SPANISH BROADCASTING SYSTEM INC (Form: 10-Q, Received: 08/08/2006 16:37:10)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended June 30, 2006
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission file number 33-82114

Spanish Broadcasting System, Inc.

(Exact name of registrant as specified in its charter)


Delaware	13-3827791
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.	)

2601 South Bayshore Drive, PH II

Coconut Grove, Florida 33133

(Address of principal executive offices) (Zip Code)

(305) 441-6901

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year,

if changed since last report)

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

Indicate by a 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.

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of August 7, 2006, 40,277,805 shares of Class A common stock, par value $0.0001 per share, 24,503,500 shares of Class B common stock, par value $0.0001 per share and 380,000 shares of Series C convertible preferred stock, $0.01 par value per share, which are convertible into 7,600,000 shares of Class A common stock, were outstanding.

SPANISH BROADCASTING SYSTEM, INC.

INDEX


		Page

PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements — Unaudited		4
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005		4
	Unaudited Condensed Consolidated Statements of Operations for the Three- and Six-Months Ended June 30, 2006 and 2005		5
	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income for the Six-Months Ended June 30, 2006		6
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six-Months Ended June 30, 2006 and 2005		7
	Notes to Unaudited Condensed Consolidated Financial Statements		8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		24
ITEM 4.	Controls and Procedures		25

PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings		25
ITEM 1A.	Risk Factors		25
ITEM 4.	Submission of Matters to a Vote of Security Holders		25
ITEM 5.	Other Information		26
ITEM 6.	Exhibits		26
2006 Omnibus Equity Compensation Plan
EX-31.(I).1 Section 302 Certification of CEO
EX-31.(I).2 Section 302 Certification of CFO
Ex-32.1 Section 906 Certification of CEO
Ex-32.2 Section 906 Certification of CFO

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect our current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “plan,” “project,” “foresee,” “likely,” “will” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals are, or may be, forward- looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be different from any future results, performance and anticipated achievements expressed or implied by these statements. We do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in this report, in Part II, “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2005, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

PART I — FINANCIAL INFORMATION


Item 1.	*Financial Statements — Unaudited*

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets


	June 30,			December 31,
	2006			2005
	(In thousands, except per share data)

ASSETS
Current assets:
Cash and cash equivalents	$	59,808		$	125,156
Receivables, net of allowance for doubtful accounts of $3,994 in 2006 and $3,832 in 2005		36,015			34,269
Prepaid expenses and other current assets		4,332			3,635
Assets held for sale		—			65,109

Total current assets		100,155			228,169
Property and equipment, net of accumulated depreciation of $31,793 in 2006 and $30,335 in 2005		25,890			22,973
FCC licenses		749,861			710,410
Goodwill		32,806			32,806
Other intangible assets, net of accumulated amortization of $88 in 2006 and $70 in 2005		1,346			2,580
Deferred financing costs, net of accumulated amortization of $1,189 in 2006 and $749 in 2005		6,473			8,744
Other assets		726			596
Derivative instrument		14,646			6,939

Total assets	$	931,903		$	1,013,217


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	16,226		$	21,487
Accrued interest		53			1,426
Deposits on sale of stations		—			55,000
Unearned revenue		2,716			263
Deferred commitment fee		413			450
Current portion of the senior credit facility term loan due 2012		3,250			3,250
Current portion of the senior credit facility term loan due 2013		—			100,000
Current portion of other long-term debt		77			75
Series B cumulative exchangeable redeemable preferred stock dividends payable		2,014			2,014

Total current liabilities		24,749			183,965
Senior credit facility term loan due 2012, less current portion		317,688			319,313
Non-interest bearing note payable due 2009, net of unamortized discount of $3,326 in 2006		15,174			—
Other long-term debt, less current portion		453			492
Deferred income taxes		145,943			144,163
Unearned revenue, less current portion		2,968			—
Other long-term liabilities		244			525

Total liabilities		507,219			648,458

Cumulative exchangeable redeemable preferred stock:
10 3 / 4 % Series B cumulative exchangeable redeemable preferred stock, $0.01 par value, liquidation value $1,000 per share. Authorized 280,000 shares; 89,932 shares issued and outstanding at June 30, 2006 and December 31, 2005		89,932			89,932

Stockholders’ equity:
Series C preferred stock, $0.002 par value and liquidation value. Authorized 600,000 shares; 380,000 shares issued and outstanding at June 30, 2006 and December 31, 2005		1			1
Class A common stock, $0.0001 par value. Authorized 100,000,000 shares; 40,277,805 shares issued and outstanding at June 30, 2006 and December 31, 2005		4			4
Class B common stock, $0.0001 par value. Authorized 50,000,000 shares; 24,503,500 shares issued and outstanding at June 30, 2006 and December 31, 2005		2			2
Additional paid-in capital		521,501			520,421
Accumulated other comprehensive income		14,646			6,939
Accumulated deficit		(201,402	)		(252,540	)

Total stockholders’ equity		334,752			274,827

Total liabilities, cumulative exchangeable redeemable preferred stock and stockholders’ equity	$	931,903		$	1,013,217

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations


	Three-Months Ended						Six-Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
	(In thousands, except per share data)						(In thousands, except per share data)

Net revenue	$	48,841			44,575		$	86,616			79,914

Operating expenses:
Engineering and programming		12,986			8,452			24,805			16,317
Selling, general and administrative		19,727			16,858			36,426			32,176
Corporate expenses		3,661			3,733			7,189			7,434
Depreciation and amortization		905			824			1,832			1,654
Loss (gain) on the sale of assets, net of disposal of costs		8			—			(50,793	)		—

Total operating expenses		37,287			29,867			19,459			57,581

Operating income		11,554			14,708			67,157			22,333

Other (expense) income:
Interest expense, net		(4,936	)		(10,646	)		(10,355	)		(20,816	)
Loss on early extinguishment of debt		—			(3,154	)		(2,997	)		(3,154	)
Other, net		3			1,793			(23	)		1,800

Income before income taxes and discontinued operations		6,621			2,701			53,782			163
Income tax expense (benefit)		4,190			2,579			(2,190	)		—

Income before discontinued operations		2,431			122			55,972			163
Loss on discontinued operations, net of tax		—			(1	)		—			(3	)

Net income	$	2,431			121		$	55,972			160
Dividends on Series B preferred stock		(2,417	)		(2,343	)		(4,834	)		(4,625	)

Net income (loss) applicable to common stockholders	$	14			(2,222	)	$	51,138			(4,465	)

Basic and diluted income (loss) per common share:
Net income (loss) per common share before discontinued operations	$	—			(0.03	)	$	0.71			(0.06	)
Net loss per common share from discontinued operations	$	—			—		$	—			—

Net income (loss) per common share	$	—			(0.03	)	$	0.71			(0.06	)

Weighted average common shares outstanding:
Basic		72,381			72,381			72,381			72,381

Diluted		72,390			72,381			72,392			72,381

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in

Stockholders’ Equity and Comprehensive Income

for the Six-Months Ended June 30, 2006


	Class C				Class A				Class B						Accumulated
	Preferred Stock				Common Stock				Common Stock				Additional		Other					Total
	Number		Par		Number		Par		Number		Par		Paid-In		Comprehensive		Accumulated			Stockholders’
	of Shares		Value		of Shares		Value		of Shares		Value		Capital		Income		Deficit			Equity
	(In thousands, except per share data)

Balance at December 31, 2005		380,000	$	1		40,277,805	$	4		24,503,500	$	2	$	520,421	$	6,939	$	(252,540	)	$	274,827
Stock-based compensation		—		—		—		—		—		—		1,080		—		—			1,080
Series B preferred stock dividends		—		—		—		—		—		—		—		—		(4,834	)		(4,834	)
Comprehensive income:
Net income		—		—		—		—		—		—		—		—		55,972			55,972
Unrealized gain on derivative instrument		—		—		—		—		—		—		—		7,707		—			7,707

Comprehensive income																					63,679

Balance at June 30, 2006		380,000	$	1		40,277,805	$	4		24,503,500	$	2	$	521,501	$	14,646	$	(201,402	)	$	334,752

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows


	Six-Months Ended
	June 30,
	2006			2005
	(In thousands)

Cash flows from operating activities:
Net income	$	55,972			160
Adjustments to reconcile net income to net cash provided by
operating activities:
Income from discontinued operations, net of tax		—			3
Loss on early extinguishment of debt		2,997			3,154
Gain on the sale of assets, net of disposal costs		(50,793	)		—
Depreciation and amortization		1,832			1,654
Net barter income		(3	)		(126	)
Provision for (reduction of) doubtful trade accounts receivable		657			(167	)
Loss (gain) on disposal of fixed assets		(11	)		(2	)
Amortization of debt discount		—			672
Accretion of the time-value of money component related to unearned revenue		97			—
Amortization of non-interest bearing note payable		396			—
Stock-based compensation		1,080			—
Amortization of deferred financing costs		626			1,031
Decrease in deferred income taxes		(2,069	)		—
Increase in unearned revenue		15			—
Amortization of deferred commitment fee		(37	)		(37	)
Changes in operating assets and liabilities:
(Increase) decrease in trade receivables		(2,429	)		1,185
(Increase) decrease in prepaids and other current assets		(697	)		93
Increase in other assets		(130	)		(260	)
Decrease in accounts payable and accrued expenses		(5,261	)		(7,693	)
(Decrease) increase in accrued interest		(1,373	)		422

Net cash provided by continuing operations		869			89
Net cash used in discontinued operations		—			(245	)

Net cash provided by (used in) operating activities		869			(156	)

Cash flows from investing activities:
Proceeds from sale of radio stations, net of closing costs		64,751			20,000
Acquisition of television stations		(18,534	)		—
Additions to property and equipment		(4,305	)		(1,987	)

Net cash provided by investing activities		41,912			18,013

Cash flows from financing activities:
Payment of senior credit facility term loan due 2009		—			(123,750	)
Payments of senior credit facility term loan due 2012		(1,625	)		(812	)
Payment of senior credit facility term loan due 2013 (including prepayment premium of $1.0 million)		(101,000	)		—
Payments of Series B preferred stock dividends		(4,834	)		—
Payments of other long-term debt		(318	)		(3,275	)
Payments of deferred financing costs		(352	)		(8,699	)
Restricted cash related to the redemption of the 9 5 / 8 % senior subordinated notes, due 2009		—			(357,483	)
Proceeds from senior credit facility term loan due 2012		—			325,000
Proceeds from senior credit facility term loan due 2013		—			100,000

Net cash used in financing activities		(108,129	)		(69,019	)

Net decrease in cash and cash equivalents		(65,348	)		(51,162	)
Cash and cash equivalents at beginning of period		125,156			132,032

Cash and cash equivalents at end of period		59,808			80,870

Supplemental cash flows information:
Interest paid during the period		12,403			20,673

Income taxes paid during the period, net		389			1,582

Non-cash investing and financing activities:
Unrealized gain on derivative instrument	$	7,707			—

Unearned revenue (advertising given as consideration for acquisition of television stations)	$	5,338			—

Non-interest bearing note payable issued for the acquisition of television stations	$	14,778			—

Accrual of preferred stock as payment of preferred stock dividend	$	—			1,961

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.	Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of Spanish Broadcasting System, Inc. and its subsidiaries (the “Company”, “we”, “us”, “our” or “SBS”). All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements as of June 30, 2006 and December 31, 2005 and for the three- and six-month periods ended June 30, 2006 and 2005 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements as of, and for, the fiscal year ended December 31, 2005, included in our fiscal year end 2005 Annual Report on Form 10-K.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are all of a normal and recurring nature, necessary for a fair presentation of the results of the interim periods. The results of operations for the three- and six-month periods ended June 30, 2006 are not necessarily indicative of the results for a full year.


2.	Assets Held for Sale

In connection with the closing of the LA Asset Sale, Styles Media Group paid a cash purchase price of $120.0 million, consisting of $65.0 million paid at closing and $55.0 million previously paid to us as non-refundable deposits. As a result of the LA Asset Sale, we recognized a pre-tax gain on the sale of assets, net of disposal costs, of approximately $50.8 million during the six-months ended June 30, 2006.

Previously, on August 17, 2004, Spanish Broadcasting System SouthWest, Inc., also entered into a time brokerage agreement with Styles Media Group pursuant to which Styles Media Group was permitted to begin broadcasting its programming on radio stations KZAB-FM and KZBA-FM beginning on September 20, 2004. On January 31, 2006, the time brokerage agreement was terminated upon the completion of the sale.

We determined that, since we were not eliminating all significant revenues and expenses generated in this market, the LA Asset Sale did not meet the criteria to classify the stations’ operations as discontinued operations. KZAB-FM and KZBA-FM generated net revenues of $0.6 million and generated station operating income of $0.4 million for the three-month period ended June 30, 2005. KZAB-FM and KZBA-FM generated net revenues of $0.2 million and $1.1 million and generated station operating income of $0.1 million and $0.8 million for the six-month periods ended June 30, 2006 and 2005, respectively. These stations’ net revenue and station operating income were mainly generated by the monthly fees received related to the time brokerage agreement.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


3.	Stockholders’ Equity


*(a)*	*Series C Preferred Stock*

On December 23, 2004, in connection with the closing of the merger agreement, dated October 5, 2004, with Infinity Media Corporation (“Infinity”), Infinity Broadcasting Corporation of San Francisco (“Infinity SF”) and SBS Bay Area, LLC, a wholly-owned subsidiary of SBS (“SBS Bay Area”), we issued to Infinity (i) an aggregate of 380,000 shares of Series C convertible preferred stock, $0.002 par value per share (the “Series C preferred stock”), each of which is convertible at the option of the holder into twenty fully paid and non-assessable shares of our Class A common stock; and (ii) a warrant to purchase an additional 190,000 shares of Series C preferred stock, exercisable at any time from December 23, 2004 until December 23, 2008, at an exercise price of $300.00 per share (the “Warrant”).

Under the terms of the certificate of designation governing the Series C preferred stock, the holder of Series C preferred stock has the right to convert each share of Series C preferred stock into twenty fully paid and non-assessable shares of our Class A common stock. The shares of Series C preferred stock issued at the closing of the merger are convertible into 7,600,000 shares of our Class A common stock, subject to adjustment, and the Series C preferred stock issuable upon exercise of the Warrant is convertible into an additional 3,800,000 shares of our Class A common stock, subject to adjustment. To date, none of these warrants have been exercised.

In connection with the closing of the merger transaction, we also entered into a registration rights agreement with Infinity, pursuant to which, following a period of one year (or earlier if we take certain actions), Infinity may instruct us to file up to three registration statements, on a best efforts basis, with the Securities and Exchange Commission (SEC) providing for the registration for resale of the Class A common stock issuable upon conversion of the Series C preferred stock.

We are required to pay holders of Series C preferred stock dividends on parity with our Class A common stock and Class B common stock, and each other class or series of our capital stock, if created, after December 23, 2004.


*(b)*	*Class A and B Common Stock*

The rights of the holders of shares of Class A common stock and Class B common stock are identical, except for voting rights and conversion provisions. The Class A common stock is entitled to one vote per share and the Class B common stock is entitled to ten votes per share. Holders of each class of common stock are entitled to receive dividends and, upon liquidation or dissolution, are entitled to receive all assets available for distribution to stockholders. The holders of each class have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares. Each class of common stock is subordinate to our 10 3 / 4 % Series B cumulative exchangeable redeemable preferred stock, par value $0.01 per share and liquidation preference of $1,000 per share (the “Series B preferred stock”) and on parity with the Series C preferred stock with respect to dividend rights and rights upon liquidation, winding up and dissolution of SBS.


*(c)*	*Warrants*

In connection with the purchase of radio station KXOL-FM, serving our Los Angeles market, and the merger agreement with Infinity, as discussed in Note 3(a), we have warrants outstanding to ultimately purchase

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

an aggregate of 4,100,000 shares of our Class A common stock. The following table summarizes information about these warrants which are outstanding as of June 30, 2006:

Number of Class A

Common Shares

Per Share

Warrant Date of Issue

Underlying Warrants

Exercise Price

Warrant Expiration Date

July 31, 2003(1)

100,000

8.17

July 31, 2006

August 31, 2003

100,000

7.74

August 31, 2006

September 30, 2003

100,000

8.49

September 30, 2006

December 23, 2004

3,800,000

(see Note 3

(a))

December 23, 2008

4,100,000


(1)		Subsequent to June 30, 2006, warrants for 100,000 shares of Class A common stock expired unexercised.


*(d)*	*Stock Option Plans*

Background

In September 1999, we adopted an employee incentive stock option plan (the “1999 ISO Plan”) and a non-employee director stock option plan (the “1999 NQ Plan”). Options granted under the 1999 ISO Plan will vest according to terms to be determined by the compensation committee of our board of directors, and will have a contractual life of up to 10 years from the date of grant. Options granted under the 1999 NQ Plan will vest 20% upon grant and 20% each year for the first four years from grant. All options granted under the 1999 ISO Plan and the 1999 NQ Plan vest immediately upon a change in control of SBS, as defined therein. A total of 3,000,000 shares and 300,000 shares of Class A common stock have been reserved for issuance under the 1999 ISO Plan and the 1999 NQ Plan, respectively. Additionally, on November 2, 1999, we granted a stock option to purchase 250,000 shares of Class A common stock to a former director. These options vested immediately, and expire 10 years from the date of grant.

Impact of the Adoption of SFAS No. 123(R) “Share-Based Payment”

We adopted SFAS No. 123(R) using the modified prospective transition method beginning January 1, 2006. Accordingly, during the six-month period ended June 30, 2006, we recorded stock-based compensation expense for awards granted prior to, but not yet vested, as of January 1, 2006, as if the fair value method required for pro forma disclosure under SFAS No. 123 “Accounting for Stock-Based Compensation,” were in effect for expense recognition purposes, adjusted for estimated forfeitures. For stock-based awards granted after January 1, 2006, we have recognized compensation expense based on the estimated grant date fair value method using the Black-Scholes option pricing model. For these awards, we have recognized compensation expense using a straight-line amortization method (prorated). As SFAS No. 123(R) requires that stock-based compensation expense be based on awards that are ultimately expected to vest, stock-based compensation for the three- and six-month periods ended June 30, 2006 have been reduced for estimated forfeitures. When estimating forfeitures, we consider voluntary termination behaviors as well as trends of actual option

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

forfeitures. The impact on our results of operations of recording stock-based compensation for the three- and six-month periods ended June 30, 2006 was as follows (in thousands):


	Three-Months		Six-Months
	Ended		Ended
Stock-Based Compensation Expense:	June 30, 2006		June 30, 2006

Engineering and programming expenses	$	176	$	356
Selling, general and administrative expenses		87		174
Corporate expenses		250		550

Total	$	513	$	1,080

As of June 30, 2006, there was $2.9 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under all of our plans. The cost is expected to be recognized over a weighted-average period of approximately two years.

SFAS No. 123(R) requires cash flows resulting from excess tax benefits to be classified as a part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation costs for such options. We did not receive any cash payments from option exercises for the three-and six-month periods ended June 30, 2006. In addition, we did not recognize a tax benefit on our stock-based compensation expense due to our full valuation allowance on our deferred tax assets.

Valuation Assumptions

We calculated the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The per share weighted-average fair value of stock options granted to employees during the three- and six-month periods ended June 30, 2005 was $7.50 and $6.45, respectively. There have been no stock options granted for the three- and six-month periods ended June 30, 2006. The following assumptions were used for each respective period:


	Three-Months Ended						Six-Months Ended
	June 30,						June 30,
	2006			2005			2006			2005

Expected life		7 years			5 years			7 years			5 years
Dividends		None			None			None			None
Risk-free interest rate		5.11	%		3.72	%		4.97	%		4.11	%
Expected volatility		66	%		71	%		66	%		72	%

Our computation of expected volatility for the three- and six-month periods ended June 30, 2006 was based on a combination of historical and market-based implied volatility from traded options on our stock. Prior to 2006, our computation of expected volatility was based on historical volatility. Our computation of expected life in 2006, was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The range provided above results from the behavior patterns of separate groups of employees that have similar historical experience. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock-Based Payment Award Activity

A summary of the status of our stock options, as of December 31, 2005 and June 30, 2006, and changes during the six-months ended June 30, 2006, is presented below (in thousands, except per share data):


					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Shares		Price		Term		Value

Outstanding at December 31, 2005		2,939	$	11.54
Granted		—		—
Exercised		—		—
Forfeited		4		9.10

Outstanding at June 30, 2006		2,935	$	11.54		6.2	$	32

Exercisable at June 30, 2006		2,342	$	12.18		5.7	$	30

The following table summarizes information about stock options outstanding and exercisable at June 30, 2006 (in thousands, except per share data):


											Weighted
					Weighted						Average
					Average		Weighted				Exercise
					Remaining		Average		Number of		Price of
	Vested		Unvested		Contractual		Exercise		Exercisable		Exercisable
Range of Exercise Prices	Options		Options		Life (Years)		Price		Options		Options

$ 0 - 4.99		100		—		4.4	$	4.81		100	$	4.81
5 - 9.99		1,370		471		7.2		8.70		1,370		8.74
10 - 14.99		146		122		7.9		10.95		146		11.04
15 - 19.99		16		—		5.9		15.48		16		15.48
20 - 24.99		710		—		3.3		20.00		710		20.00

		2,342		593		6.2	$	11.54		2,342	$	12.18

Pro forma Information for Periods Prior to the Adoption of SFAS 123(R)

Prior to the adoption of SFAS No. 123(R), we provided the disclosures required under SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosures.” Employee stock-based compensation expense recognized under SFAS No. 123(R) was not reflected in our results of operations for the three- and six-month periods ended June 30, 2005 for employee stock option awards as all options were granted with an exercise price equal to the market value of the underlying common stock on the date of grant.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The pro forma information for the three- and six-month periods ended June 30, 2005 was as follows (in thousands, except per share amounts):


	Three-Months			Six-Months
	Ended			Ended
	June 30, 2005			June 30, 2005

Net loss applicable to common stockholders:
As reported	$	(2,222	)	$	(4,465	)
Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of tax		(587	)		(1,329	)

Pro forma net loss	$	(2,809	)	$	(5,794	)

Net loss per common share:
As reported: Basic and Diluted	$	(0.03	)	$	(0.06	)

Pro forma: Basic and Diluted	$	(0.04	)	$	(0.08	)


4.	Operating Segments

Due to the recent commencement of our new television operation “MEGA TV”, we are now reporting two operating segments, radio and television.

Radio broadcasting. We own and operate 20 radio stations located in some of the nation’s top Hispanic markets: Los Angeles, New York, Miami, Chicago, San Francisco and Puerto Rico.

Television broadcasting. We own and operate two television stations, which operate as one television operation, branded “MEGA TV”, serving the South Florida market.

Separate financial data for each of our operating segments is provided below. We evaluate the performance of our operating segments based on the following (in thousands):


	Three-Months Ended										Six-Months Ended
	June 30,				Change						June 30,				Change
	2006		2005		$			%			2006		2005		$		%
	(In thousands)										(In thousands)

Net revenue:
Radio	$	47,443		44,575		2,868			6	%	$	84,787		79,914		4,873		6	%
Television		1,398		—		1,398			100	%		1,829		—		1,829		100	%

Consolidated	$	48,841		44,575		4,266			10	%	$	86,616		79,914		6,702		8	%

Engineering and programming expense:
Radio	$	8,320		8,452		(132	)		(2	)%	$	16,756		16,317		439		3	%
Television		4,666		—		4,666			100	%		8,049		—		8,049		100	%

Consolidated	$	12,986		8,452		4,534			54	%	$	24,805		16,317		8,488		52	%

Selling, general and administrative:
Radio	$	17,790		16,858		932			6	%	$	32,342		32,176		166		1	%
Television		1,937		—		1,937			100	%		4,084		—		4,084		100	%

Consolidated	$	19,727		16,858		2,869			17	%	$	36,426		32,176		4,250		13	%

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Three-Months Ended
Six-Months Ended

June 30, Change June 30, Change

2006 2005 $ % 2006 2005 $ %

(In thousands) (In thousands)

Operating income (loss) before depreciation and amortization and gain on sales of assets, net:

Radio
$ 21,333 19,265 2,068 11 % $ 35,689 31,421 4,268 14 %

Television
(5,205 ) — (5,205 ) 100 % (10,304 ) — (10,304 ) 100 %

Corporate
(3,661 ) (3,733 ) 72 (2 )% (7,189 ) (7,434 ) 245 (3 )%

Consolidated
$ 12,467 15,532 (3,065 ) (20 )% $ 18,196 23,987 (5,791 ) (24 )%

Depreciation and amortization:

Radio
$ 605 565 40 7 % $ 1,223 1,137 86 8 %

Television
73 — 73 100 % 130 — 130 100 %

Corporate
227 259 (32 ) (12 )% 479 517 (38 ) (7 )%

Consolidated
$ 905 824 81 10 % $ 1,832 1,654 178 11 %

Operating income (loss):

Radio
$ 20,720 18,700 2,020 11 % $ 85,259 30,284 54,975 182 %

Television
(5,278 ) — (5,278 ) 100 % (10,434 ) — (10,434 ) 100 %

Corporate
(3,888 ) (3,992 ) 104 (3 )% (7,668 ) (7,951 ) 283 (4 )%

Consolidated
$ 11,554 14,708 (3,154 ) (21 )% $ 67,157 22,333 44,824 201 %

Capital expenditures:

Radio
$ 994 826 168 20 % $ 1,523 1,515 8 1 %

Television
923 — 923 100 % 2,441 — 2,441 100 %

Corporate
220 267 (47 ) (18 )% 341 472 (131 ) (28 )%

Consolidated
$ 2,137 1,093 1,044 96 % $ 4,305 1,987 2,318 117 %


	As of June 30,
	2006		2005

Total Assets:
Radio	$	885,276		1,320,169
Television		46,627		—

Consolidated	$	931,903		1,320,169


5.	Litigation

From time to time we are involved in litigation incidental to the conduct of our business, such as contractual matters and employee-related matters. In the opinion of management, such litigation is not likely to have a material adverse effect on our business, operating results or financial position.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amigo Broadcasting Litigation

On December 5, 2003, Amigo Broadcasting, L.P. (“Amigo”) filed an original petition and application for temporary injunction in the District Court of Travis County, Texas (the “Court”), against us, Raul Bernal (“Bernal”) and Joaquin Garza (“Garza”), two of our former employees. Amigo filed a first and second amended petition and application for temporary injunction on June 25, 2004 and February 18, 2005, respectively. The second amended petition alleged that we (1) misappropriated Amigo’s proprietary interests by broadcasting the characters and concepts portrayed by the Bernal and Garza radio show (the “Property”), (2) wrongfully converted the Property to our own use and benefit, (3) induced Bernal and Garza to breach their employment agreements with Amigo, (4) used and continued to use Amigo’s confidential information and property with the intention of diverting profits from Amigo and of inducing Amigo’s potential customers to do business with us and our syndicators, (5) invaded Amigo’s privacy by misappropriating the names and likenesses of Bernal and Garza, and (6) committed violations of the Lanham Act by diluting and infringing on Amigo’s trademarks. Based on these claims, Amigo seeks damages in excess of $3.0 million.

On December 5, 2003, the Court issued a temporary injunction against all of the defendants and scheduled a hearing before the Court on December 17, 2003. The temporary injunction dissolved by its terms on December 1, 2004. On December 17, 2003, the parties entered into a settlement agreement, whereby the Court entered an Order on Consent of the settling parties, permitting Bernal and Garza’s radio show to be broadcast on our radio stations. In addition, we agreed that we would not broadcast the Bernal and Garza radio show in certain prohibited markets and that we would not distribute certain promotional materials that were developed by Amigo. On January 5, 2004, we answered the remaining claims asserted by Amigo for damages. On March 18, 2005, the case was removed to the United States District Court for the Western District of Texas (the “District Court”) and a trial date was scheduled for May 2006. On January 17, 2006, we filed a motion for summary judgment with the District Court. On March 2, 2006, the parties conducted a mediation but were unable to reach a settlement. The case was thereafter tried before a jury the week of May 1, 2006. At the close of plaintiff’s evidence, defendants presented a motion for judgment as a matter of law and the motion was granted on all counts. The District Court entered judgment for the defendants, Garza, Bernal and us. On June 2, 2006, Plaintiff filed a notice of appeal to the Fifth Circuit Court of Appeals. The time for filing of their brief has not yet run so we are unable to identify the specific basis for the appeal. Based on the existing circumstances, we believe that it is unlikely that the appeal will result in a material adverse outcome to us.


6.	Repayment of Second Lien Senior Secured Credit Facilities

On February 17, 2006, we repaid and terminated our second lien credit facility, dated as of June 10, 2005, among us, Merrill Lynch Pierce Fenner & Smith, Incorporated, Wachovia Bank, National Association, Lehman Commercial Paper Inc., and certain other lenders (the “Second Lien Credit Facility”). We used approximately $101.0 million of the net cash proceeds from the LA Asset Sale to pay the full amount owed under the Second Lien Credit Facility. Accordingly, we have no further obligations remaining under the Second Lien Credit Facility. As a result of the prepayment of the Second Lien Credit Facility, we recognized a loss on early extinguishment of debt related to the prepayment premium and the write-off of unamortized deferred financing costs of approximately $3.0 million during the six-months ended June 30, 2006.


7.	Television Station Acquisition

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

formerly known as WDLP-DT) in Key West, Florida and WSBS-CA (Channel 50, formerly known as WDLP- CA) in Miami, Florida, pursuant to that certain asset purchase agreement, dated as of July 12, 2005, as amended on September 19, 2005, October 19, 2005 and January 6, 2006, with WDLP Broadcasting Company, LLC, WDLP Licensed Subsidiary, LLC, Robin Broadcasting Company, LLC, and Robin Licensed Subsidiary, LLC (collectively, the “Sellers”). WSBS-TV-DT and WSBS-CA are operating as one television operation, branded as “MEGA TV”, serving the South Florida market. MEGA TV debuted on the air on March 1, 2006.

In connection with the closing, Mega Media paid an aggregate purchase price equal to $37.6 million, consisting of: (i) cash in the amount of $17.0 million; (ii) a thirty-four month, non-interest-bearing secured promissory note in the principal amount of $18.5 million (present valued at approximately $14.8 million at the closing), which we have guaranteed and is secured by the assets acquired in the transaction; (iii) deposits of $0.5 million and $1.0 million made on July 13, 2005 and January 6, 2006, respectively; and (iv) two extension payments of $0.3 million made on September 1, 2005 and January 6, 2006, respectively, in consideration for the extensions of the closing date.

In addition, as part of the television station acquisition, we entered into an advertising agreement with the Sellers that provides them with up to $2.0 million per year, for the three years following closing, of commercial advertising time on any of our broadcasting stations. Accordingly, we recognized this liability to provide commercial advertising as part of consideration given for the acquisition and recorded a liability (unearned revenue) of approximately $5.3 million at the closing, which represented the present value of the commercial advertising due.


8.	New Accounting Pronouncements

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (FIN 48) , which clarifies the accounting for uncertainties in tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the impact of adopting FIN 48 on our consolidated financial statements.


9.	Income Taxes

Our income tax expense differs from the statutory federal tax rate of 35% primarily as a result of the application of SFAS 142, “Goodwill and Other Intangible Assets”. Under SFAS No. 142, the reversal of our deferred tax liabilities related to our intangible assets could no longer be assured over our net operating loss carry forward period. Therefore, our effective book tax rate is impacted by establishing a valuation allowance on substantially all of our deferred tax assets.


10.	Comprehensive Income

Our total comprehensive income, comprised of net income and unrealized gain on derivative instrument, for the three- and six-months ended June 30, 2006 was as follows (in thousands):


	Three-Months				Six-Months
	Ended June 30,				Ended June 30,
	2006		2005		2006		2005

Net income:	$	2,431		121		55,972		160
Other comprehensive income:
Unrealized gain on derivative instrument		3,174		—		7,707		—

Total comprehensive income	$	5,605		121		63,679		160


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

Overview

We are the largest publicly traded Hispanic-controlled media and entertainment company in the United States. We own and operate 20 radio stations in markets that reach approximately 49% of the U.S. Hispanic population, and two television stations, which are expected to reach approximately 1.5 million households in the South Florida market. Our radio stations are located in six of the top-ten Hispanic markets of Los Angeles, New York, Puerto Rico, Chicago, Miami and San Francisco. Los Angeles and New York have the largest and second largest Hispanic populations, and are also the largest and second largest radio markets in the United States in terms of advertising revenue, respectively. Our two television stations operate as one television operation, branded “MEGA TV”. We also occasionally produce live concerts and events throughout the United States and Puerto Rico. In addition, we operate LaMusica.com , a bilingual Spanish-English website providing content related to Latin music, entertainment, news and culture.

On March 1, 2006, we acquired television stations WSBS-TV (Channel 22, formerly known as WDLP-TV) and its derivative digital television station WSBS-DT (Channel 3, formerly known as WDLP-DT) in Key West, Florida and WSBS-CA (Channel 50, formerly known as WDLP-CA) in Miami, Florida, serving the South Florida market. On March 1, 2006, we also launched MEGA TV, our general interest Spanish-language television operation. We intend to design our television programming to meet a broad range of preferences of the U.S. Hispanic market, directed primarily at the 18-to-49 year old age bracket. We plan to develop approximately 60% of our programming and expect to commission other content from Spanish-language production partners. The channel currently features televised versions of our Miami top-rated radio shows, debate shows, dance and music contests, reality and entertainment shows and game shows. We anticipate that television revenue will be generated primarily from the sale of local and national market advertising.

The success of each of our stations depends significantly upon its audience ratings and share of the overall advertising revenue within its market. The broadcasting industry is a highly competitive business, but some barriers to entry do exist. Each of our stations competes with both Spanish-language and English-language stations in its market, as well as with other advertising media, such as newspapers, cable television, the Internet, magazines, outdoor advertising, satellite radio, transit advertising and direct mail marketing. Factors which are material to our competitive position include management experience, our stations’ rank in their markets, signal strength and frequency, and audience demographics, including the nature of the Spanish-language market targeted by a particular station.

Our primary source of revenue is the sale of advertising time on our stations to local and national advertisers. Our revenue is affected primarily by the advertising rates that our stations are able to charge, as well as the overall demand for advertising time in each respective market. Seasonal net broadcasting revenue fluctuations are common in the broadcasting industry and are primarily due to fluctuations in advertising demand from local and national advertisers. Typically for the broadcasting industry, the first calendar quarter generally produces the lowest revenue. Our most significant operating expenses are compensation expenses, programming expenses, professional fees and advertising and promotional expenses. Our senior management strives to control these expenses, as well as other expenses, by working closely with local station management and others, including vendors.

Comparison Analysis of the Operating Results for the Three-Months Ended June 30, 2006 and 2005

Due to the recent commencement of our television operation, we are now reporting two operating segments, radio and television. The following summary table presents separate financial data for each of our operating segments for the three-month periods ended June 30, 2006 and 2005.


	Three-Months Ended June 30,						Change
	2006			2005			$			%
	(In thousands)

Net revenue:
Radio	$	47,443			44,575			2,868			6	%
Television		1,398			—			1,398			100	%

Consolidated	$	48,841			44,575			4,266			10	%

Engineering and programming expense:
Radio	$	8,320			8,452			(132	)		(2	)%
Television		4,666			—			4,666			100	%

Consolidated	$	12,986			8,452			4,534			54	%

Selling, general and administrative:
Radio	$	17,790			16,858			932			6	%
Television		1,937			—			1,937			100	%

Consolidated	$	19,727			16,858			2,869			17	%

Operating income (loss) before depreciation and amortization and gain on sales of assets, net:
Radio	$	21,333			19,265			2,068			11	%
Television		(5,205	)		—			(5,205	)		100	%
Corporate		(3,661	)		(3,733	)		72			(2	)%

Consolidated	$	12,467			15,532			(3,065	)		(20	)%

Depreciation and amortization:
Radio	$	605			565			40			7	%
Television		73			—			73			100	%
Corporate		227			259			(32	)		(12	)%

Consolidated	$	905			824			81			10	%

Operating income (loss):
Radio	$	20,720			18,700			2,020			11	%
Television		(5,278	)		—			(5,278	)		100	%
Corporate		(3,888	)		(3,992	)		104			(3	)%

Consolidated	$	11,554			14,708			(3,154	)		(21	)%

Capital expenditures:
Radio	$	994			826			168			20	%
Television		923			—			923			100	%
Corporate		220			267			(47	)		(18	)%

Consolidated	$	2,137			1,093			1,044			96	%

The following summary table presents a comparison of our results of operations for the three-month periods ended June 30, 2006 and 2005. Various fluctuations illustrated in the table are discussed below. This section should be read in conjunction with our unaudited condensed consolidated financial statements and notes.


	Three Months Ended
	June 30,						Change
	2006			2005			$			%
	(In thousands)

Net revenue	$	48,841			44,575			4,266			10	%
Engineering and programming expense		12,986			8,452			4,534			54	%
Selling, general and administrative expense		19,727			16,858			2,869			17	%
Corporate expenses		3,661			3,733			(72	)		(2	)%
Depreciation and amortization		905			824			81			10	%
Loss on sale of assets, net of disposal costs		8			—			8			100	%

Operating income	$	11,554			14,708			(3,154	)		(21	)%
Interest expense, net		(4,936	)		(10,646	)		5,710			(54	)%
Loss on early extinguishment of debt		—			(3,154	)		3,154			(100	)%
Other income, net		3			1,793			(1,790	)		(100	)%
Income tax expense		4,190			2,579			1,611			62	%
Loss on discontinued operations, net of taxes		—			(1	)		1			(100	)%

Net income	$	2,431			121			2,310			1909	%

Net Revenue. The growth of 10% in net revenue was mainly due to the revenue generated by our radio segment, which had net revenue growth of 6% primarily from local and barter revenues. This radio net revenue growth was primarily in our San Francisco, Los Angeles, New York and Puerto Rico markets, offset by a decrease in our Chicago market. Our new television segment “MEGA TV”, which debuted on March 1, 2006, generated net revenue of $1.4 million primarily from local revenues.

Engineering and Programming Expenses. The increase in engineering and programming expenses was mainly due to our new television segment, which totaled $4.7 million in expenses, primarily related to programming costs and original produced programming.

Selling, General and Administrative Expenses. The increase in selling, general and administrative expenses was mainly due to our new television segment, which totaled $1.9 million in expenses, primarily related to (a) advertising and promotions, (b) employee compensation and benefits and (c) rent expense. Our radio segment’s selling, general and administrative expenses increased $0.9 million or 6%, as a result of increases in (a) advertising and promotions costs, (b) local commissions due to the increase in net revenue, (c) employee compensation and benefits costs, (d) rent expense related to our new Miami radio stations’ facilities and (e) the provision for doubtful accounts receivable. These increases in the radio segment’s selling, general and administrative expenses were offset by decreases in radio’s promotional events expense of $1.1 million and professional fees of $0.2 million, mainly related to our in-house compliance with the Sarbanes-Oxley Act of 2002.

Corporate Expenses. The decrease in corporate expenses was mainly a result of a decrease in legal and professional fees, offset by an increase in employee compensation and benefits related to SFAS No. 123(R) stock-based compensation of $0.2 million.

Operating Income. The decrease in operating income was primarily attributed to our new television segment’s operating loss of approximately $(5.3) million, which was offset by an increase in our radio segment’s operating income of approximately $2.0 million.

Interest Expense, net. The decrease in interest expense, net, was due primarily to lower interest expense incurred with respect to the senior secured credit facility due 2012 we entered into on June 10, 2005 as

compared to interest expense incurred on our prior debt structure, which had a greater outstanding principal balance and a higher applicable interest rate.

Income Taxes. The increase in income tax expense was primarily due to this year’s application of our effective tax rate, which continues to be impacted by a full valuation allowance.

Net Income. The increase in net income was primarily due to the decrease in interest expense, net, and loss on early extinguishment of debt, offset by a decrease in operating income.

Comparison Analysis of the Operating Results for the Six-Months Ended June 30, 2006 and 2005


	Six-Months Ended
	June 30,						Change
	2006			2005			$			%
	(In thousands)

Net revenue:
Radio	$	84,787			79,914			4,873			6	%
Television		1,829			—			1,829			100	%

Consolidated	$	86,616			79,914			6,702			8	%

Engineering and programming expense:
Radio	$	16,756			16,317			439			3	%
Television		8,049			—			8,049			100	%

Consolidated	$	24,805			16,317			8,488			52	%

Selling, general and administrative:
Radio	$	32,342			32,176			166			1	%
Television		4,084			—			4,084			100	%

Consolidated	$	36,426			32,176			4,250			13	%

Operating income (loss) before depreciation and amortization and gain on sales of assets, net:
Radio	$	35,689			31,421			4,268			14	%
Television		(10,304	)		—			(10,304	)		100	%
Corporate		(7,189	)		(7,434	)		245			(3	)%

Consolidated	$	18,196			23,987			(5,791	)		(24	)%

Depreciation and amortization:
Radio	$	1,223			1,137			86			8	%
Television		130			—			130			100	%
Corporate		479			517			(38	)		(7	)%

Consolidated	$	1,832			1,654			178			11	%


	Six-Months Ended
	June 30,						Change
	2006			2005			$			%
	(In thousands)

Operating income (loss):
Radio	$	85,259			30,284			54,975			182	%
Television		(10,434	)		—			(10,434	)		100	%
Corporate		(7,668	)		(7,951	)		283			(4	)%

Consolidated	$	67,157			22,333			44,824			201	%

Capital expenditures:
Radio	$	1,523			1,515			8			1	%
Television		2,441			—			2,441			100	%
Corporate		341			472			(131	)		(28	)%

Consolidated	$	4,305			1,987			2,318			117	%

The following summary table presents a comparison of our results of operations for the six-month periods ended June 30, 2006 and 2005. Various fluctuations illustrated in the table are discussed below. This section should be read in conjunction with our unaudited condensed consolidated financial statements and notes.


	Six Months Ended
	June 30,						Change
	2006			2005			$			%
	(In thousands)

Net revenue	$	86,616			79,914			6,702			8	%
Engineering and programming expense		24,805			16,317			8,488			52	%
Selling, general and administrative expense		36,426			32,176			4,250			13	%
Corporate expenses		7,189			7,434			(245	)		(3	)%
Depreciation and amortization		1,832			1,654			178			11	%
Gain on sale of assets, net of disposal costs		(50,793	)		—			(50,793	)		100	%

Operating income	$	67,157			22,333			44,824			201	%
Interest expense, net		(10,355	)		(20,816	)		10,461			(50	)%
Loss on early extinguishment of debt		(2,997	)		(3,154	)		157			(5	)%
Other (expense) income, net		(23	)		1,800			(1,823	)		(101	)%
Income tax benefit		(2,190	)		—			(2,190	)		100	%
Loss on discontinued operations, net of taxes		—			(3	)		3			(100	)%

Net income	$	55,972			160			55,812			34883	%

Net Revenue. The growth of 8% in net revenue was mainly due to the revenue generated by our radio segment, which had net revenue growth of 6% primarily from local revenues. This radio net revenue growth was primarily in our San Francisco, Puerto Rico, Los Angeles, New York and Miami markets, offset by a decrease in our Chicago market. Our new television segment “MEGA TV”, which debuted on March 1, 2006, generated net revenue of $1.8 million primarily from local revenues.

Engineering and Programming Expenses. The increase in engineering and programming expenses was mainly due to our new television segment, which totaled $8.0 million in expenses, primarily related to programming costs and original produced programming, and employee compensation and benefits. Our radio segment’s engineering and programming expenses increased $0.4 million or 3%, as a result of an increase in our music licenses fees of $0.4 million and employee compensation related to SFAS No. 123(R) stock-based compensation of $0.4 million, offset by a decrease in severance pay of $0.3 million.

Selling, General and Administrative Expenses. The increase in selling, general and administrative expenses was mainly due to our new television segment, which totaled $4.1 million in expenses, primarily related to (a) advertising and promotions, (b) employee compensation and benefits and (c) rent expense.

Corporate Expenses. The decrease in corporate expenses was mainly a result of a decrease in legal and professional fees of $0.5 million and other business development expenses of $0.2 million, offset by an increase in employee compensation and benefits related to SFAS No. 123(R) stock-based compensation of $0.5 million.

Gain on sales of assets, net. The gain on sales of assets, net, is related to the sale of our radio stations KZAB-FM and KZBA-FM, serving the Los Angeles, California market, which was completed on January 31, 2006 and we recognized a pre-tax gain of approximately $50.8 million.

Operating Income. The increase in operating income was primarily attributed to the increase in our radio segment’s operating income of approximately $55.0 million, which includes a gain on sales of assets, net of $50.8 million, offset by our new television segment’s operating loss of approximately $10.4 million.

Interest Expense, net. The decrease in interest expense, net, was due primarily to lower interest expense incurred with respect to the senior secured credit facilities we entered into on June 10, 2005 as compared to interest expense incurred on our prior debt structure. In addition, on February 17, 2006, we repaid our $100.0 million Second Lien Credit Facility. Interest expense, net, also decreased due to an increase in interest income resulting from a general increase in interest rates on our cash balances.

Loss on early extinguishment of debt. The loss on early extinguishment of debt was due to the $1.0 million prepayment premium paid and the $2.0 million write-off of unamortized deferred financing costs related to the repayment of our $100.0 million Second Lien Credit Facility.

Income Taxes. The increase in income tax benefit was primarily due to the reversal of the deferred tax liability associated with our Los Angeles radio stations KZAB-FM and KZBA-FM, as a result of the book/tax basis differences on the date of sale, partially offset by the application of our effective tax rate, which continues to be impacted by a full valuation allowance, on our pre-tax income.

Net Income. The increase in net income was primarily due to the gain on sale of assets, net, decrease in interest expense, net, and an increase in income tax benefit, offset by a decrease in other income.

Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand, cash provided by operations and, to the extent necessary, undrawn commitments that are available under our $25.0 million revolving credit facility. Our ability to raise funds by increasing our indebtedness is limited by the terms of the certificates of designations governing our preferred stock and the credit agreement governing our first lien credit facility. Additionally, our certificates of designations and credit agreement each place restrictions on us with respect to the sale of assets, liens, investments, dividends, debt repayments, capital expenditures, transactions with affiliates and consolidations and mergers, among other things. We had cash and cash equivalents of $59.8 million and $125.2 million as of June 30, 2006 and December 31, 2005, respectively.

The following summary table presents a comparison of our capital resources for the six-month periods ended June 30, 2006 and 2005, with respect to certain of our key measures affecting our liquidity. The changes set forth in the table are discussed below. This section should be read in conjunction with the unaudited condensed consolidated financial statements and notes.


	Six Months Ended
	June 30,						Change
	2006			2005			$
	(In thousands)

Capital expenditures	$	4,305			1,987			2,318

Net cash flows provided by (used in) operating activities	$	869			(156	)		1,025
Net cash flows provided by investing activities		41,912			18,013			23,899
Net cash flows used in financing activities		(108,129	)		(69,019	)		(39,110	)

Net decrease in cash and cash equivalents	$	(65,348	)		(51,162	)

Net Cash Flows Provided by (Used in) Operating Activities. Changes in our net cash flows from operating activities were primarily a result of a decrease in cash paid to vendors and for interest.

Net Cash Flows Provided by Investing Activities. Changes in our net cash flows from investing activities were primarily a result of: (a) in 2006, we received proceeds of $64.8 million for the sale of our Los Angeles stations KZAB-FM and KZBA-FM, offset by $18.5 million of payments made to acquire our television operation “MEGA TV” and capital expenditures, while (b) in 2005, we received deposits totaling $20.0 million for the sale of Los Angeles stations KZAB-FM and KZBA-FM, offset by capital expenditures.

Net Cash Flows Used In Financing Activities. Changes in our net cash flows from financing activities were primarily a result of: (a) in 2006, we repaid our $100.0 million Second Lien Credit Facility and paid cash dividends on our Series B preferred stock, while (b) in 2005, we refinanced our prior debt structure which consisted of a $135.0 million senior secured credit facility term loan due 2009 and the 9 5 / 8 % senior subordinated notes due 2009.

Management believes that cash from operating activities, together with cash on hand, should be sufficient to permit us to meet our operating obligations in the foreseeable future, including required interest and quarterly principal payments pursuant to the credit agreement governing our first lien credit facility due 2012 and capital expenditures, excluding the acquisitions of FCC licenses. Assumptions (none of which can be assured) which underlie management’s beliefs, include the following:


	•	the demand for advertising within the broadcasting industry and economic conditions in general will not deteriorate in any material respect;

	•	we will continue to successfully implement our business strategies; and

	•	we will not incur any material unforeseen liabilities, including environmental liabilities and legal judgements.

Our strategy is to primarily utilize cash flows from operations to meet our capital needs and contractual obligations. However, we also have bank borrowings available to meet our capital needs and contractual obligations and, when appropriate and, if available, will obtain financing by issuing debt or stock.

On January 31, 2006, we completed the sale of the assets of our radio stations KZAB-FM and KZBA-FM, serving the Los Angeles, California market, for a cash purchase price of $120.0 million (the “LA Asset Sale”), to Styles Media Group, LLC (“Styles Media Group”) pursuant to that certain asset purchase agreement, dated as of August 17, 2004, as amended on February 18, 2005, March 30, 2005 and July 29, 2005, by and among Styles Media Group, Spanish Broadcasting Systems Southwest, Inc. and us. Styles Media Group made a $65.0 million payment at closing and non-refundable deposits to us on February 18, 2005, March 30, 2005, July 29, 2005 and December 22, 2005 in the amount of $6.0 million, $14.0 million, $15.0 million and $20.0 million, respectively, totaling $55.0 million. As a result of the LA Asset Sale, we recognized a pre-tax

gain on the sale of assets, net of disposal costs, of approximately $50.8 million during the six-months ended June 30, 2006.

On February 17, 2006, we repaid and terminated our Second Lien Credit Facility by using approximately $101.0 million of our net cash proceeds from the LA Asset Sale to pay the full amount owed. Accordingly, we have no further obligations remaining under the Second Lien Credit Facility. As a result of the prepayment of the Second Lien Credit Facility, we recognized a loss on early extinguishment of debt related to the prepayment premium and the write-off of unamortized deferred financing costs of approximately $3.0 million during the six-months ended June 30, 2006. In addition, as a result of the repayment of our Second Lien Credit Facility, our first lien credit facility applicable margin decreased from 2.0% to 1.75%.

On March 1, 2006, our wholly-owned subsidiaries, Mega Media Holdings, Inc. (“Mega Media Holdings”) and WDLP Licensing, Inc. (“Mega-Sub,” and, together with Mega Media Holdings, “Mega Media”), completed the acquisition of certain assets, including licenses, permits and authorizations issued by the FCC used in or related to the operation of television stations WDLP-TV (Channel 22, formerly known as WDLP-TV), its derivative digital television station WDLP-DT (Channel 3, formerly known as WDLP-DT) in Key West, Florida and WSBS-CA (Channel 50, formerly known as WDLP-CA) in Miami, Florida, pursuant to that certain asset purchase agreement, dated as of July 12, 2005, and as amended on September 19, 2005, October 19, 2005 and January 6, 2006, with WDLP Broadcasting Company, LLC, WDLP Licensed Subsidiary, LLC, Robin Broadcasting Company, LLC, and Robin Licensed Subsidiary, LLC (collectively, the “Seller”). WSBS-TV-DT and WSBS-CA are operating as one television operation, branded as “MEGA TV”, serving the South Florida market. MEGA TV debuted on the air on March 1, 2006.

In addition, as part of the television station acquisition, we entered into an advertising agreement with the Sellers that provides them with up to $2.0 million per year, for the three years following closing, of commercial advertising time in any of our broadcasting stations. Accordingly, we recognized this liability to provide commercial advertising as part of consideration given for the acquisition and recorded a liability (unearned revenue) of approximately $5.3 million at the closing, which represents the present value of commercial advertising due.

We continuously evaluate opportunities to make strategic acquisitions, primarily in the largest Hispanic markets in the United States. We engage in discussions regarding potential acquisitions from time to time in the ordinary course of business. We anticipate that any future acquisitions would be financed through funds generated from permitted debt financing, equity financing, operations, asset sales or a combination of these sources. However, there can be no assurance that financing from any of these sources, if necessary and available, can be obtained on favorable terms for future acquisitions.

New Accounting Pronouncements

See Note 8 of the Notes to Unaudited Condensed Consolidated Financial Statements.


Item 3.	*Quantitative and Qualitative Disclosures About Market Risk*

As of June 30, 2006, there are no material changes in the qualitative and quantitative analysis regarding market risk described in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” of our most recently issued Annual Report on Form 10-K for the year ending December 31, 2005.


Item 4.	*Controls and Procedures*

Evaluation Of Disclosure Controls And Procedures. Our principal executive and financial officers have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) of the Exchange Act of 1934 (the “Exchange Act”) to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and financial officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes In Internal Control Over Financial Reporting. There has been no change in our internal control over financial reporting during the fiscal quarter ended June 30, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION


Item 1.	*Legal Proceedings*

The information set forth under Note 5 contained in the “Notes to Unaudited Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q is incorporated by reference in answer to this Item.


Item 1A.	*Risk Factors*

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2005, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.


Item 4.	*Submission of Matters to a Vote of Security Holders*

The election of our board of directors and the approval of the Spanish Broadcasting System, Inc. 2006 Omnibus Equity Compensation Plan (the “Omnibus Plan”) were submitted to a vote of security holders, through the solicitation of proxies pursuant to Section 14A under the Securities Exchange Act of 1934, as amended, at the annual meeting of stockholders held on July 18, 2006 (the “Annual Meeting”).

At the Annual Meeting, our shareholders approved the (i) election of six director nominees to hold office until their successors are duly elected and qualified and (ii) Omnibus Plan. The voting results relating to the director elections and the Omnibus Plan are set forth in the tables below.


			Votes Against/
Directors	Votes For		Withheld

Raúl Alarcón, Jr.		270,219,650		9,987,942
Pablo Raúl Alarcón, Sr.		270,166,884		10,040,708
Antonio S. Fernandez		279,178,165		1,029,427
Jose A. Villamil		279,510,064		697,528
Dan Mason		279,510,235		697,357
Jason L. Shrinsky		270,091,543		10,116,049

There were no broker non-votes.

Proposal

Votes For

Votes Against

Abstentions

Omnibus Plan

269,304,340

1,206,481

53,891


Item 5.	*Other Information*

The Spanish Broadcasting System, Inc. 2006 Omnibus Equity Compensation Plan

At the Annual Meeting, our shareholders approved the Spanish Broadcasting System, Inc. 2006 Omnibus Equity Compensation Plan, effective as of July 18, 2006 (the “Omnibus Plan”). The Company’s Board of Directors previously approved the Omnibus Plan at a meeting held on May 3, 2006, subject to shareholder approval.

In connection with the approval of the Omnibus Plan, our shareholders also approved that (i) the compensation attributable to grants under the Omnibus Plan qualify for an exemption from the $1,000,000 deduction limit under Section 162(m) of the Internal Revenue Code (the “Code”), (ii) incentive stock options meet the requirements of the Code, and (iii) the Omnibus Plan meet the NASDAQ listing requirements.

The Omnibus Plan provides that grants may be made to participants in any of the following forms: (i) incentive stock options, (ii) nonqualified stock options, (iii) stock appreciation rights (“SARs”), (iv) stock units, (v) stock awards, (vi) dividend equivalents, and (vii) other stock-based awards.

The Omnibus Plan authorizes up to 3,500,000 shares of our common stock (“Company Stock”) for issuance, subject to adjustment in certain circumstances. If and to the extent options and SARs granted under the Omnibus Plan terminate, expire or are cancelled, forfeited, exchanged or surrendered without being exercised or if any stock awards, stock units, dividend equivalents or other stock-based awards are forfeited or terminated prior to vesting, or otherwise not paid in full, the shares subject to such grants will become available again for purposes of the Omnibus Plan. In addition, the Omnibus Plan provides that if any shares of Company Stock are surrendered to pay the exercise price of an option or withheld for purposes of satisfying our minimum tax withholding obligations with respect to a grant, such shares will also again become available for grant under the Omnibus Plan. If SARs are exercised, only the net number of shares actually issued upon exercise will be considered issued. If any grants under the Omnibus Plan are paid in cash, and not in shares of Company Stock, any shares subject to such grant will also again become available for grant under the Omnibus Plan.

The Omnibus Plan provides that the maximum aggregate number of shares of Company Stock that may be made with respect to grants, other than dividend equivalents, to any individual during any calendar year is 1,000,000 shares, subject to adjustments. In addition, the maximum aggregate number of shares of Company Stock with respect to grants of stock units, stock awards and other stock-based awards that may be made to any individual during a calendar year is also 1,000,000 shares, subject to adjustments.

A copy of the Omnibus Plan is filed as Exhibit 10.1 to this report. The foregoing description of the Omnibus Plan is qualified in its entirety by reference to the actual agreement.


Item 6.	*Exhibits*


	(a)	Exhibits —


3	.1	—	Third Amended and Restated Certificate of Incorporation of Spanish Broadcasting System, Inc. (the “Company”), dated September 29, 1999 (incorporated by reference to the Company’s 1999 Registration Statement on Form S-1 (Commission File No. 333-85499) (the “1999 Registration Statement”)) (Exhibit A to this exhibit is incorporated by reference to the Company’s Current Report on Form 8-K, dated March 25, 1996 (the “1996 Current Report”).
3	.2	—	Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.2 of the Company’s 1999 Registration Statement).
3	.3	—	Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.3 of the Company’s 1999 Registration Statement).
3	.4	—	Certificate of Elimination of 14 1 / 4 % Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report on Form 10-Q, dated November 14, 2003 (the “11/14/03 Quarterly Report”)).
4	.1	—	Article V of the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.1 of the Company’s 1999 Registration Statement).


4	.2	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 10 3 / 4 % Series A Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.1 of the Company’s 11/14/03 Quarterly Report).
4	.3	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 10 3 / 4 % Series B Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.2 of the Company’s 11/14/03 Quarterly Report).
4	.4	—	Indenture dated June 29, 1994 among the Company, IBJ Schroder Bank & Trust Company, as Trustee, the Guarantors named therein and the Purchasers named therein (incorporated by reference to Exhibit 4.1 of the Company’s 1994 Registration Statement on Form S-4 (the “1994 Registration Statement”).
4	.5	—	First Supplemental Indenture dated as of March 25, 1996 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).
4	.6	—	Second Supplemental Indenture dated as of March 1, 1997 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).
4	.7	—	Supplemental Indenture dated as of October 21, 1999 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the Company’s 1999 Registration Statement).
4	.8	—	Indenture with respect to 9 5 / 8 % Senior Subordinated Notes due 2009 with The Bank of New York as Trustee, dated November 2, 1999 (incorporated by reference to the Current Report on Form 8-K dated November 2, 1999 (the “1999 Current Report”)).
4	.9	—	Indenture with respect to 9 5 / 8 % Senior Subordinated Notes due 2009 with the Bank of New York as Trustee, dated June 8, 2001 (incorporated by reference to the Company’s Registration Statement on Form S-3, filed on June 25, 2001 (the “2001 Form S-3”).
4	.10	—	Form of stock certificate for the Class A common stock of the Company (incorporated by reference to the Company’s 1999 Registration Statement).
4	.11	—	Certificate of Elimination of 14 1 / 4 % of Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2003).
4	.12	—	Certificate of Designation Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the Series C Convertible Preferred Stock of the Company (“Certificate of Designation of Series C Preferred Stock”) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on December 27, 2004).
4	.13	—	Certificate of Correction to Certificate of Designation of Series C Preferred Stock of the Company dated January 7, 2005 (incorporated by reference to Exhibit 4.13 of the Company’s Annual Report filed on Form 10-K for the fiscal year 2004).
10	.1	—	Employment Agreement dated as of November 21, 2005, effective January 3, 2006 between the Company and Cynthia Hudson-Fernandez (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on July 6, 2006).
10	.2	—	Spanish Broadcasting System, Inc. 2006 Omnibus Equity Compensation Plan.
14	.1	—	Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 of the Company’s 2004 Form 10-K).
31(i)	.1	—	Chief Executive Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(i)	.2	—	Chief Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


32	.1	—	Chief Executive Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32	.2	—	Chief Financial Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

SPANISH BROADCASTING SYSTEM, INC.


	By:	/s/ JOSEPH A. GARCÍA

JOSEPH A. GARCÍA

Executive Vice President, Chief

Financial Officer and Secretary

(principal financial and accounting

officer and duly authorized

officer of the registrant)

Date: August 8, 2006


	(a)	Exhibits —


3	.1	—	Third Amended and Restated Certificate of Incorporation of Spanish Broadcasting System, Inc. (the “Company”), dated September 29, 1999 (incorporated by reference to the Company’s 1999 Registration Statement on Form S-1 (Commission File No. 333-85499) (the “1999 Registration Statement”)) (Exhibit A to this exhibit is incorporated by reference to the Company’s Current Report on Form 8-K, dated March 25, 1996 (the “1996 Current Report”).
3	.2	—	Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.2 of the Company’s 1999 Registration Statement).
3	.3	—	Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.3 of the Company’s 1999 Registration Statement).
3	.4	—	Certificate of Elimination of 14 1 / 4 % Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report on Form 10-Q, dated November 14, 2003 (the “11/14/03 Quarterly Report”)).
4	.1	—	Article V of the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.1 of the Company’s 1999 Registration Statement).
4	.2	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 10 3 / 4 % Series A Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.1 of the Company’s 11/14/03 Quarterly Report).
4	.3	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 10 3 / 4 % Series B Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.2 of the Company’s 11/14/03 Quarterly Report).
4	.4	—	Indenture dated June 29, 1994 among the Company, IBJ Schroder Bank & Trust Company, as Trustee, the Guarantors named therein and the Purchasers named therein (incorporated by reference to Exhibit 4.1 of the Company’s 1994 Registration Statement on Form S-4 (the “1994 Registration Statement”).
4	.5	—	First Supplemental Indenture dated as of March 25, 1996 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).
4	.6	—	Second Supplemental Indenture dated as of March 1, 1997 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).
4	.7	—	Supplemental Indenture dated as of October 21, 1999 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the Company’s 1999 Registration Statement).
4	.8	—	Indenture with respect to 9 5 / 8 % Senior Subordinated Notes due 2009 with The Bank of New York as Trustee, dated November 2, 1999 (incorporated by reference to the Current Report on Form 8-K dated November 2, 1999 (the “1999 Current Report”)).
4	.9	—	Indenture with respect to 9 5 / 8 % Senior Subordinated Notes due 2009 with the Bank of New York as Trustee, dated June 8, 2001 (incorporated by reference to the Company’s Registration Statement on Form S-3, filed on June 25, 2001 (the “2001 Form S-3”).
4	.10	—	Form of stock certificate for the Class A common stock of the Company (incorporated by reference to the Company’s 1999 Registration Statement).
4	.11	—	Certificate of Elimination of 14 1 / 4 % of Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2003).


4	.12	—	Certificate of Designation Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the Series C Convertible Preferred Stock of the Company (“Certificate of Designation of Series C Preferred Stock”) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on December 27, 2004).
4	.13	—	Certificate of Correction to Certificate of Designation of Series C Preferred Stock of the Company dated January 7, 2005 (incorporated by reference to Exhibit 4.13 of the Company’s Annual Report filed on Form 10-K for the fiscal year 2004).
10	.1	—	Employment Agreement dated as of November 21, 2005, effective January 3, 2006 between the Company and Cynthia Hudson-Fernandez (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on July 6, 2006).
10	.2	—	Spanish Broadcasting System, Inc. 2006 Omnibus Equity Compensation Plan.
14	.1	—	Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 of the Company’s 2004 Form 10-K).
31(i)	.1	—	Chief Executive Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(i)	.2	—	Chief Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	.1	—	Chief Executive Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32	.2	—	Chief Financial Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EXHIBIT 10.2

SPANISH BROADCASTING SYSTEM, INC.

2006 OMNIBUS EQUITY COMPENSATION PLAN

Adopted by

Spanish Broadcasting System, Inc.

Board of Directors on March 3, 2006

Approved by

Spanish Broadcasting System, Inc.

Stockholders on July 18, 2006

SPANISH BROADCASTING SYSTEM, INC.

2006 OMNIBUS EQUITY COMPENSATION PLAN


1.	Purpose

The purpose of the Spanish Broadcasting System, Inc. 2006 Omnibus Equity Compensation Plan (the “Plan”) is to provide (i) designated employees of Spanish Broadcasting System, Inc. (the “Company”) and its subsidiaries, and (ii) non-employee members of the board of directors of the Company with the opportunity to receive grants of stock options, stock units, stock awards, dividend equivalents and other stock-based awards. The Company believes that the Plan will encourage the participants to contribute materially to the overall growth of the Company, thereby benefitting the Company’s shareholders, and will align the economic interests of the participants with those of the shareholders. The Plan shall be effective as of July 18, 2006, subject to approval by the shareholders of the Company.


2.	Definitions

Whenever used in this Plan, the following terms will have the respective meanings set forth below:


	(a) “Board” means the Company’s Board of Directors.

	(b) “Change of Control” shall mean a change in the ownership of the voting power or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, as determined in accordance with the rules and guidance set forth in Internal Revenue Service Notice 2005-1 and any further regulations or guidance issued by the Internal Revenue Service under Code Section 409.

	(c) “Code” means the Internal Revenue Code of 1986, as amended.

	(d) “Committee” means (i) with respect to Grants to Employees, the Compensation Committee of the Board or another committee appointed by the Board to administer the Plan, (ii) with respect to Grants made to Non-Employee Directors, the Board, and (iii) with respect to Grants that are intended to be “qualified performance-based compensation” under section 162(m) of the Code as well as Grants to Employees who are officers, a committee that consists of two or more persons appointed by the Board, all of whom shall be “outside directors” as defined under section 162(m) of the Code and related Treasury regulations and “non-employee directors” as defined under Rule 16b-3 promulgated under the Exchange Act. The Board or committee, as applicable, that has authority with respect to a specific Grant shall be referred to as the “Committee” with respect to that Grant.

	(e) “Company” means Spanish Broadcasting System, Inc. and any successor corporation.

	(f) “Company Stock” means the common stock of the Company or such other securities of the Company that may be substituted for common stock pursuant to Section 5(e) provided that such stock qualifies as “service recipient stock” as defined under section 409A of the Code and the applicable regulations thereunder.

	(g) “Disability” means a physical or mental incapacity that renders a Participant incapable of engaging in any substantial gainful employment, or that has lasted for a continuous period of no less than six consecutive months, or six months in any twelve-month period, as determined by the Committee in good faith in its sole discretion, provided that if a Participant has entered into an employment agreement with the Company or a subsidiary, the definition of disability, if any, set forth in that agreement shall be substituted for the above definition. All determinations as to the date and extent of disability shall be made by the Committee upon the basis of such evidence as it deems necessary or desirable.

	(h) “Dividend Equivalent” means an amount determined by multiplying the number of shares of Company Stock subject to a Grant by the per-share cash dividend, or the per-share fair market value

(as determined by the Committee) of any dividend in consideration other than cash, paid by the Company on its Company Stock.

      (i) “Effective Date” of the Plan means July 18, 2006, subject to approval of the Plan by the shareholders of the Company.

      (j) “Employee” means an employee of the Employer (including an officer or director who is also an employee).

      (k) “Employer” means the Company and its subsidiaries.

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

      (m) “Exercise Price” means the per share price at which shares of Company Stock may be purchased under an Option, as designated by the Committee.

      (n) “Fair Market Value” of Company Stock means as of any given date, unless the Committee determines otherwise with respect to a particular Grant, (i) if the principal trading market for the Company Stock is a national securities exchange such as the New York Stock Exchange or the Nasdaq National Market, the last reported sale price of Company Stock on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, (ii) if the Company Stock is not principally traded on such exchange or market, the mean between the last reported “bid” and “asked” prices of Company Stock on the relevant date, as reported on Nasdaq or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Committee determines, or (iii) if the Company Stock is not publicly traded or, if publicly traded, is not subject to reported transactions or “bid” or “asked” quotations as set forth above, the Fair Market Value per share shall be as determined by the Committee through the reasonable application of a reasonable valuation method.

      (o) “Grant” means an Option, Stock Unit, Stock Award, SAR, Dividend Equivalent or Other Stock-Based Award granted under the Plan.

      (p) “Grant Agreement” means the written instrument that sets forth the terms and conditions of a Grant, including all amendments thereto.

      (q) “Incentive Stock Option” means an Option that is intended to meet the requirements of an incentive stock option under section 422 of the Code or any successor provision thereto.

      (r) “Non-Employee Director” means a member of the Board who is not an employee of the Employer.

      (s) “Nonqualified Stock Option” means an Option that is not intended to be an Incentive Stock Option.

      (t) “Option” means a right granted to a Participant to purchase shares of Company Stock, as described in Section 7.

      (u) “Other Stock-Based Award” means any Grant based on, measured by or payable in Company Stock (other than a Grant described in Sections 7, 8, 9 or 10 of the Plan), as described in Section 11.

      (v) “Participant” means an Employee or Non-Employee Director designated by the Committee to participate in the Plan.

      (w) “Plan” means this Spanish Broadcasting System, Inc. 2006 Omnibus Equity Compensation Plan, as in effect from time to time.

      (x) “SAR” means a stock appreciation right as described in Section 10.

      (y) “Stock Award” means an award of Company Stock as described in Section 9.

      (z) “Stock Unit” means an award of a phantom unit representing a share of Company Stock, as described in Section 8.

3. Administration

(a) Committee. The Plan shall be administered and interpreted by the Committee. In its sole discretion, the Board may at anytime and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to a matter that under Rule 16b-3 of the Exchange Act or section 162(m) of the Code or any regulations or rules issued thereunder is required to be determined in the sole discretion of the Committee. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may only be filled by the Board. To the extent permitted by applicable law, ministerial functions may be performed by an administrative committee comprised of Company employees appointed by the Committee. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation, and the Committee may at any time rescind the authority so delegated or appoint a new delegate. At all times, the delegate appointed under this Section 3 shall serve in such capacity at the pleasure of the Committee.

(b) Committee Authority. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan. The Committee shall have the sole authority to (i) determine the Participants to whom Grants shall be made under the Plan, (ii) determine the type, size and terms and conditions of the Grants to be made to each such Participant, (iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability; provided, however, that the Committee shall not have the authority to accelerate the vesting or waive the forfeiture of any performance based awards granted pursuant to Section 12, (iv) amend the terms and conditions of any previously issued Grant, subject to the provisions of Section 18 below, and (v) deal with any other matters arising under the Plan.

(c) Committee Determinations . The Committee shall have full power and express discretionary authority to administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Committee’s interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any awards granted hereunder. All powers of the Committee shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated Participants.


4.	Grants

(a) Grants under the Plan may consist of Options as described in Section 7, Stock Units as described in Section 8, Stock Awards as described in Section 9, and SARs or Other Stock-Based Awards as described in Section 10. All Grants shall be subject to such terms and conditions as the Committee deems appropriate and as are specified in writing by the Committee to the Participant in the Grant Agreement.

(b) All Grants shall be made conditional upon the Participant’s acknowledgement, in writing or by acceptance of the Grant, that all decisions and determinations of the Committee shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under such Grant. Grants under a particular section of the Plan need not be uniform as among the Participants.

(c) The Committee may make Grants that are contingent on, and subject to, shareholder approval of the Plan or an amendment to the Plan.


5.	Shares Subject to the Plan

(a) Shares Authorized . The total aggregate number of shares of Company Stock that may be issued under the Plan is 3.5 million (3,500,000) shares, subject to adjustment as described in subsection (e) below.

(b) Limit on Stock Awards, Stock Units and Other Stock-Based Awards . Within the aggregate limit described in subsection (a), the maximum number of shares of Company Stock that may be issued under the Plan pursuant to Stock Awards, Stock Units and Other Stock-Based Awards during the term of the Plan is 3.5 million (3,500,000) shares, subject to adjustment as described in subsection (e) below.

(c) Source of Shares; Share Counting . Shares issued under the Plan may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the Company on the open market for purposes of the Plan. If and to the extent Options or SARs granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised, and if and to the extent that any Stock Awards, Stock Units, or Other Stock-Based Awards are forfeited or terminated prior to vesting, or otherwise are not paid in full, the shares reserved for such Grants shall again be available for purposes of the Plan. Shares of Company Stock surrendered in payment of the Exercise Price of an Option shall again be available for purposes of the Plan. Shares of Company Stock withheld for payment of applicable tax withholding obligations with respect to the exercise or other taxation of a Grant shall again be available for purposes of the Plan. If SARs are exercised, only the net number of shares actually issued upon exercise of the SARs shall be considered issued under the Plan for purposes of this subsection (c). To the extent that Grants are paid in cash, and not in shares of Company Stock, any shares previously reserved for issuance pursuant to such Grants shall again be available for purposes of the Plan. Notwithstanding the foregoing, no shares shall become available pursuant to this section 5(c) to the extent that the transaction resulting in the return of shares occurs more than ten years after the date of the most recent shareholder approval of the Plan or such return of shares would constitute a “material revision” of the Plan subject to shareholder approval under then applicable rules of the Nasdaq Marketplace Rules (or any applicable exchange or quotation system).

(d) Individual Limits . All Grants under the Plan shall be expressed in shares of Company Stock. The maximum aggregate number of shares of Company Stock with respect to which all Grants may be made under the Plan to any individual during any calendar year shall be 1 million (1,000,000) shares, subject to adjustment as described in subsection (e) below. The individual limits of this subsection (d) shall apply without regard to whether the Grants are to be paid in Company Stock or cash. All cash payments (other than with respect to Dividend Equivalents) shall equal the Fair Market Value of the shares of Company Stock to which the cash payments relate.

(e) Adjustments . If there is any change in the number or kind of shares of Company Stock outstanding (i) by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, (ii) by reason of a merger, reorganization or consolidation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of any other extraordinary or unusual event affecting the outstanding Company Stock as a class without the Company’s receipt of consideration, or if the value of outstanding shares of Company Stock is substantially reduced as a result of a spinoff or the Company’s payment of an extraordinary dividend or distribution, the maximum number of shares of Company Stock available for issuance under the Plan, the maximum number of shares of Company Stock for which any individual may receive Grants in any year, the number of shares covered by outstanding Grants, the kind of shares issued and to be issued under the Plan, and the price per share or the applicable market value of such Grants shall be appropriately adjusted by the Committee, as it may deem reasonably necessary, to reflect any increase or decrease in the number of, or change in the kind or value of, issued shares of Company Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such Grants; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. Any adjustments determined by the Committee shall be final, binding and conclusive. Any adjustment affecting a Grant made pursuant to Section 12 shall be made consistent with the requirements of section 162 (m) of the Code.


6.	Eligibility for Participation

(a) Eligible Persons . All Employees, including Employees who are officers or members of the Board, and all Non-Employee Directors shall be eligible to participate in the Plan.

(b) Selection of Participants . The Committee shall select the Employees and Non-Employee Directors to receive Grants and shall determine the number of shares of Company Stock subject to each Grant.


7.	Options

(a) General Requirements . The Committee may grant Options to an Employee or Non-Employee Director upon such terms and conditions as the Committee deems appropriate under this Section 7. The Committee shall determine the number of shares of Company Stock that will be subject to each Grant of Options to Employees and Non-Employee Directors.

(b) Type of Option, Price and Term .


	(i) The Committee may grant Incentive Stock Options or Nonqualified Stock Options or any combination of the two, all in accordance with the terms and conditions set forth herein. Incentive Stock Options may be granted only to Employees of the Company or its parents or subsidiaries, as defined in section 424 of the Code. Nonqualified Stock Options may be granted to Employees or Non-Employee Directors.

	(ii) The Exercise Price of Company Stock subject to an Option shall be determined by the Committee and may be equal to or greater than the Fair Market Value of a share of Company Stock on the date the Option is granted; provided, however, that an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary, as defined in section 424 of the Code, unless the Exercise Price per share is not less than 110% of the Fair Market Value of the Company Stock on the date of grant.

	(iii) The Committee shall determine the term of each Option, which shall not exceed ten years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary, as defined in section 424 of the Code, may not have a term that exceeds five years from the date of grant.


	(i) Options shall become exercisable in accordance with such terms and conditions as may be determined by the Committee and specified in the Grant Agreement. The Committee may accelerate the exercisability of any or all outstanding Options at any time for any reason.

	(ii) The Committee may provide in a Grant Agreement that the Participant may elect to exercise part or all of an Option before it otherwise has become exercisable. Any shares so purchased shall be restricted shares and shall be subject to a repurchase right in favor of the Company during a specified restriction period, with the repurchase price equal to the lesser of (A) the Exercise Price or (B) the Fair Market Value of such shares at the time of repurchase, or such other restrictions as the Committee deems appropriate.

	(iii) Options granted to persons who are non-exempt employees under the Fair Labor Standards Act of 1938, as amended, may not be exercisable for at least six months after the date of grant (except that such Options may become exercisable, as determined by the Committee, upon the Participant’s death, Disability or retirement, or upon a Change of Control or other circumstances permitted by applicable regulations).

(d) Termination of Employment or Service . Except as provided in the Grant Agreement, an Option may only be exercised while the Participant is employed by the Employer, or providing service as a Non-

Employee Director. The Committee shall determine in the Grant Agreement under what circumstances and during what time periods a Participant may exercise an Option after termination of employment or service.

(e) Exercise of Options . A Participant may exercise an Option that has become exercisable, in whole or in part, by delivering a notice of exercise to the Company. The Participant shall pay the Exercise Price for the Option (i) in cash, (ii) if permitted by the Committee, by delivery of or attestation to ownership of shares of Company Stock owned by the Participant and having a Fair Market Value on the date of exercise equal to the Exercise Price, (iii) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, or (iv) by such other method as the Committee may approve. Shares of Company Stock used to exercise an Option shall have been held by the Participant for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option. Payment for the shares pursuant to the Option, and any required withholding taxes, must be received by the time specified by the Committee depending on the type of payment being made, but in all cases prior to the issuance of the Company Stock.

(f) Limits on Incentive Stock Options . Each Incentive Stock Option shall provide that, if the aggregate Fair Market Value of the stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary, as defined in section 424 of the Code, exceeds $100,000, then the Option, as to the excess, shall be treated as a Nonqualified Stock Option.

(g) The Participant shall give the Company prompt notice of any disposition of shares of Company Stock acquired by exercise of an Incentive Stock Option within two years from the date of grant of such Option or one year after the transfer of such shares of Company Stock to the Participant.


8.	Stock Units

(a) General Requirements . The Committee may grant Stock Units to an Employee or Non-Employee Director, upon such terms and conditions as the Committee deems appropriate under this Section 8. Each Stock Unit shall represent the right of the Participant to receive a share of Company Stock or an amount based on the value of a share of Company Stock. All Stock Units shall be credited to bookkeeping accounts on the Company’s records for purposes of the Plan.

(b) Terms of Stock Units . The Committee may grant Stock Units that are payable on terms and conditions determined by the Committee, which may include payment based on achievement of performance goals. Stock Units may be paid at the end of a specified vesting or performance period, or payment may be deferred to a date authorized by the Committee in a manner that complies with section 409A of the Code. The Committee shall determine the number of Stock Units to be granted and the requirements applicable to such Stock Units.

(c) Payment With Respect to Stock Units . Payment with respect to Stock Units shall be made in cash, in Company Stock, or in a combination of the two, as determined by the Committee. The Grant Agreement shall specify the maximum number of shares that can be issued under the Stock Units.

(d) Requirement of Employment or Service . The Committee shall determine in the Grant Agreement under what circumstances a Participant may retain Stock Units after termination of the Participant’s employment or service, and the circumstances under which Stock Units may be forfeited.


9.	Stock Awards

(a) General Requirements . The Committee may issue shares of Company Stock to an Employee or Non-Employee Director under a Stock Award, upon such terms and conditions as the Committee deems appropriate under this Section 9. Shares of Company Stock issued pursuant to Stock Awards may be issued for cash consideration or for no cash consideration, and subject to restrictions or no restrictions, as determined by the Committee. The Committee may establish conditions under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Committee deems

appropriate, including restrictions based upon the achievement of specific performance goals. The Committee shall determine the number of shares of Company Stock to be issued pursuant to a Stock Award.

(b) Requirement of Employment or Service . The Committee shall determine in the Grant Agreement under what circumstances a Participant may retain Stock Awards after termination of the Participant’s employment or service, and the circumstances under which Stock Awards may be forfeited or repurchased by the Company.

(c) Restrictions on Transfer . While Stock Awards are subject to restrictions, a Participant may not sell, assign, transfer, pledge or otherwise dispose of the shares of a Stock Award except upon death as described in Section 15(a). Each certificate for a share of a Stock Award shall contain a legend giving appropriate notice of the restrictions in the Grant. The Participant shall be entitled to have the legend removed when all restrictions on such shares have lapsed. The Company may retain possession of any certificates for Stock Awards until all restrictions on such shares have lapsed.

(d) Right to Vote and to Receive Dividends . The Committee shall determine to what extent, and under what conditions, the Participant shall have the right to vote shares of Stock Awards and to receive any dividends or other distributions paid on such shares during the restriction period.


10.	Stock Appreciation Rights and Other Stock-Based Awards

(a) SARs . The Committee may grant SARs to an Employee or Non-Employee Director separately or in tandem with an Option. The following provisions are applicable to SARs:


	(i) Base Amount . The Committee shall establish the base amount of the SAR at the time the SAR is granted. The base amount of each SAR shall be equal to the per share Exercise Price of the related Option or, if there is no related Option, an amount that is at least equal to the Fair Market Value of a share of Company Stock as of the date of Grant of the SAR.

	(ii) Tandem SARs . The Committee may grant tandem SARs either at the time the Option is granted or at any time thereafter while the Option remains outstanding; provided, however, that, in the case of an Incentive Stock Option, SARs may be granted only at the date of the grant of the Incentive Stock Option. In the case of tandem SARs, the number of SARs granted to a Participant that shall be exercisable during a specified period shall not exceed the number of shares of Company Stock that the Participant may purchase upon the exercise of the related Option during such period. Upon the exercise of an Option, the SARs relating to the Company Stock covered by such Option shall terminate. Upon the exercise of SARs, the related Option shall terminate to the extent of an equal number of shares of Company Stock.

	(iii) Exercisability . A SAR shall be exercisable during the period specified by the Committee in the Grant Agreement and shall be subject to such vesting and other restrictions as may be specified in the Grant Agreement. The Committee may grant SARs that are subject to achievement of performance goals or other conditions. The Committee may accelerate the exercisability of any or all outstanding SARs at any time for any reason. The Committee shall determine in the Grant Agreement under what circumstances and during what periods a Participant may exercise a SAR after termination of employment or service. A tandem SAR shall be exercisable only while the Option to which it is related is exercisable.

	(iv) Grants to Non-Exempt Employees . SARs granted to persons who are non-exempt employees under the Fair Labor Standards Act of 1938, as amended, may not be exercisable for at least six months after the date of grant (except that such SARs may become exercisable, as determined by the Committee, upon the Participant’s death, Disability or retirement, or upon a Change of Control or other circumstances permitted by applicable regulations).

	(v) Value of SARs . When a Participant exercises SARs, the Participant shall receive in settlement of such SARs an amount equal to the value of the stock appreciation for the number of

SARs exercised. The stock appreciation for a SAR is the amount by which the Fair Market Value of the underlying Company Stock on the date of exercise of the SAR exceeds the base amount of the SAR as described in subsection (i).

(vi) Form of Payment . The Committee shall determine whether the stock appreciation for a SAR shall be paid in the form of shares of Company Stock, cash or a combination of the two. For purposes of calculating the number of shares of Company Stock to be received, shares of Company Stock shall be valued at their Fair Market Value on the date of exercise of the SAR. If shares of Company Stock are to be received upon exercise of a SAR, cash shall be delivered in lieu of any fractional share.

(b) Other Stock-Based Awards . The Committee may grant other awards not specified in Sections 7, 8 or 9 above that are based on or measured by Company Stock to Employees and Non-Employee Directors, on such terms and conditions as the Committee deems appropriate. Other Stock-Based Awards may be granted subject to achievement of performance goals or other conditions and may be payable in Company Stock or cash, or in a combination of the two, as determined by the Committee in the Grant Agreement.


11.	Dividend Equivalents .

(a) General Requirements . When the Committee makes a Grant under the Plan or anytime between the date of a Grant and the date the Grant is exercised, vests or expires, the Committee may grant Dividend Equivalents in connection with the Grant, under such terms and conditions as the Committee deems appropriate under this Section 11. Dividend Equivalents may be paid to Participants currently or may be deferred, as determined by the Committee. All Dividend Equivalents that are not paid currently shall be credited to bookkeeping accounts on the Company’s records for purposes of the Plan. Dividend Equivalents may be accrued as a cash obligation, or may be converted to Stock Units for the Participant, and deferred Dividend Equivalents may accrue interest, all as determined by the Committee. The Committee may provide that Dividend Equivalents shall be payable based on the achievement of specific performance goals. Dividend Equivalents granted with respect to Options or SARs that are intended to be qualified performance based compensation shall be payable, with respect to pre-exercise periods, regardless of whether such Option or SAR is subsequently exercised.

(b) Payment with Respect to Dividend Equivalents . Dividend Equivalents may be payable in cash or shares of Company Stock or in a combination of the two, as determined by the Committee.


12.	Qualified Performance-Based Compensation

(a) Designation as Qualified Performance-Based Compensation . The Committee may determine that Stock Units, Stock Awards, Dividend Equivalents or Other Stock-Based Awards granted to an Employee shall be considered “qualified performance-based compensation” under section 162(m) of the Code, in which case the provisions of this Section 12 shall apply and control over any contrary provision in this Plan. The Committee may also grant Options or SARs under which the exercisability of the Options is subject to achievement of performance goals as described in this Section 12 or otherwise.

(b) Performance Goals . When Grants are made under this Section 12, the Committee shall establish in writing (i) the objective performance goals that must be met, (ii) the period during which performance will be measured, (iii) the maximum amounts that may be paid if the performance goals are met, and (iv) any other conditions that the Committee deems appropriate and consistent with the requirements of section 162(m) of the Code for “qualified performance-based compensation.” The performance goals shall satisfy the requirements for “qualified performance-based compensation,” including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the performance goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goals have been met. The Committee shall not have discretion to increase the amount of compensation that is payable, but may

reduce the amount of compensation that is payable, pursuant to Grants identified by the Committee as “qualified performance-based compensation.”

(c) Criteria Used for Objective Performance Goals . The Committee shall use objectively determinable performance goals based on one or more of the following criteria: stock price, earnings per share, price-earnings multiples, net earnings, operating earnings, revenue, number of days sales outstanding in accounts receivable, productivity, margin, EBITDA (earnings before interest, taxes, depreciation and amortization), net capital employed, return on assets, shareholder return, return on equity, return on capital employed, growth in assets, unit volume, sales, cash flow, market share, relative performance to a comparison group designated by the Committee, or strategic business criteria consisting of one or more objectives based on meeting specified revenue goals, market penetration goals, customer growth, geographic business expansion goals, cost targets or goals relating to acquisitions or divestitures. The performance goals may relate to one or more business units or the performance of the Company as a whole, or any combination of the foregoing. Performance goals need not be uniform as among Participants.

(d) Timing of Establishment of Goals . The Committee shall establish the performance goals in writing either before the beginning of the performance period or during a period ending no later than the earlier of (i) 90 days after the beginning of the performance period or (ii) the date on which 25% of the performance period has been completed, or such other date as may be required or permitted under applicable regulations under section 162(m) of the Code.

(e) Certification of Results . The Committee shall certify the performance results for the performance period specified in the Grant Agreement after the performance period ends. The Committee shall determine the amount, if any, to be paid pursuant to each Grant based on the achievement of the performance goals and the satisfaction of all other terms of the Grant Agreement.

(f) Death, Disability or Other Circumstances . The Committee may provide in the Grant Agreement that Grants under this Section 12 shall be payable, in whole or in part, in the event of the Participant’s death or Disability, a Change of Control or under other circumstances consistent with the Treasury regulations and rulings under section 162(m) of the Code.


13.	Deferrals

The Committee may permit or require a Participant to defer receipt of the payment of cash or the delivery of shares that would otherwise be due to the Participant in connection with any Grant. The Committee shall establish rules and procedures for any such deferrals, consistent with applicable requirements of section 409A of the Code. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Committee determines that a Grant may be subject to section 409A of the Code and related Department of Treasury guidance, the Committee may adopt such amendments to the Plan and the applicable Grant Agreements or take any other actions that the Committee determines are necessary or appropriate to (a) exempt the Grant from section 409A of the Code and/or preserve the intended tax treatment of the benefits with respect to the Grant, or (b) comply with the requirements of section 409A of the Code and the applicable guidance.


14.	Withholding of Taxes

(a) Required Withholding . All Grants under the Plan shall be subject to applicable federal (including FICA), state and local tax withholding requirements. The Company may require that the Participant or other person receiving or exercising Grants pay to the Company the amount of any federal, state or local taxes that the Company is required to withhold with respect to such Grants, or the Company may deduct from other wages paid by the Company the amount of any withholding taxes due with respect to such Grants.

(b) Election to Withhold Shares . If the Committee so permits, a Participant may elect to satisfy the Company’s tax withholding obligation with respect to Grants paid in Company Stock by having shares withheld, at the time such Grants become taxable, up to an amount that does not exceed the minimum

applicable withholding tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form and manner prescribed by the Committee.


15.	Transferability of Grants

(a) Restrictions on Transfer . No right or interest of a Participant in any Grant may be pledged, encumbered or hypothecated to or in favor of any party other than the Company or a subsidiary. Except as described in subsection (b) below, only the Participant may exercise rights under a Grant during the Participant’s lifetime, and a Participant may not transfer those rights except by will or by the laws of descent and distribution. When a Participant dies, the personal representative or other person entitled to succeed to the rights of the Participant may exercise such rights. Any such successor must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Participant’s will or under the applicable laws of descent and distribution.

(b) Transfer of Nonqualified Stock Options to or for Family Members . Notwithstanding the foregoing, the Committee may provide, in a Grant Agreement, that a Participant may transfer Nonqualified Stock Options to family members, charitable institutions or one or more trusts or other entities for the benefit of or owned by family members, consistent with the applicable securities laws, according to such terms as the Committee may determine; provided that the Participant receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer.


16.	Consequences of a Change of Control

(a) In the event of a Change of Control, the Committee may take any one or more of the following actions with respect to or all outstanding Grants, without the consent of any Participant: (i) the Committee may determine that outstanding Options and SARs shall be fully exercisable, and restrictions on outstanding Stock Awards and Stock Units shall lapse, as of the date of the Change of Control or at such other time as the Committee determines, (ii) the Committee may require that Participants surrender their outstanding Options and SARs in exchange for one or more payments by the Company, in cash or Company Stock as determined by the Committee, in an amount equal to the amount by which the then Fair Market Value of the shares of Company Stock subject to the Participant’s unexercised Options and SARs exceeds the Exercise Price, if any, and on such terms as the Committee determines, (iii) after giving Participants an opportunity to exercise their outstanding Options and SARs, the Committee may terminate any or all unexercised Options and SARs at such time as the Committee deems appropriate, (iv) with respect to Participants holding Stock Units, Other Stock-Based Awards or Dividend Equivalents, the Committee may determine that such Participants shall receive one or more payments in settlement of such Stock Units, Other Stock-Based Awards or Dividend Equivalents, in such amount and form and on such terms as may be determined by the Committee, or (v) the Committee may determine that Grants that remain outstanding after the Change of Control shall be converted to similar grants of, or assumed by, the surviving corporation (or a parent or subsidiary of the surviving corporation or successor). Such acceleration, surrender, termination, settlement or conversion shall take place as of the date of the Change of Control or such other date as the Committee may specify.

(b) Other Transactions . The Committee may provide in a Grant Agreement that a sale or other transaction involving a subsidiary or other business unit of the Company shall be considered a Change of Control for purposes of a Grant, or the Committee may establish other provisions that shall be applicable in the event of a specified transaction.


17.	Requirements for Issuance of Shares

No Company Stock shall be issued in connection with any Grant hereunder unless and until all legal requirements applicable to the issuance of such Company Stock have been complied with to the satisfaction of the Committee. The Committee shall have the right to condition any Grant made to any Participant hereunder on such Participant’s undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares of Company Stock as the Committee shall deem necessary or

advisable, and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing shares of Company Stock issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon. No Participant shall have any right as a shareholder with respect to Company Stock covered by a Grant until shares have been issued to the Participant.


18.	Amendment and Termination of the Plan

(a) Amendment . The Board may amend or terminate the Plan at any time; provided, however, that the Board shall not amend the Plan without approval of the shareholders of the Company if such approval is required in order to comply with the Code or applicable laws, or to comply with applicable stock exchange requirements. No amendment or termination of this Plan shall, without the consent of the Participant, materially impair any rights or obligations under any Grant previously made to the Participant under the Plan, unless such right has been reserved in the Plan or the Grant Agreement, or except as provided in Sections 13 above or 19(b) below. Notwithstanding anything in the Plan to the contrary, the Board may amend the Plan in such manner as it deems appropriate in the event of a change in applicable law or regulations.

(b) No Repricing Without Shareholder Approval . Notwithstanding anything in the Plan to the contrary, the Committee may not reprice Options, nor may the Board amend the Plan to permit repricing of Options, unless the shareholders of the Company provide prior approval for such repricing. The term “repricing” shall have the meaning given that term in section 303A(8) of the New York Stock Exchange Listed Company Manual, as in effect from time to time.

(c) Shareholder Approval for “Qualified Performance-Based Compensation .” If Grants are made under Section 12 above, the Plan must be reapproved by the Company’s shareholders no later than the first shareholders meeting that occurs in the fifth year following the year in which the shareholders previously approved the provisions of Section 12, if additional Grants are to be made under Section 12 and if required by section 162(m) of the Code or the regulations thereunder.

(d) Termination of Plan . The Plan shall terminate on the day immediately preceding the tenth anniversary of its Effective Date, unless the Plan is terminated earlier by the Board or is extended by the Board with the approval of the shareholders. The termination of the Plan shall not impair the power and authority of the Committee with respect to an outstanding Grant.


19.	Miscellaneous

(a) Grants in Connection with Corporate Transactions and Otherwise . Nothing contained in this Plan shall be construed to (i) limit the right of the Committee to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who become Employees, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other stock-based awards outside of this Plan. Without limiting the foregoing, the Committee may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company in substitution for a grant made by such corporation. The terms and conditions of the Grants may vary from the terms and conditions required by the Plan and from those of the substituted stock incentives, as determined by the Committee.

(b) Compliance with Law . The Plan, the exercise of Options and the obligations of the Company to issue or transfer shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is the intent of the Company that Incentive Stock Options comply with the applicable provisions of section 422 of the Code, that Grants of “qualified performance-based compensation” comply

with the applicable provisions of section 162(m) of the Code and that, to the extent applicable, Grants comply with the requirements of section 409A of the Code. To the extent that any legal requirement of section 16 of the Exchange Act or section 422, 162(m) or 409A of the Code as set forth in the Plan ceases to be required under section 16 of the Exchange Act or section 422, 162(m) or 409A of the Code, that Plan provision shall cease to apply. The Committee may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Committee may also adopt rules regarding the withholding of taxes on payments to Participants. The Committee may, in its sole discretion, agree to limit its authority under this Section.

(c) Enforceability . The Plan shall be binding upon and enforceable against the Company and its successors and assigns.

(d) Funding of the Plan; Limitation on Rights . This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. Nothing contained in the Plan and no action taken pursuant hereto shall create or be construed to create a fiduciary relationship between the Company and any Participant or any other person. No Participant or any other person shall under any circumstances acquire any property interest in any specific assets of the Company. To the extent that any person acquires a right to receive payment from the Company hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.

(e) Rights of Participants . Nothing in this Plan shall entitle any Employee, Non-Employee Director or other person to any claim or right to receive a Grant under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employment or service of the Employer.

(f) No Fractional Shares . No fractional shares of Company Stock shall be issued or delivered pursuant to the Plan or any Grant. The Committee shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

(g) Employees Subject to Taxation Outside the United States . With respect to Participants who are subject to taxation in countries other than the United States, the Committee may make Grants on such terms and conditions as the Committee deems appropriate to comply with the laws of the applicable countries, and the Committee may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws.

(h) Governing Law . The validity, construction, interpretation and effect of the Plan and Grant Agreements issued under the Plan shall be governed and construed by and determined in accordance with the laws of the State of New York, without giving effect to the conflict of laws provisions thereof.

(i) Indemnification . To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified or held harmless by the Company from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit or proceeding to which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit or proceeding against him or her; provided he or she gives the Company an opportunity to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Corporation or Bylaws as a matter of law, or otherwise, any power that the Company may have to indemnify them or hold them harmless.

(j) Relationship to other Benefits . No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any subsidiary except to the extent otherwise expressly provided in writing in such other plan or in agreement thereunder.

(k) Expenses . The expenses of administering the Plan shall be borne by the Company.

Exhibit 31(i).1

CERTIFICATION

I, Raúl Alarcón, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Spanish Broadcasting System, Inc.;

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 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 13(a)-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 controls 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 occured during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer 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 registrant’s board of directors (or persons performing the equivalent function):

(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.

/s/ Raúl Alarcón, Jr.

Name: Raúl Alarcón, Jr.


	Title:	Chairman of the Board of Directors,

Chief Executive Officer and President

Date: August 8, 2006

Exhibit 31(i).2

CERTIFICATION

I, Joseph A. García, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Spanish Broadcasting System, Inc.;

(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.

/s/ Joseph A. García

Name: Joseph A. García


	Title:	Chief Financial Officer,

Executive Vice President and Secretary

Date: August 8, 2006

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Spanish Broadcasting System, Inc. (the “Company”) for the quarterly period ended June 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Raúl Alarcón, Jr., Chairman of the Board of Directors, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Raúl Alarcón, Jr.

Name: Raúl Alarcón, Jr.


	Title:	Chairman of the Board of Directors,

President and Chief Executive Officer

Date: August 8, 2006

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Spanish Broadcasting System, Inc. (the “Company”) for the quarterly period ended June 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph A. García, Chief Financial Officer, Executive Vice President and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Joseph A. García

Name: Joseph A. García


	Title:	Chief Financial Officer,

Executive Vice President and Secretary

Date: August 8, 2006

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	(as determined by the Committee) of any dividend in consideration other than cash, paid by the Company on its Company Stock.

	(i) “Effective Date” of the Plan means July 18, 2006, subject to approval of the Plan by the shareholders of the Company.

	(j) “Employee” means an employee of the Employer (including an officer or director who is also an employee).

	(k) “Employer” means the Company and its subsidiaries.

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

	(m) “Exercise Price” means the per share price at which shares of Company Stock may be purchased under an Option, as designated by the Committee.

	(n) “Fair Market Value” of Company Stock means as of any given date, unless the Committee determines otherwise with respect to a particular Grant, (i) if the principal trading market for the Company Stock is a national securities exchange such as the New York Stock Exchange or the Nasdaq National Market, the last reported sale price of Company Stock on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, (ii) if the Company Stock is not principally traded on such exchange or market, the mean between the last reported “bid” and “asked” prices of Company Stock on the relevant date, as reported on Nasdaq or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Committee determines, or (iii) if the Company Stock is not publicly traded or, if publicly traded, is not subject to reported transactions or “bid” or “asked” quotations as set forth above, the Fair Market Value per share shall be as determined by the Committee through the reasonable application of a reasonable valuation method.

	(o) “Grant” means an Option, Stock Unit, Stock Award, SAR, Dividend Equivalent or Other Stock-Based Award granted under the Plan.

	(p) “Grant Agreement” means the written instrument that sets forth the terms and conditions of a Grant, including all amendments thereto.

	(q) “Incentive Stock Option” means an Option that is intended to meet the requirements of an incentive stock option under section 422 of the Code or any successor provision thereto.

	(r) “Non-Employee Director” means a member of the Board who is not an employee of the Employer.

	(s) “Nonqualified Stock Option” means an Option that is not intended to be an Incentive Stock Option.

	(t) “Option” means a right granted to a Participant to purchase shares of Company Stock, as described in Section 7.

	(u) “Other Stock-Based Award” means any Grant based on, measured by or payable in Company Stock (other than a Grant described in Sections 7, 8, 9 or 10 of the Plan), as described in Section 11.

	(v) “Participant” means an Employee or Non-Employee Director designated by the Committee to participate in the Plan.

	(w) “Plan” means this Spanish Broadcasting System, Inc. 2006 Omnibus Equity Compensation Plan, as in effect from time to time.

	(x) “SAR” means a stock appreciation right as described in Section 10.

	(y) “Stock Award” means an award of Company Stock as described in Section 9.

	(z) “Stock Unit” means an award of a phantom unit representing a share of Company Stock, as described in Section 8.


	SARs exercised. The stock appreciation for a SAR is the amount by which the Fair Market Value of the underlying Company Stock on the date of exercise of the SAR exceeds the base amount of the SAR as described in subsection (i).

	(vi) Form of Payment . The Committee shall determine whether the stock appreciation for a SAR shall be paid in the form of shares of Company Stock, cash or a combination of the two. For purposes of calculating the number of shares of Company Stock to be received, shares of Company Stock shall be valued at their Fair Market Value on the date of exercise of the SAR. If shares of Company Stock are to be received upon exercise of a SAR, cash shall be delivered in lieu of any fractional share.