchases of the Company’s Class A Common Stock		(398,376	)		—			—			—			—			(398,376	)
Proceeds from exercise of stock options		4,033			—			—			—			—			4,033
Preferred stock dividends paid		(8,984	)		—			—			—			—			(8,984	)
Settlement of tax withholding obligations on stock issued to employees		(2,729	)		—			—			—			—			(2,729	)
Intercompany, net		314,500			720,913			(1,044,751	)		9,338			—			—
Debt related costs		(8,562	)		(2,023	)		—			—			—			(10,585	)
Other		102			—			—			—			—			102
Net cash provided by (used in) financing activities		19,984			210,752			(1,044,751	)		9,338			—			(804,677	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		—			126,013			(2,459	)		1,214			—			124,768
CASH AND CASH EQUIVALENTS:
Beginning of period		—			3,688			6,173			6,193			—			16,054
End of period	$	—		$	129,701		$	3,714		$	7,407		$	—		$	140,822

106

Emmis Communications Corporation and Subsidiaries
Condensed Consolidating Balance Sheet
As of February 28, 2005

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	—		$	3,688		$	6,173		$	6,193		$	—		$	16,054
Accounts receivable, net		—			—			56,218			7,135			—			63,353
Prepaid expenses		—			1,413			12,852			384			—			14,649
Other		—			4,593			2,814			1,868			—			9,275
Current assets — discontinued operations		—			—			63,754			—			—			63,754
Total current assets		—			9,694			141,811			15,580			—			167,085
Property and equipment, net		—			29,872			24,785			7,863			—			62,520
Intangible assets, net		—			—			849,736			150,541			—			1,000,277
Investment in affiliates		876,553			1,499,532			—			—			(2,376,085	)		—
Deferred tax assets		32,138			46,445			—			—			—			78,583
Other assets, net		28			41,236			4,054			1,429			(18,774	)		27,973
Noncurrent assets — discontinued operations		—			—			486,597			—			—			486,597
Total assets	$	908,719		$	1,626,779		$	1,506,983		$	175,413		$	(2,394,859	)	$	1,823,035
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	—		$	6,858		$	9,028		$	12,192		$	(8,230	)	$	19,848
Current maturities of other long-term debt		—			6,750			—			2,954			(2,016	)		7,688
Accrued salaries and commissions		—			3,862			5,802			580			—			10,244
Accrued interest		—			9,582			—			—			—			9,582
Deferred revenue		—			—			13,409			—			—			13,409
Other		1,123			4,362			(172	)		383			—			5,696
Current liabilities — discontinued operations		—			—			49,474			—			—			49,474
Total current liabilities		1,123			31,414			77,541			16,109			(10,246	)		115,941
Long-term debt, net of current maturities		1,245			1,172,563			—			—			—			1,173,808
Other long-term debt, net of current maturities		—			—			50			13,900			(8,528	)		5,422
Other noncurrent liabilities		—			8			1,769			27			—			1,804
Minority Interest		—			—			—			48,021			—			48,021
Noncurrent liabilities — discontinued operations		—			—			25,447			—			—			25,447
Total liabilities		2,368			1,203,985			104,807			78,057			(18,774	)		1,370,443
SHAREHOLDERS’ EQUITY:
Preferred stock		29			—			—			—			—			29
Common stock		564			876,553			—			—			(876,553	)		564
Additional paid-in capital		1,041,128			—			—			4,393			(4,393	)		1,041,128
Subsidiary investment		—			—			1,100,452			118,490			(1,218,942	)		—
Retained earnings/(accumulated deficit)		(135,370	)		(453,984	)		301,724			(21,296	)		(280,428	)		(589,354	)
Accumulated other comprehensive loss		—			225			—			(4,231	)		4,231			225
Total shareholders’ equity		906,351			422,794			1,402,176			97,356			(2,376,085	)		452,592
Total liabilities and shareholders’ equity	$	908,719		$	1,626,779		$	1,506,983		$	175,413		$	(2,394,859	)	$	1,823,035

107

Emmis Communications Corporation and Subsidiaries
Condensed Consolidating Statement of Operations
For the Year Ended February 28, 2005

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
Net revenues	$	—		$	1,021		$	307,528		$	43,271		$	—		$	351,820
Operating expenses:
Station operating expenses, excluding noncash compensation		—			582			189,439			30,452			—			220,473
Corporate expenses, excluding noncash compensation		—			30,792			—			—			—			30,792
Loss on disposal of assets		—			—			795			—			—			795
Noncash compensation		—			4,544			6,756			—			—			11,300
Depreciation and amortization		—			6,504			5,389			3,977			—			15,870
Total operating expenses		—			42,422			202,379			34,429			—			279,230
Operating income (loss)		—			(41,401	)		105,149			8,842			—			72,590
Other income (expense)
Interest expense		(5,707	)		(33,592	)		(9	)		(1,201	)		819			(39,690	)
Loss on debt extinguishment		(66,319	)		(30,929	)		—			—			—			(97,248	)
Other income (expense), net		—			198			1,816			2,015			(1,833	)		2,196
Total other income (expense)		(72,026	)		(64,323	)		1,807			814			(1,014	)		(134,742	)
Income (loss) before income taxes, minority interest and discontinued operations		(72,026	)		(105,724	)		106,956			9,656			(1,014	)		(62,152	)
Provision (benefit) for income taxes		(5,051	)		1,742			—			4,130			—			821
Minority interest expense, net of tax		—			—			—			2,486			—			2,486
Income (loss) from continuing operations		(66,975	)		(107,466	)		106,956			3,040			(1,014	)		(65,459	)
Income (loss) from discontinued operations, net of tax		—			—			59,906			4,185			—			64,091
Income (loss) before accounting change		(66,975	)		(107,466	)		166,862			7,225			(1,014	)		(1,368	)
Cumulative effect of accounting change, net of tax		—			(303,000	)		(303,000	)		—			303,000			(303,000	)
Equity in earnings (loss) of subsidiaries		—			173,073			—			—			(173,073	)		—
Net income (loss)		(66,975	)		(237,393	)		(136,138	)		7,225			128,913			(304,368	)
Preferred stock dividends		8,984			—			—			—			—			8,984
Net income (loss) available to common shareholders	$	(75,959	)	$	(237,393	)	$	(136,138	)	$	7,225		$	128,913		$	(313,352	)

108

Emmis Communications Corporation and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Year Ended February 28, 2005

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
OPERATING ACTIVITIES:
Net income (loss)	$	(66,975	)	$	(237,393	)	$	(136,138	)	$	7,225		$	128,913		$	(304,368	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities -
Discontinued operations		—			—			(59,906	)		(4,185	)		—			(64,091	)
Loss on debt extinguishment		66,319			30,929			—			—			—			97,248
Cumulative effect of accounting change		—			303,000			303,000			—			(303,000	)		303,000
Depreciation and amortization		—			8,534			4,607			4,758			—			17,899
Accretion of interest on senior discount notes, including amortization of related debt costs		5,707			—			—			—			—			5,707
Minority Interest Expense		—			—			—			2,486			—			2,486
Provision for bad debts		—			—			1,924			—			—			1,924
Provision (benefit) for deferred income taxes		(5,051	)		1,742			—			4,130			—			821
Noncash compensation		—			4,544			6,756			—			—			11,300
Equity in earnings of subsidiaries		—			(173,073	)		—			—			173,073			—
Loss on disposal of assets		—			—			795			—			—			795
Tax benefits of exercise of stock options		—			(2,305	)		—			—			—			(2,305	)
Other		—			—			6			50			1,014			1,070
Changes in assets and liabilities -								—
Accounts receivable		—			—			(3,408	)		(301	)		—			(3,709	)
Prepaid expenses and other current assets		—			571			(28	)		(620	)		—			(77	)
Other assets		(45	)		(7,513	)		1,937			(43	)		—			(5,664	)
Accounts payable and accrued liabilities		—			(5,905	)		(3,538	)		5,163			—			(4,280	)
Deferred liabilities		—			—			(489	)		—			—			(489	)
Other liabilities		—			880			(1,955	)		(3,479	)		—			(4,554	)
Net cash provided by operating activities — discontinued operations		—			—			70,091			—			—			70,091
Net cash provided by (used in) operating activities		(45	)		(75,989	)		183,654			15,184			—			122,804
INVESTING ACTIVITIES:
Purchases of property and equipment		—			(1,825	)		(5,678	)		(3,016	)		—			(10,519	)
Proceeds from sale of stations, net		—			—			74,778			7,300			—			82,078
Deposits on acquisitions and other		—			(1,755	)		894			—			—			(861	)
Net cash used in investing activities — discontinued operations		—			—			(16,349	)		—			—			(16,349	)
Net cash provided by (used in) investing activities		—			(3,580	)		53,645			4,284			—			54,349
FINANCING ACTIVITIES:
Payments on long-term debt		(227,708	)		(1,237,010	)		—			—			—			(1,464,718	)
Proceeds from long-term debt		—			1,376,500			—			—			—			1,376,500
Premiums paid to redeem outstanding debt obligations		(59,905	)		(12,905	)		—			—			—			(72,810	)
Proceeds from exercise of stock options		2,285			—			—			—			—			2,285
Preferred stock dividends paid		(8,984	)		—			—			—			—			(8,984	)
Settlement of tax withholding obligations on stock issued to employees		(1,586	)		—			—			—			—			(1,586	)
Intercompany, net		295,647			(38,700	)		(240,158	)		(16,789	)		—			—
Debt related costs		—			(12,052	)		—			—			—			(12,052	)
Other		296			—			—			—			—			296
Net cash provided by (used in) financing activities		45			75,833			(240,158	)		(16,789	)		—			(181,069	)
INCREASE (DECREASE) IN CASH      AND CASH EQUIVALENTS		—			(3,736	)		(2,859	)		2,679			—			(3,916	)
CASH AND CASH EQUIVALENTS:
Beginning of period		—			7,424			9,032			3,514			—			19,970
End of period	$	—		$	3,688		$	6,173		$	6,193		$	—		$	16,054

109

Emmis Communications Corporation and Subsidiaries
Condensed Consolidating Statement of Operations
For the Year Ended February 29, 2004

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
Net revenues	$	—		$	946		$	297,243		$	28,429		$	—		$	326,618
Operating expenses:
Station operating expenses, excluding noncash compensation		—			670			181,942			19,081			—			201,693
Corporate expenses, excluding noncash compensation		—			24,105			—			—			—			24,105
Loss on sale of assets		—			—			78			—			—			78
Noncash compensation		—			5,273			9,548			—			—			14,821
Depreciation and amortization		—			6,090			5,391			3,789			—			15,270
Total operating expenses		—			36,138			196,959			22,870			—			255,967
Operating income (loss)		—			(35,192	)		100,284			5,559			—			70,651
Other income (expense)
Interest expense		(26,524	)		(35,711	)		(144	)		(1,484	)		913			(62,950	)
Loss on debt extinguishment		—			—			—			—			—			—
Other income (expense), net		—			(1,018	)		681			1,006			(1,464	)		(795	)
Total other income (expense)		(26,524	)		(36,729	)		537			(478	)		(551	)		(63,745	)
Income (loss) before income taxes, minority interest and discontinued operations		(26,524	)		(71,921	)		100,821			5,081			(551	)		6,906
Provision (benefit) for income taxes		(9,362	)		13,375			—			1,666			—			5,679
Minority interest expense, net of tax		—			—			—			1,878			—			1,878
Income (loss) from continuing operations		(17,162	)		(85,296	)		100,821			1,537			(551	)		(651	)
Income (loss) from discontinued operations, net of tax		—			—			12,926			(10,019	)		—			2,907
Equity in earnings (loss) of subsidiaries		—			104,714			—			—			(104,714	)		—
Net income (loss)		(17,162	)		19,418			113,747			(8,482	)		(105,265	)		2,256
Preferred stock dividends		8,984			—			—			—			—			8,984
Net income (loss) available to common shareholders	$	(26,146	)	$	19,418		$	113,747		$	(8,482	)	$	(105,265	)	$	(6,728	)

110

Emmis Communications Corporation and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Year Ended February 29, 2004

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
OPERATING ACTIVITIES:
Net income (loss)	$	(17,162	)	$	19,418		$	75,165		$	(8,482	)	$	(66,683	)	$	2,256
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities -
Discontinued operations		—			—			(12,926	)		10,019			—			(2,907	)
Depreciation and amortization		—			9,782			5,391			4,161			—			19,334
Accretion of interest on senior discount notes, including amortization of related debt costs		26,524			—			—			—			—			26,524
Minority interest expense		—			—			—			1,878						1,878
Provision for bad debts		—			—			1,862			—			—			1,862
Provision (benefit) for deferred income taxes		(9,362	)		17,721			(4,346	)		1,666			—			5,679
Noncash compensation		—			5,273			9,548			—			—			14,821
Loss disposal of assets								78									78
Equity in earnings of subsidiaries		—			(66,132	)		—			—			66,132			—
Tax benefits of exercise of stock options		2,775			—			—			—			—			2,775
Other		—			—			1,151			1,938			551			3,640
Changes in assets and liabilities -								—
Accounts receivable		—			—			(1,618	)		(357	)		—			(1,975	)
Prepaid expenses and other current assets		—			(1,712	)		5,155			(2,758	)		—			685
Other assets		—			13,191			(11,410	)		841			—			2,622
Accounts payable and accrued liabilities		—			(2,248	)		(5,230	)		2,187			—			(5,291	)
Deferred liabilities		—			—			(1,117	)		(46	)		—			(1,163	)
Cash paid for TV programming rights		—			—			—			—			—			—
Other liabilities		—			561			(4,476	)		(8,784	)		—			(12,699	)
Net cash provided by (used in) operating activities -								—
discontinued operations		—			—			61,450			(1,404	)		—			60,046
Net cash provided by (used in) operating activities		2,775			(4,146	)		118,677			859			—			118,165
INVESTING ACTIVITIES:
Purchases of property and equipment		—			(4,767	)		(5,290	)		115			—			(9,942	)
Disposals of property and equipment		—			—			1,804			—			—			1,804
Cash paid for acquisitions		—			—			—			(109,470	)		—			(109,470	)
Deposits on acquisitions and other		—			(798	)		319			—			—			(479	)
Net cash used in investing activities — discontinued operations		—			—			(28,272	)		—			—			(28,272	)
Net cash provided by (used in) investing activities		—			(5,565	)		(31,439	)		(109,355	)		—			(146,359	)
FINANCING ACTIVITIES:
Payments on long-term debt		—			(105,066	)		—			—			—			(105,066	)
Proceeds from long-term debt		—			138,000			—			—			—			138,000
Premiums paid to redeem outstanding debt obligations		—			—			—			—			—			—
Proceeds from exercise of stock options		10,555			—			—			—			—			10,555
Preferred stock dividends paid		(8,984	)		—			—			—			—			(8,984	)
Settlement of tax withholding obligations on stock issued to employees		(1,774	)		—			—			—			—			(1,774	)
Intercompany, net		(2,572	)		(19,038	)		(84,050	)		105,660			—			—
Debt related costs		—			(646	)		—			—			—			(646	)
Net cash provided by (used in) financing activities		(2,775	)		13,250			(84,050	)		105,660			—			32,085
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		—			3,539			3,188			(2,836	)		—			3,891
CASH AND CASH EQUIVALENTS:
Beginning of period		—			3,885			5,844			6,350			—			16,079
End of period	$	—		$	7,424		$	9,032		$	3,514		$	—		$	19,970

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15. SUBSEQUENT EVENTS

     On March 1, 2006, Emmis granted an additional 0.2 million shares of restricted stock or restricted stock units and 0.5 million stock options to certain of its employees. The anticipated noncash compensation expense to be recognized in fiscal 2007 associated with these March 1, 2006 grants is approximately $2.6 million.

     On March 9, 2006, Emmis redeemed at par the remaining $120.0 million outstanding of its senior floating rate notes. In connection with this debt extinguishment, Emmis will record a loss of approximately $2.6 million related to the write-off of unamortized deferred debt costs.

     On March 15, 2006, Emmis redeemed at 106.25% of par the remaining $1.4 million outstanding of its 12.5% senior discount notes. In connection with this debt extinguishment, Emmis will record a loss of approximately $0.1 million related to the premium paid and the write-off of unamortized deferred debt costs.

     On May 3, 2006, Major League Baseball announced that it had awarded the right to purchase the Washington Nationals to a group other than the one led by Emmis. Consequently, Emmis expensed approximately $1.1 million of acquisition-related costs in the year ended February 28, 2006.

     On May 5, 2006, Emmis closed on its sale of WRDA-FM in St. Louis to Radio One, Inc. for $20 million. Emmis used the proceeds to repay outstanding debt obligations. In connection with the sale, Emmis expects to record a gain on sale of approximately $4 million, net of tax, in its quarter ended May 31, 2006, which will be reflected in discontinued operations.

     On May 5, 2006, Emmis signed a definitive agreement to sell the assets of WKCF-TV in Orlando to Hearst-Argyle Television Inc. for $217.5 million. The transaction contains customary representations, warranties and covenants, and is subject to standard closing conditions, including but not limited to approvals by the Federal Communications Commission. Emmis hopes to close this transaction by the end of its quarter ended August 31, 2006 and plans to use the proceeds to repay outstanding debt obligations, to fund acquisitions or for other general corporate purposes. WKCF-TV is included in discontinued operations in the accompanying consolidated financial statements.

     On May 5, 2006, Emmis signed an agreement to sell the assets of KKFR-FM in Phoenix to Bonneville International Corporation for $77.5 million. The transaction provides for customary representations, warranties and covenants, and is subject to standard closing conditions, including but not limited to approvals by the Federal Communications Commission. Emmis had exchanged three of its radio stations in Phoenix for WLUP-FM in Chicago and cash in the year ended February 28, 2005 (see Note 6). Emmis hopes to close this transaction by the end of its quarter ended August 31, 2006 and plans to use the proceeds to repay outstanding debt obligations, to fund acquisitions or for other general corporate purposes. KKFR-FM is included in the radio reporting segment in the accompanying consolidated financial statements. The following table summarizes certain operating results for KKFR-FM for all periods presented:

	Year ended February 28 (29),
	2004		2005		2006
Net revenues	$	7,673	$	7,859	$	9,945
Station operating expenses, excluding noncash compensation		4,704		4,936		5,846
Noncash compensation		317		202		39
Depreciation and amortization		208		236		236
Impairment loss		—		—		1,691
Pre-tax income		2,444		2,485		2,133
Provision for income taxes		929		1,019		875

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     Net assets related to KKFR-FM are included in the accompanying balance sheets as follows:

	February 28, 2005		February 28, 2006
Total current assets		2,058		2,267
Noncurrent assets:
Property and equipment, net		895		1,785
Intangibles, net		57,136		55,671
Total noncurrent assets		58,031		57,456
Total assets	$	60,089	$	59,723
Current liabilities		479		398
Noncurrent liabilities		—		45
Total liabilities	$	479	$	443

     On May 8, 2006, Emmis announced that ECC Acquisition, Inc., an Indiana Corporation wholly owned by Jeffrey H. Smulyan, the Chairman, Chief Executive Officer and controlling shareholder of the Company, made a non-binding proposal to acquire the outstanding publicly held shares of Emmis for $15.25 per share in cash. The offer stated that the purchaser intends to invite certain other members of the Company’s management to join the purchaser to participate in the transaction. In the offer, Mr. Smulyan also made clear that, in his capacity as a shareholder of the Company, his interest in the proposed transaction is to purchase shares of the Company not owned by him and will not agree to any other transaction involving the Company or his shares of the Company. In response to the proposal, the Board of Directors of Emmis announced that it has formed a special committee of independent directors to consider the proposal. The special committee will select its own independent financial and legal advisors. Mr. Smulyan and other directors of Emmis that are members of management will not participate in the evaluation of the proposal, which requires the recommendation of the special committee and the approval of the Board of Directors. The transaction will be subject to the negotiation and execution of definitive agreements related to the transaction and will be subject to the receipt of required financing and required regulatory approvals. Furthermore, the transaction will be subject to approval by Emmis’ shareholders. Pursuant to the terms of the Company’s Second Amended and Restated Articles of Incorporation and based on Mr. Smulyan’s ownership of shares of Class A Common Stock and Class B Common Stock, Mr. Smulyan holds shares with a voting interest of approximately 17.0% on the proposal and 66.7% on any other transaction requiring approval of stockholders of the Company (calculated in each case to include shares issuable under all options exercisable currently or within 60 days). Subsequent to the announcement, two lawsuits were filed in Marion County (Indiana) Superior Court on behalf of Emmis shareholders seeking injunctive relief and damages in connection with Mr. Smulyan’s offer, as well as class action status for the lawsuits. The Company is in the process of evaluating these lawsuits.

16. QUARTERLY FINANCIAL DATA (UNAUDITED)

	Quarter Ended										Full
	May 31			Aug. 31		Nov. 30		Feb. 28			Year
Year ended February 28, 2006
Net revenues	$	94,827		$	107,552	$	100,517	$	84,485		$	387,381
Operating income		20,136			28,932		25,464		(36,702	)		37,830
Net income (loss) before accounting change		10,378			8,430		200,021		138,942			357,771
Net income (loss) available to common shareholders		8,132			6,184		197,775		136,696			348,787
Basic earnings (loss) per common share:
Continuing operations, before accounting change	$	0.04		$	0.05	$	0.01	$	(1.03	)	$	(0.78	)
Discontinued operations	$	0.10		$	0.10	$	5.35	$	4.72		$	8.91
Cumulative effect of accounting change, net of tax	$	—		$	—	$	—	$	—		$	—
Net income (loss) available to common shareholders	$	0.14		$	0.15	$	5.36	$	3.69		$	8.13
Diluted earnings (loss) per common share:
Continuing operations, before accounting change	$	0.04		$	0.05	$	0.01	$	(1.03	)	$	(0.78	)
Discontinued operations	$	0.10		$	0.10	$	5.29	$	4.72		$	8.91
Cumulative effect of accounting change, net of tax	$	—		$	—	$	—	$	—		$	—
Net income (loss) available to common shareholders	$	0.14		$	0.15	$	5.30	$	3.69		$	8.13
Year ended February 28, 2005
Net revenues	$	84,059		$	96,689	$	90,196	$	80,876		$	351,820
Operating income		15,903			25,666		20,905		10,116			72,590
Net income (loss) before accounting change		(73,570	)		15,296		19,805		37,101			(1,368	)
Net income (loss) available to common shareholders		(75,816	)		13,050		17,559		(268,145	)		(313,352	)
Basic earnings (loss) per common share:
Continuing operations, before accounting change	$	(1.50	)	$	0.14	$	0.07	$	(0.04	)	$	(1.33	)
Discontinued operations	$	0.14		$	0.09	$	0.24	$	0.66		$	1.15
Cumulative effect of accounting change, net of tax	$	—		$	—	$	—	$	(5.37	)	$	(5.40	)
Net income (loss) available to common shareholders	$	(1.36	)	$	0.23	$	0.31	$	(4.75	)	$	(5.58	)
Diluted earnings (loss) per common share:
Continuing operations, before accounting change	$	(1.50	)	$	0.14	$	0.07	$	(0.04	)	$	(1.33	)
Discontinued operations	$	0.14		$	0.09	$	0.24	$	0.66		$	1.15
Cumulative effect of accounting change, net of tax	$	—		$	—	$	—	$	(5.37	)	$	(5.40	)
Net income (loss) available to common shareholders	$	(1.36	)	$	0.23	$	0.31	$	(4.75	)	$	(5.58	)

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     Our results of operations are usually subject to seasonal fluctuations, which result in higher second and third quarter revenues and operating income. The net loss available to common shareholders in the quarter ended May 31, 2005 includes a pre-tax loss on debt extinguishment of $97.3 million. The net loss available to common shareholders in the quarter ended February 28, 2005 includes a charge of $303.0 million, net of tax, to reflect the cumulative effect of an accounting change in connection with our adoption of EITF Topic D-108, “Use of the Residual Method to Value Acquired Assets other than Goodwill.” The net income available to common shareholders in the quarters ended November 30, 2005 and February 28, 2006 reflect gains on sale of television assets. Operating results for fiscal 2005 and fiscal 2006 have been reclassified to reflect the discontinued operations related to our television division and WRDA-FM.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

           Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     As of the end of the period covered by this annual 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 February 28, 2006, 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.

Management’s Report on Internal Control Over Financial Reporting

     Management’s report on internal control over financial reporting and the attestation report of Emmis Communications Corporation’s independent auditors are included in Emmis Communications Corporation’s financial statements under the captions entitled “Management’s Report on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm” and are incorporated herein by this reference.

ITEM 9B. OTHER INFORMATION

     Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information required by this item with respect to directors or nominees to be directors of Emmis is incorporated by reference from the sections entitled “Proposal No. 1: Election of Directors,” “Corporate Governance – Certain Committees of the Board of Directors,” “Corporate Governance – Code of Ethics” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Emmis 2006 Proxy Statement. Information about executive officers of Emmis or its affiliates who are not directors or nominees to be directors is presented in Part I under the caption “Executive Officers of the Registrant.”

ITEM 11. EXECUTIVE COMPENSATION.

     The information required by this item is incorporated by reference from the sections entitled “Corporate Governance – Compensation of Directors,” “Compensation Committee Interlocks and Insider Participation,” “Employment and Change-in-Control Agreements” and “Compensation Tables” in the Emmis 2006 Proxy Statement.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Information required by this item is incorporated by reference from the section entitled “Security Ownership of Beneficial Owners and Management” in the Emmis 2006 Proxy Statement.

Equity Compensation Plan Information

     The following table gives information about our common stock that may be issued upon the exercise of options, warrants and rights or vesting of restricted stock and restricted stock units under all of our existing equity compensation plans as of February 28, 2006. These plans include the 2004 Equity Compensation Plan and the Employee Stock Purchase Plan. Our shareholders have approved all of these plans.

	Number of Securities to be Issued			Weighted-Average Exercise			Number of Securities Remaining
	Upon Exercise of Outstanding			Price of Outstanding Options,			Available for Future Issuance under
	Options, Warrants and Rights			Warrants, Rights and			Equity Compensation Plans (Excluding
	and Vesting of Restricted Stock			Restricted Stock			Securities Reflected in Column (A))
Plan Category	(A)			(B)			(C)
Equity Compensation Plans Approved by Security Holders		5,946,464	(1)		23.95	(1)		7,627,000	(2)
Equity Compensation Plans Not Approved by Security Holders		—			—			—
Total		5,946,464	(1)		23.95	(1)		7,627,000	(2)

(1)

Includes 0.1 million shares estimated to be issuable in 2006 to employees in lieu of current salary pursuant to contract rights under our stock compensation program. See Note 1g to our Consolidated Financial Statements. The exact number and price of shares to be issued depends upon actual compensation during the period prior to issuance and changes in our share price, neither of which can be determined at this time. Thus, the weighted averages in Column B do not reflect these shares. The amount in Column A excludes obligations under employment contracts to issue bonus shares in the future.

(2)

Includes 0.3 million shares currently available under the initial authorization for the Employee Stock Purchase Plan. The number of shares reserved for issuance under this plan is automatically increased on the first day of each fiscal year by the lesser of 0.5% of the common shares outstanding on the last day of the immediately preceding fiscal year or a lesser amount determined by our board of directors. On March 1, 2006, options were granted to employees to purchase an additional 0.5 million shares of Emmis Communications Corporation common stock at $16.34 per share and 0.2 million shares of restricted stock or restricted stock units were granted.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by this item is incorporated by reference from the sections entitled “Corporate Governance – Certain Transactions” in the Emmis 2006 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

     The information required by this item is incorporated by reference from the section entitled “Matters Relating to Independent Registered Public Accountants” in the Emmis 2006 Proxy Statement.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Financial Statements

     The financial statements filed as a part of this report are set forth under Item 8.

Financial Statement Schedules

     No financial statement schedules are required to be filed with this report.

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. *
3.2	Amended and Restated Bylaws of Emmis Communications Corporation, incorporated by reference from Exhibit 3.2 to the Company’s Form 10-Q for the quarter ended November 30, 2002.
4.1	Indenture dated May 10, 2004 (the “67/8% Subordinated Notes Indenture”) among Emmis Operating Company and The Bank of Nova Scotia Trust Company of New York, as trustee, including as an exhibit thereto the form of note, incorporated by reference to the Company’s Form 10-K for the year ended February 29, 2004.
4.2	Indenture dated March 27, 2001 (the “121/2% Senior Discount Notes Indenture”) among Emmis Communications Corporation and The Bank of Nova Scotia Trust Company of New York, as trustee, including as an exhibit thereto the form of note, incorporated by reference to Exhibit 4.1 to Emmis’ Registration Statement on Form S-4, File No. 333-621604, as amended.
4.3	Supplemental Indenture dated April 26, 2004 to the 121/2% Senior Discount Notes Indenture, incorporated by reference to the Company’s Form 10-K for the year ended February 29, 2004.
4.4	Emmis Communications Floating Rate Notes Indenture, incorporated by reference from Exhibit 4.1 to the Company’s Form S-4 Registration Statement filed June 30, 2005 (File No. 333-126283).
4.5	Form of stock certificate for Class A common stock, incorporated by reference from Exhibit 3.5 to the 1994 Emmis Registration Statement on Form S-1, File No. 33-73218 (the “1994 Registration Statement”).
10.1	Revolving Credit and Term Loan Agreement dated May 10, 2004, incorporated by reference to the Company’s Form 10-K for the year ended February 29, 2004.
10.2	First Amendment to Revolving Credit and Term Loan Agreement, incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 6, 2005.
10.3	The Emmis Communications Corporation 1995 Non-Employee Director Stock Option Plan, incorporated by reference from Exhibit 10.15 to Emmis’ Annual Report on Form 10-K for the fiscal year ended February 28, 1995 (the “1995 10-K”).++
10.4	Emmis Communications Corporation 1997 Equity Incentive Plan, incorporated by reference from Exhibit 10.5 to Emmis’ Annual Report on Form 10-K for the fiscal year ended February 28, 1998.++
10.5	Emmis Communications Corporation 1999 Equity Incentive Plan, incorporated by reference from the Company’s proxy statement dated May 26, 1999.++

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10.6	Emmis Communications Corporation 2001 Equity Incentive Plan, incorporated by reference from the Company’s proxy statement dated May 25, 2001.++
10.7	Emmis Communications Corporation 2002 Equity Compensation Plan, incorporated by reference from the Company’s proxy statement dated May 30, 2002.++
10.8	Emmis Communications Corporation 2004 Equity Compensation Plan, incorporated by reference from the Company’s proxy statement dated May 28, 2004.++
10.9	Employment Agreement and Change in Control Severance Agreement, dated as of March 1, 2004, by and between Emmis Operating Company and Jeffrey H. Smulyan, incorporated by reference from Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended August 31, 2004.++
10.10	Employment Agreement dated as of March 1, 2002, by and between Emmis Operating Company and Richard Cummings, incorporated by reference from Exhibit 10.21 to the 2003 10-K and Amendment to Employment Agreement dated February 7, 2005, incorporated by reference from Exhibit 10.2 to the Company’s Form 8-K filed February 11, 2005. ++
10.11	Employment Agreement dated as of September 9, 2002, by and between Emmis Operating Company and Michael Levitan, incorporated by reference from Exhibit 10.22 to the 2003 10-K and Amendment to Employment Agreement dated February 7, 2005, incorporated by reference from Exhibit 10.4 to the Company’s Form 8-K filed February 11, 2005. ++
10.12	Employment Agreement dated as of March 1, 2003, by and between Emmis Operating Company and Gary A. Thoe, incorporated by reference from Exhibit 10.23 to the 2003 10-K. ++
10.13	Employment Agreement dated as of March 1, 2002, by and between Emmis Operating Company and Walter Z. Berger, incorporated by reference from Exhibit 10.24 to the 2003 10-K and Amendment to Employment Agreement dated February 7, 2005, incorporated by reference from Exhibit 10.1 to the Company’s Form 8-K filed February 11, 2005. ++
10.14	Employment Agreement, dated as of March 1, 2003, by and between Emmis Operating Company and Randall D. Bongarten, incorporated by reference from Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended May 31, 2003 and Amendment to Employment Agreement dated May 13, 2005, incorporated by reference from Exhibit 10.14 to the Company’s Form 10-K for the year ended February 28, 2005. ++
10.15	Employment agreement effective as of March 1, 2003, by and between Emmis Operating Company and Gary L. Kaseff, incorporated by reference from Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended August 31, 2003 and Amendment to Employment Agreement dated February 7, 2005, incorporated by reference from Exhibit 10.3 to the Company’s Form 8-K filed February 11, 2005. ++
10.16	Change in Control Severance Agreement, dated as of August 11, 2003, by and between Emmis Communications Corporation and Walter Z. Berger, incorporated by reference from Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended August 31, 2003. ++
10.17	Change in Control Severance Agreement, dated as of August 11, 2003, by and between Emmis Communications Corporation and Gary L. Kaseff, incorporated by reference from Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended August 31, 2003. ++
10.18	Change in Control Severance Agreement, dated as of August 11, 2003, by and between Emmis Communications Corporation and David R. Newcomer.++*
10.19	Change in Control Severance Agreement, dated as of August 11, 2003, by and between Emmis Communications Corporation and Randall D. Bongarten, incorporated by reference from Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended August 31, 2003, amended by Amendment to Employment Agreement dated May 13, 2005, incorporated by reference from Exhibit 10.14 to the Company’s Form 10-K for the year ended February 28, 2005. ++

117

10.20	Amendment to Employment Agreement and Change in Control Severance Agreement, dated as of August 22, 2005, by and between Emmis Operating Company and Emmis Communications Corporation and Randall D. Bongarten, incorporated by reference from Exhibit 10.4 to the Company’s Form 8-K filed August 25, 2005.++
10.21	Change in Control Severance Agreement, dated as of August 11, 2003, by and between Emmis Communications Corporation and Richard F. Cummings, incorporated by reference from Exhibit 10.5 to the Company’s Form 10-Q for the quarter ended August 31, 2003. ++
10.22	Change in Control Severance Agreement, dated as of February 7, 2005, by and between Emmis Communications Corporation and Michael Levitan, incorporated by reference from Exhibit 10.5 to the Company’s Form 8-K filed February 11, 2005. ++
10.23	Change in Control Severance Agreement, dated as of August 11, 2003, by and between Emmis Communications Corporation and Paul Fiddick, incorporated by reference from Exhibit 10.7 to the Company’s Form 10-Q for the quarter ended August 31, 2003. ++
10.24	Change in Control Severance Agreement, dated as of August 11, 2003, by and between Emmis Communications Corporation and Gary A. Thoe, incorporated by reference from Exhibit 10.8 to the Company’s Form 10-Q for the quarter ended August 31, 2003. ++
10.25	Asset Exchange Agreement, dated as of January 14, 2005, by and between Emmis Radio, LLC and Emmis Radio License, LLC and Bonneville International Corporation and Bonneville Holding Company, incorporated by reference from Exhibit 10.25 to the Company’s Form 10-K for the year ended February 28, 2005.
10.26	Agreement for Purchase of Limited Partner and Member Interests, dated as of March 3, 2003, by and between Emmis Operating Company and Sinclair Telecable, Inc., incorporated by reference from Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended May 31, 2003.
10.27	Registration Rights Agreement dated May 10, 2004, by and between Emmis Operating Company and Goldman, Sachs & Co., incorporated by reference to the Company’s Form 10-K for the year ended February 29, 2004.
10.28	Aircraft Time Sharing Agreement dated January 22, 2003, by and between Emmis Operating Company and Jeffrey H. Smulyan, incorporated by reference to the Company’s Form 10-K for the year ended February 29, 2004.
10.29	Tax Sharing Agreement dated May 10, 2004, by and between Emmis Communications Corporation and Emmis Operating Company, incorporated by reference to the Company’s Form 10-K for the year ended February 29, 2004.
10.30	2005 Stock Compensation Program Restricted Stock Agreement Form (tax vesting option), incorporated by reference to the Company’s Form 10-Q for the quarter ended November 30, 2004.++
10.31	2005 Stock Compensation Program Restricted Stock Agreement Form (non-tax vesting option), incorporated by reference to the Company’s Form 10-Q for the quarter ended November 30, 2004.++
10.32	2005 Stock Compensation Program, incorporated by reference to the Company’s Form 8-K filed December 21, 2004.++
10.33	2005 Outside Director Stock Compensation Program, incorporated by reference to the Company’s Form 8-K filed December 21, 2004.++
10.34	Form of Stock Option Grant Agreement, incorporated by reference to the Company’s Form 8-K filed March 7, 2005.++
10.35	Form of Restricted Stock Option Grant Agreement, incorporated by reference to the Company’s Form 8-K filed March 7, 2005.++
10.36	Director Compensation Policy effective May 13, 2005, incorporated by reference from Exhibit 10.36 to the Company’s Form 10-K for the year ended February 28, 2005.++

118

10.37	Asset Purchase Agreement, dated as of August 19, 2005, by and between Emmis Television Broadcasting, L.P. and Emmis Television License, LLC and Gray Television Group, Inc., incorporated by reference from Exhibit 10.1 to the Company’s Form 8-K filed August 25, 2005.
10.38	Asset Purchase Agreement, dated as of August 19, 2005, by and between Emmis Television Broadcasting, L.P. and Emmis Television License, LLC and Journal Broadcast Corporation and Journal Broadcast Group, incorporated by reference from Exhibit 10.2 to the Company’s Form 8-K filed August 25, 2005.
10.39	Asset Purchase Agreement, dated as of August 19, 2005, by and between Emmis Television Broadcasting, L.P. and Emmis Television License, LLC and LIN Television Corporation, incorporated by reference from Exhibit 10.3 to the Company’s Form 8-K filed August 25, 2005.
10.40	Asset Purchase Agreement, dated as of September 28, 2005, by and between Emmis Television Broadcasting, L.P. and Emmis Television LLC and SJL Acquisition, LLC, incorporated by reference from Exhibit 10.1 to the Company’s Form 8-K filed on September 30, 2005.
10.41	Stock Purchase Agreement, dated as of September 28, 2005, by and between Emmis Operating Company and SJL Acquisition, LLC, incorporated by reference from Exhibit 10.2 to the Company’s Form 8-K filed on September 30, 2005.
10.42	2006 Stock Compensation Program Restricted Stock Agreement Form (tax vesting option), incorporated by reference to the Company’s Form 8-K filed December 16, 2005.++
10.43	2006 Stock Compensation Program Restricted Stock Agreement Form (non-tax vesting option), incorporated by reference to the Company’s Form 8-K filed December 16, 2005.++
10.44	2006 Stock Compensation Program, incorporated by reference to the Company’s Form 8-K filed December 16, 2005.++.
10.45	2006 Outside Director Stock Compensation Program, incorporated by reference to the Company’s Form 8-K filed December 16, 2005.++
12	Ratio of Earnings to Fixed Charges.*
21	Subsidiaries of Emmis.*
23	Consent of Independent Registered Public Accountants.*
24	Powers of Attorney.*
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	Certification of Principal Executive Officer of Emmis Communications Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of Principal Financial Officer of Emmis Communications Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

*	Filed with this report.
++	Management contract or compensatory plan or arrangement.

119

Signatures.

     Pursuant to the requirements of Section 13 or 15(d) 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.

		EMMIS COMMUNICATIONS CORPORATION
Date: May 12, 2006	By:	/s/ Jeffrey H. Smulyan
		Jeffrey H. Smulyan
		Chairman of the Board,
		President and Chief Executive Officer

120

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and on the dates indicated.

	SIGNATURE	TITLE
Date: May 12, 2006	/s/ Jeffrey H. Smulyan Jeffrey H. Smulyan	President, Chairman of the Board and Director (Principal Executive Officer)
Date: May 12, 2006	/s/ David R. Newcomer David R. Newcomer	Interim Chief Financial Officer (Principal Accounting Officer)
Date: May 12, 2006	Susan B. Bayh* Susan B. Bayh	Director
Date: May 12, 2006	Gary L. Kaseff* Gary L. Kaseff	Executive Vice President, General Counsel and Director
Date: May 12, 2006	Richard A. Leventhal* Richard A. Leventhal	Director
Date: May 12, 2006	Peter A. Lund* Peter A. Lund	Director
Date: May 12, 2006	Greg A. Nathanson* Greg A. Nathanson	Director
Date: May 12, 2006	Frank V. Sica* Frank V. Sica	Director
Date: May 9, 2006	Lawrence B. Sorrel* Lawrence B. Sorrel	Director

*By:	/s/ J. Scott Enright
	J. Scott Enright
	Attorney-in-Fact

121

EX-3.1

Exhibit 3.1

ARTICLES OF AMENDMENT
OF THE
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
EMMIS COMMUNICATIONS CORPORATION

     The undersigned officer of Emmis Communications Corporation (hereinafter referred to as the “Corporation”) existing pursuant to the provisions of the Indiana Business Corporation Law, as amended (hereinafter referred to as the “Law”), desiring to give notice of corporate action effectuating amendment of certain provisions of its Second Amended and Restated Articles of Incorporation, certifies the following facts:

ARTICLE I

Amendments

     SECTION 1: The date of incorporation of the Corporation is July 17, 1986.

     SECTION 2: The name of the Corporation following this amendment to the Articles of Incorporation is Emmis Communications Corporation.

     SECTION 3: Exhibit A of the Second Amended and Restated Articles of Incorporation is amended as provided on Attachment 1.

ARTICLE II

Date of Amendment’s Adoption

     The amendment was adopted June 13, 2005.

ARTICLE III

Manner of Adoption and Vote

     SECTION 1: Action by Directors:

     The amendment was approved by the Board of Directors of the Corporation on June 1, 2005.

     SECTION 2: Action by Shareholders:

     The Shareholders of the Corporation entitled to vote in respect of the amendment adopted the amendment by vote of the Shareholders during a meeting called by the Board of Directors and held June 13, 2005. The result of the vote was as follows:

Designation of Each Voting	Class A Common and Class	6.25% Series A Cumulative
Group	B Common 1	Convertible Preferred
Number of outstanding shares:	Class A: 51,944,160		2,875,000
	Class B: 48,797,840
Number of votes entitled to be cast:	Class A: 51,944,160		2,875,000
	Class B: 48,797,840
Number of votes represented at the meeting:	Class A: 25,667,744		2,137,050
	Class B: 48,797,840
Shares voted in favor:	Class A: 24,142,474		2,126,140
	Class B: 48,797,840
	Total: 72,940,314
Shares voted against:	Class A: 2,626		9,410
	Class B: 0
	Total: 2,626

¹ The Class A Common Stock and the Class B Common Stock voting together as a single class.

2

ARTICLE IV

Compliance with Legal Requirements

     The manner of the adoption of the Articles of Amendment and the vote by which they were adopted constitute full legal compliance with the provisions of the Law, the Articles of Incorporation, as amended, and the By-Laws of the Corporation.

     I hereby verify subject to the penalties of perjury that the statements contained are true this 13th day of June 2005.

/s/ J. Scott Enright

J. Scott Enright, Secretary

3

ATTACHMENT 1

     Section 9(c)(v) of Exhibit A to the Second Amended and Restated Articles of Incorporation is amended hereby by deleting Section 9(c)(v) in its entirety and restating it to read as follows:

          (v) In case the Corporation shall at any time or from time to time (A) make a distribution to all holders of shares of its Common Stock consisting exclusively of cash (excluding any cash portion of distributions referred to in paragraph (iv) above, or cash distributed upon a merger or consolidation to which (B) of this paragraph below applies), that, when combined together with (x) all other such all-cash distributions made within the then-preceding 12 months in respect of which no adjustment has been made and (y) any cash and the fair market value of any other consideration paid or payable in respect of any tender offer by the Corporation or any of its subsidiaries for shares of Common Stock concluded within the then-preceding 12 months in respect of which no adjustment pursuant to this Section 9(c) has been made, in the aggregate exceeds 15% of the Corporation’s Market Capitalization as of the record date of such distribution; (B) complete a tender or exchange offer which the Corporation or any of its subsidiaries makes for shares of the Corporation’s Common Stock that involves an aggregate consideration that, together with (x) any cash and other consideration payable in a tender or exchange offer by the Corporation or any of its subsidiaries for shares of the Corporation’s Common Stock expiring within the then preceding 12 months in respect of which no adjustment has been made and (y) the aggregate amount of any such all-cash distributions referred to in (A) of this paragraph to all holders of shares of Common Stock within the then preceding 12 months in respect of which no adjustments have been made, exceeds 15% of the Corporation’s Market Capitalization as of the date of the first public announcement of such tender or exchange offer (the “Announcement Date”); or (C) make a distribution to all holders of its Common Stock consisting of evidences of indebtedness, shares of its capital stock other than Common Stock or assets (including securities, but excluding those dividends, rights, options, warrants and distributions referred to in this Section 9(c)), then (1) in the case of (A) and (C) above, the Conversion Price then in effect shall be adjusted by dividing the Conversion Price in effect immediately prior to the date of such distribution by a fraction (x) the numerator of which shall be the Market Value as of the record date referred to below and (y) the denominator of which shall be such Market Value less the then fair market value (as determined by the Board of Directors of the Corporation) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed or paid in such tender or exchange offer, for which no adjustment has been made, applicable to one share of Common Stock (assuming that the distribution and/or tender or exchange offer consideration is paid to the holders of all outstanding shares of Common Stock on the record date for the determination of shareholders entitled to receive such distribution) (but such denominator not to be less than one), and (2) in the case of (B) above, the Conversion Price then in effect shall be adjusted by dividing the Conversion Price in effect immediately prior to the expiration of such tender or exchange offer (the “Expiration Time”) by a fraction (which shall not be less than one) (x) the numerator of which shall be equal to the product of (a) the Market Value as of the Announcement Date and (b) the number of shares of Common Stock outstanding (including any tendered shares) on the date of the Expiration Time less the number of all shares of Common Stock validly tendered, not withdrawn and accepted for payment up to any maximum specified in the terms of the tender offer or exchange offer (such

4

validly tendered shares, up to any such maximum, being referred to as the “Purchased Shares”) and (y) the denominator of which shall be equal to (a) the product of (I) the Market Value as of the Announcement Date and (II) the number of shares of Common Stock outstanding (including any tendered shares) on the date of the Expiration Time less (b) the fair market value (as determined by the Board of Directors of the Corporation) of the cash, evidences of indebtedness, securities or other assets paid in such tender or exchange offer or so distributed for which no adjustment has been made (assuming in the case of any tender offer or exchange offer, the acceptance, up to any maximum specified in the terms of the tender or exchange offer, of Purchased Shares); provided, however, that no adjustment shall be made with respect to any distribution of rights to purchase securities of the Corporation if the holder of shares of Preferred Stock would otherwise be entitled to receive such rights upon Conversion at any time of shares of Preferred Stock into shares of Class A Common Stock unless such rights are subsequently redeemed by the Corporation, in which case such redemption shall be treated for purposes of this Section 9(c)(v) as a dividend on the Common Stock. Such adjustment shall be made whenever any such distribution is made or tender or exchange offer is completed, as the case may be, and shall become effective retroactively to a date immediately following the close of business on the record date for the determination of stockholders entitled to receive such distribution (or in the case of a tender or exchange offer, immediately prior to the opening of business on the day after the Expiration Time). For purposes of determining the fair market value of any cash, evidences of indebtedness, securities or other assets paid in any tender or exchange offer (the “Tender Consideration”) in clause (1)(y) above, only the excess (if any) of the Tender Consideration over the product of the Market Value as of the Announcement Date for such tender or exchange offer and the number of shares of Common Stock purchased in such tender of exchange offer shall be included in such calculation.

     Notwithstanding the foregoing, with respect to the Company’s tender offer for up to 20,250,000 shares of Class A Common Stock as set forth in the Offer to Purchase dated May 16, 2005, as amended from time to time thereafter (the “2005 Tender Offer”), the Conversion Price shall be adjusted as follows: the Conversion Price then in effect shall be adjusted to the number equal to (a) the Liquidation Preference divided by (b) the sum of (i) a fraction the numerator of which shall equal the Liquidation Preference and the denominator of which shall be the Conversion Price in effect immediately prior to the close of business on the date of the Expiration Time for the 2005 Tender Offer plus (ii) the product of (x) 0.386 and (y) a fraction the numerator of which shall be the purchase price paid in the 2005 Tender Offer for all shares of Class A Common Stock that are validly tendered and not withdrawn and accepted for payment in accordance with the terms of the 2005 Tender Offer and the denominator of which shall be 400,000,000.

[Remainder of page left blank deliberately]

5

     A new Section 11 is added hereby to Exhibit A to the Second Amended and Restated Articles of Incorporation to read as follows:

          11. Redemption Upon Going Private Transaction.

          11.1 If a Going Private Redemption Transaction (as defined below) occurs, the holders of the Preferred Stock shall have the right to require that the Corporation redeem all or a portion of their outstanding shares of Preferred Stock on the date that is the first anniversary of the Going Private Redemption Transaction (or, if such date is not a Business Day, on the next Business Day) (such date, the “Going Private Redemption Date”) at a redemption price per share equal to 100% of the Liquidation Preference plus Accrued Dividends and Accumulated Dividends, if any, whether or not declared to the Going Private Redemption Date (the “Going Private Redemption Price”) in accordance with the terms of this Section 11. “Going Private Redemption Transaction” shall mean a Going Private Transaction (as defined in Article III of the Corporation’s Second Amended and Restated Articles of Incorporation) in which a Permitted Holder or an Affiliate of Smulyan (as defined in Article III of the Corporation’s Second Amended and Restated Articles of Incorporation) participates, which does not otherwise constitute a Change of Control.

          11.2 At least 30 days prior to the Going Private Redemption Date, the Corporation shall provide a notice (the “Going Private Redemption Notice”) by first class mail to each record holder of shares of Preferred Stock, at such holder’s address as the same appears on the books of the Corporation. Each such notice shall state (i) that a Going Private Redemption Transaction has occurred and that each holder has the right to require the Corporation to redeem all or a portion of such holder’s shares of Preferred Stock at a redemption price per share equal to 100% of the Liquidation Preference plus Accrued Dividends and Accumulated Dividends, if any, whether or not declared to the Going Private Redemption Date; (ii) the last day on which a holder may elect to have all or a portion of its shares of Preferred Stock redeemed; (iii) the procedures that holders must follow to have their Preferred Stock redeemed; and (iv) the Going Private Redemption Date; provided, however, that no failure to mail such notice, nor any defect therein, nor in the mailing thereof, shall affect the validity of the proceedings for the redemption of any of the Preferred Stock to be redeemed owned by the other holders to whom such notice was duly given. On the Going Private Redemption Date, the Corporation shall pay over the Going Private Redemption Price to the holders of the shares of Preferred Stock who have validly elected to have all or a portion of their shares redeemed upon the endorsement and surrender of the certificates for such shares of Preferred Stock by the holders thereof.

          11.3 On or before the Going Private Redemption Date, each holder of shares of Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares of Preferred Stock to the Corporation, in the manner and at the place designated in the Going Private Redemption Notice and on the Going Private Redemption Date, the full Going Private Redemption Price, payable in cash, for such shares of Preferred Stock to be redeemed shall be paid or delivered to the person whose name appears on such certificate or certificates as the owner thereof, and the shares represented by each surrendered certificate shall be returned to authorized but unissued shares of preferred stock of any or no series. Upon surrender (in accordance with the Going Private Redemption Notice) of the certificate or certificates

6

representing any shares to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the Going Private Redemption Notice shall so state), such shares shall be redeemed by the Corporation at the Going Private Redemption Price. If fewer than all the shares represented by any such certificate are to be redeemed, a new certificate shall be issued representing the unredeemed shares, without cost to the holder thereof, together with the amount of cash, if any, in lieu of fractional shares.

          11.4 If a Going Private Redemption Notice shall have been given as provided in Section 11.2 and a holder shall have validly elected to have all or a portion of its shares of Preferred Shares redeemed, dividends on such shares of Preferred Stock to be redeemed shall cease to accrue, such shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as shareholders of the Corporation with respect to shares so called for redemption (except for the right to receive from the Corporation the Going Private Redemption Price) shall cease (including any right to receive dividends otherwise payable on any Dividend Payment Date that would have occurred after the time and date of such redemption) either (i) from and after the Going Private Redemption Date (unless the Corporation shall default in the payment of the Going Private Redemption Price, in which case such rights shall not terminate at such date) or (ii) if the Corporation shall so elect and state in the Going Private Redemption Notice, from and after the time and date (which date shall be the Going Private Redemption Date or an earlier date not less than 30 days after the date of mailing of the Going Private Redemption Notice) on which the Corporation shall establish an account and irrevocably deposit for the holders of the shares of Preferred Stock to be redeemed with a designated bank or trust company doing business in the State of New York, as paying agent (the “Principal Agent”), money sufficient to pay at the office of such paying agent, on the Going Private Redemption Date, the Going Private Redemption Price. The holders of the Preferred Stock or their appointed representatives shall have a perfected first priority security interest in such account. Any money so deposited with any such Principal Agent which shall not be required for such redemption shall be returned to the Corporation forthwith. Subject to applicable escheat laws, any moneys so set aside by the Corporation and unclaimed at the end of one year from the Going Private Redemption Date shall revert to the general funds of the Corporation, after which reversion the holders of such shares so called for redemption shall look only to the general funds of the Corporation for the payment of the Going Private Redemption Price without interest. Any interest accrued on funds so deposited shall be paid to the Corporation from time to time.

          11.5 Immediately prior to the consummation of a Going Private Redemption Transaction, the Corporation shall establish a dividend account with a designated bank or trust company doing business in the State of New York (the “Dividend Agent”). The holders of the Preferred Stock or their appointed representatives shall have a perfected first priority security interest in such account (the “Preferred Shareholder Dividend Security Account”). The Corporation shall deposit with such Dividend Agent money sufficient to pay all dividends payable pursuant to Section 3 of this Exhibit A to the holders of all outstanding shares of Preferred Stock for each Dividend Payment Date occurring after the consummation of the Going Private Redemption Transaction and on or prior to the Going Private Redemption Date. On each Dividend Payment Date occurring after the consummation of the Going Private Redemption Transaction, the Dividend Agent shall release from such account money sufficient to pay the dividends then due and payable on the outstanding shares of Preferred Stock. Any money so held

7

which shall not be used to pay such dividends shall be returned to the Corporation forthwith and in any event following the Going Private Redemption Date, all such money so held shall be released to the Corporation (unless the Corporation shall default in the payment of the Going Private Redemption Price). Any interest accrued on the funds or investment income in respect of such funds shall be paid to the Corporation from time to time. In connection with any Going Private Redemption Transaction, the Company shall disclose in the 13e-3 disclosure document filed in connection therewith the terms of the Preferred Shareholder Dividend Security Account and shall attach as an exhibit thereto the definitive documentation to be entered into in connection therewith.

          11.6 The Corporation shall comply, to the extent applicable, with the requirements of Section 13(e) and 14(e) of the Exchange Act and any other securities laws or regulations in connection with redemption of the Preferred Stock pursuant to this Section 11. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 11, the Corporation shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 11 by virtue of its compliance with such securities laws or regulations.

          11.7 The rights of holders of Preferred Stock pursuant to this Section 11 are in addition to the rights of holders of Preferred Stock provided for in Sections 6 and 9 of this Exhibit A.

8

ARTICLES OF AMENDMENT
OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
EMMIS COMMUNICATIONS CORPORATION

The undersigned officer of EMMIS COMMUNICATIONS CORPORATION (the “Corporation”), existing pursuant to the provisions of the Indiana Business Corporation Law (IND. CODE § 23-1 et seq.) as amended (the “Act”), desiring to give notice of corporate action effectuating amendment of certain provisions of its Amended and Restated Articles of Incorporation, certifies the following facts:

ARTICLE I — Amendment

SECTION 1: The date of incorporation of the Corporation is:

     July 17, 1986

SECTION 2: The name of the Corporation following this amendment of its Amended and Restated Articles of Incorporation is:

     EMMIS COMMUNICATIONS CORPORATION

SECTION 3: The text of the Amended and Restated Articles of Amendment is amended to add Exhibit B as follows:

     SEE ATTACHED EXHIBIT 1

This amendment is to be effective upon filing.

ARTICLE II — Manner and Adoption and Vote

SECTION 1: Action by Directors:

The Board of Directors of the Corporation duly adopted resolutions amending the Amended and Restated Articles of Incorporation. These resolutions were adopted at a meeting held on March 11, 2001 at which a quorum was present.

SECTION 2: Action by Shareholders:

Pursuant to I.C. 23-1-25-2(d), the Shareholders of the Corporation were not required to vote with respect to this amendment to the Amended and Restated Articles of Incorporation.

SECTION 3: Compliance with legal requirements:

The manner of the adoption of the Articles of Incorporation and the vote by which they were adopted constitute full legal compliance with the provisions of the Act, the Amended and Restated Articles of Incorporation, and the Code of By-Laws of the Corporation.

     I hereby verify, subject to penalties for perjury, that the facts contained herein are true this 26^th day of March, 2001.

/s/ J. Scott Enright

J. Scott Enright

Vice President and Associate General Counsel

2

EXHIBIT 1

Exhibit B
to the Amended and Restated
Articles of Incorporation of
Emmis Communications Corporation

Pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation by the provisions of Article VIII, Section 8.01 of the Corporation’s Amended and Restated Articles of Incorporation, as amended from time to time (the “Articles of Incorporation”), and pursuant to I.C. 23-1-25-2, the Board of Directors hereby creates a series of preferred stock of the Corporation with the following voting powers, designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof (in addition to the provisions set forth in the Articles of Incorporation which are applicable to the preferred stock of all classes and series):

     1. Designation, Amount and Ranking.

          1.1 There shall be created from the 10,000,000 shares of preferred stock, par value $0.01 per share, of the Corporation authorized to be issued pursuant to the Articles of Incorporation, a series of preferred stock, designated as the “12.50% Senior Preferred Stock,” par value $0.01 per share (the “Senior Preferred Stock”), and the number of shares of such series shall be 250. Such number of shares may be decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of shares of Senior Preferred Stock to a number less than that of the shares of Senior Preferred Stock then outstanding plus the number of shares issuable upon exercise of options or rights then outstanding.

          1.2 The Senior Preferred Stock, with respect to dividend distributions upon the liquidation, winding-up and dissolution of the Corporation, ranks:

               (a) senior to all classes of the Corporation’s common stock and to each other class of capital stock or series of preferred stock established after the Issue Date by the Board of Directors, the terms of which do not expressly provide that it ranks senior to or on a parity with the Senior Preferred Stock as to dividend distributions and distributions upon the liquidation, winding-up and dissolution of the Corporation (“Senior Securities”);

               (b) ratably with the Corporation’s 6.25% Series A Cumulative Convertible Preferred Stock and with any class of capital stock or series of preferred stock issued by the Corporation established after the Issue Date by the Board of Directors, the terms of which expressly provide that such class or series will rank on a parity with the Senior Preferred Stock as to dividend distributions and distributions upon the liquidation, winding-up and dissolution of the Corporation (“Parity Securities”); and

               (c) subject to certain conditions which include the affirmative vote or consent of the holders of at least a majority of the outstanding Senior Preferred Stock, junior to each class of capital stock or series of preferred stock issued by the Corporation established after

B-1

the Issue Date by the Board of Directors, the terms of which expressly provide that such class or series will rank senior to the Senior Preferred Stock as to dividend distributions and distributions upon liquidation, winding-up and dissolution of the Corporation.

          1.3 The Corporation may not authorize, create (by way of reclassification or otherwise) or issue any Senior Securities (other than Disqualified Stock), or any obligation or security convertible into or evidencing the right to purchase Senior Securities (other than Disqualified Stock), without the consent of the holders of at least a majority in Liquidation Preference of the then outstanding Senior Preferred Stock, in each case, voting as a single class.

     2. Definitions. As used in this Exhibit B, the following terms shall have the following meanings:

          2.1 “Acquired Debt” means, with respect to any specified Person:

(1) Indebtedness or Disqualified Stock of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person; and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

          2.2 “Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

          2.3 “Applicable Premium” means, with respect to any share of Senior Preferred Stock on any Redemption Date, the greater of:

     (1) 1.0% of the Liquidation Preference of the share; or

     (2) the excess of:

     (a) the present value of the Liquidation Preference at such Redemption Date of (i) the redemption price of the share at March 15, 2006 (such redemption price being set forth in the table appearing above) plus (ii) all required dividend payments due on the share through March 15, 2006 (excluding accrued but unpaid dividends), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over

B-2

     (b) the Liquidation Preference of the share.

          2.4 “Asset Sale” means:

(1) the sale, lease, conveyance or other disposition of any assets or rights, other than sales of inventory in the ordinary course of business; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Corporation and its Restricted Subsidiaries taken as a whole will be governed by Section 7 and subsection 11.4 and not by Section 8; and

(2) the issuance of Equity Interests by any of the Corporation’s Restricted Subsidiaries or the sale of Equity Interests in any of its Subsidiaries.

Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales:

(1) any single transaction or series of related transactions that: (a) involves assets having a fair market value of less than $1.0 million; or (b) results in net proceeds to the Corporation and its Restricted Subsidiaries of less than $1.0 million;

(2) a transfer of assets between or among the Corporation and any of its Restricted Subsidiaries;

(3) an issuance of Equity Interests by a Restricted Subsidiary to the Corporation or to another Restricted Subsidiary;

(4) a transfer by the Corporation of assets in a transaction that qualifies as a charitable contribution or donation and which does not exceed $2.0 million in the aggregate; and

(5) a Restricted Payment or Permitted Investment that is permitted under subsection 11.1.

          2.5 “Attributable Debt” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP.

          2.6 “Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.

B-3

          2.7 “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law or executive order to close.

          2.8 “Capital Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP.

          2.9 “Capital Stock” means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

          2.10 “Cash Equivalents” means:

(1) United States dollars;

(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition;

(3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating of “B” or better;

(4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

(5) commercial paper or marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case, having one the two highest ratings obtainable from Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Group and in each case maturing within one year after the date of acquisition; and

(6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) - (5) of this definition.

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          2.11 “Change of Control” means the occurrence of any of the following:

(1) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Corporation and its Restricted Subsidiaries, taken as a whole to any “person” (as such term is used in Section 13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a Principal;

(2) the adoption of a plan relating to the liquidation or dissolution of the Corporation;

(3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as defined above), other than the Principals and their Related Parties and disregarding any holding company whose principal asset is capital stock of the Corporation, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Corporation, measured by voting power rather than number of shares; or

(4) the first day on which a majority of the members of the Board of Directors of the Corporation are not Continuing Directors.

          2.12 “Consolidated EBITDA” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus:

(1) an amount equal to any extraordinary loss on an after tax basis plus any loss realized in connection with an Asset Sale or any refinancing of a Credit Facility on an after tax basis, to the extent such losses were deducted in computing such Consolidated Net Income; plus

(2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

(3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, consent fees, premiums, prepayment penalties, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net payments, if any, pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus

(4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and

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its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus

(5) all one-time cash compensation payments in connection with employment agreements (or replacement therefor) as in effect on March 27, 2001; minus

(6) non-cash items increasing such Consolidated Net Income for such period, other than items that were accrued in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP.

          Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of the Corporation shall be added to Consolidated Net Income to compute Consolidated EBITDA of the Corporation only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Corporation by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter, all judgments, decrees, orders, statutes, rules and governmental regulations, and all agreements and instruments applicable to that Subsidiary or its stockholders.

          2.13 “Consolidated Net Income” means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:

(1) the Net Income or loss of any Person other than the Corporation that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Restricted Subsidiary thereof;

(2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any judgment, decree, order, statute, rule or governmental regulation (and, with respect to the Senior Preferred Stock, any agreement or instrument) applicable to that Restricted Subsidiary or its stockholders;

(3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded;

(4) the cumulative effect of a change in accounting principles shall be excluded; and

(5) the Net Income or loss of any Unrestricted Subsidiary shall be excluded whether or not distributed to the specified Person or one of its Subsidiaries.

          2.14 “Consolidated Net Worth” means, with respect to any Person as of any date, the sum of:

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(1) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date; plus

(2) the respective amounts reported on such Person’s balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock.

          2.15 “Continuing Directors” means, as of any date of determination, any member of the Board of Directors of the Corporation who:

(1) was a member of such Board of Directors on March 27, 2001;

(2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election; or

(3) is a designee of a Principal or was nominated by a Principal.

          2.16 “Credit Agreement” means the Fourth Amended and Restated Revolving Credit and Term Loan Agreement, dated as of December 29, 2000, as amended, among Emmis Communications Corporation, the lenders named therein, Toronto Dominion (Texas), Inc., as Administrative Agent, Fleet National Bank, as Documentation Agent, First Union National Bank, as Syndication Agent, and Credit Suisse First Boston Corporation, as co-document agent, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.

          2.17 “Credit Facilities” means one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.

          2.18 “Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, in each case, at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof in whole or in part, on or prior to the date that is 91 days after the date on which the Senior Preferred Stock becomes mandatorily redeemable; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Corporation to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Corporation may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with subsection 11.1.

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          2.19 “Emmis Holdings” means Emmis Holdings Corporation, an Indiana corporation which, if formed, will become the holding company parent of the Corporation.

          2.20 “Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

          2.21 “Equity Offering” means any sale of Equity Interests of the Corporation (excluding sales made to any Restricted Subsidiary and excluding sales of Disqualified Stock) (a) to the public pursuant to an effective registration statement under the Securities Act or (b) in a private placement of Equity Interests of the Corporation pursuant to an exemption from the registration requirements of the Securities Act.

          2.22 “Escrow Corp.” means Emmis Escrow Corporation, an Indiana corporation.

          2.23 “Escrow Corp. Merger” means the merger transaction involving Escrow Corp., Escrow Holdings and the Corporation (or Emmis Holdings) pursuant to the Escrow Corp. Merger Agreement.

          2.24 “Escrow Corp. Merger Agreement” means the Agreement and Plan of Merger with respect to the Escrow Corp. Merger, dated as of March 27, 2001.

          2.25 “Escrow Holdings” means Emmis Escrow Holding Corporation, an Indiana corporation.

          2.26 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

          2.27 “Existing Indebtedness” means Indebtedness of the Corporation and its Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on March 27, 2001, until such amounts are repaid.

          2.28 “Fixed Charges” means, with respect to any Person for any period, the sum, without duplication, of:

(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net payments, if any, pursuant to Hedging Obligations; plus

(2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus

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(3) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets, of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon and limited to the amount of such Guarantee or the fair market value of such property secured by such Lien, as the case may be.

          2.29 “GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on March 27, 2001.

          2.30 “Guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness.

          2.31 “Hedging Obligations” means, with respect to any Person, the obligations of such Person under:

(1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and

(2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates.

          2.32 “Indebtedness” means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of:

(1) borrowed money;

(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

(3) banker’s acceptances;

(4) representing Capital Lease Obligations;

(5) the balance deferred and unpaid of the purchase price of any property; or

(6) representing any Hedging Obligations,

except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person whether or not such Indebtedness is assumed by such Person (the amount of such Indebtedness as of any date being deemed to be the lesser of the value of such property or assets as of such date or the

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principal amount of such Indebtedness of such other Person so secured) and, to the extent not otherwise included, the Guarantee by such Person of any Indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

          2.33 “Investments” means with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Corporation or any Restricted Subsidiary of the Corporation sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Corporation or a Restricted Subsidiary of the Corporation issues any of its Equity Interests such that, in each case, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Corporation, the Corporation shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in subsection 11.1(e).

          2.34 “Issue Date” means the original date of issuance of the Senior Preferred Stock.

          2.35 “Junior Disqualified Preferred Stock” means Disqualified Stock that ranks junior in right of payment to the Corporation’s obligations under the Senior Preferred Stock.

          2.36 “Leverage Ratio” means, with respect to any specified Person on any date of determination (the “Calculation Date”), the ratio, on a pro forma basis, of (1) the sum of the aggregate outstanding amount of Indebtedness, Disqualified Stock and Pari Passu Preferred Stock (other than the outstanding Series A Preferred Stock) of such Person and its Restricted Subsidiaries as of the Calculation Date determined on a consolidated basis in accordance with GAAP to (2) the Consolidated EBITDA of such Person and its Restricted Subsidiaries attributable to continuing operations and businesses (exclusive of amounts attributable to operations and businesses permanently discontinued or disposed of) for the Reference Period. For purposes of calculating the Leverage Ratio:

(1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the Reference Period or subsequent to such Rreference Period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of such Reference Period and Consolidated EBITDA for such reference period shall be calculated without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income; and

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(2) transactions giving rise to the need to calculate the Leverage Ratio shall be assumed to have occurred on the first day of the Reference Period.

          2.37 “Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).

          2.38 “Liquidation Preference” means, with respect to each share of Senior Preferred Stock, $1,000,000.

          2.39 “Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however:

(1) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and

(2) any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss.

          2.40 “Net Proceeds” means the aggregate cash proceeds received by the Corporation or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of:

(1) the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof;

(2) taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements);

(3) amounts required to be applied to the repayment of Indebtedness (other than Indebtedness under a Credit Facility) secured by a Lien on the asset or assets that were the subject of such Asset Sale;

(4) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Sale;

(5) the deduction of appropriate amounts provided by the seller as a reserve in accordance with GAAP against any liabilities associated with the assets disposed of in

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such Asset Sale and retained by the Corporation or any Restricted Subsidiary after such Asset Sale; and

(6) without duplication, any reserves that the Corporation’s Board of Directors determines in good faith should be made in respect of the sale price of such asset or assets for post closing adjustments; provided that in the case of any reversal of any reserve referred to in clause (5) or (6) above, the amount so reserved shall be deemed to be Net Proceeds from an Asset Sale as of the date of such reversal.

          2.41 “Non-Recourse Debt” means Indebtedness:

(1) as to which neither the Corporation nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender;

(2) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Corporation or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and

(3) as to which the lenders have been notified in writing that they will not have any recourse to the assets of the Corporation or the stock or assets of any of its Restricted Subsidiaries (except that this clause (3) will not apply to any Indebtedness incurred by the Corporation and its Subsidiaries prior to March 27, 2001).

          2.42 “Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

          2.43 “Officers’ Certificate” has the meaning given to that term in the the indenture dated as of March 27, 2001, between Escrow Corp. and The Bank of Nova Scotia Trust Company of New York, as amended or supplemented, providing for the issuance of Senior Discount Notes.

          2.44 “Pari Passu Preferred Stock” means preferred stock of the Corporation which by its terms is equal in right of payment to the Corporation’s obligations under the Senior Preferred Stock.

          2.45 “Permitted Business” means any business conducted by the Corporation, its Restricted Subsidiaries on March 27, 2001 and any other business related, ancillary or complementary to any such business.

          2.46 “Permitted Investments” means:

(1) any Investment in the Corporation or in a Restricted Subsidiary of the Corporation;

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(2) any Investment in Cash Equivalents;

(3) any Investment by the Corporation or any Restricted Subsidiary of the Corporation in a Person, if as a result of such Investment:

     (a) such Person becomes a Restricted Subsidiary of the Corporation; or

     (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Corporation or a Restricted Subsidiary of the Corporation;

(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described in Section 8;

(5) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Corporation;

(6) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (6) since March 27, 2001, not to exceed $15 million in the aggregate;

(7) Investments in Permitted Joint Ventures, provided that, at the time of and immediately after giving pro forma effect to such Investment (and any related transaction or series of transactions), the Leverage Ratio under clause (C) of subsection 11.2(a) would be less than or equal to such Leverage Ratio immediately prior to such Investment;

(8) any purchase, redemption, defeasance or other acquisition of Indebtedness of the Corporation or any Restricted Subsidiary using the proceeds of Permitted Refinancing Indebtedness incurred under paragraph (5) of the definition of Preferred Stock Permitted Debt in subsection 11.2;

(9) agreements relating to the Indebtedness incurred under paragraph (7) of the definition of Preferred Stock Permitted Debt in subsection 11.2;

(10) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers in good faith settlement of delinquent obligations of such trade creditors or customers;

(11) guarantees of Indebtedness otherwise permitted to be incurred by this Exhibit B;

(12) Investments in the form of Productive Assets received in connection with an Asset Sale;

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(13) commission, travel, payroll, entertainment, relocation and similar advances made to officers and employees of the Corporation or any Restricted Subsidiary made in the ordinary course of business; and

(14) any Investment in the form of loans or advances to employees of the Corporation not to exceed $3.0 million in aggregate principal amount at any one time outstanding.

          2.47 “Permitted Joint Ventures” means a corporation, partnership or other entity (other than a Subsidiary) engaged in one or more Permitted Businesses in respect of which the Corporation or a Restricted Subsidiary (a) beneficially owns at least 20% of the Equity Interests of such entity and (b) either is a party to an agreement empowering one or more parties to such agreement (which may or may not be the Corporation or a Subsidiary), or is a member of a group that, pursuant to the constituent documents of the applicable corporation, partnership or other entity, has the power, to direct the policies, management and affairs of such entity.

          2.48 “Permitted Refinancing Indebtedness” means any Indebtedness of the Corporation or any of its Restricted Subsidiaries, Disqualified Stock or Pari Passu Preferred Stock of the Corporation issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness, Disqualified Stock or Pari Passu Preferred Stock of the Corporation or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:

(1) the principal amount, initial accreted value or liquidation preference, if applicable, of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest or dividends on, the Indebtedness or preferred stock so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of expenses, consent fees and prepayment premiums incurred in connection therewith);

(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness or preferred stock being extended, refinanced, renewed, replaced, defeased or refunded;

(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to, the notes on terms at least as favorable to the holders of the notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and

(4) such Indebtedness is incurred either by the Corporation or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.

          2.49 “Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or agency or

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political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business).

          2.50 “Principals” means Jeffrey H. Smulyan.

          2.51 “Productive Assets” means assets (including Equity Interests) that are used or usable by the Corporation and/or a Restricted Subsidiary in Permitted Businesses; provided that for any Equity Interests to qualify as Productive Assets, they must, after giving pro forma effect to the transaction in which they were acquired, be Equity Interests of a Restricted Subsidiary.

          2.52 “Reference Period” means, with regard to any Person, the four full fiscal quarters (or such lesser period during which such Person has been in existence) ended immediately preceding any date upon which any determination or calculation is to be made pursuant to the terms of this Exhibit B.

          2.53 “Registration Rights Agreement” means the registration rights agreement to be entered into by Escrow Corp. on or before March 27, 2001 relating in part to the registration of the Senior Discount Notes with the Commission.

          2.54 “Related Party” with respect to any Principal means:

(1) any controlling stockholder, 80% (or more) owned Subsidiary of such Principal;

(2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, members, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of such Principal and/or such other Persons referred to in the immediately preceding clause (1); or

(3) a spouse, lineal descendants and ascendants, heirs, executors or other legal representatives and any trusts or other entities established by or for the benefit of any of the foregoing or established by any of the foregoing for charitable purposes, or any other person or entity in which the foregoing persons or entities exercise control.

          2.55 “Reorganization” means either (i) the transfer of all of the Corporation’s assets and liabilities (including indebtedness under its credit facility and outstanding senior subordinated notes) to a newly-formed subsidiary or (ii) a merger whereby a new holding company, Emmis Holdings, will acquire all of the capital stock of the Corporation, and the stockholders of the Corporation will become stockholders of Emmis Holdings.

          2.56 “Restricted Investment” means an Investment other than a Permitted Investment.

          2.57 “Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

          2.58 “Senior Discount Notes” means the 12.50% Senior Discount Notes due 2011 of Escrow Corp.

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          2.59 “Senior Subordinated Notes” means the 8.125% Senior Subordinated Notes due 2009 of the Corporation.

          2.60 “Series A Preferred Stock” means the Corporation’s 6.25% Series A Cumulative Convertible Preferred Stock.

          2.61 “Significant Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person that would be a “significant subsidiary” of such Person as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act of 1933, as such Regulation is in effect on March 27, 2001.

          2.62 “Subsidiary” means, with respect to any Person:

(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof).

          2.63 “Treasury Rate” means, as of any Redemption Date, the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to March 15, 2006; provided, however, that if the period from the Redemption Date to March 15, 2006 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

          2.64 “Unrestricted Subsidiary” means (i) Game Warden Wildlife Journal Magazine, LLC, an Indiana limited liability company, Country Sampler Stores, LLC, an Illinois limited liability company), Radio Hungaria Co., Ltd. (a Hungarian corporation), Emmis Escrow Corporation, an Indiana corporation, and Emmis Escrow Holding Corporation, an Indiana corporation, and (ii) any Subsidiary of the Corporation that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary:

(1) has no Indebtedness other than Non-Recourse Debt;

(2) is not party to any agreement, contract, arrangement or understanding with the Corporation or any Restricted Subsidiary of the Corporation unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the

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Corporation or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Corporation;

(3) is a Person with respect to which neither the Corporation nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results;

(4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Corporation or any of its Restricted Subsidiaries; and

(5) has at least one director on its board of directors that is not a director or executive officer of the Corporation or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Corporation or any of its Restricted Subsidiaries.

Any such designation by the Board of Directors shall be evidenced to the transfer agent by filing with the transfer agent a certified copy of the Board Resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing conditions and was permitted by subsection 11.1. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Exhibit B and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Corporation as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under subsection 11.2, the Corporation shall be in default of such covenant). The Board of Directors of the Corporation may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Corporation of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under subsection 11.2, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Voting rights Triggering Event (as defined in subsection 9.2) would occur or be in existence following such designation.

          2.65 “Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

          2.66 “Weighted Average Life to Maturity” means, when applied to any Indebtedness or series or class of preferred stock at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal or liquidation preference, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

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(2) the then outstanding principal amount of such Indebtedness or the aggregate liquidation preference of such preferred stock, as the case may be.

          2.67 “Wholly Owned Restricted Subsidiary” of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

     3. Dividends.

          3.1 When the Board of Directors declares dividends out of legally available company funds, the holders of the Senior Preferred Stock, who are holders of record as of the preceding March 1 and September 1 (each, a “Record Date”), will be entitled to receive cumulative preferential dividends at the rate per share of 12.50% per annum. Dividends on the Senior Preferred Stock will be payable semi-annually in arrears on March 15 and September 15 of each year (each, a “Dividend Payment Date”).

          3.2 On or prior to March 15, 2006, the Corporation may, at its option, pay dividends:

(1) in cash; or

(2) in additional fully-paid and non-assessable shares of Senior Preferred Stock (including fractional stock) having an aggregate Liquidation Preference equal to the amount of such dividends.

          3.3 After March 15, 2006, the Corporation shall pay dividends in cash only.

          3.4 Dividends payable on the Senior Preferred Stock will be:

(1) computed on the basis of a 360-day year comprised of twelve 30-day months; and

(2) accrue on a daily basis.

          3.5 Dividends on the Senior Preferred Stock will accrue whether or not:

(1) the Corporation has earnings or profits;

(2) there are funds legally available for the payment of such dividends; or

(3) dividends are declared.

          3.6 Dividends will accumulate to the extent they are not paid on the Dividend Payment Date for the quarterly period to which they relate. Accumulated unpaid dividends will accrue dividends at the rate of 12.50% per annum. The Corporation must take all actions required or permitted under Indiana law to permit the payment of dividends on the Senior Preferred Stock.

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          3.7 For any dividend period, the Corporation will not declare or pay upon, or set any sum apart for the payment of dividends upon any outstanding Senior Preferred Stock unless it has declared and paid upon, or declared and set apart a sufficient sum for the payment of dividends upon, all outstanding Senior Preferred Stock for all preceding dividend periods.

          3.8 Unless the Corporation has declared and paid upon, or declared and set apart a sufficient sum for the payment of, full cumulative dividends on all outstanding Senior Preferred Stock due for all past dividend periods, then:

(1) no dividend (other than a dividend payable solely in stock of any class of stock ranking junior to Senior Preferred Stock as to the payment of dividends and as to rights in liquidation, dissolution or winding up of the affairs of the Corporation (any such stock, “Junior Securities”)) shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any Junior Securities;

(2) no other distribution shall be declared or made upon, or any sum set apart for the payment of any distribution upon, any Junior Securities;

(3) no Junior Securities shall be purchased, redeemed or otherwise acquired or retired for value (excluding purchases, redemptions, acquisitions and retirements for value of Junior Securities permitted by subsection 11.1(b)) by the Corporation or any of its Restricted Subsidiaries; and

(4) no monies shall be paid into or set apart or made available for a sinking or other like fund for the purchase, redemption or other acquisition or retirement for value of any Junior Securities by the Corporation or any of its Restricted Subsidiaries.

          3.9 When dividends, if any, are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Senior Preferred Stock, the Series A Preferred Stock and any other class of Parity Securities, all dividends declared upon the Senior Preferred Stock, the Series A Preferred Stock and such Parity Securities will be declared pro rata so that the amount of dividends declared per share of the Senior Preferred Stock and per share of the Series A Preferred Stock and such Parity Securities shall in all cases bear to each other the same ratio that accumulated dividends per share of the Senior Preferred Stock, the Series A Preferred Stock and such Parity Securities bear to each other. Holders of the Senior Preferred Stock will not be entitled to any dividends, whether payable in cash, property or stock, in excess of the full cumulative dividends as herein described.

     4. Mandatory Redemption. On March 15, 2011 (the “Mandatory Redemption Date”), the Corporation shall redeem (subject to it having sufficient legally available funds) all outstanding Senior Preferred Stock at a price in cash equal to the Liquidation Preference, plus accrued and unpaid dividends, if any, to the date of redemption. The Corporation is not required to make sinking fund payments with respect to the Senior Preferred Stock. The Corporation shall take all actions required or permitted under Indiana law to permit such redemption.

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     5. Optional Redemption.

          5.1 At any time prior to March 15, 2004, the Corporation may on any one or more occasions redeem up to 35% of the aggregate Liquidation Preference of the Senior Preferred Stock then outstanding at a redemption price of 113.25% of the Liquidation Preference thereof, plus accrued and unpaid dividends and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that:

(1) at least 65% of the aggregate Liquidation Preference of Senior Preferred Stock remains outstanding immediately after the occurrence of such redemption (excluding Senior Preferred Stock held by the Corporation and its Subsidiaries); and

(2) the redemption must occur within 90 days after the date of the closing of such Equity Offering.

          5.2 On or after March 15, 2006, the Corporation may redeem all or any part of the Senior Preferred Stock upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the Liquidation Preference) set forth below plus accrued and unpaid dividends and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below:

Year	Percentage
2006		106.625	%
2007		104.417	%
2008		102.208	%
2009 and thereafter		100.000	%

          5.3 At any time prior to March 15, 2006, the Corporation may also redeem all or a part of the Senior Preferred Stock upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to each holder’s registered address, at a redemption price equal to 100% of the Liquidation Preference thereof plus the Applicable Premium as of, and accumulated and unpaid dividends and Liquidated Damages, if any, to the date of redemption (the “Redemption Date”).

     6. Selection and Notice; Procedure for Redemption.

          6.1 If less than all of the Senior Preferred Stock is to be redeemed at any time, the transfer agent shall select Senior Preferred Stock for redemption as follows:

(1) if the Senior Preferred Stock is listed, in compliance with the requirements of the principal national securities exchange on which the Senior Preferred Stock is listed; or

(2) If the Senior Preferred Stock is not so listed, on a pro rata basis, by lot or by such method as the transfer agent shall deem fair and appropriate.

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          6.2 Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of Senior Preferred Stock to be redeemed at its registered address. Notices of redemption may not be conditional.

          6.3 If any Senior Preferred Stock is to be redeemed in part only, the notice of redemption that relates to that Senior Preferred Stock shall state the portion of the Liquidation Preference thereof to be redeemed. Senior Preferred Stock called for redemption becomes due on the date fixed for redemption. On and after the redemption date, dividends cease to accrue on Senior Preferred Stock or portions thereof called for redemption.

          6.4 Not less than 30 nor more than 60 days previous to the date fixed for redemption by the Board of Directors, a notice specifying the time and place thereof shall be given to the holders of record of the Senior Preferred Stock to be redeemed by first class mail at their respective addresses as the same shall appear on the books of the Corporation; provided, however, that no failure to mail such notice, nor any defect therein, nor in the mailing thereof, shall affect the validity of the proceedings for the redemption of any of the Senior Preferred Stock to be redeemed. Upon the redemption date, the Corporation shall pay over the redemption price to the holders of the shares upon the endorsement and surrender of the certificates for such shares by the holders of the Senior Preferred Stock.

          6.5 On or before any redemption date, each holder of shares of Senior Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares of Senior Preferred Stock to the Corporation, in the manner and at the place designated in the notice of redemption and on the redemption date, the full redemption price, payable in cash, for such shares of Senior Preferred Stock shall be paid or delivered to the person whose name appears on such certificate or certificates as the owner thereof, and the shares represented by each surrendered certificate shall be returned to authorized but unissued shares of preferred stock of any or no series. Upon surrender (in accordance with the notice of redemption) of the certificate or certificates representing any shares to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice of redemption shall so state), such shares shall be redeemed by the Corporation at the redemption price. If fewer than all the shares represented by any such certificate are to be redeemed, a new certificate shall be issued representing the unredeemed shares, without costs to the holder thereof, together with the amount of cash, if any, in lieu of fractional shares.

     7. Change of Control.

          7.1 If a Change of Control occurs, each holder of Senior Preferred Stock will have the right to require the Corporation to repurchase all or any part (but not any fractional shares) of such holder’s Senior Preferred Stock pursuant to the offer described below (the “Change of Control Offer”). In the Change of Control Offer, the Corporation shall offer a payment in cash equal to 101% of the aggregate Liquidation Preference of Senior Preferred Stock repurchased plus accrued and unpaid dividends and Liquidated Damages thereon, if any (subject to the right of holders of record on the relevant record date to receive dividends and Liquidated Damages, if any, due on the relevant dividend payment date), to the date of purchase (the “Change of Control Payment”). Within 30 days following any Change of Control, the Corporation shall mail a notice to each holder describing the transaction or transactions that

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constitute the Change of Control and offering to repurchase Senior Preferred Stock on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”), pursuant to the procedures required by this Exhibit B and described in such notice.

          7.2 On the Change of Control Payment Date, the Corporation shall, to the extent lawful:

(1) accept for payment all Senior Preferred Stock or portions thereof properly tendered pursuant to the Change of Control Offer;

(2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all Senior Preferred Stock or portions thereof so tendered; and

(3) deliver or cause to be delivered to the transfer agent the Senior Preferred Stock so accepted together with an Officers’ Certificate stating the aggregate Liquidation Preference of Senior Preferred Stock or portions thereof being purchased by the Corporation.

          7.3 The Corporation shall promptly mail to each holder of Senior Preferred Stock so tendered the Change of Control Payment for such Senior Preferred Stock, and the transfer agent shall promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new certificate representing the Senior Preferred Stock equal in Liquidation Preference to any unpurchased portion of the Senior Preferred Stock surrendered, if any.

          7.4 The Change of Control provisions in this Section 7 shall be applicable whether or not any other provisions of this Exhibit B are applicable. The Corporation shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations applicable to any Change of Control Offer. To the extent that the provisions of any such securities laws or securities regulations conflict with the provisions of the covenant described above, the Corporation shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the covenant described above by virtue thereof.

          7.5 The Corporation shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 7 applicable to a Change of Control Offer made by the Corporation and purchases all Senior Preferred Stock validly tendered and not withdrawn under such Change of Control Offer. The provisions in this Section 7 relative to the Corporation’s obligation to make an offer to repurchase the Senior Preferred Stock as a result of a Change of Control may be waived or modified with the written consent of the holders of a majority in Liquidation Preference of the Senior Preferred Stock then outstanding.

          7.6 The Corporation shall not be required to repurchase any Senior Preferred Stock pursuant to this Section 7 unless such repurchase complies with the restricted payments covenant contained in the existing and future Indebtedness of the Corporation; provided that if the Corporation does not make a Change of Control Offer or does not repurchase any Senior

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Preferred Stock pursuant to a Change of Control Offer, then such failure shall constitute a Voting Rights Triggering Event.

          7.7 Notwithstanding the foregoing, the Escrow Corp. Merger, the Reorganization or a merger with an Affiliate incorporated for the purpose of reincorporating the Corporation in another jurisdiction and/or for the purpose of forming a holding company shall not constitute a “Change of Control.”

     8. Asset Sales.

          8.1 The Corporation shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:

(1) the Corporation (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of:

(2) such fair market value is determined by the Corporation’s Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers’ Certificate delivered to the transfer agent; and

(3) at least 75% of the consideration therefor received by the Corporation or such Restricted Subsidiary is in the form of cash. For purposes of this provision, each of the following shall be deemed to be cash:

     (a) any liabilities (as shown on the Corporation’s or such Restricted Subsidiary’s most recent balance sheet), of the Corporation or any Restricted Subsidiary (other than contingent liabilities) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Corporation or such Restricted Subsidiary from further liability; and

     (b) any securities, notes or other obligations received by the Corporation or any such Restricted Subsidiary from such transferee that are converted by the Corporation or such Restricted Subsidiary into cash within 30 days after receipt (to the extent of the cash received in that conversion).

          8.2 Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Corporation and any Restricted Subsidiary may apply such Net Proceeds at its option:

(1) to repay Indebtedness;

(2) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business that is owned by the Corporation;

(3) to make a capital expenditure; or

(4) to acquire assets that are used or useful in a Permitted Business that is owned by the Corporation.

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          8.3 Pending the final application of any such Net Proceeds, the Corporation may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Exhibit B.

          8.4 Notwithstanding Subsections 7.2 and 7.3, the Corporation and its Restricted Subsidiaries shall be permitted to consummate an Asset Sale without complying with such subsections to the extent (i) at least 75% of the consideration for such Asset Sale constitutes Productive Assets, cash, Cash Equivalents and/or Marketable Securities and (ii) such Asset Sale is for fair market value (as determined in good faith by the Board of Directors and certified to in an Officer’s Certificate); provided that any cash consideration not constituting Productive Assets received by the Corporation or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall be subject to the provisions of subsections 8.1, 8.2 and 8.3.

          8.5 Any Net Proceeds from Asset Sales that are not applied or invested as provided in subsections 8.2, 8.3 and 8.4 will constitute Excess Proceeds. When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Corporation shall make an Asset Sale Offer to all holders of Senior Preferred Stock and all holders of other preferred stock that is pari passu with the Senior Preferred Stock containing provisions similar to those set forth in this Exhibit B with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum Liquidation Preference of Senior Preferred Stock and such other pari passu preferred stock that may be purchased out of the Excess Proceeds. To the extent that any Indebtedness of the Corporation or any Restricted Subsidiary requires that the Corporation or any Restricted Subsidiary make a similar Asset Sale Offer, the Corporation and/or such Restricted Subsidiary may make simultaneous offers with the offer to the holder of Senior Preferred Stock being limited to proceeds not used to repurchase such Indebtedness. The offer price in any Asset Sale Offer shall be equal to 100% of Liquidation Preference of Senior Preferred Stock to be repurchased plus accrued and unpaid dividends and Liquidated Damages thereon, if any, to the date of purchase, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Corporation may use such Excess Proceeds for any purpose not otherwise prohibited by this Exhibit B. If the aggregate Liquidation Preference of the Senior Preferred Stock and such other pari passu preferred stock tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the transfer agent shall select the Senior Preferred Stock and such other pari passu preferred stock to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

          8.6 The Asset Sale provisions described above shall be applicable whether any other provisions of this Exhibit B are applicable. The Corporation shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations applicable to any Asset Sale Offer. To the extent that the provisions of any such securities laws or securities regulations conflict with the provisions of the covenant described above, the Corporation shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the covenant described above by virtue thereof.

          8.7 Notwithstanding the foregoing, the Corporation may not repurchase any Senior Preferred Stock pursuant to this provision unless such repurchase complies with the

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restricted payments covenant contained in the existing and future Indebtedness of the Corporation and its Subsidiaries; provided that if the Corporation does not make an Asset Sale Offer or does not repurchase any Senior Preferred Stock pursuant to an Asset Sale Offer, then such failure shall constitute a Voting Rights Triggering Event.

          8.8 Notwithstanding the foregoing, the Escrow Corp. Merger or the Reorganization or a merger with an Affiliate incorporated for the purpose of reincorporating the Corporation in another jurisdiction and/or for the purpose of forming a holding company shall not constitute an “Asset Sale.”

     9. Voting.

          9.1 Holders of record of Senior Preferred Stock shall have no voting rights except as required by law or as set forth in this section.

          9.2 The number of members of the Corporation’s Board of Directors will immediately and automatically increase by two, and the holders of a majority of the outstanding Senior Preferred Stock, voting separately as a class together with holders of the Series A Preferred Stock and all other Parity Securities having similar voting rights, may elect two members to the Board of Directors of the Corporation, upon the occurrence of any of the following events (each, a “Voting Rights Triggering Event”):

(1) the accumulation of accrued and unpaid dividends on the outstanding Senior Preferred Stock (or after September 15, 2006, if such dividends are not paid in cash) in an amount equal to three full semi-annual dividends (whether or not consecutive);

(2) failure by the Corporation to comply with any mandatory redemption obligation with respect to the Senior Preferred Stock or the failure to make an Asset Sale Offer or Change of Control Offer in accordance with the provisions of this Exhibit C and/or the failure to repurchase Senior Preferred Stock pursuant to such offers;

(3) failure by the Corporation to make a Change of Control Offer or to repurchase any Senior Preferred Stock pursuant to a Change of Control Offer in reliance on subsection 7.6 and the failure by the Corporation to make an Asset Sale Offer or to repurchase any Senior Preferred Stock pursuant to an Asset Sale Offer in reliance on subsection 8.7;

(4) failure by the Corporation or any of its Restricted Subsidiaries to comply with any of the other covenants or agreements set forth in this Exhibit B and the continuance of such failure for 60 consecutive days after notice to the Corporation by holders of record of the Senior Preferred Stock representing 25% of the outstanding shares of the Senior Preferred Stock;

(5) defaults under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Corporation or any of its Significant Subsidiaries (or the payment of which is guaranteed by the Corporation or any of its Significant Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the Closing Date, which

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default (i) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”) or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $20.0 million or more; or

(6) the Corporation or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Title 11, U.S. Code or any similar federal or state law for the relief of debtors (a “Bankruptcy Law”):

     (i) commences a voluntary case,

     (ii) consents to the entry of an order for relief against it in an involuntary case,

     (iii) consents to the appointment of a custodian of it or for all or substantially all of its property,

     (iv) makes a general assignment for the benefit of its creditors, or

     (v) generally is not paying its debts as they become due; or

(7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

           (i) is for relief against the Corporation or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case,

           (ii) appoints a custodian of the Corporation or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Corporation or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, or

           (iii) orders the liquidation of the Corporation or any of its Restricted Subsidiaries;

and the order or decree remains unstayed and in effect for 60 consecutive days.

          9.3 The term of office of the directors elected as a result of a Voting Rights Triggering Event shall continue until all dividends in arrears on the Senior Preferred Stock are paid in full and all other Voting Rights Triggering Events have been cured or waived, at which time the term of office of any such directors shall terminate.

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     10. Liquidation Rights.

          10.1 Each holder of the Senior Preferred Stock shall be entitled to payment, out of the assets of the Corporation available for distribution, of an amount equal to the Liquidation Preference per Senior Preferred Stock held by such holder, plus accrued and unpaid dividends, if any, to the date fixed for liquidation, dissolution, winding up or reduction or decrease in capital stock, before any distribution is made on any Junior Securities, including, without limitation, common stock of the Corporation, upon any:

(1) voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; or

(2) reduction or decrease in the Corporation’s capital stock resulting in a distribution of assets to the holders of any class or series of the Corporation’s capital stock (a “reduction or decrease in capital stock”).

          10.2 After payment in full of the Liquidation Preference and all accrued dividends, if any, to which holders of Senior Preferred Stock are entitled, such holders may not further participate in any distribution of assets of the Corporation. Neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more corporations will be a voluntary or involuntary liquidation, dissolution or winding up of the Corporation or reduction or decrease in capital stock, unless such sale, conveyance, exchange or transfer is in connection with a liquidation, dissolution or winding up of the business of the Corporation or reduction or decrease in capital stock.

          10.3 If, upon any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the amounts payable with respect to the shares of the Senior Preferred Stock and the Series A Preferred Stock and all other Parity Securities are not paid in full, the holders of the shares of the Senior Preferred Stock and the Series A Preferred Stock and all other Parity Securities shall share equally and ratably in any distribution of remaining assets of the Corporation legally available therefor in proportion to the full liquidation preference and accumulated and unpaid dividends and liquidated damages, if any, to which each is entitled.

     11. Covenants.

          11.1 Restricted Payments.

               (a) The Corporation shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:

(x) declare or pay any dividend or make any other payment or distribution on account of the Corporation’s or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Corporation or any of its Restricted Subsidiaries) (other than Pari Passu Preferred Stock) or to the direct or indirect holders of the Corporation’s or any of its Restricted Subsidiaries’ Equity Interests (other than Pari Passu Preferred Stock) in their

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capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Corporation or to the Corporation or a Restricted Subsidiary of the Corporation),

(y) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Corporation) any Equity Interests of the Corporation (other than Pari Passu Preferred Stock) or any direct or indirect parent of the Corporation or any Restricted Subsidiary of the Corporation (other than any such Equity Interests owned by the Corporation or any Restricted Subsidiary of the Corporation), or

(z) make any Restricted Investment (all such payments and other actions set forth in clauses (x) through (z) above being collectively referred to as “Restricted Payments”);

unless, at the time of and after giving effect to such Restricted Payment:

(1) no Voting Rights Triggering Event shall have occurred and be continuing or would occur as a consequence thereof; and

(2) the Corporation would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Junior Disqualified Preferred Stock pursuant to clause (C) of the Leverage Ratio test set forth in subsection 11.2(a); and

(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Corporation and its Restricted Subsidiaries after March 27, 2001 (excluding Restricted Payments permitted by clauses (2), (3) and (5) of subsection 11.1(b)), is less than the sum, without duplication, of:

     (A) (i) the aggregate Consolidated EBITDA of the Corporation for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after February 12, 1999 to the end of the Corporation’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, in the event aggregate Consolidated EBITDA for such period is a deficit, then minus such deficit) less (ii) 1.4 times the aggregate Fixed Charges of the Corporation for the same period; plus

     (B) the aggregate net cash proceeds and the fair value, determined in good faith by the Board of Directors, of any non-cash consideration, in each case, received by the Corporation since February 12, 1999 as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Corporation (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities, of the Corporation that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Corporation); plus

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     (C) to the extent that any Restricted Investment that was made after February 12, 1999 is sold for cash or otherwise liquidated or repaid for cash, the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any); plus

     (D) if any Unrestricted Subsidiary (i) is redesignated as a Restricted Subsidiary, the fair market value of such redesignated Subsidiary (as determined in good faith by the Board of Directors) as of the date of its redesignation or (ii) pays any cash dividends or cash distributions to the Corporation or any of its Restricted Subsidiaries, 100% of any such cash dividends or cash distributions made after February 12, 1999; plus

     (E) without duplication of any of the foregoing, the aggregate amount returned in cash on or with respect to Restricted Investments made subsequent to February 12, 1999, whether through interest payments, principal payments, dividends or other distributions or payments; plus

     (F) $10.0 million.

               (b) So long as no Voting Rights Triggering Event has occurred and is continuing or would be caused thereby, subsection 11.1(a) shall not prohibit:

(1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Exhibit B;

(2) the making of any Investment or the redemption, repurchase, retirement, defeasance or other acquisition of any Equity Interests of the Corporation in exchange for, or out of the proceeds of the sale (other than to a Subsidiary of the Corporation) of, any Equity Interests of the Corporation (other than any Disqualified Stock); provided that, in each such case, the amount of any such net cash proceeds that are so utilized shall be excluded from clause (3)(B) of subsection 11.1(a);

(3) the payment of any dividend by a Restricted Subsidiary of the Corporation to the holders of its common Equity Interests on a pro rata basis;

(4) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Corporation or any Restricted Subsidiary of the Corporation held by any former member of the Corporation’s (or any of its Restricted Subsidiaries’) management pursuant to any management equity subscription agreement or stock option agreement in effect as of March 27, 2001; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in any twelve-month period;

(5) the repurchase of Equity Interests of the Corporation deemed to occur upon the exercise of stock options if such Equity Interests represent a portion of the exercise price of such options; or

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(6) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Corporation in an amount not to exceed $25.0 million under this clause (6).

               (c) In determining whether any payment is permitted by this subsection 11.1, the Corporation may allocate or reallocate, among clauses (1) through (6) of subsection 11.1(b) or among such clauses and subsection 11.1(a), all or any portion of such payment and all or any portion of any payment previously allocated; provided that, after giving effect to such allocation or reallocation, all such payments (or allocated portions of such payments) would be permitted under the various provisions of this covenant.

               (d) The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Voting Rights Triggering Event. For purposes of making such determination, all outstanding Investments by the Corporation and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated shall be deemed to be Restricted Payments at the time of such designation and shall reduce the amount available for Restricted Payments under subsection 11.1(a)(3). All such outstanding Investments shall be deemed to constitute Investments in an amount equal to the fair market value of such Investments at the time of such designation. Such designation shall only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if such designation would not cause a Voting Rights Triggering Event.

               (e) The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Corporation or the applicable Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any property, assets or Investments required by this covenant to be determined shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the transfer agent.

               (f) In making the computations required by this subsection 11.1:

(1) the Corporation may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Corporation for the remaining portion of such period; and

(2) the Corporation may rely in good faith on the financial statements and other financial data derived from its books and records that are available on the date of determination.

               (g) If the Corporation makes a Restricted Payment that, at the time of the making of such Restricted Payment, would in the good faith determination of the Corporation be permitted under the requirements of this Exhibit B, such Restricted Payment will be deemed to have been made in compliance with this Exhibit B notwithstanding any subsequent adjustments made in good faith to the Corporation’s financial statements for any period which

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adjustments affect any of the financial data used to make the calculations with respect to such Restricted Payment.

          11.2 Incurrence of Indebtedness and Issuance of Preferred Stock.

               (a) The Corporation shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness (including Acquired Debt), and the Corporation will not issue any Pari Passu Preferred Stock or Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that (A) the Corporation and any Restricted Subsidiary may incur Indebtedness (including Acquired Debt), and the Corporation may issue Pari Passu Preferred Stock or Disqualified Stock, if the Leverage Ratio of the Corporation (without giving effect to any Pari Passu Preferred Stock that is not Disqualified Stock) for the Reference Period immediately preceding the date on which such additional Indebtedness is incurred or such Pari Passu Preferred Stock or Disqualified Stock is issued would not have been greater than 7.0 to 1, (B) the Corporation may issue Pari Passu Preferred Stock if the Leverage Ratio of the Corporation for the Reference Period immediately preceding the date on which such Pari Passu Preferred Stock is issued would not have been greater than 7.5 to 1 and (C) the Corporation may issue Junior Disqualified Preferred Stock if the Leverage Ratio of the Corporation for the Reference Period immediately preceding the date on which such Junior Disqualified Preferred Stock is issued would not have been greater than 8.0 to 1, in the case of each of (A), (B) and (C) determined on a pro forma basis (after giving pro forma effect to such incurrence or issuance and to the application of the net proceeds therefrom) and in accordance with the definition of Leverage Ratio.

               (b) Subsection 11.2(a) will not prohibit the incurrence of any of the following items of Indebtedness or the issuance of any of the following securities (collectively, “Preferred Stock Permitted Debt”):

(1) the incurrence by the Corporation or any of its Restricted Subsidiaries of Indebtedness under the Credit Facilities; provided that the aggregate amount of all Indebtedness of the Corporation and the Restricted Subsidiaries outstanding under the Credit Facilities after giving effect to such incurrence does not exceed an amount equal to $750.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied by the Corporation or any of its Restricted Subsidiaries since the Issue Date to repay Indebtedness under the Credit Facilities pursuant to Section 8;

(2) the incurrence by the Corporation and its Restricted Subsidiaries of the Existing Indebtedness;

(3) the incurrence by the Corporation or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Corporation or such Restricted Subsidiary, in an aggregate principal amount not to exceed $5.0 million at any time outstanding;

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(4) the incurrence by the Corporation or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace, Indebtedness of the Corporation or any of its Restricted Subsidiaries or Pari Passu Preferred Stock or Disqualified Stock of the Corporation (other than intercompany Indebtedness) that was permitted by this Exhibit B to be incurred under the first paragraph hereof or clauses (2), (3), (7), (8), (10) or (12) of this subsection 11.2(b);

(5) the incurrence by the Corporation or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Corporation and any of its Restricted Subsidiaries; provided, that: (A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Corporation or a Restricted Subsidiary and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Corporation or a Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Corporation or such Restricted Subsidiary, as the case may be;

(6) the incurrence by the Corporation or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging foreign currency risk or interest rate risk with respect to any Indebtedness that is permitted by the terms of this Exhibit B to be outstanding;

(7) the guarantee by the Corporation or any of its Restricted Subsidiaries of Indebtedness of the Corporation or a Restricted Subsidiary of the Corporation that was permitted to be incurred by another provision of this Exhibit B;

(8) the incurrence by the Corporation or any of its Restricted Subsidiaries of additional Indebtedness or Pari Passu Preferred Stock in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness or Pari Passu Preferred Stock incurred pursuant to this clause (8), not to exceed $25 million;

(9) the incurrence by the Corporation’s Unrestricted Subsidiaries of Non-Recourse Debt; provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Corporation that was not permitted by this clause (9);

(10) the accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms (provided, in each such case, that the amount thereof is included in Fixed Charges of the Corporation as accrued), and the payment of dividends on Disqualified Stock or Pari Passu Preferred Stock in the form of additional shares of the same class of Disqualified Stock or Pari Passu Preferred Stock;

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(11) the incurrence by the Corporation or any of its Restricted Subsidiaries Indebtedness of up to an aggregate principal amount of $250.0 million of Indebtedness under the Credit Facilities for the purpose of acquiring Permitted Businesses; and

(12) the issuance by the Corporation of Pari Passu Preferred Stock in an aggregate liquidation preference at any one time outstanding under this clause (12) not to exceed the greater of (a) $50.0 million or (b) two times the proceeds to the Corporation from the issuance of any Junior Securities.

               (c) For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Preferred Stock Permitted Debt described in clauses (1) through (12) of subsection 11.2(b) or is entitled to be incurred pursuant to subsection 11.2(a), the Corporation shall, in its sole discretion, classify (or later reclassify in whole or in part) such item of Indebtedness or preferred stock in any manner that complies with this covenant. Accrual of interest or dividends, accretion or amortization of original issue discount and the payment of interest or dividends in the form of additional Indebtedness or preferred stock shall not be deemed to be an incurrence of Indebtedness for purposes of this subsection 11.2.

          11.3 Dividend and Other Payment Restrictions Affecting Subsidiaries.

               (a) The Corporation shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to:

(1) pay dividends or make any other distributions to the Corporation or any of its Restricted Subsidiaries on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits;

(2) pay any indebtedness owed to the Corporation or any of its Restricted Subsidiaries;

(3) make loans or advances to the Corporation or any of its Restricted Subsidiaries; or

(4) transfer any of its properties or assets to the Corporation or any of its Restricted Subsidiaries.

               (b) However, the foregoing restrictions will not apply to encumbrances or restrictions existing under or by reason of:

(1) Existing Indebtedness or Indebtedness under the Credit Facilities, in each case as in effect on March 27, 2001, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in the Existing Indebtedness or in the Credit Facilities, in each case as in effect on March 27, 2001;

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(2) encumbrances and restrictions applicable to any Unrestricted Subsidiary, as the same are in effect on the date on which such Subsidiary becomes a Restricted Subsidiary, and as the same may be amended, modified, restated, renewed, increased, supplemented, refunded, replaced or refinanced; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in the applicable series of Indebtedness of such Subsidiary as in effect on the date on which such Subsidiary becomes a Restricted Subsidiary;

(3) this Exhibit B;

(4) applicable law;

(5) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Corporation or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Exhibit B to be incurred;

(6) customary non-assignment provisions in leases or licenses entered into in the ordinary course of business;

(7) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition;

(8) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

(9) Liens that limit the right of the debtor to transfer the assets subject to such Liens;

(10) provisions with respect to the disposition or distribution of assets or property in joint venture agreements and other similar agreements entered into in the ordinary course of business; and

(11) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business.

          11.4 Merger, Consolidation or Sale of Assets.

               (a) The Corporation may not consolidate or merge with or into (whether or not the Corporation is the surviving corporation) or sell, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless:

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(1) the Corporation is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Corporation) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia;

(2) the entity or Person formed by or surviving any such consolidation or merger (if other than the Corporation) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made issues preferred stock with terms substantially the same as those of the Senior Preferred Stock pursuant to agreements reasonably satisfactory to the Corporation’s transfer agent;

(3) immediately after such transaction no Voting Rights Triggering Event exists; and

(4) the Corporation or the entity or Person formed by or surviving any such consolidation or merger (if other than the Corporation) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made:

     (a) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Corporation immediately preceding the transaction; and

     (b) will, on the date of such transaction after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Junior Disqualified Preferred Stock pursuant to clause (C) of the Leverage Ratio test in subsection 11.2(a).

This subsection 11.4(a) shall not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Corporation and any of its Wholly-Owned Subsidiaries.

               (b) Notwithstanding the foregoing, the Corporation may complete the Escrow Corp. Merger, the Reorganization or merge with an Affiliate incorporated for the purpose of reincorporating the Corporation in another jurisdiction and/or for the purpose of forming a holding company.

          11.5 Transactions with Affiliates.

               (a) The Corporation will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an “Affiliate Transaction”), unless:

     (1) such Affiliate Transaction is on terms that are no less favorable to the Corporation or the relevant Restricted Subsidiary than those that would have

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been obtained in a comparable transaction by the Corporation or such Restricted Subsidiary with an unrelated Person; and

(2) the Corporation delivers to the transfer agent:

     (A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5 million, a resolution of the Board of Directors set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and

     (B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10 million, an opinion as to the fairness to the holders of the financial terms of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.

                  (b) The following items shall not be deemed to be Affiliate Transactions and therefore will not be subject to the provisions of subsection 11.5(a):

(1) any employment or indemnification arrangements or transactions relating to benefit plans with any employee, consultant or director of the Corporation or a Restricted Subsidiary that is entered into by the Corporation or any of its Restricted Subsidiaries in the ordinary course of business and consistent with past practice of the Corporation or such Restricted Subsidiary;

(2) transactions between or among the Corporation and/or its Restricted Subsidiaries;

(3) payment of reasonable directors fees to Persons who are not otherwise Affiliates of the Corporation;

(4) Restricted Payments that are permitted by the provisions of this Exhibit B described in subsection 11.1;

(5) the Corporation and any Restricted Subsidiary may enter into an administrative services agreement or a tax sharing agreement with an Affiliate or Affiliates so long as such agreement is approved by a majority of the independent directors;

(6) transactions and payments contemplated by any agreement in effect on March 27, 2001 or any amendment thereto in any replacement agreement therefor, so long as any such amendment or replacement agreement, taken as a whole, is not more disadvantageous to the Corporation or such Restricted Subsidiary as the original agreement as in effect on March 27, 2001;

(7) loans and advances to employees of the Corporation or any Restricted Subsidiary in the ordinary course of business; and

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(8) the Escrow Corp. Merger, the Reorganization and any merger with an Affiliate incorporated for the purpose of reincorporating the Corporation in another jurisdiction and/or for the purpose of forming a holding company.

          11.6 Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Corporation:

(1) shall not, and shall not permit any Restricted Subsidiary of the Corporation to, transfer, convey, sell, lease or otherwise dispose of any Equity Interests in any Restricted Subsidiary of the Corporation to any Person (other than the Corporation or a Wholly Owned Restricted Subsidiary of the Corporation); and

(2) shall not permit any Restricted Subsidiary of the Corporation to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors’ qualifying shares) to any Person other than to the Corporation or a Wholly Owned Restricted Subsidiary of the Corporation,

unless, in each such case: (a) as a result of such transfer, conveyance, sale, lease or other disposition or issuance such Restricted Subsidiary no longer constitutes a Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition or issuance are applied in accordance with the Asset Sales covenant in Section 8.

12. Other Provisions.

          12.1 With respect to any notice to a holder of shares of Senior Preferred Stock required to be provided hereunder, neither failure to mail such notice, nor any defect therein or in the mailing thereof, to any particular holder shall affect the sufficiency of the notice or the validity of the proceedings referred to in such notice with respect to the other holders or affect the legality or validity of any distribution, rights, warrant, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up, or the vote upon any such action. Any notice which was mailed in the manner provided in this Exhibit B shall be conclusively presumed to have been duly given whether or not the holder receives the notice.

          12.2 Senior Preferred Stock redeemed or otherwise acquired by the Corporation shall assume the status of authorized but unissued preferred stock and may thereafter be reissued in the same manner as the other authorized but unissued preferred stock, including as Parity Securities, but not as the same class as the Senior Preferred Stock.

          12.3 The shares of Senior Preferred Stock shall be issuable only in whole shares.

          12.4 All notice periods referred to in this Exhibit B shall commence on the date of the mailing of the applicable notice.

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SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

EMMIS COMMUNICATIONS CORPORATION

     The Second Amended and Restated Articles of Incorporation (the “Restated Articles”) of Emmis Communications Corporation, a corporation organized and existing under the laws of the State of Indiana (the “Corporation”), are as follows:

ARTICLE I

Corporate Name

     The name of the Corporation is Emmis Communications Corporation.

ARTICLE II

Purposes

     The purpose of the Corporation is to transact any or all lawful business for which corporations may be incorporated under the Indiana Business Corporation Law, as now or hereafter amended (the “Act”). The Corporation shall have the same capacity to act as possessed by natural persons and shall have and exercise all powers granted to business corporations formed under the Act and permitted by the laws of the State of Indiana in force from time to time hereafter, including, but not limited to, the general rights, privileges and powers set out in the Act, the power to enter into and engage in partnerships and joint ventures, and to act as agent. The Corporation shall have the power and capacity to engage in all business activities, either directly or through any person, firm, entity, trust, partnership or association.

ARTICLE III

Definitions

     As used herein, the following terms shall have the meanings indicated:

          “Act” has the meaning defined in Article II.

     “Affiliate of Smulyan” means (i) any person or entity that, directly or indirectly, controls, is controlled by or is under common control with Smulyan, (ii) any corporation or organization (other than the Corporation or a majority-owned subsidiary of the Corporation) of which Smulyan is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of voting securities, or in which Smulyan has a substantial beneficial interest, (iii) a Qualified Voting Trust, (iv) any other trust or estate in which Smulyan has a substantial beneficial interest or as to which Smulyan serves as trustee or in a similar fiduciary capacity, or (v) any relative or spouse of Smulyan, or any relative of such spouse, who has the same residence as Smulyan.

     “Alien” has the meaning defined in Article XI.

     “Alien Ownership Restrictions” has the meaning defined in Article XI.

     “Board of Directors” has the meaning defined in Section 7.2(a).

     “Class A Directors” has the meaning defined in Section 7.4(b).

     “Class A Shares” has the meaning defined in Section 6.1(a).

     “Class B Shares” has the meaning defined in Section 6.1(b).

     “Class C Shares” has the meaning defined in Section 6.1(c).

     “Common Shares” has the meaning defined in Section 6.1(c).

     “Communications Act” has the meaning defined in Article XI.

     “Corporation” has the meaning defined in the introduction to these Restated Articles.

     “Effective Date” means March 1, 1994, the date and time at which the Corporation’s Amended and Restated Articles become effective.

     “Event of Automatic Conversion” means each of the automatic conversion events described in Section 7.6(a) or Section 7.6(c).

     “Existing Common Shares” has the meaning defined in Section 7.6(a).

     “Going Private Transaction” shall mean any transaction that is a “Rule 13e-3 Transaction,” as such term is defined in Rule 13e-3(a)(3), 17 C.F.R. § 240.13e-3, as amended from time to time, promulgated under the Securities Exchange Act of 1934, as amended; provided, however, that the term “affiliate” as used in Rule 13e-3(a)(3)(i) shall be deemed to include an Affiliate of Smulyan.

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     “Independent Director” shall have the meaning defined in Part III, Section 5(c) of Schedule D to the By-Laws of the National Association of Security Dealers, Inc., as the same may be amended from time to time.

     “Preferred Stock” has the meaning defined in Section 6.1(c).

     “Qualified Voting Trust” means any voting trust, voting agreement or similar arrangement pursuant to which Smulyan generally controls the vote of the Common Shares held by or subject to such trust, agreement or similar arrangement, regardless of whether the beneficial owner reserves or is granted a limited right to vote such Common Shares in certain circumstances. A good faith determination by the Board of Directors as to whether a voting trust, voting agreement or similar arrangement constitutes a Qualified Voting Trust shall be conclusive and binding on all shareholders.

     “Restated Articles” has the meaning defined in the introduction to these Second Amended and Restated Articles of Incorporation of Emmis Communications Corporation.

     “Smulyan” means and refers to Jeffrey H. Smulyan.

ARTICLE IV

Term of Existence

     The period during which the Corporation shall continue is perpetual.

ARTICLE V

Registered Office and Registered Agent

     The street address of the registered office of the Corporation is 950 North Meridian Street, Suite 1200, Indianapolis, Indiana 46204, and the name of the registered agent at such office is Steven C. Crane.

ARTICLE VI

Capital Structure

     6.1. Authorized Shares. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is Two Hundred Forty million (240,000,000), consisting of the following:

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          (a) One hundred seventy million (170,000,000) shares of Class A Common Stock, par value $.01 per share (the “Class A Shares”);

          (b) Thirty million (30,000,000) shares of Class B Common Stock, par value $.01 per share (the “Class B Shares”);

          (c) Thirty million (30,000,000) shares of Class C Common Stock, par value $.01 per share (the “Class C Shares” and together with the Class A Shares and the Class B Shares, the “Common Shares”); and

          (d) Ten million (10,000,000) shares of serial Preferred Stock, par value $.01 per share (the “Preferred Stock”).

     6.2. Terms of Stock. The designations, preferences, powers, qualifications and special or relative rights or privileges of the capital stock of the Corporation shall be as set forth in Articles VII and VIII.

(i)     ARTICLE VII

Common Shares

     7.1. Identical Rights. Except as otherwise provided in these Restated Articles, all Common Shares shall be identical and shall entitle the holders thereof to the same rights and privileges, including, but not limited to, the right to share ratably in liquidation distributions after payment in full of creditors and payment in full to any holders of Preferred Stock then outstanding of any amount required to be paid under the terms of such Preferred Stock.

     7.2. Dividends.

          (a) General. When, as and if dividends are declared by the Corporation’s board of directors (the “Board of Directors”), whether payable in cash, securities of the Corporation or other property, the holders of Common Shares shall be entitled, in accordance with the number of Common Shares held by each, to share equally in and to receive all such dividends, except that if dividends are declared that are payable in Common Shares, such stock dividends shall be payable at the same rate on each class of Common Shares and shall be payable only in Class A Shares to holders of Class A Shares, in Class B Shares to holders of Class B Shares and in Class C Shares to holders of Class C Shares.

          (b) Record Date. Dividends declared by the Board of Directors shall be paid to the holders of record of the outstanding Common Shares as their names shall appear on the stock register of the Corporation on the record date fixed by the Board of Directors in advance of declaration and payment of each dividend.

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          (c) Stock Dividends. Any Common Shares issued as a dividend shall, when so issued, be duly authorized, validly issued, fully paid and non-assessable. The Corporation shall not issue fractions of Common Shares on payment of any such stock dividend but shall issue a whole number of shares to such holder of Common Shares rounded up or down in the Corporation’s sole discretion to the nearest whole number, without compensation to the stockholder whose fractional share has been rounded down or from any stockholder whose fractional share has been rounded up.

     7.3. Stock Splits. The Corporation shall not in any manner subdivide (by stock split, reverse stock split, reclassification, stock dividend, recapitalization or otherwise) or combine the outstanding shares of one class of Common Shares unless the outstanding shares of all classes of Common Shares shall be proportionately subdivided or combined, provided that this Section shall not apply to the reclassification taking effect upon the filing of these Restated Articles with the Secretary of State of Indiana.

     7.4. Voting Rights.

          (a) General. The holders of the Class A Shares and the Class B Shares shall vote as a single class in all matters submitted to a vote of the stockholders, with each Class A Share being entitled to one vote and each Class B Share being entitled to ten votes, except (i) for the election of directors, which shall be governed by Subsections (b) and (c) below, (ii) with respect to any Going Private Transaction described in Subsection (e) below, which shall be governed by such Subsection, and (iii) as otherwise provided by law. The holders of the Class C Shares have no right to vote on any matter except as otherwise provided by law.

          (b) Class A Directors. In the election of directors, the holders of Class A Shares shall be entitled by class vote, exclusive of all other stockholders, to elect two of the Corporation’s directors (the “Class A Directors”), with each Class A Share entitled to one vote; provided, however, that each Class A Director must be qualified at the time of his or her election to be an Independent Director. Any vote by stockholders on the removal of a Class A Director shall only be by the class vote of the holders of Class A Shares.

          (c) Other Directors. Except as provided in Subsection (b) above, the holders of Class A Shares and Class B Shares, voting as a single class, shall have the right to vote on the election or removal of all directors of the Corporation (other than directors, if any, who may be elected by the holders of Preferred Stock), with each Class A Share entitled to one vote and each Class B Share entitled to ten votes.

          (d) Class A Director Vacancies. In the event of the death, removal or resignation of a Class A Director prior to expiration of the director’s term, the vacancy on the Board of Directors created thereby may be filled by a majority of the directors then in office, although less than a quorum; provided, however, that any person appointed to fill a vacancy created by the death, removal or resignation of a Class A Director shall be an Independent Director. A director elected in such manner to fill such a vacancy shall hold office until the director’s successor has been duly elected and qualified at a meeting of holders of Class A Shares duly called for such purpose.

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          (e) Going Private Transactions. With respect to any Going Private Transaction between the Corporation and (i) Smulyan, (ii) any Affiliate of Smulyan or (iii) any group of which Smulyan or any Affiliate of Smulyan is a member, the holders of Class A Shares and Class B Shares shall vote as a single class, with each Class A Share and Class B Share entitled to one vote.

     7.5. Issuance of Common Shares. Each new issuance of Common Shares after the Effective Date shall be an issuance of Class A Shares or Class C Shares unless (i) the Common Shares are issued to Smulyan or (ii) the Common Shares are issued or subject to a Qualified Voting Trust. In each event described in clauses (i) or (ii) above, each Common Share issued shall be a Class B Share.

     7.6. Conversion.

          (a) Automatic Conversion on Effective Date. Each share of the Corporation’s common stock issued and outstanding immediately prior to the Effective Date (the “Existing Common Shares”) that is owned of record as of the Effective Date by Smulyan shall convert automatically and without the requirement of any further action into one fully paid and non-assessable Class B Share as of the Effective Date. Each of the Existing Common Shares not converted in accordance with the previous sentence shall convert automatically and without the requirement of any further action into one fully paid and non-assessable Class A Share as of the Effective Date.

          (b) Voluntary Conversion. Each Class B Share shall be convertible, at the option of its holder, into one fully paid and non-assessable Class A Share at any time.

          (c) Automatic Conversion.

          (i) Each Class B Share shall convert automatically into one fully paid and non-assessable Class A Share upon the sale, gift or other transfer of such share, voluntarily or involuntarily, to a person or entity other than Smulyan or an Affiliate of Smulyan; provided, however, that the pledge of a Class B Share pursuant to a bona fide pledge as security for indebtedness owed to the pledgee shall not constitute a transfer for purposes of this Subsection (c) until such time as either (A) such share is registered in the name of the pledgee, (B) the pledgee acquires the right to vote such share and exercises such right, in which case the automatic conversion into a Class A Share shall be deemed to occur immediately prior to such vote, or (C) ownership of the pledged share is transferred pursuant to enforcement of such pledge to a person or entity other than Smulyan or an Affiliate of Smulyan.

          (ii) All Class B Shares shall convert automatically into fully paid and non-assessable Class A Shares (on the basis of one Class A Share for each Class B Share) upon the earlier of (A) the death of Smulyan or (B) Smulyan’s ceasing to own at least 1,520,000 Common Shares, as adjusted from time to time to account for any stock dividend in respect of the Common Shares or any stock split or reverse stock split of Common Shares.

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          (d) Voluntary Conversion Procedure. At the time of a voluntary conversion, the holder of Class B Shares shall deliver to the office of the Corporation or any transfer agent for the Common Shares (i) the certificate or certificates representing the Class B Shares to be converted, duly endorsed in blank or accompanied by proper instruments of transfer, and (ii) written notice to the Corporation stating that such holder elects to convert such share or shares and stating the names and addresses in which each certificate for Class A Shares issued upon such conversion is to be issued. Voluntary conversion shall be deemed to have been effected at the close of business on the date when such delivery is made to the Corporation of the shares to be converted, and the person or entity exercising such voluntary conversion shall be deemed to be the holder of record of the number of Class A Shares issuable upon such conversion at such time. The Corporation shall promptly deliver certificates evidencing the appropriate number of Class A Shares to such holder.

          (e) Automatic Conversion Procedure. Upon the occurrence of the Event of Automatic Conversion pursuant to Section 7.6(a), each certificate previously representing Existing Common Shares that pursuant to Section 7.6(a) are converted into Class A Shares shall automatically and without the requirement of any further action represent the same number of Class A Shares. Promptly upon the occurrence of (i) the Event of Automatic Conversion pursuant to Section 7.6(a) with respect to those Existing Common Shares that are converted automatically into Class B Shares, or (ii) an Event of Automatic Conversion pursuant to Section 7.6(c), such that Class B Shares are converted automatically into Class A Shares, the holder of such converted shares shall surrender the certificate or certificates therefor, duly endorsed in blank or accompanied by proper instruments of transfer, at the office of the Corporation or of any transfer agent for the Common Shares and shall give written notice to the Corporation, at such office (A) stating that the shares are being converted pursuant to an Event of Automatic Conversion into Class B Shares or Class A Shares as provided in Section 7.6(a) or (c), respectively, (B) specifying the Event of Automatic Conversion (and, if the occurrence of such event is within the control of the transferor, stating the transferor’s intent to effect an Event of Automatic Conversion), (C) identifying the number of Existing Common Shares or Class B Shares being converted, and (D) setting out the name or names (with addresses) and denominations in which the certificate or certificates shall be issued, and instructions for the delivery thereof. Delivery of such notice together with the certificates representing the converted shares shall obligate the Corporation to issue and deliver, and thereupon the Corporation or its transfer agent shall promptly issue and deliver, at such stated address to such holder or to the transferee of the converted shares a certificate or certificates for the number and class of Common Shares to which such holder or transferee is entitled, registered in the name of such holder, the designee of such holder or transferee as specified in such notice. Nothing contained in this Subsection (e) or elsewhere in these Restated Articles shall be construed to permit or provide for (i) the transfer of any Class B Shares to any person or entity other than Smulyan or an Affiliate of Smulyan without the conversion of such Class B Shares into Class A Shares upon such transfer or (ii) the issuance of Class B Shares to any person or entity other than Smulyan or an Affiliate of Smulyan.

          To the extent permitted by law, conversion pursuant to an Event of Automatic Conversion shall be deemed to have been effected as of the date and time at which the Event of Automatic Conversion occurs (such time being the “Conversion Time”). The person or entity

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entitled to receive the Common Shares issuable upon such conversion shall be treated for all purposes as the record holder of such Common Shares at and as of the Conversion Time. The rights as a holder of the converted shares shall cease and terminate at and as of the Conversion Time, in each case without regard to any failure by the holder to deliver the certificates or the notice required by this Subsection (e).

          (f) Unconverted Shares; Notice Required. In the event of the conversion of less than all of the Class B Shares evidenced by a certificate surrendered to the Corporation in accordance with the procedures of Section 7.6(d) or (e), the Corporation shall execute and deliver to or upon the written order of the holder of such certificate, without charge to such holder, a new certificate evidencing the number of Class B Shares not converted. Class B Shares shall not be transferred as Class B Shares on the books of the Corporation unless the Corporation shall have received from the holder thereof the written notice described herein.

          (g) Reservation. The Corporation hereby reserves and shall at all times reserve and keep available, out of its authorized and unissued Class A Shares, for the purposes of effecting conversions, such number of duly authorized Class A Shares as shall from time to time be sufficient to effect the conversion of all outstanding Class B Shares. The Corporation covenants that all the Class A Shares so issuable shall, when so issued, be duly and validly issued, fully paid and non-assessable. Subject to Article XI, the Corporation will take all such action as may be necessary to assure that all such Class A Shares may be so issued without violation of any applicable law or regulation, or of any requirements of any national securities exchange upon which the Class A Shares may be listed.

     7.7. Consideration on Merger, Consolidation, etc. In any merger, consolidation or business combination, the consideration to be received per share by the holders of Class A Shares, Class B Shares and Class C Shares must be identical for each class of stock, except that in any such transaction in which shares of common stock are to be distributed, such shares may differ as to voting rights to the extent that the voting rights provided in these Restated Articles differ between the Class A Shares, the Class B Shares and the Class C Shares.

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ARTICLE VIII

Preferred Stock

     8.1. Terms of Preferred Stock. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation shall have authority to fix by resolution or resolutions the designations and powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, the voting rights, dividend rate, purchase or sinking funds, provisions for redemption, conversion rights, redemption price and liquidation preference, of any series of shares of Preferred Stock, to fix the number of shares constituting any such series and to increase or decrease the number of shares of any such series (but not below the number of shares thereof then outstanding). In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution or resolutions originally fixing the number of shares of such series.

(ii) ARTICLE IX

Board of Directors

     9.1 Number of Directors. The number of directors constituting the Board of Directors shall be fixed by the By-Laws of the Corporation and shall be not less than six (6) and not more than fifteen (15). No amendment to the By-Laws decreasing the number of directors shall have the effect of shortening the term of any incumbent director.

     9.2 Classes and Term of Office. Effective as of the annual meeting of shareholders in 2000, the Board of Directors shall be divided into three (3) classes, designated Class I, Class II and Class III, as nearly equal in number as possible. The number of Class A Directors in each class shall also be as nearly equal in number as possible. The initial term of office of directors in Class I will expire at the annual meeting of shareholders in 2001. The initial term of office of directors in Class II will expire at the annual meeting of shareholders in 2002. The initial term of office of directors in Class III will expire at the annual meeting of shareholders in 2003. At each annual election beginning at the annual meeting of shareholders in 2001, the successors to the class of directors whose term then expires shall be elected to hold office for a term of three (3) years and until his or her successor is elected and qualifies or until his or her earlier resignation, removal from office or death. This section does not apply to any directors elected pursuant to special voting rights of one or more series of Preferred Stock.

     9.3 Removal of Directors.

     (a) A director other than a Class A Director may be removed by the shareholders only for cause and only if the removal has been approved by an 80% majority of the combined voting power of the shares entitled to vote for the election of such director, cast at a special meeting of the shareholders called for that purpose. A Class A Director may be removed by the holders of

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Class A Shares as provided in Section 7.4(b) only for cause and only if the removal has been approved by the holders of an 80% majority of the Class A Shares, cast at a special meeting of the shareholders called for that purpose. Cause for removal exists only if:

(1)	the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction and the conviction is no longer subject to direct appeal; or
(2)	the director whose removal is proposed has been adjudicated by a court of competent jurisdiction to be liable for negligence or misconduct in the performance of his duty to the Corporation in a matter of substantial importance to the Corporation, and the adjudication is not longer subject to direct appeal.

     (b) This section does not apply to any directors elected pursuant to special voting rights of one or more series of Preferred Stock.

     9.4 Amendment or Repeal of this Article. Notwithstanding any other provision of these Articles or the By-Laws of the Corporation, and in addition to any other procedure specified under Indiana law, any amendment or repeal of or adoption of a provision inconsistent with any provision in this Article IX is not effective unless it is approved by at least an 80% majority of the combined voting power of the outstanding Common Shares.

ARTICLE X

Control Share Acquisitions

     Chapter 42 of the Act (I.C. 23-1-42) shall not apply to control share acquisitions of shares of capital stock of the Corporation.

(iii)	ARTICLE XI
(iv)	Alien Ownership

     The following provisions are included in these Restated Articles for the purpose of ensuring that control and management of the Corporation complies with the Communications Act of 1934 and the rules, regulations and policies of the Federal Communications Commission as amended from time to time (collectively, the “Communications Act”):

          (a) The Corporation (i) shall not issue to or for the account of (A) a person who is a citizen of a country other than the United States; (B) an entity organized under the laws of a government other than the government of the United States or any state, territory, or possession of the United States; (C) a government other than the government of the United States

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or of any state, territory, or possession of the United States; or (D) a representative of, or an individual or entity controlled by, any of the foregoing (each person or entity described in any of the foregoing clauses (A) through (D), an “Alien”) any share of capital stock of the Corporation if such issuance would cause the total capital stock of the Corporation held or voted by Aliens to exceed, in violation of the Communications Act, 25% of (1) the total capital stock of the Corporation outstanding at any time or (2) the total voting power of all shares of such capital stock outstanding and entitled to vote at any time, and (ii) shall not permit the transfer on the books of the Corporation of any capital stock to any Alien that would result in the total capital stock of the Corporation held or voted by Aliens to exceed such 25% limits in violation of the Communications Act.

          (b) No Alien or Aliens, individually or collectively, shall be entitled to vote or direct or control the vote of more than 25% of (i) the total capital stock of the Corporation outstanding at any time or (ii) the total voting power of all shares of capital stock of the Corporation outstanding and entitled to vote at any time, if to do so would violate the Communications Act.

          (c) No Alien shall be qualified to act as an officer of the Corporation and no more than one-fourth of the total number of directors of the Corporation at any time may be Aliens, in either case if such would violate the Communications Act.

          (d) The Board of Directors shall have all powers necessary to implement the provisions of this Article and to ensure compliance with the alien ownership restrictions (the “Alien Ownership Restrictions”) of the Communications Act, including, without limitation, the power to prohibit the transfer of any shares of capital stock of the Corporation to any Alien and to take or cause to be taken such action as it deems appropriate to implement such prohibition. Without limiting the generality of the foregoing and notwithstanding any other provision of these Restated Articles to the contrary, any shares of capital stock of the Corporation (other than the Series A Preferred Stock and the Series B Preferred Stock) determined by the Board of Directors to be owned beneficially by an Alien or Aliens shall always be subject to redemption by the Corporation by action of the Board of Directors to the extent necessary in the judgment of the Board of Directors to comply with the Alien Ownership Restrictions. The terms and conditions of such redemption shall be as follows:

          (i) The redemption price of the shares to be redeemed pursuant to this Article shall be equal to the lower of (A) the fair market value of the shares to be redeemed, as determined in good faith by the Board of Directors in good faith, and (B) such Alien’s purchase price of such shares;

          (ii) The redemption price of such shares may be paid in cash, securities or any combination thereof;

          (iii) If less than all the shares held by Aliens are to be redeemed, the shares to be redeemed shall be selected in any manner determined by the Board of Directors to be fair and equitable;

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          (iv) At least ten (10) days’ written notice of the redemption date shall be given to the record holders of the shares selected to be redeemed (unless waived in writing by any such holder), provided that the redemption date may be the date on which written notice shall be given to record holders if the cash or securities necessary to effect the redemption shall have been deposited in trust for the benefit of such record holders and subject to immediate withdrawal by them upon surrender of the stock certificates for their shares to be redeemed;

          (v) From and after the redemption date, the shares to be redeemed shall cease to be regarded as outstanding and any and all rights of the holders in respect of the shares to be redeemed or attaching to such shares of whatever nature (including, without limitation, any rights to vote or participate in dividends declared on stock of the same class or series as such shares) shall cease and terminate, and the holders thereof shall thereafter be entitled only to receive the cash or securities payable upon redemption; and

          (vi) Such other terms and conditions as the Board of Directors shall determine.

For purposes of this Article, the determination of the beneficial ownership of shares of capital stock of the Corporation shall be made pursuant to Rule 13d-3, 17 C.F.R. § 240.13d-3, as amended from time to time, promulgated under the Securities Exchange Act of 1934, as amended, or in such other manner as determined in good faith by the Board of Directors to be fair and equitable.

ARTICLE XII

Indemnification

     12.1. General. The Corporation shall, to the fullest extent to which it is empowered to do so by the Act, or any other applicable laws, as from time to time in effect, indemnify any person who was or 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 and whether formal or informal, by reason of the fact that such person is or was a director or officer of the Corporation, or who, while serving as such a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, whether for profit or not, against expenses (including counsel fees), judgments, settlements, penalties and fines (including excise taxes assessed with respect to employee benefit plans) actually or reasonably incurred by such person in accordance with such action, suit or proceeding, if such person acted in good faith and in a manner he or she reasonably believed, in the case of conduct in his or her official capacity, was in the best interests of the Corporation, and in all other cases, was not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, such person either had reasonable cause to believe his or her conduct was lawful or no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not meet the prescribed standard of conduct.

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     12.2. Authorization of Indemnification. To the extent that a director or officer of the Corporation has been wholly successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in Section 12.1, or in the defense of any claim, issue or matter therein, the Corporation shall indemnify such person against expenses (including counsel fees) actually and reasonably incurred by such person in connection therewith. Any other indemnification under Section 12.1 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case, upon a determination that indemnification of the director or officer is permissible in the circumstances because he or she has met the applicable standard of conduct. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not at the time parties to such action, suit or proceeding; or (ii) if a quorum cannot be obtained under clause (i), by a majority vote of a committee duly designated by the Board of Directors (in which designation directors who are parties may participate), consisting solely of two or more directors not at the time parties to such action, suit or proceeding; or (iii) by special legal counsel (A) selected by the Board of Directors or its committee in the manner prescribed in clauses (i) or (ii), or (B) if a quorum of the Board of Directors cannot be obtained under clause (i) and a committee cannot be designated under clause (ii), selected by a majority vote of the full Board of Directors (in which selection directors who are parties may participate); or (iv) by the stockholders, but shares owned by or voted under the control of directors or officers who are at the time parties to such action, suit or proceeding may not be voted on the determination.

     Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under foregoing clause (iii) to select counsel.

     12.3. Good Faith. For purposes of any determination under Section 12.1, a person shall be deemed to have acted in good faith and to have otherwise met the applicable standard of conduct set forth in Section 12.1 if his or her action is based on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by (i) one or more officers or employees of the Corporation or other enterprise whom he or she reasonably believes to be reliable and competent in the matters presented; (ii) legal counsel, public accountants, appraisers or other persons as to matters he or she reasonably believes are within the person’s professional or expert competence; or (iii) a committee of the Board of Directors of the Corporation or other enterprise of which the person is not a member if he or she reasonably believes the committee merits confidence. The term “other enterprise” as used in this Section 12.3 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, partner, trustee, employee or agent. The provisions of this Section 12.3 shall not be exclusive or limit in any way the circumstances in which a person may be deemed to have met the applicable standards of conduct set forth in Section 12.1.

     12.4. Payment of Expenses in Advance. Expenses incurred in connection with any civil or criminal action, suit or proceeding may be paid for or reimbursed by the Corporation in

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advance of the final disposition of such action, suit or proceeding, as authorized in the specific case in the same manner described in Section 12.2, upon receipt of the director or officer’s written affirmation of his or her good faith belief that he or she has met the standard of conduct described in Section 12.1 and upon receipt of a written undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she did not meet the standard of conduct set forth in this Article XII, and a determination is made that the facts then known to those making the determination would not preclude indemnification under this Article XII.

     12.5. Other Indemnitees. The Corporation may, by action of its Board of Directors, indemnify employees and agents of the Corporation with the same scope and effect and pursuant to the same procedures as provided in this Article XII for directors and officers.

     12.6. Provisions Not Exclusive. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under these Restated Articles of Incorporation, the Corporation’s By-Laws, any resolution of the Board of Directors or stockholders, any other authorization, whenever adopted, after notice, by a majority vote of all voting shares of the Corporation then outstanding, or any contract, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to serve in his or her official capacity, and shall inure to the benefit of the heirs, executors and administrators of such a person.

     12.7. Vested Right to Indemnification. The right of any person to indemnification under this Article shall vest at the time of occurrence or performance of any event, act or omission giving rise to any action, suit or proceeding of the nature referred to in Section 12.1 and, once vested, shall not later be impaired as a result of any amendment, repeal, alteration or other modification of any or all of these provisions. Notwithstanding the foregoing, the indemnification afforded under this Article shall be applicable to all alleged prior acts or omissions of any individual seeking indemnification hereunder, regardless of the fact that such alleged acts or omissions may have occurred prior to the adoption of this Article. To the extent such prior acts or omissions cannot be deemed to be covered by this Article XII, the right of any person to indemnification shall be governed by the indemnification provisions in effect at the time of such prior acts or omissions.

     12.8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or who is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by the individual in that capacity or arising from the individual’s status as a director, officer, employee or agent, whether or not the Corporation would have power to indemnify the individual against the same liability under this Article.

     12.9. Additional Definitions. For purposes of this Article:

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          (i) References to the “Corporation” shall include any domestic or foreign predecessor entity of the Corporation in a merger or other transaction in which the predecessor’s existence ceased upon consummation of the transaction.

          (ii) Serving an employee benefit plan at the request of the Corporation shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries. A person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interest of the Corporation” referred to in this Article.

          (iii) The term “party” includes any individual who is or was a plaintiff, defendant or respondent in any action, suit or proceeding, or who is threatened to be made a named defendant or respondent in any action, suit or proceeding.

          (iv) The term “official capacity,” when used with respect to a director, shall mean the office of director of the Corporation; and when used with respect to an individual other than a director, shall mean the office in the Corporation held by the officer or the employment or agency relationship undertaken by the employee or agent on behalf of the Corporation. “Official capacity” does not include service for any other foreign or domestic corporation or any partnership, joint venture, trust, employee benefit plan, or other enterprise, whether for profit or not.

ARTICLE XIII

Severability

     In the event that any Article or Section (or portion thereof) of these Restated Articles shall be found to be invalid, prohibited or unenforceable for any reason, the remaining provisions, or portion thereof, of these Restated Articles shall be deemed to remain in full force and effect, and shall be construed as if such invalid, prohibited or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of the Corporation and its stockholders that each such remaining provision (or portion thereof) of these Restated Articles remain, to the fullest extent permitted by law, applicable and enforceable as to all stockholders notwithstanding any such findings.

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EXHIBIT A

Exhibit A

to the Amended and Restated

Articles of Incorporation of

Emmis Communications Corporation

     Pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation by the provisions of Article VIII, Section 8.01 of the Corporation’s Amended and Restated Articles of Incorporation, as amended from time to time (the “Articles of Incorporation”), and pursuant to I.C. 23-1-25-2, the Board of Directors hereby creates a series of preferred stock of the Corporation with the following voting powers, designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof (in addition to the provisions set forth in the Articles of Incorporation which are applicable to the preferred stock of all classes and series):

     1. Designation, Amount and Ranking.

          1.1 There shall be created from the 10,000,000 shares of preferred stock, par value $0.01 per share, of the Corporation authorized to be issued pursuant to the Articles of Incorporation, a series of preferred stock, designated as the “6.25% Series A Cumulative Convertible Preferred Stock,” par value $0.01 per share (the “Preferred Stock”), and the number of shares of such series shall be 2,875,000. Such number of shares may be decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of shares of Preferred Stock to a number less than that of the shares of Preferred Stock then outstanding plus the number of shares issuable upon exercise of options or rights then outstanding and, if any portion of the over-allotment option granted by the Corporation pursuant to the Purchase Agreement (as defined in this Exhibit A) expires unexercised, the Board of Directors shall by resolution decrease the number of authorized shares of Preferred Stock by the number of shares subject to the expired portion of such over-allotment option. Any shares of Preferred Stock issued after the Issue Date (as defined in this Exhibit A) pursuant to the over-allotment option granted by the Corporation pursuant to the Purchase Agreement shall, for all purposes, including, without limitation, voting and dividend rights, be deemed issued as of the Issue Date.

          1.2 The Preferred Stock, with respect to dividend distributions upon the liquidation, winding-up and dissolution of the Corporation, ranks:

               (a) senior to all classes of the Corporation’s common stock and to each other class of capital stock or series of preferred stock established after the Issue Date by the Board of Directors, the terms of which do not expressly provide that it ranks senior to or on a

A-1

parity with the Preferred Stock as to dividend distributions and distributions upon the liquidation, winding-up and dissolution of the Corporation;

                (b) ratably with any class of capital stock or series of preferred stock issued by the Corporation established after the Issue Date by the Board of Directors, the terms of which expressly provide that such class or series will rank on a parity with the Preferred Stock as to dividend distributions and distributions upon the liquidation, winding-up and dissolution of the Corporation; and

                (c) subject to certain conditions which include the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding Preferred Stock, junior to each class of capital stock or series of preferred stock issued by the Corporation established after the Issue Date by the Board of Directors, the terms of which expressly provide that such class or series will rank senior the Preferred Stock as to dividend distributions and distributions upon liquidation, winding-up and dissolution of the Corporation.

     2. Definitions. As used in this Exhibit A, the following terms shall have the following meanings:

          2.1 “Accrued Dividends” shall mean, with respect to any share of Preferred Stock, as of any date, the accrued and unpaid dividends on such share from and including the most recent Dividend Payment Date (or the Issue Date, if such date is prior to the first Dividend Payment Date) to but not including such date. “Accumulated Dividends” shall mean, with respect to any share of Preferred Stock, as of any date, the aggregate accumulated and unpaid dividends on such share from the Issue Date until the most recent Dividend Payment Date prior to such date. There shall be no Accumulated Dividends with respect to any share of Preferred Stock prior to the first Dividend Payment Date.

          2.2 “Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law or executive order to close.

          2.3 “Change of Control” shall mean any of the following events: (i) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the Corporation’s assets to any “person or group,” as such terms are used in Section 13(d)(3) of the Exchange Act other than to Permitted Holders; (ii) the adoption of a plan relating to the liquidation or dissolution of the Corporation; (iii) the acquisition, directly or indirectly, by any person or group, as such terms are used in Section 13(d)(3) of the Exchange Act as in effect on the original date of issuance of the Preferred Stock, other than Permitted Holders, of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act as in effect on the original date of issuance of the convertible preferred stock, except that a person will be deemed to have beneficial ownership of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after passage of time) of more than 50% of the Corporation’s total outstanding voting stock; provided, however, that the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the issue date), directly or indirectly, in the aggregate a lesser percentage of the total voting

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power of the Corporation’s voting stock than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Corporation’s Board of Directors; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Corporation’s Board of Directors, together with any new directors whose election by such Board of Directors or whose nomination for election by the Corporation’s shareholders was approved by a vote of 66 2/3% of the Corporation’s Board of Directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Corporation’s Board of Directors then in office.

          2.4 “Change of Control Date” shall mean the date on which the Change of Control event occurs.

          2.5 “Conversion Price” shall mean $78.125, subject to adjustment as set forth in Section 9(c).

          2.6 “Class A Common Stock” shall mean the Class A Common Stock, par value $0.01 per share, of the Corporation, or any other class of stock resulting from successive changes or reclassifications of such common stock consisting solely of changes in par value, or from par value to no par value, or as a result of a subdivision, combination, or merger, consolidation or similar transaction in which the Corporation is a constituent corporation.

          2.7 “Class B Common Stock” shall mean the Class B Common Stock par value $0.01 per share, of the Corporation.

          2.8 “Common Stock” shall mean both the Class A Common Stock and the Class B Common Stock of the Corporation.

          2.9 “Dividend Payment Date” shall mean January 15, April 15, July 15 and October 15 of each year, commencing January 15, 2000.

          2.10 “Dividend Record Date” shall mean, with respect to each Dividend Payment Date, a date not more than 60 days nor less than 10 days preceding a Dividend Payment Date, as may be fixed by the Board of Directors.

          2.11 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

          2.12 “Issue Date” shall mean October 26, 1999, the original date of issuance of the Preferred Stock.

          2.13 “Liquidation Preference” shall mean, with respect to each share of Preferred Stock, $50.

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          2.14 “Market Capitalization” shall mean as of a given date the product of the Market Value so of such date times the total number of shares of Common Stock outstanding as of such date.

          2.15 “Market Value” shall mean as of a given date the average closing price of the Class A Common Stock for a ten consecutive trading day period, ending on the last trading day immediately preceding such date, on the Nasdaq Stock Market or any national securities exchange or authorized quotation system on which the Corporation’s Class A Common Stock is listed or authorized for quotation, or if the Class A Common Stock is not so listed or authorized for quotation, an amount determined in good faith by the Board of Directors to be the fair value of the Class A Common Stock.

          2.16 “Permitted Holders” means Jeffrey H. Smulyan, his spouse, lineal descendants and ascendants, heirs, executors or other legal representatives and any trusts or other entities established by or for the benefit of any of the foregoing or established by any of the foregoing for charitable purposes, or any other person or entity in which the foregoing persons or entities exercise control.

          2.17 “Person” shall mean any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.

          2.18 “Purchase Agreement” shall mean that certain Purchase Agreement with respect to the Preferred Stock, dated as of October 26, 1999 among the Corporation, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co.

     3. Dividends.

          3.1 The holders of shares of the outstanding Preferred Stock shall be entitled, when, as and if declared by the Board of Directors out of funds legally available therefor, to receive cumulative annual cash dividends at a rate per annum equal to 6.25% (the “Dividend Rate”) of the Liquidation Preference, payable quarterly in arrears. Dividends payable for each full dividend period will be computed by dividing the Dividend Rate by four and shall be payable in arrears on each Dividend Payment Date for the quarterly period ending immediately prior to such Dividend Payment Date, to the holders of record of Preferred Stock at the close of business on the Dividend Record Date applicable to such Dividend Payment Date. Such dividends shall be cumulative from the Issue Date and shall accrue on a day-to-day basis, whether or not earned or declared, from and after the Issue Date. Dividends on the Preferred Stock which are not declared and paid when due will compound quarterly on each Dividend Payment Date at the Dividend Rate. Dividends payable for any partial dividend period shall be computed on the basis of actual days elapsed over a 360-day year consisting of twelve 30-day months. Notwithstanding anything in this Exhibit A to the contrary, the initial Dividend Payment Date, which shall be for dividends accrued during the period commencing on the Issue Date and ending on January 15, 2000, will be January 15, 2000.

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          3.2 Dividends paid on the Preferred Stock shall be payable in cash.

          3.3 No dividends or other distributions (other than a dividend or distribution payable solely in stock of the Corporation ranking junior to or ratably with the Preferred Stock as to dividends and upon liquidation, dissolution or winding up and cash in lieu of fractional shares) may be declared, made or paid or set apart for payment on the Common Stock or upon any other stock of the Corporation ranking junior to or ratably with the Preferred Stock as to dividends, and no Common Stock or any other stock of the Corporation ranking junior to or ratably with the Preferred Stock as to dividends or upon liquidation, dissolution or winding up, may be redeemed, purchased or otherwise acquired for any consideration (or any money paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to or ratably with the Preferred Stock as to dividends and upon liquidation dissolution or winding up), unless full Accumulated Dividends shall have been or contemporaneously are paid or declared and a sum sufficient for the payment thereof is set apart for such payment on the Preferred Stock for all Dividend Payment Periods terminating on or prior to the date of such declaration, payment, redemption, purchase or acquisition. Notwithstanding the foregoing, if full dividends have not been paid to the holders of the Preferred Stock and on any other preferred stock ranking ratably with the Preferred Stock as to dividends, dividends may be declared and paid on the Preferred Stock and such other ratable preferred stock, only so long as the dividends are declared and paid pro rata so that the amounts of dividends declared per share on the Preferred Stock and such other ratable preferred stock will in all cases bear to each other the same ratio that, immediately prior to payment of the dividend on such other ratable stock, Accumulated and Accrued Dividends per share of the Preferred Stock and accrued and unpaid dividends per share of such other ratable preferred stock bear to each other.

          3.4 Holders of shares of Preferred Stock shall not be entitled to any dividends on the Preferred Stock, whether payable in cash, property or stock in excess of full cumulative dividends at the Dividend Rate provided in this Exhibit A. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Preferred Stock which may be in arrears.

          3.5 The holders of shares of Preferred Stock at the close of business on a Dividend Record Date will be entitled to receive the dividend payment on those shares (except that holders of shares called for redemption on a redemption date between the Dividend Record Date and the Dividend Payment Date will be entitled to receive such dividend on such redemption date on the corresponding Dividend Payment Date notwithstanding the subsequent conversion thereof or the Corporation’s default in payment of the dividend due on that Dividend Payment Date.

     4 Optional Redemption.

          4.1 The Preferred Stock is not subject to any sinking fund or other similar provisions. From April 15, 2001 to October 15, 2002, the Corporation may redeem Preferred Stock (the “Provisional Redemption”) at a redemption premium equal to 104.911% of the Liquidation Preference plus Accumulated Dividends, if any, whether or not declared to the

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redemption date (the “Provisional Redemption Date”), if the closing price of the Corporation’s Class A Common Stock on the Nasdaq Stock Market, or any national securities exchange or authorized quotation system on which the Corporation’s Class A Common Stock is then listed or authorized for quotation, if not so listed, is greater than 150% of the Conversion Price ($117.1875), as hereafter defined in this Exhibit A, per share for 20 trading days within any 30 consecutive trading day period. If the Corporation undertakes a Provisional Redemption, holders of Preferred Stock that the Corporation calls for redemption will also receive a payment (the “Additional Payment”) in an amount equal to the present value of the aggregate value of the dividends (whether or not declared) that would thereafter have been payable on the Preferred Stock called for redemption from the Provisional Redemption Date to October 15, 2002 (the “Additional Period”). The present value will be calculated using as the discount rate the bond equivalent yield on U.S. Treasury notes or bills having the term nearest in length to that of the Additional Period, calculated as of the day immediately preceding the date on which a notice of Provisional Redemption is mailed. The Corporation will be obligated to make the Additional Payment on all shares of Preferred Stock that the Corporation has called for the Provisional Redemption whether or not those shares of Preferred Stock that the Corporation has called are converted prior to the Provisional Redemption Date.

          4.2 Beginning on October 15, 2002, the Corporation may redeem in cash the Preferred Stock, during the twelve-month periods commencing on October 15 of the years indicated below, at the following redemption premiums (which are expressed as a percentage of the stated liquidation preference of $50 per share), plus in each case Accrued Dividends and Accumulated Dividends, if any, whether or not declared to the redemption date:

Year	Amount
2002		103.571	%
2003		102.679	%
2004		101.786	%
2005		100.893	%
2006		100.000	%

     5. Procedure for Redemption.

          5.1 Not less than 30 nor more than 60 days previous to the date fixed for redemption by the Board of Directors, a notice specifying the time and place thereof shall be given to the holders of record of the Preferred Stock to be redeemed by first class mail at their respective addresses as the same shall appear on the books of the Corporation; provided, however, that no failure to mail such notice, nor any defect therein, nor in the mailing thereof, shall affect the validity of the proceedings for the redemption of any of the Preferred Stock to be redeemed. Upon the redemption date, the Corporation shall pay over the redemption price to the holders of the shares upon the endorsement and surrender of the certificates for such shares by the holders of the Preferred Stock.

          5.2 On or before any redemption date, each holder of shares of Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares of Preferred Stock to the Corporation, in the manner and at the place designated in the notice of

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redemption and on the redemption date, the full redemption price, payable in cash, for such shares of Preferred Stock shall be paid or delivered to the person whose name appears on such certificate or certificates as the owner thereof, and the shares represented by each surrendered certificate shall be returned to authorized but unissued shares of preferred stock of any or no series. Upon surrender (in accordance with the notice of redemption) of the certificate or certificates representing any shares to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice of redemption shall so state), such shares shall be redeemed by the Corporation at the redemption price. If fewer than all the shares represented by any such certificate are to be redeemed, a new certificate shall be issued representing the unredeemed shares, without costs to the holder thereof, together with the amount of cash, if any, in lieu of fractional shares.

          5.3 If a notice of redemption shall have been given as provided in Section 5.1, dividends on the shares of Preferred Stock so called for redemption shall cease to accrue, such shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation with respect to shares so called for redemption (except for the right to receive from the Corporation the redemption price) shall cease (including any right to receive dividends otherwise payable on any Dividend Payment Date that would have occurred after the time and date of redemption) either (i) from and after the time and date fixed in the notice of redemption as the time and date of redemption (unless the Corporation shall default in the payment of the redemption price, in which case such rights shall not terminate at such time and date) or (ii) if the Corporation shall so elect and state in the notice of redemption, from and after the time and date (which date shall be the date fixed for redemption or an earlier date not less than 30 days after the date of mailing of the redemption notice) on which the Corporation shall irrevocably deposit in trust for the holders of the shares of Preferred Stock to be redeemed with a designated bank or trust company doing business in the State of New York, as paying agent, money sufficient to pay at the office of such paying agent, on the redemption date, the redemption price. Any money so deposited with any such paying agent which shall not be required for such redemption shall be returned to the Corporation forthwith. Subject to applicable escheat laws, any moneys so set aside by the Corporation and unclaimed at the end of one year from the redemption date shall revert to the general funds of the Corporation, after which reversion the holders of such shares so called for redemption shall look only to the general funds of the Corporation for the payment of the redemption price without interest. Any interest accrued on funds so deposited shall be paid to the Corporation from time to time.

          5.4 In the event that fewer than all the outstanding shares of the Preferred Stock are to be redeemed, the shares to be redeemed will be determined pro rata or by lot. From and after the applicable redemption date, unless the Corporation defaults in the payment of the redemption price, dividends on the shares of Preferred Stock to be redeemed on such redemption date will cease to accrue, said shares will no longer be deemed to be outstanding, and all rights of the holders thereof as the Corporation’s shareholders (except the right to receive the redemption price) will cease.

          5.5 The Corporation shall not redeem any shares of Preferred Stock if any dividends on the Preferred Stock are in arrears unless all dividends on the Preferred Stock in arrears are paid in full.

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     6. Change of Control.

          6.1 Upon the occurrence of a Change of Control of the Corporation, holders of Preferred Stock will, if the Market Value as of the Change of Control Date is less than the Conversion Price, have a one-time option (the “Change of Control Option”) to convert all of their outstanding shares of Preferred Stock into shares of the Corporation’s Class A Common Stock at a conversion price equal to the greater of (i) the Market Value as of the Change of Control Date; or (ii) 66.67% of the market price per share of the Corporation’s Class A Common Stock at the close of trading on the date of issuance of the Preferred Stock. The Change of Control Option will be exercisable during a period of not less than 30 days nor more than 60 days commencing on the third business day after notice of the Change of Control is given by the Corporation. In lieu of issuing the shares of the Corporation’s Class A Common Stock issuable upon conversion in the event of a Change of Control, the Corporation may, at its option, make a cash payment equal to the Market Value as of the Change of Control Date of such Class A Common Stock otherwise issuable.

          6.2 In the event of a Change of Control, notice of such Change of Control shall be given, within five Business Days of the Change of Control Date, by the Corporation by first class mail to each record holder of shares of Preferred Stock, at such holder’s address as the same appears on the books of the Corporation. Each such notice shall state (i) that a Change of Control has occurred; (ii) the last day on which the Change of Control Option may be exercised (the “Expiration Date”); (iii) the name and address of the paying agent; and (iv) the procedures that holders must follow to exercise the Change of Control Option.

          6.3 On or before the Expiration Date, each holder of shares of Preferred Stock wishing to exercise the Change of Control Option shall surrender the certificate or certificates representing the shares of Preferred Stock to be converted, in the manner and at the place designated in the notice described in Section 6.2, and on such date the cash or shares of Class A Common Stock due to such holder shall be delivered to the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be returned to authorized but unissued shares. Upon surrender (in accordance with the notice described in Section 6.2) of the certificate or certificates representing any shares to be so converted (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares shall be converted by the Corporation at the Conversion Price.

          6.4 The rights of holders of Preferred Stock pursuant to this Section 6 are in addition to, and not in lieu of, the rights of holders of Preferred Stock provided for in Section 9 in this Exhibit A.

     7. Voting.

          7.1 The shares of Preferred Stock shall have no voting rights except as required by law or as set forth in this Section 7. increase or decrease the aggregate number of authorized shares of the class of preferred stock;

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          7.2 If the dividends payable on the Preferred Stock are in arrears for six consecutive quarterly periods, the holders of Preferred Stock voting separately as a class with the shares of any other preferred stock or preference securities having similar voting rights will be entitled at the next regular or special meeting of the Corporation’s shareholders to elect two directors to the Corporation’s Board of Directors. Such voting rights and terms of the directors so elected continue until such time as the dividend arrearage on the Preferred Stock has been paid in full.

          7.3 The affirmative vote or consent of the holders of at least 66 2/3% of the outstanding Preferred Stock will be required for the issuance of any class or series of stock, or security convertible into the Corporation’s stock, ranking senior to the Preferred Stock as to dividends, liquidation rights or voting rights and for amendments to the Corporation’s Articles of Incorporation that would adversely affect the rights of holders of the Preferred Stock; provided, however, that any issuance of shares of preferred stock which rank ratably with the Preferred Stock (including the issuance of additional shares of the Preferred Stock) will not, by itself, be deemed to adversely affect the rights of the holders of the Preferred Stock. In all such cases, each share of Preferred Stock will be entitled to one vote.

     8. Liquidation Rights.

          8.1 In the event of any dissolution, voluntary or involuntary liquidation or winding-up of the Corporation, the holders of the shares of Preferred Stock shall be entitled to receive and to be paid out of the assets of the Corporation available for distribution to stockholders, before any payment or distribution is made to holders of the Corporation’s Common Stock or any other class or series of stock of the Corporation ranking junior to the Preferred Stock upon liquidation, the Liquidation Preference plus Accumulated Dividends, if any, with respect to each share.

          8.2 Neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation, or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, voluntary or involuntary liquidation or winding up, for the purposes of this Section 8.

          8.3 After the payment to the holders of the shares of Preferred Stock of full preferential amounts provided for in this Section 8, the holders of Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.

          8.4 If upon any voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the amounts payable with respect to the Liquidation Preference and Accumulated Dividends on the Preferred Stock and any other shares of the Corporation’s stock ranking as to any distribution ratably with the Preferred Stock are not paid in full, the holders of the Preferred Stock and of such other shares will share pro rata in proportion to the Liquidation Preference plus Accumulated Dividends thereon.

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     9. Conversion.

               (a) Subject to compliance with the provisions of this Section 9, each outstanding share of the Preferred Stock shall be convertible at any time at the option of the holder into that number of whole shares of the Corporation’s Class A Common Stock as is equal to the Liquidation Preference, divided by an initial conversion price of $78.125, equivalent to 0.6400 shares of Class A Common Stock per share of Preferred Stock, subject to adjustment as described in Section 9(c). The initial conversion price and the conversion price as adjusted are referred to in this Exhibit A as the Conversion Price. A share of Preferred Stock called for redemption will be convertible into shares of Class A Common Stock up to and including, but not after, the close of business on the date fixed for redemption unless the Corporation defaults in the payment of the amount payable upon redemption.

          To exercise the conversion right, the holder of each share of Preferred Stock to be converted shall surrender the Certificate representing such share, if certificated, duly endorsed or assigned to the Corporation or in blank, at the office of the transfer agent, together with written notice of the election to convert executed by the holder (the “Conversion Notice”) specifying the number of shares of Preferred Stock to be converted, the name in which the shares of Class A Common Stock deliverable upon conversion shall be registered, and the address of the named person. If the shares of Preferred Shares are not certificated, the holder must deliver evidence of ownership satisfactory to the Corporation and the transfer agent. Unless the shares of Class A Common Stock deliverable upon conversion are to be issued in the same name as the name in which the shares of Preferred Stock to be converted are registered, the holder must also deliver to the transfer agent an instrument of transfer, in form satisfactory to the Corporation, duly executed by the holder or the holder’s duly authorized attorney, together with an amount sufficient to pay any transfer or similar tax in connection with the issuance and delivery of such shares of Class A Common Stock in such name (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid).

          As promptly as practicable after compliance with the provisions of the foregoing paragraph, the Corporation shall deliver or cause to be delivered at the office where such certificates are surrendered to or upon the written order of the holder thereof a certificate or certificates representing the number of shares of Class A Common Stock into which such Preferred Stock may be converted in accordance with the provisions of this Section 9, registered in such name or names as are duly specified in the Conversion Notice. Such conversion shall be deemed to have been effected at the close of business on the date the holder has complied with the provisions of the foregoing paragraph, and the rights with respect to the shares of Preferred Stock so converted, including the rights, if any, to receive notices, will terminate at that time, except only (i) the rights of holders of such shares of Preferred Stock to receive certificates for the number of shares of Class A Common Stock into which such shares of Preferred Stock have been converted; and (ii) the right of holders of such shares of the Preferred Stock at the close of business on a Dividend Record Date to receive, on the corresponding Dividend Payment Date, the dividend declared on such shares for payment on such Dividend Payment Date.

          If the last day for the exercise of the conversion right shall not be a Business Day, then such conversion right may be exercised on the next preceding Business Day.

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               (b) Upon and after conversion of shares of the Preferred Stock, the Corporation shall have no obligation to pay any undeclared Accumulated Dividends or Accrued Dividends.

               (c) The Conversion Price shall be subject to adjustment as follows:

                    (i) In case the Corporation shall at any time or from time to time make a redemption payment or pay a dividend or make another distribution payable in shares of the Corporation’s Common Stock to all holders of any class of the Corporation’s capital stock, other than the issuance of shares of Class A Common Stock in connection with the conversion of Preferred Stock, then, the Conversion Price in effect immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Corporation) so that the holder of any share of Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Class A Common Stock that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share of Preferred Stock been converted into shares of Class A Common Stock immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 9(c)(i) shall become effective retroactively in the case of any such dividend or distribution, to the day immediately following the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution.

                    (ii) In case the Corporation shall at any time or from time to time issue to all holders of its Common Stock rights, options or warrants entitling the holders thereof to subscribe for or purchase shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) at a price per share less than the Market Value as of the record date of such issuance (treating the price per share of any security convertible or exchangeable or exercisable into Common Stock as equal to (A) the sum of the price paid to acquire such security convertible, exchangeable or exercisable into Common Stock plus any additional consideration payable (without regard to any anti-dilution adjustments) upon the conversion, exchange or exercise of such security into Common Stock divided by (B) the number of shares of Common Stock into which such convertible, exchangeable or exercisable security is initially convertible, exchangeable or exercisable), other than (I) issuances of such rights, options or warrants if the holder of Preferred Stock would be entitled to receive such rights, options or warrants upon conversion at any time of shares of Preferred Stock, or if such rights, options, and warrants have expired or been redeemed by the Corporation prior to conversion and (II) issuances that are subject to certain triggering events (until such time as such triggering events occur), then, the Conversion Price then in effect shall be adjusted by dividing the Conversion Price in effect on the day immediately prior to the record date of such issuance by a fraction (y) the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock issued or to be issued upon or as a result of the issuance of such rights, options or warrants (or the maximum number into or for which such convertible or exchangeable securities initially may convert or exchange or for which such options, warrants or other rights initially may be exercised) and (z) the denominator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock

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which the aggregate consideration for the total number of such additional shares of Common Stock so issued (or into or for which such convertible or exchangeable securities may convert or exchange or for which such options, warrants or other rights may be exercised plus the aggregate amount of any additional consideration initially payable upon the conversion, exchange or exercise of such security) would purchase at the Market Value as of such record date; provided, that if the Corporation distributes rights or warrants (other than those referred to above in this subparagraph (c)(ii)) pro rata to the holders of Common Stock, so long as such rights or warrants have not expired or been redeemed by the Corporation, (y) the holder of any Preferred Stock surrendered for conversion shall be entitled to receive upon such conversion, in addition to the shares of Class A Common Stock then issuable upon such conversion (the “Conversion Shares”), a number of rights or warrants to be determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to the holders of rights or warrants of separate certificates evidencing such rights or warrants (the “Distribution Date”), the same number of rights or warrants to which a holder of a number of shares of Class A Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions applicable to the rights or warrants and (ii) if such conversion occurs after the Distribution Date, the same number of rights or warrants to which a holder of the number of shares of Class A Common Stock into which such Preferred Stock was convertible immediately prior to such Distribution Date would have been entitled on such Distribution Date had such Preferred Stock been converted immediately prior to such Distribution Date in accordance with the terms and Provisions applicable to the rights and warrants, and (z) the Conversion Price shall not be subject to adjustment on account of any declaration, distribution or exercise of such rights or warrants.

                    (iii) In case the Corporation shall at any time or from time to time subdivide the outstanding shares of Common Stock into a larger number of shares, combine the outstanding shares of Common Stock into a smaller number of shares, or issue any shares of its capital stock in a reclassification of the Common Stock, then, the Conversion Price in effect immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Corporation) so that the holder of any share of Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share of Preferred Stock been converted into shares of Class A Common Stock immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 9(c)(iii) shall become effective retroactively in the case of any such subdivision, combination, or reclassification, to the close of business on the date upon which such corporate action becomes effective.

                    (iv) In case the Corporation shall at any time or from time to time pay a dividend or distribute to all holders of shares of the Corporation’s Common Stock (other than a dividend or distribution subject to 9(c)(ii)) pursuant to any shareholder rights plan, “poison pill” or similar arrangement and excluding regular dividends and distributions paid exclusively in cash and dividends payable upon the Preferred Stock, then, the Conversion Price in effect immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Corporation) so that the holder of any share of Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Class A Common

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Stock that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share of Preferred Stock been converted into shares of Class A Common Stock immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 9(c)(iv) shall become effective retroactively in the case of any such dividend or distribution, to the day immediately following the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution.

                    (v) In case the Corporation shall at any time or from time to time (A) make a distribution to all holders of shares of its Common Stock consisting exclusively of cash (excluding any cash portion of distributions referred to in paragraph (iv) above, or cash distributed upon a merger or consolidation to which (B) of this paragraph below applies), that, when combined together with (x) all other such all-cash distributions made within the then-preceding 12 months in respect of which no adjustment has been made and (y) any cash and the fair market value of any other consideration paid or payable in respect of any tender offer by the Corporation or any of its subsidiaries for shares of Common Stock concluded within the then-preceding 12 months in respect of which no adjustment pursuant to this Section 9(c) has been made, in the aggregate exceeds 15% of the Corporation’s Market Capitalization as of the record date of such distribution; (B) complete a tender or exchange offer which the Corporation or any of its subsidiaries makes for shares of the Corporation’s Common Stock that involves an aggregate consideration that, together with (x) any cash and other consideration payable in a tender or exchange offer by the Corporation or any of its subsidiaries for shares of the Corporation’s Common Stock expiring within the then preceding 12 months in respect of which no adjustment has been made and (y) the aggregate amount of any such all-cash distributions referred to in (A) of this paragraph to all holders of shares of Common Stock within the then preceding 12 months in respect of which not adjustments have been made, exceeds 15% of the Corporation’s Market Capitalization just prior to the expiration of such tender offer; or (C) make a distribution to all holders of its Common Stock consisting of evidences of indebtedness, shares of its capital stock other than Common Stock or assets (including securities, but excluding those dividends, rights, options, warrants and distributions referred to in this Section 9(c)), then, the Conversion Price then in effect shall be adjusted by dividing the Conversion Price in effect immediately prior to the date of such distribution or completion of such tender or exchange offer, as the case may be, by a fraction (x) the numerator of which shall be the Market Value as of the record date referred to below, or, if such adjustment is made upon the completion of a tender or exchange offer, as of the payment date for such offer, and (y) the denominator of which shall be such Market Value less the then fair market value (as determined by the Board of Directors of the Corporation) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed or paid in such tender or exchange offer, applicable to one share of Common Stock (but such denominator not to be less than one); provided, however, that no adjustment shall be made with respect to any distribution of rights to purchase securities of the Corporation if the holder of shares of Preferred Stock would otherwise be entitled to receive such rights upon Conversion at any time of shares of Preferred Stock into shares of Class A Common Stock unless such rights are subsequently redeemed by the Corporation, in which case such redemption shall be treated for purposes of this Section 9(c)(v) as a dividend on the Common Stock. Such adjustment shall be made whenever any such distribution is made or tender or exchange offer is completed, as the case may be, and shall become effective retroactively to a date immediately

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following the close of business on the record date for the determination of stockholders entitled to receive such distribution.

                    (vi) In the case the Corporation at any time or from time to time shall take any action affecting its Common Stock (it being understood that the issuance or sale of shares of Class A Common Stock (or securities convertible into or exchangeable for shares of Class A Common Stock, or any options, warrants or other rights to acquire shares of Class A Common Stock) to any Person at a price per share less than the Conversion Price then in effect shall not be deemed such an action), other than an action described in any of Section 9(c)(i) through Section 9(c)(v), inclusive, or Section 9(g), then the Conversion Price shall be adjusted in such manner and at such time as the Board of Directors of the Corporation in good faith determines to be equitable in the circumstances (such determination to be evidenced in a resolution, a certified copy of which shall be mailed to the holders of the Preferred Stock).

                    (vii) Notwithstanding anything in this Exhibit A to the contrary, no adjustment under this Section 9(c) need be made to the Conversion Price unless such adjustment would require an increase or decrease of at least 1% of the Conversion Price then if effect. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, if any, which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% of such Conversion Price. Notwithstanding anything to the contrary, no Conversion Price adjustment will be made as a result of the issuance of the Corporation’s Class A Common Stock on conversion of the Preferred Stock. Each event requiring adjustment to the Conversion Price will require only a single adjustment even though more than one of the foregoing adjustment clauses may be applicable to such event.

                    (viii) The Corporation reserves the right to make such reductions in the Conversion Price in addition to those required in the foregoing provisions as it considers advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the recipients. In the event the Corporation elects to make such a reduction in the Conversion Price, the Corporation will comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder if and to the extent that such laws and regulations are applicable in connection with the reduction of the Conversion Price.

               (d) If the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter (and before the dividend or distribution has been paid or delivered to stockholders) legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the Conversion Price then in effect shall be required by reason of the taking of such record.

               (e) Upon any increase or decrease in the Conversion Price, then, and in each such case, the Corporation promptly shall deliver to each registered holder of Preferred Stock a certificate signed by an authorized officer of the Corporation, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was

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calculated and specifying the increased or decreased Conversion Price then in effect following such adjustment.

               (f) No fractional shares or scrip representing fractional shares of Class A Common Stock shall be issued upon the conversion of any shares of Preferred Stock. If more than one share of Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Class A Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate Liquidation Preference of the shares of Preferred Stock so surrendered. If the conversion of any share or shares of Preferred Stock results in a fraction, an amount equal to such fraction multiplied by the last reported sale price of the Class A Common Stock on the Nasdaq Stock Market (or on such other national securities exchange or authorized quotation system on which the Class A Common Stock is then listed for trading or authorized for quotation or, if the Class A Common Stock is not then so listed or authorized for quotation, an amount determined in good faith by the Board of Directors to be the fair value of the Class A Common Stock) at the close of business on the trading day next preceding the day of conversion shall be paid to such holder in cash by the Corporation.

               (g) In the event of any capital reorganization or reclassification or other change of outstanding shares of Class A Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value), or in the event of any consolidation or merger of the Corporation with or into another Person (other than a consolidation or merger in which the Corporation is the resulting or surviving Person and which does not result in any reclassification or change of outstanding Class A Common Stock), or in the event of any sale or other disposition to another Person of all or substantially all of the assets of the Corporation (other than any assets not owned directly or indirectly by the Corporation and its subsidiaries) (computed on a consolidated basis) (any of the foregoing, a “Transaction”), each share of Preferred Stock then outstanding shall, without the consent of any holder of Preferred Stock, become convertible only into the kind and amount of shares of stock or other securities (of the Corporation or another issuer) or property or cash receivable upon such Transaction by a holder of the number of shares of Class A Common Stock into which such share of Preferred Stock could have been converted immediately prior to such Transaction after giving effect to any adjustment event. The provisions of this Section 9(g) and any equivalent thereof in any such certificate similarly shall apply to successive Transactions. The provisions of this Section 9(g) shall be the sole right of holders of Preferred Stock in connection with any Transaction and such holders shall have no separate vote thereon.

               (h) In the event of any distribution by the Corporation to its stockholders of all or substantially all of its assets (other than any assets not owned directly or indirectly by the Corporation and its subsidiaries) (computed on a consolidated basis), each holder of Preferred Stock will participate pro rata in such distribution based on the number of shares of Class A Common Stock into which such holders’ shares of Preferred Stock would have been convertible immediately prior to such distribution.

               (i) The Corporation shall at all times reserve and keep available for issuance upon the conversion of the Preferred Stock such number of its authorized but unissued shares of Class A Common Stock as will from time to time be sufficient to permit the conversion

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of all outstanding shares of Preferred Stock, and shall take all action required to increase the authorized number of shares of Class A Common Stock if at any time there shall be insufficient unissued shares of Class A Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Preferred Stock.

               (j) The issuance or delivery of certificates for Class A Common Stock upon the conversion of shares of Preferred Stock shall be made without charge to the converting holder of shares of Preferred Stock for such certificates or for any documentary stamp or similar issue or transfer tax in respect of the issuance or delivery of such certificates or the securities represented thereby, and such certificates shall be issued or delivered in the respective names of, or in such names as may be directed by, the holders of the shares of Preferred Stock converted; provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the holder of the shares of Preferred Stock converted, and the Corporation shall not be required to issue or deliver such certificate unless or until the Person or Persons requesting the issuance or delivery thereof shall have paid to the Corporation the amount of such tax or shall have established to the reasonable satisfaction of the Corporation that such tax has been paid.

     10. Other Provisions.

          10.1 With respect to any notice to a holder of shares of Preferred Stock required to be provided hereunder, neither failure to mail such notice, nor any defect therein or in the mailing thereof, to any particular holder shall affect the sufficiency of the notice or the validity of the proceedings referred to in such notice with respect to the other holders or affect the legality or validity of any distribution, rights, warrant, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up, or the vote upon any such action. Any notice which was mailed in the manner provided in this Exhibit A shall be conclusively presumed to have been duly given whether or not the holder receives the notice.

          10.2 Shares of Preferred Stock issued and reacquired will be retired and canceled promptly after reacquisition thereof and, upon compliance with the applicable requirements of Indiana law, have the status of authorized but unissued shares of preferred stock of the Corporation undesignated as to series and may with any and all other authorized but unissued shares of preferred stock of the Corporation be designated or redesignated and issued or reissued, as the case may be, as part of any series of preferred stock of the Corporation, except that any issuance or reissuance of shares of Preferred Stock must be in compliance with this Certificate of Designation.

          10.3 The shares of Preferred Stock shall be issuable only in whole shares.

          10.4 All notices periods referred to in this Exhibit A shall commence on the date of the mailing of the applicable notice.

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EX-10.18

Exhibit 10.18

EMMIS COMMUNICATIONS CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT

     THIS AGREEMENT is entered into as of the 11th day of August, 2003 (the “Effective Date”) by and between EMMIS COMMUNICATIONS CORPORATION, an Indiana corporation (the “Company”), and David Newcomer (“Executive”).

W I T N E S S E T H

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

     WHEREAS, the Company recognizes that, as is the case with many 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 its stockholders; and

     WHEREAS, the Compensation Committee of the “Board” (as defined in Section 1) has determined that it is in the best interests of the Company and its stockholders 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) of the Company; and

     WHEREAS, the Compensation Committee, at a meeting held on June 25, 2003, has authorized the Company to enter into this Agreement.

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

          (c) “Bonus Amount” means the greater of (i) the highest annual incentive bonus earned by Executive from the Company (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 Company generally pays bonuses to its Executives for the fiscal year in which

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Executive’s employment commenced, the Executive’s target bonus for the fiscal year of the Company which includes the Executive’s Date of Termination.

          (d) “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 clauses (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.

          (e) “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 the Company 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 25% or more of either the then outstanding 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 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 the Company immediately before such acquisition in substantially the same proportion as their ownership, immediately

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before such acquisition, of the outstanding 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) 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 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, or (B) the sale or other disposition of all or substantially all of the assets of the Company to any Person; (iv) the approval by the shareholders of the Company of a liquidation or dissolution of the Company; or (v) 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 of the Company shall be deemed not to have occurred (a) with respect to any Executive, if such Executive is, by written agreement executed prior to such Change in Control, a participant on such Executive’s own behalf in a transaction in which the persons (or their Affiliates) with whom such Executive has the written agreement Acquire the Company (as defined below) and, pursuant to the written agreement, the Executive has an equity interest in the resulting entity or a right to acquire such an equity interest, or (b) in the event the Company separates or bifurcates its radio and television divisions by means of merger, corporate reorganization, sale or disposition of assets, spin-off, tax-free reorganization, or otherwise (any such separation or bifurcation, a “Separation Event”), and, immediately thereafter, Mr. Smulyan is Chairman or Chief Executive Officer of the Company or any successor thereto, including without limitation, either division or any entity established as a result of a Separation Event ( a “Successor”), Mr. Smulyan retains the ability to vote at least fifty percent (50%) of all classes of stock of the Company or any Successor, or Mr. Smulyan retains the ability to elect a majority of the Board of Directors of the Company or any Successor.

          Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any Person acquires beneficial ownership of more than 25% of the then outstanding Stock as a result of the acquisition of the Stock by the Company which reduces the number of shares of Stock outstanding; provided, that if after such acquisition by the Company 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 of the Company shall then occur.

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          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 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.

               (f) “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.

               (g) “Date of Termination” means (1) the effective date on which Executive’s employment by the Company terminates as specified in a prior written notice by the Company or Executive, as the case may be, to the other, delivered pursuant to Section 10 or (2) if Executive’s employment by the Company terminates by reason of death, the date of death of Executive.

               (h) “Disability” means termination of Executive’s employment by the Company due to Executive’s absence from Executive’s duties with the Company on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Executive’s incapacity due to physical or mental illness.

               (i) “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.

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

               (i) any (A) change in the duties or responsibilities (including reporting responsibilities) of Executive that is inconsistent in any material and adverse respect with Executive’s position(s), duties, responsibilities or status with the Company immediately prior to such Change in Control (including any material and adverse diminution of such duties or responsibilities); provided, however, that 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 the Company no longer being a publicly traded entity and does not involve any other event set forth in this paragraph (j) or (B) material and adverse change in Executive’s titles or offices (including, if applicable, membership on the Board) with the Company as in effect immediately prior to such Change in Control;

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

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               (iii) a reduction by the Company in Executive’s rate of annual base salary or annual target bonus opportunity as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;

               (iv) any requirement of the Company that Executive (A) be based anywhere more than thirty-five (35) miles from the office where Executive is located 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 substantially greater than the travel obligations of Executive immediately prior to such Change in Control;

               (v) the failure of the Company to (A) continue in effect any material employee benefit plan, compensation plan, welfare benefit plan or fringe benefit plan in which Executive is participating immediately prior to such Change in Control or the taking of any action by the Company which would adversely affect Executive’s participation in or reduce Executive’s benefits under any such plan, unless Executive is permitted to participate in other plans providing Executive with substantially equivalent benefits in the aggregate (at substantially equivalent cost with respect to welfare benefit plans), or (B) provide Executive with paid vacation in accordance with the most favorable vacation policies of the Company and its Affiliates as in effect for Executive immediately prior to such Change in Control, including the crediting of all service for which Executive had been credited under such vacation policies prior to the Change in Control;

               (vi) any refusal by the Company to continue to permit Executive to engage in activities not directly related to the business of the Company in which Executive was permitted to engage prior to the Change in Control;

               (vii) any purported termination of Executive’s employment which is not effectuated pursuant to Section 10(b) (and which will not constitute a termination hereunder); or

               (viii) 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).

An isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by Executive shall not constitute Good Reason. 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 provide notice of termination of employment within ninety (90) days following Executive’s knowledge of an event constituting Good

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Reason or such event shall not constitute a termination for Good Reason under this Agreement.

          (k) “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.

          (l) “Retirement” means Executive’s 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.

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

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

          (o) “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(g).

     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

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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. Notwithstanding anything in this Section to the contrary, this Agreement shall terminate if Executive or the Company terminates Executive’s employment prior to a Change in Control except as provided in the second sentence of Section 1(o).

          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, then 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) a pro rata portion of Executive’s annual bonus for the fiscal year in which Executive’s Date of Termination occurs in an amount at least equal to (1) Executive’s target bonus for such fiscal year, multiplied by (2) 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 (1¹/2 ) 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 (1¹/2 ) 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 continue to provide, for a period of three (3) years following Executive’s Date of Termination, Executive (and Executive’s dependents, if applicable) with the same level of medical, dental, accident, disability 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. Notwithstanding the foregoing, in the event Executive becomes reemployed with another employer and becomes eligible to receive welfare benefits from such employer, the welfare benefits described herein 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. For two

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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), Executive shall be provided with outplacement services from a provider selected by the Company and at the Company’s expense. In addition, the Company may make such additional payments, and provide such additional benefits, to Executive as the Company and Executive may agree in writing, or to which the 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, then 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 the 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 Options. In the event of a Change in Control, all options to purchase Company stock held by Executive (“Options”) which are not fully vested and exercisable 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 Options and cause the stock acquired thereby to participate in the Change in Control transaction. If the Change in Control transaction is structured such that stock participating therein at one time is or may be treated differently than stock participating therein at a different time (e.g., a tender offer followed by a squeeze-out merger), the Board shall interpret this paragraph (d) to provide for the required vesting acceleration in a manner designed to allow Executive to exercise the Options 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 paragraph (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 Section 4(d), each stock option agreement reflecting the Options, and each stock option plan relating to each such stock option agreement, if any, shall be deemed amended.

          5. Certain Additional Payments by the Company.

               (a) If it is determined (as hereafter provided) that any payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or

9

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 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

10

possession of the Company 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;

11

               (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.

          6. Withholding Taxes. The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by

12

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 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.

          8. Scope of Agreement. Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its Subsidiaries, 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.

               (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 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 and shall entitle Executive to compensation and other benefits from the Company in the same amount and on the same terms as Executive would be entitled hereunder if Executive’s employment were terminated following a Change in Control by reason of a Qualifying Termination. For purposes of implementing the foregoing, the date on which any such Business Combination becomes effective shall be deemed the date Good Reason occurs, and shall be the Date of Termination if requested by Executive.

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               (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:

Emmis Communications Corporation

40 Monument Circle

Suite 700

Indianapolis, Indiana 46204

Attn.: General Counsel

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

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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. 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 Subsidiaries. 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.

15

          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.

          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 COMMUNICATIONS CORPORATION
By:	/s/ Jeffrey H. Smulyan
Title:
EXECUTIVE
:	/s/ David Newcomer

EX-12

Exhibit 12

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited, dollars in thousands)

	FEBRUARY 28 (29),
	2002			2003			2004		2005			2006
EARNINGS:
Pre-tax income (loss) from continuing operations before adjustment for minority interests in consolidated subsidiaries or income or loss from equity investees	$	(93,854	)	$	(40,984	)	$	7,084	$	(62,249	)	$	36,660
Add:
Fixed charges		139,802			114,631			74,351		51,094			81,989
Amortization of capitalized interest		74			74			74		74			74
Less:
Capitalized interest		—			—			—		—			—
Preferred stock dividends		8,984			8,984			8,984		8,984			8,984
Earnings	$	37,038		$	64,737		$	72,525	$	(20,065	)	$	109,739
FIXED CHARGES:
Interest expense (including amortization of debt expenses)	$	128,625		$	103,459		$	62,590	$	39,690		$	70,586
Capitalized interest		—			—			—		—			—
Portion of rents representative of the interest factor		2,193			2,188			2,777		2,420			2,419
Preferred stock dividends		8,984			8,984			8,984		8,984			8,984
Fixed Charges	$	139,802		$	114,631		$	74,351	$	51,094		$	81,989
Ratio of Earnings to Fixed Charges		N/A			N/A			N/A		N/A			1.3
Deficiency	$	102,764		$	49,894		$	1,826	$	71,159		$	—

EX-21

Exhibit 21

Emmis Communications Corporation
Listing of Subsidiaries

		NAME UNDER WHICH
LEGAL NAME	ORGANIZATION	ENTITY DOES BUSINESS
Emmis Communications Corporation	IN	Emmis Communications Corporation
Emmis Operating Company	IN	Emmis Operating Company
Emmis Radio, LLC	IN	WKQX-FM, WLUP-FM, KPWR-FM, KZLA-FM, WQCD-FM, WQHT-FM, WRKS-FM, KKFR-FM, KIHT-FM, WRDA-FM, KSHE-FM, KPNT-FM, KFTK-FM
Emmis Television Broadcasting, L.P.	IN	KGMB-TV, WVUE-TV, WKCF-TV
Emmis Publishing, L.P.	IN	Atlanta Magazine, Texas Monthly, Country Sampler, Cincinnati Magazine, Indianapolis Monthly, Los Angeles Magazine
Emmis Indiana Broadcasting, L.P.	IN	WLHK-FM, WIBC-AM, WNOU-FM, WWVR-FM, WTHI-FM, WYXB-FM, Network Indiana
Emmis International Broadcasting Corporation	CA	Emmis International Broadcasting Corporation
Slager Radio Co. PLtd. (59.5%)	Hungary	Slager Radio Co. PLtd.
Slager Sales Kft.	Hungary	Slager Sales Kft.
d’Expres, a.s.	Slovakia	d’Expres, a.s
Expres Media	Slovakia	Expres Media
Expres Net	Slovakia	Expres Net
Emmis Belgium Broadcasting NV	Belgium	Emmis Belgium Broadcasting NV
Emmis Bulgarian Broadcasting EOOD	Bulgaria	Emmis Bulgarian Broadcasting EOOD
Emmis Meadowlands Corporation	IN	Emmis Meadowlands Corporation
Emmis Publishing Corporation	IN	Emmis Publishing Corporation
Emmis Television License, LLC	IN	Emmis Television License, LLC
Emmis Radio License, LLC	IN	Emmis Radio License, LLC
Emmis License Corporation of New York	CA	Emmis License Corporation of New York
Emmis Radio License Corporation of New York	CA	Emmis Radio License Corporation of New York
Emmis Enterprises, Inc.	IN	Emmis Enterprises, Inc.
Emmis Ventures, Inc.	IN	Emmis Ventures, Inc.
Mediatex Communications Corporation	IN	Mediatex Communications Corporation
Los Angeles Magazine Holding Company, Inc.	IN	Los Angeles Magazine Holding Company, Inc.
Radio Austin Management, L.L.C.	TX	Radio Austin Management, L.L.C.
Emmis Austin Radio Broadcasting Company, L.P.	TX	KLBJ-AM, KLBJ-FM, KDHT-FM, KGSR-FM, KROX-FM, KBPA-FM
CIUDAD, LLC	IN	CIUDAD, LLC

Footnotes

*	Emmis Communications Corporation directly or indirectly owns 100% of all entities except as otherwise noted.
1	Emmis Radio, LLC operates all our radio stations except for the stations held by Emmis Indiana Broadcasting, L.P. and Emmis Austin Radio Broadcasting Company, L.P.
2	Emmis Television Broadcasting, L.P. operates all our television stations
3	Emmis Publishing, L.P. publishes Indianapolis Monthly, Atlanta Magazine, Cincinnati Magazine, Country Sampler, Texas Monthly and Los Angeles Magazine.
4	Emmis Indiana Broadcasting, L.P. operates all our Indiana radio stations WIBC-AM, WLHK-FM, WNOU-FM, WYXB-FM, WTHI-FM, WWVR-FM, Network Indiana,
5	Emmis Television License, LLC holds all our television FCC licenses
6	Emmis Radio License, LLC holds all our radio FCC licenses except for the WRKS-FM licenses which are held by Emmis Radio License Corporation of New York and the WQHT-FM licenses which are held by Emmis License Corporation of New York.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

• Combined shelf Registration Statement (Form S-3, No. 333-62172) of Emmis Communications Corporation and Emmis Operating,

• Registration Statement (Form S-8, No. 33-83890), pertaining to the Emmis Communications Corporation 1994 Equity Incentive Plan,

• Registration Statement (Form S-8, No. 333-14657), pertaining to the Emmis Communications Corporation 1995 Equity Incentive Plan and the Non-Employee Director Stock Option Plan ,

• Registration Statement (Form S-8, No. 333-42878), pertaining to the Emmis Communications Corporation 1997 Equity Incentive Plan, the 1999 Equity Incentive Plan and the Employee Stock Purchase Agreement,

• Registration Statement (Form S-8, No. 333-71904), pertaining to the Emmis Communications Corporation 2001 Equity Incentive Plan,

• Registration Statement (Form S-8, No. 333-92318), pertaining to the Emmis Communications Corporation 2002 Equity Compensation Plan,

• Registration Statement (Form S-8, No. 333-105724), pertaining to the Emmis Operating Company 401(k) Plan and Emmis Operating Company 401(k) Plan Two, and

• Registration Statement (Form S-8, No. 333-117033), pertaining to the Emmis Communications Corporation 2004 Equity Compensation Plan of Emmis Communications Corporation and Emmis Operating Company;

of our reports dated May 8, 2006, with respect to the consolidated financial statements listed in Item 8 of Emmis Communications Corporation and Subsidiaries, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting of Emmis Communications Corporation and Subsidiaries, included in this Annual Report (Form 10-K) for the year ended February 28, 2006.

/s/ ERNST & YOUNG LLP

Indianapolis, Indiana
May 8, 2006

EX-24

Exhibit 24

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, hereby constitutes and appoints Jeffrey H. Smulyan, David R. Newcomer and J. Scott Enright, or any of them, his attorneys-in-fact and agents, with full power of substitution and resubstitution for him in any and all capacities, to sign the annual report of Emmis Communications Corporation and Emmis Operating Company on Form 10-K under the Securities Exchange Act of 1934 for the fiscal year ended February 28, 2006, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that each of such attorneys-in-fact and agents or his substitute or substitutes may do or cause to be done by virtue hereto.

Dated: May 12, 2006	/s/ Susan B. Bayh
	Susan B. Bayh

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, hereby constitutes and appoints Jeffrey H. Smulyan, David R. Newcomer and J. Scott Enright, or any of them, his attorneys-in-fact and agents, with full power of substitution and resubstitution for him in any and all capacities, to sign the annual report of Emmis Communications Corporation and Emmis Operating Company on Form 10-K under the Securities Exchange Act of 1934 for the fiscal year ended February 28, 2006, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that each of such attorneys-in-fact and agents or his substitute or substitutes may do or cause to be done by virtue hereto.

Dated: May 9, 2006	/s/ Lawrence B. Sorrel
	Lawrence B. Sorrel

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, hereby constitutes and appoints Jeffrey H. Smulyan, David R. Newcomer and J. Scott Enright, or any of them, his attorneys-in-fact and agents, with full power of substitution and resubstitution for him in any and all capacities, to sign the annual report of Emmis Communications Corporation and Emmis Operating Company on Form 10-K under the Securities Exchange Act of 1934 for the fiscal year ended February 28, 2006, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that each of such attorneys-in-fact and agents or his substitute or substitutes may do or cause to be done by virtue hereto.

Dated: May 12, 2006	/s/ Richard A. Leventhal
	Richard A. Leventhal

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, hereby constitutes and appoints Jeffrey H. Smulyan, David R. Newcomer and J. Scott Enright, or any of them, his attorneys-in-fact and agents, with full power of substitution and resubstitution for him in any and all capacities, to sign the annual report of Emmis Communications Corporation and Emmis Operating Company on Form 10-K under the Securities Exchange Act of 1934 for the fiscal year ended February 28, 2006, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that each of such attorneys-in-fact and agents or his substitute or substitutes may do or cause to be done by virtue hereto.

Dated: May 12, 2006	/s/ Peter A. Lund
	Peter A. Lund

POWER OF ATTORNEY

     KNOW BY THESE PRESENTS, that the person whose signature appears below, hereby constitutes and appoints Jeffrey H. Smulyan, David R. Newcomer and J. Scott Enright, or any of them, his or her attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her in any and all capacities, to sign the annual report of Emmis Communications Corporation and Emmis Operating Company on Form 10-K under the Securities Exchange Act of 1934 for the fiscal year ended February 28, 2006, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that each of such attorneys-in-fact and agents or his or her substitute or substitutes may do or cause to be done by virtue hereto.

Dated: May 12, 2006	/s/ Greg A. Nathanson
	Greg A. Nathanson

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, hereby constitutes and appoints Jeffrey H. Smulyan, David R. Newcomer and J. Scott Enright, or any of them, his attorneys-in-fact and agents, with full power of substitution and resubstitution for him in any and all capacities, to sign the annual report of Emmis Communications Corporation and Emmis Operating Company on Form 10-K under the Securities Exchange Act of 1934 for the fiscal year ended February 28, 2006, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that each of such attorneys-in-fact and agents or his substitute or substitutes may do or cause to be done by virtue hereto.

Dated: May 12, 2006	/s/ Gary L. Kaseff
	Gary L. Kaseff

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, hereby constitutes and appoints Jeffrey H. Smulyan, David R. Newcomer and J. Scott Enright, or any of them, his attorneys-in-fact and agents, with full power of substitution and resubstitution for him in any and all capacities, to sign the annual report of Emmis Communications Corporation and Emmis Operating Company on Form 10-K under the Securities Exchange Act of 1934 for the fiscal year ended February 28, 2006, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that each of such attorneys-in-fact and agents or his substitute or substitutes may do or cause to be done by virtue hereto.

Dated: May 12, 2006	/s/ Frank V. Sica
	Frank V. Sica

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Jeffrey H. Smulyan, certify that:

1.	I have reviewed this annual report on Form 10-K of Emmis Communications Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2006

/s/ JEFFREY H. SMULYAN

Jeffrey H. Smulyan

Chairman of the Board, President and

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, David R. Newcomer, certify that:

1.	I have reviewed this annual report on Form 10-K of Emmis Communications Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2006

/s/ DAVID R. NEWCOMER

David R. Newcomer

Interim Chief Financial Officer

EX-32.1

Exhibit 32.1

SECTION 1350 CERTIFICATION

The undersigned hereby certifies, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Emmis Communications Corporation (the “Company”), that, to his knowledge:

(1) the Annual Report of the Company on Form 10-K for the period ended February 28, 2006, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 12, 2006

/s/ JEFFREY H. SMULYAN

Jeffrey H. Smulyan

Chairman of the Board, President and

Chief Executive Officer

EX-32.2

Exhibit 32.2

SECTION 1350 CERTIFICATION

The undersigned hereby certifies, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Emmis Communications Corporation (the “Company”), that, to his knowledge:

(1) the Annual Report of the Company on Form 10-K for the period ended February 28, 2006, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 12, 2006

/s/ DAVID R. NEWCOMER

David R. Newcomer

Interim Chief Financial Officer