SPANISH BROADCASTING SYSTEM INC, 424B4, 1999-10-29

SPANISH BROADCASTING SYSTEM INC
424B4, 1999-10-29
RADIO BROADCASTING STATIONS

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<PAGE> 1
As Filed Pursuant to Rule 424(b)(4)
Registration Nos. 333-85519;
333-85519-01; 333-85519-02;
333-85519-03; 333-85519-04;
333-85519-05; 333-85519-06;
333-85519-07; 333-85519-08;
333-85519-09; 333-85519-10;
333-85519-11; 333-85519-12
333-85519-14
PROSPECTUS
$235,000,000
SPANISH BROADCASTING SYSTEM, INC.

9 5/8% Senior Subordinated Notes due 2009
SPS LOGO
- --------------------------------------------------------------------------------

This is an offering by Spanish Broadcasting System, Inc. of $235.0 million
aggregate principal amount of its 9 5/8% Senior Subordinated Notes due 2009.
Interest on the notes is payable semi-annually in arrears on May 1 and November
1 of each year, beginning on May 1, 2000. This offering is conditioned upon
completion of an initial public offering of our Class A Common Stock, and we
cannot assure you that the Class A Common Stock offering will be completed on
terms that are favorable to us or at all.

At any time prior to November 1, 2002, we may redeem up to 35% of the notes with
the proceeds of certain equity offerings. On or after November 1, 2004, we may
redeem all or a part of the notes at prices specified in this prospectus under
"Description of Notes -- Optional Redemption."

These notes will be general unsecured obligations of Spanish Broadcasting
System, Inc. and will be subordinated in right of payment to all of our existing
and future senior debt. The notes will be unconditionally guaranteed by certain
of our subsidiary guarantors as described in "Description of Notes -- Subsidiary
Guarantees."

INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 12.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these notes or determined if this
offering memorandum is truthful or complete. Any representation to the contrary
is a criminal offense.

<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- ------------
<S> <C> <C>
Public Offering Price....................................... 100.00% $235,000,000

Underwriting Discount....................................... 3.00% $ 7,050,000

Proceeds to Spanish Broadcasting System, Inc................ 97.00% $227,950,000
</TABLE>

The underwriters expect to deliver the notes on or about November 2, 1999.

- --------------------------------------------------------------------------------

LEHMAN BROTHERS CIBC WORLD MARKETS

October 28, 1999
<PAGE> 2

[ARTWORK]
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More
Information...................... v
Forward-Looking Statements......... v
Summary............................ 1
Risk Factors....................... 12
Use of Proceeds.................... 20
Ratio of Earnings to Fixed
Charges.......................... 21
Capitalization..................... 22
Selected Historical Consolidated
Financial Information............ 23
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 26
Business........................... 37
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management......................... 61
Executive Compensation............. 63
Principal Stockholders............. 68
Certain Relationships and Related
Transactions..................... 69
Description of Other
Indebtedness..................... 71
Description of Notes............... 73
Certain Federal Income Tax
Considerations................... 114
Underwriting....................... 118
Legal Matters...................... 119
Experts............................ 120
Index to Consolidated Financial
Statements....................... F-1
</TABLE>

ABOUT THIS PROSPECTUS

- - You should rely only on the information contained in this prospectus or to
which we have referred you. We have not, and our underwriters have not,
authorized anyone to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely
on it. We are not, and the underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. The
information in this prospectus may only be accurate on the date of this
prospectus.

- - You should read the entire prospectus before making an investment decision.
The information in this prospectus may not contain all of the information that
may be important to you.

- - All references to "we", "us", "our", "SBS" or "our Company" in this prospectus
mean Spanish Broadcasting System, Inc., a Delaware corporation, and all
entities owned or controlled by Spanish Broadcasting System, Inc. and, if
prior to 1994, refer to our predecessor parent company SBS-NJ.

- - All references to "SBS-NJ" in this prospectus mean our predecessor parent
company Spanish Broadcasting System, Inc., a New Jersey corporation.

- - Unless otherwise indicated, the titles of each officer are those which each
officer will hold upon completion of our Class A Common Stock offering.

- - All references to "FCC" in this prospectus refer to the Federal Communications
Commission.

- - When citing Arbitron(C) Survey data, all references to the "United States"
include the 50 states, the District of Columbia and the Commonwealth of Puerto
Rico.

- - Unless otherwise indicated, all references to "U.S. Hispanic", "Hispanic
markets in the United States" and similar phrases in this prospectus include
Hispanics in the United States and the Commonwealth of Puerto Rico.

- - All references to "N/A" in this prospectus mean "not available."

ii
<PAGE> 4

- - The term "broadcast cash flow" means operating income before depreciation,
amortization and corporate expenses. Broadcast cash flow should not be
considered in isolation from, or as a substitute for, net income or cash flow
and other consolidated income or cash flow statement data or as a measure of
our profitability or liquidity. Although broadcast cash flow is not a measure
of performance calculated in accordance with generally accepted accounting
principles, broadcast cash flow is widely used in the broadcasting industry as
a measure of a broadcasting company's operating performance.

- - The term "EBITDA" means earnings before extraordinary items, gain on sale of
AM stations, net interest expense, income taxes, depreciation, amortization
and other income or expenses. We have included information concerning EBITDA
in this prospectus because it is used by some investors as a measure of a
company's ability to service its debt obligations. Although EBITDA is not a
measure of performance calculated in accordance with generally accepted
accounting principles, EBITDA is widely used in the broadcasting industry as a
measure of a broadcasting company's operating performance.

- - The term "after-tax cash flow" means income before income tax benefit
(expense) and extraordinary items, minus net gain on sale of AM stations (net
of tax) and the current income tax provision, plus depreciation and
amortization expense. Although after-tax cash flow is not a measure of
performance calculated in accordance with generally accepted accounting
principles, after-tax cash flow is widely used in the broadcasting industry as
a measure of a broadcasting company's operating performance.

- - On September 30, 1999, we commenced consent solicitations and tender offers to
repurchase our 11% notes and 12 1/2% notes. We have received consents and
tenders from the holders of 100% of our 11% notes and 99.7% of our 12 1/2%
notes. We and the trustee under each of the indentures have executed and
delivered supplemental indentures deleting many of the financial covenants
from the respective indentures. However, the supplemental indentures will not
become operative until we accept and pay for the notes.

- - On September 29, 1999, we filed a third amended and restated certificate of
incorporation which resulted in (1) the redesignation of our previously
outstanding shares of Class A Common stock into shares of Class B Common
Stock, (2) a 50-to-1 stock split of our Class B Common Stock, and (3) a
reduction in the par value of our Class A Common Stock and Class B Common
Stock from $0.01 per share to $0.0001 per share. All financial information has
been restated to reflect this redesignation, stock split and change in par
value.

- - Our fiscal year is the twelve months ended on the last Sunday in September.

- - We operate a Web site at www.lamusica.com. The information on our Web site is
not part of this prospectus.

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SOURCES OF INFORMATION

- - Unless otherwise indicated, all market revenue share and revenue rankings in
this prospectus are based on information for calendar year 1999 contained in
James H. Duncan, Jr., Duncan's Radio Market Guide (1999 ed.), Miller, Kaplan,
Arase & Co., Certified Public Accountants, Executive Summary, June 1999
(Miller Kaplan), Hungerford Radio Revenue Reports, 1999 (Hungerford) and BIA
Research, Inc.'s, Investing in Radio, 1999 Market Report (BIA Research).

- - Revenue rank and revenue share information are reported cumulatively for each
calendar quarter and, therefore, include the period from January 1 through the
date indicated.

- - Unless otherwise indicated, rank in audience share data in this prospectus is
based on the "12+ average quarter hour share." This refers to the number of
persons, aged 12 and over, who listen to a radio station for at least five
minutes in a quarter-hour segment Monday through Sunday, 6:00 a.m. to midnight
in the most recent survey period (Spring 1999) as reported by the Arbitron(C)
Company, Arbitron(C) Radio Market Reports (copyright 1999). Further, and
unless otherwise noted, references in this prospectus to the rank of a station
among all the radio stations within a market have been determined with
reference to all radio stations rated by Arbitron(C) within the applicable
market.

- - Arbitron(C) does not rank radio stations. All references in this prospectus to
radio station rankings from Arbitron(C) Surveys reflect our analysis of
information published by Arbitron(C).

- - Unless otherwise indicated, all references to the demographic statistics in
this prospectus are derived from the Strategy Research Corporation -- 1998
United States Hispanic Market Study, the 1990 and 1997 reports by the Bureau
of the U.S. Census and Hispanic Business Magazine. This market study is
sponsored by advertisers and other businesses targeting the Hispanic market,
including SBS and many of our principal competitors.

iv
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WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Exchange Act. The file number for our SEC
filings is 33-82114. You may read and copy any document we file at the following
SEC public reference rooms:

<TABLE>
<S> <C> <C>
Judiciary Plaza 500 West Madison Street 7 World Trade Center
450 Fifth Street, N.W. 14th Floor Suite 1300
Room 1024 Chicago, Illinois 60661 New York, New York 10048
Washington, D.C. 20549
</TABLE>

We file information electronically with the SEC. Our SEC filings also are
available from the SEC's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements and other information regarding
issuers that file electronically. We expect that our Class A Common Stock will
be listed on The Nasdaq National Market.

This prospectus is part of a Form S-1 registration statement we are filing
with the SEC. The SEC allows us to incorporate by reference any exhibits
referred to in this prospectus.

We will provide a copy of the exhibits we incorporate by reference, at no
cost, to any person who receives this prospectus, including any beneficial owner
of our common stock. To request a copy of any or all of these exhibits, you
should write or telephone us at the following address and telephone number:
Spanish Broadcasting System, Inc.
3191 Coral Way
Miami, FL 33145
Telephone: (305) 441-6901
Attention: Joseph A. Garcia

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, including statements
under the captions "Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business" and
elsewhere in this prospectus, concerning our expectations of future sales, gross
profits, research and development expenses, selling, general and administrative
expenses, product introductions and cash requirements. Forward-looking
statements often include words or phrases such as "will likely result,"
"expect," "will continue," "anticipate," "estimate," "intend," "plan,"
"project," "outlook" or similar expressions. The statements are not guarantees
of future performance and are subject to certain risks, uncertainties and other
factors, some of which are beyond our control, are difficult to predict and
could cause actual results to differ materially from those expressed in the
forward-looking statements. Actual results may vary materially from those
expressed in forward-looking statements. Factors which could cause actual
results to differ from expectations include those in the "Risk Factors" section
of this prospectus. We cannot assure you that our results of operations will not
be adversely affected by one or more of these factors. We caution you not to
place undue reliance on these forward-looking statements, which reflect our
management's view only as of the date of this prospectus. We are not obligated
to update these statements or publicly release the results of any revisions to
them to reflect events or circumstances occurring after the date of this
prospectus or to reflect the occurrence of unanticipated events.

v
<PAGE> 7

SUMMARY

This summary contains a general discussion of our business, this offering
and summary financial information. It does not contain all the information that
may be important to you. You should read the entire prospectus and the documents
to which we have referred you, including the financial data and the information
set forth under the heading "Risk Factors" for a more complete understanding of
Spanish Broadcasting System, Inc. and this offering.

OUR COMPANY

INTRODUCTION

Spanish Broadcasting System, Inc. was founded in 1983 and is the second
largest Spanish-language radio broadcasting company in the United States. We
currently own and operate 13 FM radio stations and have agreed to purchase eight
additional stations in Puerto Rico. We also have entered into a memorandum of
understanding to sell our two radio stations located in the Florida Keys. Eleven
of our stations are located in six of the largest Hispanic markets in the United
States, including Los Angeles, Puerto Rico, New York, Miami, Chicago and San
Antonio. Our radio stations reach over 51% of the U.S. Hispanic population. Our
WSKQ-FM station in New York is ranked in the Spring 1999 Arbitron(C) ratings as
the number one station in its target demographic group (men and women, ages
25-54).

Our strategy is to maximize the profitability of our radio station
portfolio and to expand in our existing markets and into additional markets that
have a significant Hispanic population. We believe that the favorable
demographics of the U.S. Hispanic population and the rapid increase in
advertising targeting Hispanics provide us with significant opportunities for
growth. We also believe that we have competitive advantages in the radio
industry due to our focus on formats targeting U.S. Hispanic audiences and our
skill in programming and marketing to these audiences.

Our Internet strategy complements our existing business and enables us to
capitalize on our U.S. Hispanic market expertise. We recently purchased 80% of
JuJu Media, Inc., the owner of LaMusica.com, a bilingual Spanish-English
Internet Web site and on-line community that focuses on the U.S. Hispanic
market. LaMusica.com is a provider of original information and interactive
content related to Latin music, entertainment, news and culture. LaMusica.com
provides our advertisers with an additional means of reaching the U.S. Hispanic
consumer markets and is a growing revenue source for us.

Due to the successful implementation of our strategy, we have achieved
significant growth over the last two years. From the twelve-month period ended
June 29, 1997 to the twelve-month period ended June 27, 1999, our:

- net revenues grew at a compound annual rate of 29.3%, from $55.0 million
to $91.9 million;

- broadcast cash flow grew at a compound annual rate of 35.8%, from $26.5
million to $48.9 million; and

- EBITDA grew at a compound annual rate of 35.5%, from $21.5 million to
$39.5 million.

SBS is led by Mr. Raul Alarcon, Jr., who has been our Chief Executive
Officer since June 1994, President and a director since October 1985 and who
will become Chairman of the Board of Directors upon the completion of the Class
A Common Stock offering. The Alarcon family has been involved in
Spanish-language radio broadcasting since the 1950's, when Mr. Pablo Raul
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<PAGE> 8

Alarcon, Sr., our Chairman Emeritus and a member of our board of directors,
established his first radio station in Camaguey, Cuba. Members of our senior
management team, on average, have over 15 years of experience in
Spanish-language media and radio broadcasting.

We are a corporation organized under the laws of the State of Delaware. Our
executive offices are located at 3191 Coral Way, Miami, Florida 33145, and our
telephone number is (305) 441-6901.

MARKET OPPORTUNITY

Our radio stations target the largest Hispanic markets in the United
States, including Puerto Rico. We believe that these markets have significant
growth potential for the following reasons:

- HISPANIC POPULATION GROWTH. The U.S. Hispanic population, approximately
34.3 million people, is the fastest growing segment of the U.S.
population, growing at approximately four times the rate of the
population as a whole. By 2005, Hispanics are projected to become the
largest minority group in the United States and by 2010, the second
largest Spanish-speaking population in the world.

- SIGNIFICANT GEOGRAPHIC CONCENTRATION. The U.S. Hispanic population is
highly concentrated with over 62% of U.S. Hispanics residing in the top
ten U.S. Hispanic markets. Because our stations are located in six of
these markets, advertisers can reach the U.S. Hispanic population more
cost effectively by advertising on our stations rather than advertising
through competing national media.

- ATTRACTIVE DEMOGRAPHIC GROUP FOR ADVERTISERS. The U.S. Hispanic
population accounted for estimated consumer spending of $380.0 billion in
1998 (7.4% of total U.S. consumer spending), an increase of 78.4% since
1990. By 2000, U.S. Hispanics are expected to account for estimated
consumer spending of $457.8 billion (8.2% of total U.S. consumer
spending), and by 2010 are expected to account for estimated consumer
spending of $965.3 billion (12% of total U.S. consumer spending), far
outpacing the expected growth of overall U.S. consumer spending during
the same period.

- USE OF SPANISH LANGUAGE. Approximately 69% of U.S. Hispanics speak
Spanish at home and we believe this percentage will remain relatively
constant for the near future. We believe that the continued use of
Spanish by U.S. Hispanics and their preference for Spanish-language music
will contribute to the continued popularity of Spanish-language radio as
a source of entertainment, information and culture for the U.S. Hispanic
population.

- INTERNET USAGE. Approximately 36% of the U.S. Hispanic population
(excluding Puerto Rico) currently accesses the Internet, a percentage
which we expect will increase over the
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next few years. We believe the Internet represents a complementary medium
for our advertisers to reach our target audience.

SBS AND OUR MARKETS

The table below lists the six markets where we currently own and operate
radio stations in the United States.

<TABLE>
<CAPTION>
1999
HISPANIC AUDIENCE TOTAL TOTAL ANNUAL MARKET 1998 POPULATION
MARKET SHARE AUDIENCE REVENUE RADIO RANKING --------------------
NUMBER AUDIENCE RANK SHARE % SHARE % REVENUE BY SIZE OF TOTAL HISPANIC
OF SHARE (BY TARGET (GENERAL (GENERAL ALL MARKETS HISPANIC (IN % OF
MARKET STATIONS RANK AUDIENCE) MARKET) MARKET) ($ MILLIONS) POPULATION MILLIONS) TOTAL
- ------ -------- --------- ---------- -------- -------- ------------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Los Angeles.......... 1 3 8 3.0 2.7 $727 1 16.3 38.7
Puerto Rico.......... 3 N/A 2, 12, 25 6.7 N/A 90 2 3.8 99.6
New York............. 2 1, 2 1, 11 8.0 7.3 688 3 20.1 18.1
Miami................ 3 3, 4, 5 7, 10, 14 9.4 11.7 233 4 3.7 38.1
Chicago.............. 1 1 7 2.4 2.6 471 6 9.4 12.7
San Antonio.......... 1 3 8 2.5 2.7 78 8 2.1 51.6
--
Total................ 11
</TABLE>

- Audience share and audience share rank data were obtained from the Spring
1999 Arbitron(C) Survey.

- Estimated revenue share information for all markets other than Chicago
was obtained from BIA Research and Miller Kaplan data. Revenue share
information for the Chicago market was obtained from Hungerford data.

- Population data were derived from the Strategy Research
Corporation -- 1998 U.S. Hispanic Market Report and 1990 and 1997
population reports from the Bureau of the U.S. Census.

- We currently own three radio stations in Puerto Rico, WCMA-FM (formerly
WDOY-FM), WMEG-FM and WEGM-FM. WMEG-FM and WEGM-FM are simulcast, but
have separate Arbitron(C) ratings. We have agreed to purchase eight
additional radio stations in Puerto Rico.

- We own and operate one radio station in each of Key West and Key Largo,
WVMQ-FM and WZMQ-FM, respectively, which are simulcast but are not rated
by Arbitron(C). We have entered into a memorandum of understanding to
sell these stations to Mr. Alarcon, Sr. upon completion of this offering.
Information with respect to these stations is not included in this table.

BUSINESS STRATEGY

We focus on maximizing the profitability of our radio station portfolio by
strengthening the performance of our existing radio stations and making
additional strategic station acquisitions in both our existing markets and in
new markets that have a significant Hispanic population. In addition, we are
implementing an Internet strategy in order to develop new revenue sources.
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<PAGE> 10

OPERATING STRATEGY. Our operating strategy focuses on maximizing our radio
stations' appeal to our audience and our advertisers while minimizing operating
expenses, in order to grow revenue and cash flow. To achieve these goals, we
focus on:

- providing high-quality Spanish-language programming;

- retaining strong local management teams;

- utilizing aggressive sales efforts;

- controlling operating costs;

- making effective use of promotions and special events; and

- maintaining strong community involvement.

ACQUISITION STRATEGY. Our acquisition strategy is to acquire radio
stations in the largest U.S. Hispanic markets. We consider acquisitions of
stations in our existing markets, as well as acquisitions in other markets with
a large Hispanic population where we can maximize our revenues through
aggressive sales to U.S. Hispanic and general market advertisers. These
acquisitions may include stations that do not currently target the U.S. Hispanic
market, but which we believe can be successfully reformatted.

INTERNET STRATEGY. Our Internet strategy is designed to complement our
existing business and to enable us to capitalize on our U.S. Hispanic market
expertise. The core of our strategy is LaMusica.com, an Internet Web site and
on-line community focused on the U.S. Hispanic market. This Web site offers all
of our radio stations' broadcasts through the use of audio streaming technology
and will provide our advertisers with a complementary means of reaching their
target audience.

PENDING TRANSACTIONS

PURCHASE OF ADDITIONAL PUERTO RICO STATIONS. On September 22, 1999, we
entered into an agreement to purchase all of the outstanding capital stock of
nine subsidiaries of Chancellor Media Corporation of Los Angeles. The companies
we have agreed to purchase own and operate eight radio stations in Puerto Rico:
WIOA-FM, WIOB-FM, WIOC-FM, WCOM-FM, WZMT-FM, WZNT-FM, WOYE-FM and WCTA-FM. The
purchase price we have agreed to pay for these companies is $90.0 million. In
connection with the acquisition, we have made an initial nonrefundable deposit
of $10.0 million. The agreement contains customary representations and
warranties, and the closing of our acquisition of these companies is subject to
the satisfaction of certain customary conditions, including receipt of
regulatory approval from the FCC. We expect to finance the purchase of these
companies from a combination of bank borrowings and cash on hand. Prior to the
closing of this acquisition (but following the expiration of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended), we intend to operate these stations under a local marketing
agreement pursuant to which we will pay a monthly fee in exchange for the
exclusive right to program and sell commercial announcements for each of the
stations. We expect to close our acquisition of these companies by the end of
December 1999. We cannot assure you, however, that we will be able to complete
the acquisition of these companies during the expected time frame or at all.
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According to financial information provided to us by Chancellor Media
Corporation of Los Angeles, these companies had the following financial results:

- Net revenues of $6.7 million for the six months ended June 30, 1999
(unaudited); and

- Broadcast cash flow of $2.2 million for the six months ended June 30,
1999 (unaudited); and

SALE OF FLORIDA KEYS STATIONS. We have entered into a memorandum of
understanding with Mr. Alarcon, Sr., our Chairman Emeritus and a member of our
board of directors for the sale by us of the assets and liabilities of radio
station WVMQ-FM operating in Key West, Florida and radio station WZMQ-FM
operating in Key Largo, Florida. The sale price to be paid by Mr. Alarcon, Sr.
for these stations is $700,000. The definitive agreement will contain customary
representations, warranties and indemnities, and the closing of the sale of
these stations will be subject to the satisfaction of certain conditions,
including approval from the FCC, the completion of this offering and the receipt
by Mr. Alarcon, Sr. of his portion of the proceeds of this offering as a selling
stockholder. We cannot assure you that the sale of these stations will occur
during the expected time frame or at all.

These two stations had the following financial results:

- Net revenues of $165,873 for the nine months ended June 27, 1999
(unaudited) and $8,712 for the fiscal year ended September 28, 1998
(unaudited); and

- Negative broadcast cash flow of $351,666 for the nine months ended June
27, 1999 (unaudited) and negative broadcast cash flow of $324,219 for the
fiscal year ended September 28, 1998 (unaudited).

CONCURRENT CLASS A COMMON STOCK OFFERING AND FINANCING PLAN

The net proceeds we will receive from this offering and our concurrent
Class A Common Stock offering are estimated to be approximately $227.0 million
and $327.1 million, respectively. We will not receive any proceeds from the sale
of Class A Common Stock by the selling stockholders in the Class A Common Stock
offering. This offering is conditioned upon the completion of our Class A Common
Stock offering. The Class A Common Stock offering is not conditioned on this or
any other offering. We have entered into a commitment letter for the arrangement
of financing in an amount of up to $200 million with Lehman Commercial Paper
Inc., as administrative agent and Lehman Brothers Inc., as sole lead arranger
and book running manager. This financing is expected to consist of senior credit
facilities including: (1) a $50.0 million six-year revolving credit facility,
maturing in 2005, and (2) a $150.0 million six-year delayed draw (15-months to
draw) senior term loan facility, maturing in 2005. The senior credit facilities
are conditioned upon, among other things, (1) the execution of definitive
documentation on or before November 12, 1999 in form and substance satisfactory
to the senior lenders, (2) the completion of this offering and the offering of
our Class A Common Stock, and (3) the redemption of our preferred stock.

We intend to use the net proceeds from this offering, our concurrent Class
A Common Stock offering and the repayment of stockholder loans to (1) redeem our
preferred stock at 105% of aggregate liquidation preference, (2) repurchase our
11% notes and 12 1/2% notes at approximately 111% and 114% of their par value,
respectively, pursuant to the tender offers and consent solicitations we
commenced on September 30, 1999, (3) purchase an annuity for two of our retiring
executives at an estimated cost of approximately $10.6 million, and (4) for
general
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<PAGE> 12

corporate purposes. We cannot assure you that we will complete the senior credit
facilities on terms that are favorable to us or that the tender for the 11%
notes and 12 1/2% notes will be completed in the anticipated time period or at
all. This prospectus relates only to the offering of the notes and not to any
other securities. The following table presents the sources and uses of funds pro
forma as adjusted for this offering and the Class A Common Stock offering.

<TABLE>
<CAPTION>
PRO FORMA FOR
BOTH OFFERINGS
--------------
(IN THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
This offering............................................. $235,000
Class A Common Stock offering............................. 350,000
Repayment of loans by stockholders........................ 3,019
--------
Total............................................. $588,019
========
USES OF FUNDS:
Redemption of preferred stock............................. $265,611
Annuity for retiring executives........................... 10,567
Repurchase of our 11% notes and 12 1/2% notes............. 195,952
General corporate purposes................................ 84,964
Estimated fees and expenses............................... 30,925
--------
Total............................................. $588,019
========
</TABLE>

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THIS OFFERING

Capitalized terms used in this summary are defined in the "Description of
Notes -- Certain Definitions" section of this prospectus.

Issuer........................ Spanish Broadcasting System, Inc.

Securities Offered............ $235,000,000 in aggregate principal amount of
9 5/8% Senior Subordinated Notes due 2009.

Maturity...................... November 1, 2009.

Interest Payment Dates........ May 1 and November 1, commencing May 1, 2000.

Ranking....................... The notes are:

- general unsecured obligation of SBS;

- subordinated in right of payment to all SBS's
existing and future senior debt, including
indebtedness under the senior credit
facilities; and

- pari passu in the right of payment with any
future senior subordinated indebtedness of
SBS.

At June 27, 1999, on a pro forma basis after
giving effect to the Class A Common Stock
offering and the recapitalization transactions,
SBS and the guarantors would have had $ 240.7
million of indebtedness outstanding, none of
which would have been senior debt.

Guarantors.................... The notes will be unconditionally guaranteed on
a senior subordinated basis by certain of our
current and future subsidiaries. Our foreign
subsidiaries created or acquired after the date
of the indenture governing the notes, our
single-purpose subsidiaries created or acquired
after the date of the indenture to hold one or
more of our broadcasting licenses and JuJu
Media, Inc. will not be guarantors of these
notes. If we cannot make payments on the notes
when they are due, the guarantors must make
them after making prior payment of all senior
debt of the guarantors.

Optional Redemption........... At any time prior to November 1, 2002, we may
redeem up to 35% of the notes with the proceeds
of certain equity offerings. On or after
November 1, 2004, we may redeem all or a part
of the notes at prices specified in this
prospectus under "Description of
Notes -- Optional Redemption."

Mandatory Offer to
Repurchase.................... If we sell certain assets or experience
specific kinds of changes of control, we must
offer to purchase the notes at 101% of their
principal amount, plus accrued and unpaid
interest, if any, to the date of purchase as
described under the section "Description of
Notes -- Repurchase at the Option of Holders".
7
<PAGE> 14

Basic Covenants of
Indenture..................... SBS will issue these notes under a new
indenture among SBS, the guarantors and Bank of
New York, as trustee. The new indenture will,
among other things, restrict our ability and
the ability of our subsidiaries to:

- incur additional debt;

- create liens;

- pay dividends, distributions or make other
specified restricted payments;

- sell assets and engage in asset swaps;

- enter into transactions with affiliates;

- sell capital stock of our subsidiaries; and

- merge or consolidate with any other person or
sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all
of our assets.

Taxation...................... For a discussion of the material tax
consequences of an investment in these notes,
please refer to the section of this prospectus
entitled "Certain Federal Income Tax
Considerations."

No Public Market.............. We do not intend to list the notes on any
national securities exchange or to seek the
admission of the notes for trading on the
NASDAQ National Market System. We have been
advised by the underwriters that following the
completion of this offering, the underwriters
currently intend to make a market in the notes.
However, the underwriters are not obligated to
do so. Any market making activities with
respect to the notes may be discontinued at any
time without notice.

Use of Proceeds............... SBS estimates that the net proceeds from this
offering will be approximately $227.0 million.
This offering is conditioned upon the
completion of the Class A Common Stock
offering. We intend to use net proceeds from
this offering, the concurrent Class A Common
Stock offering and the repayment of stockholder
loans to (1) redeem our preferred stock at 105%
of aggregate liquidation preference, (2)
repurchase our 11% Notes and 12 1/2% Notes at
111% and 114% of their par value, respectively,
pursuant to the tender offers and consent
solicitations we commenced on September 30,
1999, (3) purchase an annuity for two of our
retiring executives at an estimated cost of
approximately $10.6 million, and (4) for
general corporate purposes. The amounts for
redemption of preferred stock and repurchase of
our 11% notes and 12 1/2% notes, assume that
such events will occur on December 1, 1999 and
November 2, 1999, respectively.
8
<PAGE> 15

SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT RATIOS)

The following tables contain summary historical financial information for
each of the fiscal years in the three-year period ended September 27, 1998 and
the nine months ended June 27, 1999 derived from our audited consolidated
financial statements, which have been audited by KPMG LLP, independent certified
public accountants. The tables also contain summary unaudited historical
financial information for the nine months ended June 28, 1998 and summary
unaudited pro forma financial information.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------
PRO FORMA FOR
FISCAL YEAR ENDED NINE MONTHS ENDED BOTH OFFERINGS
------------------------------ ---------------------- -------------------
9/29/96 9/28/97 9/27/98 6/28/98 6/27/99 6/27/99
-------- -------- -------- ----------- -------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues.................................. $ 55,338 $ 67,982 $ 86,766 $ 62,099 $ 80,437 $ 80,437
Less: agency commissions........................ 6,703 7,972 10,623 7,508 10,082 10,082
-------- -------- -------- -------- -------- --------
Net revenues.................................. 48,635 60,010 76,143 54,591 70,355 70,355
Station operating expenses...................... 27,876 31,041 39,520 28,298 31,782 31,782
Depreciation and amortization................... 4,556 7,619 8,877 6,867 7,223 7,223
Corporate expenses.............................. 3,748 5,595 6,893 5,122 7,658 7,658
-------- -------- -------- -------- -------- --------
Operating income.............................. 12,455 15,755 20,853 14,304 23,692 23,692
Interest expense, net........................... (16,533) (22,201) (20,860) (16,002) (15,736) (16,658)
Other income (expense), net..................... (1,574) (791) (213) -- (485) (485)
Gain on sale of AM stations..................... -- -- 36,242 36,247 -- --
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary items......................... (5,652) (7,237) 36,022 34,549 7,471 6,549
Income tax expense (benefit).................... (1,166) (2,715) 15,624 13,820 3,177 2,785
-------- -------- -------- -------- -------- --------
Income (loss) before extraordinary items...... (4,486) (4,522) 20,398 20,729 4,294 3,764
Extraordinary gain (loss) net of income taxes... -- (1,647) (1,613) (1,613) -- --
-------- -------- -------- -------- -------- --------
Net income (loss)............................. $ (4,486) $ (6,169) $ 18,785 $ 19,116 $ 4,294 $ 3,764
======== ======== ======== ======== ======== ========
Dividends on preferred stock.................... (2,994) (17,044) (30,270) (22,391) (25,951) --
-------- -------- -------- -------- -------- --------
Net income (loss) applicable to common
stock....................................... $ (7,480) $(23,213) $(11,485) $ (3,275) $(21,657) $ 3,764
======== ======== ======== ======== ======== ========

OTHER FINANCIAL DATA:
Broadcast cash flow............................. $ 20,759 $ 28,969 $ 36,623 $ 26,293 $ 38,573 $ 38,573
Broadcast cash flow margin...................... 42.7% 48.3% 48.1% 48.2% 54.8% 54.8%
EBITDA.......................................... $ 17,011 $ 23,374 $ 29,730 $ 21,171 $ 30,915 $ 30,915
After-tax cash flow............................. 70 3,097 7,530 5,848 11,517 10,987
Capital expenditures............................ 3,811 2,022 1,645 1,290 1,684 1,684
Ratio of Earnings to Fixed Charges.............. -- -- -- -- -- 1.4x
</TABLE>

<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDED
-------------------
PRO FORMA FOR
BOTH OFFERINGS
6/27/99
(UNAUDITED)
<S> <C>
Ratio of total debt to EBITDA............................... 6.10x
Ratio of EBITDA to interest expense, net.................... 1.81x
</TABLE>

9
<PAGE> 16

- - Our summary historical consolidated financial data should be read in
conjunction with our historical consolidated financial statements as of and
for each of the fiscal years in the three-year period ended September 27, 1998
and for the nine months ended June 27, 1999, the related notes and the
independent auditor's report included in this prospectus. For additional
information, see the financial section of this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

- - The financial information for the nine months ended June 28, 1998 is
unaudited, but in our opinion reflects all adjustments (which include only
normal recurring adjustments) necessary for a fair presentation of the
financial information.

- - Operating results for the nine months ended June 27, 1999 are not necessarily
indicative of the results that may be expected for the fiscal year ended
September 26, 1999. Our summary unaudited pro forma consolidated financial
information does not purport to represent what our results of operations would
actually have been had the transactions described below occurred on the dates
indicated or to project our results of operations for any future period or
date.

- - The pro forma amounts for the period ended June 27, 1999, in the column "Pro
Forma for Both Offerings" are adjusted to give effect to (1) this offering,
(2) the concurrent Class A Common Stock offering, (3) the repayment of the
loans receivable from two of our selling stockholders we will receive from the
concurrent Class A Common Stock Offering, (4) the redemption of all of our
outstanding preferred stock at 105% of aggregate liquidation preference, (5)
the repurchase of our 11% notes and 12 1/2% notes at approximately 111% and
114% of their par value, respectively, pursuant to the tender offers and
consent solicitations we commenced on September 30, 1999, and (6) the purchase
of an annuity for two of our retiring executives, as if each had occurred as
of the beginning of the period. These pro forma amounts do not reflect (a) the
impact to net income available to common stockholders resulting from the
redemption of our preferred stock at a premium, (b) the impact to net income
resulting from the purchase of an annuity for certain retiring executives, and
(c) the extraordinary loss on extinguishment of debt, including the write-off
of related deferred financing costs, which we will record as a result of
repurchasing the 11% notes and 12 1/2% notes at a premium. The pro forma
interest expense for the period ended June 27, 1999 is based on an interest
rate of 9 5/8%.

- - On September 29, 1999, we filed a third amended and restated certificate of
incorporation which resulted in (1) the redesignation of our previously
outstanding shares of Class A Common Stock into shares of Class B Common
Stock, (2) a 50-to-1 stock split of our Class B Common Stock and (3) a
reduction in the par value of our Class A Common Stock and Class B Common
Stock from $0.01 per share to $0.0001 per share. All financial information has
been restated to reflect this redesignation, stock split and change in par
value.

- - For the purpose of calculating the Ratio of Earnings to Fixed Charges,
earnings are defined as earnings or loss before income taxes and extraordinary
items and fixed charges. Fixed charges are the sum of (1) interest costs, (2)
amortization of deferred financing costs, (3) one-third of operating lease
rental expense (deemed to be interest) and (4) dividends on preferred stock.
Earnings were inadequate to cover fixed charges by $9,361,000, $34,514,000 and
$17,434,000 for fiscal years 1996, 1997 and 1998, respectively. For the nine
months ended June 28, 1998 and June 27, 1999, earnings were inadequate to
cover fixed charges by $4,993,000 and $37,680,000.
10
<PAGE> 17

- - The term "EBITDA" means earnings before extraordinary items, gain on sale of
AM stations, net interest expense, income taxes, depreciation, amortization
and other income or expense. We have included information concerning EBITDA in
this prospectus because it is used by some investors as a measure of a
company's ability to service its debt obligations. Although EBITDA is not a
measure of performance calculated in accordance with generally accepted
accounting principles, EBITDA is widely used in the broadcasting industry as a
measure of a broadcasting company's operating performance.

<TABLE>
<CAPTION>
AS OF JUNE 27, 1999
----------------------------
PRO FORMA FOR
HISTORICAL BOTH OFFERINGS
---------- --------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 20,895 $123,518
Total assets................................................ 359,501 463,202
Total debt (including current portion)...................... 172,767 240,653
Preferred stock............................................. 218,802 --
Total stockholders' equity (deficiency)..................... (67,848) 216,708
</TABLE>

- - The pro forma balance sheet data are adjusted to give effect to the
transactions described above as if they had occurred as of June 27, 1999.
These pro forma adjustments reflect (1) the redemption of our outstanding
preferred stock at 105% of aggregate liquidation preference which results in
an additional dividend of $22.1 million and will reduce net income applicable
to common stockholders in the period such redemption occurs as if such
redemption occurred on June 27, 1999, (2) the repurchase of our 11% notes and
12 1/2% notes at approximately 111% and 114% of their par value, respectively,
which results in an extraordinary loss (net of income taxes) amounting to
$16.8 million, assuming such repurchases occurred on June 27, 1999, and (3)
the purchase of an annuity for two of our retiring executives which results in
an estimated nonrecurring charge (net of income taxes) of approximately $6.1
million, assuming such purchase occurred on June 27, 1999. Actual amounts will
differ based upon the actual dates the preferred stock is redeemed, the 11%
notes and 12 1/2% notes are repurchased, and the annuity for two of our
retiring executives is purchased.
11
<PAGE> 18

RISK FACTORS

You should carefully consider the following factors and other information
in this prospectus before deciding to invest in our notes.

SUBSTANTIAL DEBT -- OUR SUBSTANTIAL LEVEL OF DEBT COULD LIMIT OUR ABILITY TO
GROW AND COMPETE.

Our consolidated debt is substantial when compared to our common
stockholders' equity. As of June 27, 1999, on a pro forma basis after giving
effect to the transactions described in this prospectus (including the
concurrent Class A Common Stock offering), we had outstanding long term debt
(including current portions) of approximately $240.7 million and a stockholders'
equity of $216.7 million. We are likely to incur more debt following the closing
of this offering. Such additional debt is expected to include the senior credit
facilities.

Our substantial level of debt could have several important consequences to
the holders of our securities, including the following:

- a significant portion of our cash flow from operations will be dedicated
to servicing our debt obligations and will not be available for
operations, future business opportunities or other purposes;

- our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate or other
purposes may be limited; and

- our substantial debt could make us more vulnerable to economic downturns,
limit our ability to withstand competitive pressures and reduce our
flexibility in responding to changing business and economic conditions.

Our ability to satisfy all of our debt obligations depends upon our future
operating performance. Our operating performance will be affected by prevailing
economic conditions and financial, business and other factors, some of which are
beyond our control. We believe that our operating cash flow will be sufficient
to meet our operating expenses and to service our debt requirements as they
become due. However, if we are unable to pay our debts, whether upon
acceleration of our debt or in the ordinary course of business, we will be
forced to pursue alternative strategies such as selling assets, restructuring or
refinancing our debt, or seeking additional equity capital. We cannot assure you
that we can successfully complete any of these strategies on satisfactory terms
or that the approval of the FCC could be obtained on a timely basis, or at all,
for the transfer of any of the stations' licenses in connection with a proposed
sale of assets.

ADDITIONAL BORROWINGS AVAILABLE -- DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND
OUR SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD
FURTHER EXACERBATE THE RISKS DESCRIBED ABOVE.

We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit us
or our subsidiaries from doing so. If we enter into our senior credit
facilities, they would permit additional borrowings after completion of this
offering and all of those borrowings would be senior to the notes and the
subsidiary guarantees. If new debt is added to our and our subsidiaries' current
debt levels, the related risks that we and they now face could intensify.

12
<PAGE> 19

HOLDING COMPANY -- AS A HOLDING COMPANY WE DEPEND ON OUR SUBSIDIARIES TO MEET
OUR FINANCIAL OBLIGATIONS.

We are a holding company with no significant assets other than the stock of
our subsidiaries. In order to meet our financial needs, we rely exclusively on
repayments of interest and principal on intercompany loans made by us to our
operating subsidiaries and income from dividends and other cash flow from such
subsidiaries. We cannot assure you that our operating subsidiaries will generate
sufficient net income to pay upstream dividends or cash flow to make payments of
interest and principal to us in respect of our intercompany loans.

SUBORDINATION -- YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES IS JUNIOR TO OUR
EXISTING INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS.

The notes and the subsidiary guarantees rank behind all of our and our
subsidiary guarantors' existing indebtedness (other than trade payables) and all
of our and our subsidiary guarantors' future borrowings (other than trade
payables), except any future indebtedness that expressly provides that it ranks
equal with, or subordinated in right of payment to, the notes and the
guarantees. As a result, upon any distribution to our creditors or the creditors
of the subsidiary guarantors in a bankruptcy, liquidation or reorganization or
similar proceeding relating to us or the subsidiary guarantors or our or their
property, the holders of our senior debt and the debt of the subsidiary
guarantors will be entitled to be paid in full in cash before any payment may be
made with respect to the notes or the subsidiary guarantees.

In addition, all payments on the notes and the guarantees will be blocked
in the event of a payment default on senior debt and may be blocked for up to
179 days each year in the event of certain non-payment defaults on senior debt.

If a bankruptcy, liquidation or reorganization or similar proceeding
relating to us or the subsidiary guarantors occurs, holders of the notes will
participate with trade creditors and all other holders of our and the subsidiary
guarantors' subordinated indebtedness in the assets remaining after we and the
subsidiary guarantors have paid all of the senior debt. In any of these cases,
we and the subsidiary guarantors may not have sufficient funds to pay all of our
creditors and holders of notes may receive less, pro rata, than the holders of
senior debt.

Our obligations under the notes are subordinate and junior in right of
payment to all of our existing and future senior debt. As of June 27, 1999, on a
pro forma basis giving effect to this offering, the concurrent Class A Common
Stock offering, the redemption of our preferred stock and the refinancing of our
existing debt, none of our total consolidated indebtedness would have been
senior debt. The indenture allows us to borrow substantial additional
indebtedness, including senior debt, in the future.

NOT ALL SUBSIDIARIES ARE GUARANTORS -- YOUR RIGHT TO RECEIVE PAYMENT ON THESE
NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR SUBSIDIARIES
DECLARE BANKRUPTCY, LIQUIDATE OR REORGANIZE.

Our foreign subsidiaries created or acquired after the date of the
indenture governing the notes, our single-purpose subsidiaries created or
acquired after the date of the indenture that will hold one or more of our
broadcasting licenses and JuJu Media, Inc. will not guarantee the notes. It is
intended that our single-purpose subsidiaries which will hold one or more of our
broadcasting licenses will conduct no activities other than holding such
broadcasting licenses. We do not expect that these subsidiaries will have any
significant revenues or liabilities. Our other non-guarantor subsidiaries may
have revenues which are material. If there were any creditors of these
non-guarantor subsidiaries, however, in the event of their bankruptcy,
liquidation or

13
<PAGE> 20

reorganization, their creditors will generally be entitled to payment of their
claims from the assets of those subsidiaries before any assets are made
available for distribution to us.

RESTRICTIONS IMPOSED BY OUR DEBT -- THE TERMS OF OUR DEBT RESTRICT US FROM
ENGAGING IN MANY ACTIVITIES AND REQUIRE US TO SATISFY VARIOUS FINANCIAL TESTS.

The indenture governing the notes to be issued in this offering will
contain covenants that restrict, among other things, our ability to:

- incur additional debt;

- create liens;

- pay dividends, distributions or make other specified restricted payments;

- sell assets and engage in asset swaps;

- enter into transactions with affiliates;

- sell capital stock of our subsidiaries; and

- merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of our
assets.

If an event of default occurs under this indenture, the noteholders could
elect to declare all amounts outstanding under the indenture, together with
accrued interest, to be immediately due and payable. In addition, there is a
change of control provision in the indenture which would require us to make an
offer to repurchase all of our notes in the event that we experience a change of
control.

Similarly, if we enter into the senior credit facilities they will contain
covenants that restrict, among other things, our ability to incur additional
debt, pay cash dividends, repurchase our capital stock, make capital
expenditures, make investments or other restricted payments, swap or sell
assets, engage in transactions with related parties, secure non-senior debt with
our assets, or merge, consolidate or sell all or substantially all of our
assets.

Our senior credit facilities will require us to get our lenders' consent
before we make certain acquisitions involving the payment of cash or assumption
of indebtedness. This restriction may make it more difficult to pursue our
acquisition strategy. Our senior credit facilities will also require us to
maintain specific financial ratios. Events beyond our control could affect our
ability to meet those financial ratios, and we cannot assure you that we will
meet them.

Our senior credit facilities will mature in 2005 and will be (1) guaranteed
by our subsidiaries (other than our foreign subsidiaries created or acquired
after the date of the indenture governing the notes); (2) secured by all of our
assets and all material assets of each guarantor (except to the extent
prohibited by law, broadcast licenses); (3) secured by the stock of our domestic
subsidiaries, including the stock of our broadcasting license subsidiaries; and
(4) secured by two-thirds of the stock of our foreign subsidiaries (created or
acquired after the completion of this offering) that are not guarantors,
including the stock of our broadcasting license subsidiaries. A breach of any of
the covenants contained in our senior credit facility could allow our lenders to
declare all amounts outstanding under the senior credit facility to be
immediately due and payable. In addition, our lenders could proceed against the
collateral granted to them to secure that indebtedness. If the amounts
outstanding under the senior credit facility are accelerated, we cannot assure
you that our assets will be sufficient to repay in full the money owed to the
lenders or to our other debt holders.

14
<PAGE> 21

FRAUDULENT CONVEYANCE -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC
CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTE HOLDERS TO RETURN PAYMENTS
FROM GUARANTORS.

Any of our creditors may file a lawsuit objecting to our obligations under
the notes or the use of the proceeds from the notes. A court could void our
obligations under the notes, subordinate the notes to our other debt or order
the holders to return any amounts paid for the notes to us or to a fund
benefitting the creditors if the court finds we intended to defraud a creditor,
or did not receive fair value for the notes, and we either:

- were insolvent or became insolvent by offering the notes;

- did not have enough capital to engage in our business; or

- intended to or believed that we overextended our debt obligations.

Creditors of the subsidiary guarantors may also object to the subsidiary
guarantors' guarantees of the notes. In such circumstances, a court could order
the relief outlined above for the same reasons outlined above. In addition, the
creditors of the subsidiary guarantors could claim that since the guarantees
were made for our benefit, the subsidiary guarantors did not receive fair value
for the guarantees.

The measure of insolvency for fraudulent transfer laws will vary in
different jurisdictions. We believe that at the time we incur the debt
constituting the notes and the subsidiary guarantees, we and the subsidiary
guarantors will neither be insolvent nor be rendered insolvent as a result. We
cannot assure you, however, that a court passing on the same questions would
reach the same conclusions.

CHANGE OF CONTROL -- WE MAY NOT BE ABLE TO PURCHASE YOUR NOTES UPON A CHANGE OF
CONTROL.

Upon the occurrence of specified change of control events, we are required
to offer to purchase each holder's notes at a price of 101% of their principal
amount plus accrued interest. We may not have sufficient financial resources to
purchase all of the notes that holders may tender to us upon a change of
control. The occurrence of a change of control would also constitute an event of
default under our senior credit facility. In certain circumstances, our lenders
also have the right to prohibit any purchases by us of the notes, in which event
we would be in default on the notes.

TRANSFERABILITY -- THERE IS NO PUBLIC MARKET FOR THE NOTES

The notes are a new issue of securities for which there is currently no
trading market. The underwriters have advised us that they currently intend to
make a market in the notes following completion of this offering, but they have
no obligation to do so and may discontinue such activity at any time without
notice. We cannot be sure that an active trading market will develop for the
notes. Moreover, if a market were to exist, the notes could trade at prices that
may be lower than their initial offering price because of many factors,
including, but not limited to:

- prevailing interest rates on the markets for similar securities;

- general economic conditions;

- the prospects for other companies in the same industry; and

- our financial condition, performance or prospects.

15
<PAGE> 22

HISTORY OF NET LOSSES -- WE HAVE EXPERIENCED NET LOSSES IN THE PAST AND TO THE
EXTENT THAT WE EXPERIENCE LOSSES IN THE FUTURE, OUR ABILITY TO RAISE CAPITAL AND
THE MARKET PRICES OF OUR SECURITIES, INCLUDING THE NOTES TO BE ISSUED IN THIS
OFFERING AND THE CLASS A COMMON STOCK TO BE ISSUED IN THE CLASS A COMMON STOCK
OFFERING, COULD BE ADVERSELY AFFECTED.

We have experienced net losses in fiscal years 1996 and 1997. The primary
reasons for these losses are interest expense and significant charges for
depreciation and amortization related to the acquisition of radio stations and
refinancing costs. If we acquire additional stations, these charges will
probably increase.

We cannot assure you that we will achieve or sustain profitability. Failure
to achieve profitability may adversely affect the market price of our common
stock, which in turn may adversely affect our ability to raise additional equity
capital and to incur additional debt.

IMPORTANCE OF THE NEW YORK AND MIAMI MARKETS -- A LARGE PORTION OF OUR NET
BROADCAST REVENUE AND BROADCAST CASH FLOW COMES FROM THESE MARKETS.

Based upon the stations we owned and operated as of June 27, 1999, our
radio stations in New York and Miami collectively accounted for 69.3% of our net
broadcast revenue and for 75.6% of our broadcast cash flow for the nine-month
period ended June 27, 1999. A significant decline in net broadcast revenue or
broadcast cash flow from our stations in any of these markets could have a
material adverse effect on our financial position and results of operations.

DEPENDENCE ON KEY PERSONNEL -- LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR
BUSINESS.

Our business depends upon the efforts, abilities and expertise of our
executive officers and other key employees, including Raul Alarcon, Jr., our
Chairman of the Board of Directors and Chief Executive Officer. The loss of any
of these officers and key employees could have a material adverse effect on our
business. We do not maintain key man life insurance on any of our personnel.

COMPETITION -- WE COMPETE FOR ADVERTISING REVENUE WITH OTHER RADIO GROUPS AS
WELL AS TELEVISION AND OTHER MEDIA, MANY OPERATORS OF WHICH HAVE GREATER
RESOURCES THAN WE DO.

Broadcasting is a highly competitive business. Our radio stations compete
in their respective markets for audiences and advertising revenues with other
radio stations of all formats, as well as with other media, such as newspapers,
magazines, television, cable television, outdoor advertising, the Internet and
direct mail. As a result of this competition, our stations' audience ratings and
market shares may decline and any adverse change in a particular market could
have a material adverse effect on the revenue of our stations located in that
market.

Although we believe that each of our stations is able to compete
effectively in its respective market, we cannot assure you that any station will
be able to maintain or increase its current audience ratings and advertising
revenues. Radio stations can change formats quickly. Any other radio station
currently broadcasting could shift its format to duplicate the format of any of
our stations. If a station converts its programming to a format similar to that
of one of our stations, or if one of our competitors strengthens its operations,
the ratings and broadcast cash flow of our station in that market could be
adversely affected. In addition, other radio companies which are larger and have
more resources may also enter markets in which we operate.

16
<PAGE> 23

TECHNOLOGY CHANGES, NEW SERVICES AND EVOLVING STANDARDS -- WE MUST BE ABLE TO
RESPOND TO RAPIDLY CHANGING TECHNOLOGY, SERVICES AND STANDARDS WHICH
CHARACTERIZE OUR INDUSTRY IN ORDER TO REMAIN COMPETITIVE.

The FCC is considering ways to introduce new technologies to the radio
broadcast industry, including satellite and terrestrial delivery of digital
audio broadcasting, and the standardization of available technologies which
significantly enhance the sound quality of AM and FM broadcasts. We cannot
predict the effect new technology of this nature will have on our financial
condition and the results of our operations. Several new media technologies are
being developed, including the following:

- cable television operators have introduced a service commonly referred to
as "cable radio" which provides cable television subscribers with several
high-quality channels of music, news and other information;

- the Internet is poised to offer new and diverse forms of program
distribution;

- direct satellite broadcast television companies are supplying subscribers
with several high quality music channels;

- the introduction of satellite digital audio radio technology could result
in new satellite radio services with sound quality equivalent to that of
compact discs; and

- the introduction of in-band on-channel digital radio could provide
multi-channel, multi-format digital radio services in the same bandwidth
currently occupied by traditional AM and FM radio services.

GOVERNMENT REGULATION -- OUR BUSINESS DEPENDS ON MAINTAINING OUR FCC LICENSES.
WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO MAINTAIN THESE LICENSES.

The domestic broadcasting industry is subject to extensive federal
regulation which, among other things, requires approval by the FCC for the
issuance, renewal, transfer and assignment of broadcasting station operating
licenses and limits the number of broadcasting properties we may acquire.
Federal regulations create significant new opportunities for broadcasting
companies but also create uncertainties as to how these regulations will be
interpreted and enforced by the courts.

Our success depends in part on acquiring and maintaining broadcast licenses
issued by the FCC, which are typically issued for a maximum term of eight years
and are subject to renewal. While we believe that the FCC will approve
applications for renewal of our existing broadcasting licenses when made, we
cannot guarantee that pending or future renewal applications submitted by us
will be approved, or that renewals will not include conditions or qualifications
that could adversely affect our operations. Although we may apply to renew our
FCC licenses, interested third parties may challenge our renewal applications.
In addition, if we or any of our stockholders, officers, or directors violate
the FCC's rules and regulations or the Communications Act of 1934, or are
convicted of a felony, the FCC may commence a proceeding to impose sanctions
upon us. Examples of possible sanctions include the imposition of fines; the
revocation of our broadcast licenses; or the renewal of one or more of our
broadcasting licenses for a term of fewer than eight years. If the FCC were to
issue an order denying a license renewal application or revoking a license, we
would be required to cease operating the radio station covered by the license
only after we had exhausted administrative and judicial review without success.

17
<PAGE> 24

The radio broadcasting industry is subject to extensive and changing
federal regulation. Among other things, the Communications Act and FCC rules and
policies limit the number of broadcasting properties that any person or entity
may own (directly or by attribution) in any market and require FCC approval for
transfers of control and assignments. The filing of petitions or complaints
against SBS or any FCC licensee from which we acquire a station could result in
the FCC delaying the grant of, or refusing to grant or imposing conditions on
its consent to the assignment or transfer of licenses. The Communications Act
and FCC rules also impose limitations on non-U.S. ownership and voting of the
capital stock of SBS.

Moreover, governmental regulations and policies may change over time and we
cannot assure you that those changes would not have a material adverse impact
upon our business, financial position or results of operations. In addition, the
loss of any of our existing Los Angeles or New York stations' broadcasting
licenses, is an event of default under the indenture that governs our 12 1/2%
notes, and could cause an acceleration of amounts due under those notes prior to
maturity.

ANTITRUST MATTERS -- WE MAY FACE REGULATORY REVIEW FOR ADDITIONAL ACQUISITIONS
IN OUR EXISTING MARKETS AND, POTENTIALLY, NEW MARKETS.

An important part of our growth strategy is the acquisition of additional
radio stations. After the passage of the Telecommunications Act of 1996, the
U.S. Department of Justice has become more aggressive in reviewing proposed
acquisitions of radio stations and radio station networks. The Justice
Department is particularly concerned when the proposed buyer already owns one or
more radio stations in the market of the station it is seeking to buy. Recently,
the Justice Department has challenged a number of radio broadcasting
transactions. Some of those challenges ultimately resulted in consent decrees
requiring, among other things, divestitures of certain stations. In general, the
Justice Department has more closely scrutinized radio broadcasting acquisitions
that result in market shares in excess of 40% of local radio advertising
revenue. Similarly, the FCC has announced new procedures to review proposed
radio broadcasting transactions even if the proposed acquisition otherwise
complies with the FCC's ownership limitations. In particular, the FCC may invite
public comment on proposed radio transactions that the FCC believes, based on
its initial analysis, may present ownership concentration concerns in a
particular local radio market.

RECESSION OR DOWNTURN IN THE ECONOMY -- NATIONAL OR REGIONAL RECESSIONS COULD
IMPAIR OUR REVENUES.

Our broadcasting revenues could be adversely affected by a recession or
downturn in the United States economy since advertising expenditures generally
decrease as the economy slows down. In addition, our operating results in
individual geographic markets could be adversely affected by local or regional
economic downturns. Our broadcasting revenues have been materially adversely
affected by past recessions. Future economic downturns might have a material
adverse effect on our ability to generate advertising revenue and might
materially and adversely affect our financial condition and operating results.

YEAR 2000 -- COMPUTER PROGRAMS AND MICROPROCESSORS THAT HAVE DATE SENSITIVE
SOFTWARE MAY RECOGNIZE A DATE USING "00" AS YEAR 1900 RATHER THAN 2000, OR NOT
RECOGNIZE THE DATE AT ALL, WHICH COULD RESULT IN MAJOR SYSTEM FAILURES OR
MISCALCULATIONS.

We rely, directly and indirectly, on information technology systems to
operate our radio stations, provide our radio stations with up-to-date news and
perform a variety of administrative services, including accounting, financial
reporting, advertiser spot scheduling, payroll and

18
<PAGE> 25

invoicing. We also use non-information technology systems, such as microchips,
for dating and other automated functions. We are in the process of assessing and
remediating potential risks to our business related to the year 2000 problem.
Although we believe that, as a result of these efforts, our critical systems are
or will be substantially year 2000 compliant, we cannot assure you that this
will be the case. One of our greatest potential year 2000 risks may be that
third parties with whom we deal will fail to be year 2000 compliant. For
example, if our programming suppliers or key advertisers experience significant
disruptions in their businesses because of the year 2000 problem, we may lose
access to programming and significant advertising revenue. We are in the process
of developing a contingency plan to address any possible failures by us or our
vendors related to year 2000 compliance.

19
<PAGE> 26

USE OF PROCEEDS

The net proceeds we will receive from this offering and the concurrent
Class A Common Stock offering are estimated to be approximately $227.0 million
and $327.1 million, respectively. We will not receive proceeds from the shares
of Class A Common Stock being sold by the selling stockholders in the Class A
Common Stock offering which are estimated to be $85.7 million. This offering is
conditioned upon the completion of the Class A Common stock offering. The Class
A Common Stock offering is not conditioned upon this or any other offering. We
intend to use the net proceeds of this offering, the concurrent Class A Common
Stock offering and the repayment of stockholder loans to (1) redeem our
preferred stock at 105% of aggregate liquidation preference, (2) repurchase our
11% notes and 12 1/2% notes at approximately 111% and 114% of their par value,
respectively, pursuant to the tender offers and consent solicitations we
commenced on September 30, 1999, (3) purchase of an annuity for two of our
retiring executives at an estimated cost of approximately $10.6 million, and (4)
for general corporate purposes. The pro forma amounts for redemption of
preferred stock and repurchase of our 11% notes and 12 1/2% notes assume that
such events will occur on December 1, 1999 and November 2, 1999, respectively.
The following table presents the sources and uses of proceeds pro forma for this
offering and the Class A Common Stock offering.

<TABLE>
<CAPTION>
PRO FORMA
FOR
BOTH OFFERINGS
--------------
(IN THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
This offering............................................... $235,000
Class A Common Stock offering............................... 350,000
Repayment of loans by stockholders.......................... 3,019
--------
Total.................................................. $588,019
========
USES OF FUNDS:
Redemption of preferred stock............................... $265,611
Annuity for retiring executives............................. 10,567
Repurchase of our 11% Notes and 12 1/2% Notes............... 195,952
General corporate purposes.................................. 84,964
Estimated fees and expenses................................. 30,925
--------
Total.................................................. $588,019
========
</TABLE>

Preferred Stock. As of June 27, 1999 we had outstanding $229.5 million
aggregate liquidation preference of our preferred stock. Our preferred stock
accrues dividends at a rate of 14 1/4% per year payable semi-annually. We can
redeem our preferred stock at 105% of its liquidation preference plus
accumulated and unpaid dividends.

Senior Notes. As of June 27, 1999 we had outstanding $93.9 million
aggregate principal amount of our 12 1/2% notes and $75.0 million aggregate
principal amount of our 11% notes. The 12 1/2% notes accrue interest at an
annual rate of 12 1/2% and mature on June 15, 2002. The 11% notes accrue
interest at an annual rate of 11% and mature on March 15, 2004. On September 30,
1999, we commenced consent solicitations and tender offers to repurchase our 11%
notes and 12 1/2% notes. We have received consents and tenders from the holders
of 100% of our 11% notes and 99.7% of our 12 1/2% notes. We and the trustee
under each of the indentures have executed and delivered supplemental indentures
deleting many of the financial covenants from the respective indentures.
However, the supplemental indentures will not become operative until we accept
and pay for the notes.
20
<PAGE> 27

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth our consolidated ratio of earnings to fixed
charges for the periods indicated.

<TABLE>
<CAPTION>
PRO FORMA
FOR BOTH OFFERINGS
-------------------------
NINE MONTHS FISCAL YEAR NINE MONTHS
FISCAL YEARS ENDED ENDED ENDED ENDED
----------------------------------------------- ----------- ----------- -----------
9/25/94 9/24/95 9/29/96 9/28/97 9/27/98 6/27/99 9/27/98 6/27/99
------- ------- ------- ------- ------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges...... -- 1.2x -- -- -- -- 2.4x 1.4x
</TABLE>

For the purpose of calculating the Ratio of Earnings to Fixed Charges,
earnings are defined as earnings or loss before income taxes and extraordinary
items and fixed charges. Fixed charges are the sum of (1) interest costs, (2)
amortization of deferred financing costs, (3) one-third of operating lease
rental expense (deemed to be interest) and (4) dividends on preferred stock.
Earnings were inadequate to cover fixed charges by $5,774,000, $9,361,000,
$34,514,000 and $17,434,000 for fiscal years 1994, 1996, 1997 and 1998,
respectively. For the nine months ended June 27, 1999, earnings were inadequate
to cover fixed charges by $37,680,000.

21
<PAGE> 28

CAPITALIZATION

The table below sets forth our capitalization as of June 27, 1999 on an
actual basis and pro forma basis giving effect to this offering and our
concurrent Class A Common Stock offering.

<TABLE>
<CAPTION>
AS OF JUNE 27, 1999
-------------------------------
PRO FORMA
FOR
ACTUAL BOTH OFFERINGS
-------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 20,895 $123,518
======== ========
Long-term debt (including current portion):
12 1/2% notes............................................. $ 92,114 $ --
11% notes................................................. 75,000 --
Senior subordinated notes................................. -- 235,000
Other debt, including current portion..................... 5,653 5,653
-------- --------
Total long-term debt.............................. 172,767 240,653
Preferred stock............................................. 218,802 --
Stockholders' equity (deficiency):
Class A Common Stock...................................... -- 2
Class B Common Stock...................................... 4 4
Additional paid-in capital................................ 6,869 333,992
Accumulated deficit....................................... (72,262) (117,290)
Less: loans receivable from stockholders.................. (2,459) --
-------- --------
Total stockholders' equity (deficiency)........... (67,848) 216,708
-------- --------
Total capitalization........................................ $323,721 $457,361
======== ========
</TABLE>

- The pro forma amounts as of June 27, 1999, in the column "Pro Forma for
Both Offerings" are adjusted to give effect to (1) this offering, (2) the
concurrent Class A Common Stock offering, (3) the repayment of the loans
receivable from selling stockholders with the net proceeds that such
selling stockholders will receive from the concurrent Class A Common
Stock offering, (4) the redemption of all of our outstanding preferred
stock at 105% of aggregate liquidation preference, which results in an
additional dividend of $22.1 million and will reduce net income
applicable to common stockholders in the period such redemption occurs as
if such redemption occurred on June 27, 1999, (5) the repurchase of our
11% notes and 12 1/2% notes at 111% and 114% of their par value,
respectively, pursuant to the tender offer and consent solicitations we
commenced on September 30, 1999, which results in an extraordinary loss
(net of income taxes) amounting to $16.8 million, and (6) the purchase of
an annuity for two of our retiring executives which results in an
estimated nonrecurring charge (net of income taxes) of approximately $6.1
million, as if they had occurred as of June 27, 1999.

- Actual amounts will differ based upon the actual dates the preferred
stock is redeemed, the 11% notes and 12 1/2% notes are repurchased, and
the annuity for two of our retiring executives is purchased.

22
<PAGE> 29

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT RATIOS)

The following table sets forth the historical financial information of our
business. The selected historical consolidated financial information presented
below under the caption "Statement of Operations Data" for each of the fiscal
years in the five-year period ended September 27, 1998 and for the nine months
ended June 27, 1999, are derived from our historical consolidated financial
statements, which have been audited by KPMG LLP, independent certified public
accountants. The financial information for the nine months ended June 28, 1998
is unaudited, but in our opinion reflects all adjustments (which include only
normal recurring adjustments) necessary for a fair presentation of the financial
information. Operating results for the nine months ended June 27, 1999 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 26, 1999. Our selected historical consolidated financial data
should be read in conjunction with our historical consolidated financial
statements as of September 28, 1997, September 27, 1998 and June 27, 1999 and
for each of the fiscal years in the three-year period ended September 27, 1998
and the nine months ended June 27, 1999 and the related notes and independent
auditor's report, included elsewhere in this prospectus. For additional
information see "Consolidated Financial Data" in the financials section of this
prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
----------------------------------------------------- ----------------------
9/25/94 9/24/95 9/29/96 9/28/97 9/27/98 6/28/98 6/27/99
-------- -------- --------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues.............................. $ 45,825 $ 54,152 $ 55,338 $ 67,982 $ 86,766 $ 62,099 $ 80,437
Less: agency commissions.................... 5,688 6,828 6,703 7,972 10,623 7,508 10,082
-------- -------- -------- -------- -------- -------- --------
Net revenues.............................. 40,137 47,324 48,635 60,010 76,143 54,591 70,355
Station operating expenses(1)............... 22,145 22,998 27,876 31,041 39,520 28,298 31,782
Depreciation and amortization............... 3,256 3,389 4,556 7,619 8,877 6,867 7,223
Corporate expenses.......................... 2,884 4,281 3,748 5,595 6,893 5,122 7,658
-------- -------- -------- -------- -------- -------- --------
Operating income.......................... 11,852 16,656 12,455 15,755 20,853 14,304 23,692
Interest expense, net(2).................... (14,203) (12,874) (16,533) (22,201) (20,860) (16,002) (15,736)
Other income (expense), net(3).............. (3,423) (381) (1,574) (791) (213) -- (485)
Gain on sale of AM stations................. -- -- -- -- 36,242 36,247 --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary items....................... (5,774) 3,401 (5,652) (7,237) 36,022 34,549 7,471
Income tax expense (benefit)................ (2,231) 1,411 (1,166) (2,715) 15,624 13,820 3,177
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
items................................... (3,543) 1,990 (4,486) (4,522) 20,398 20,729 4,294
Extraordinary gain (loss) net of income
taxes(4).................................. 70,255 -- -- (1,647) (1,613) (1,613) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......................... $ 66,712 $ 1,990 $ (4,486) $ (6,169) $ 18,785 $ 19,116 $ 4,294
======== ======== ======== ======== ======== ======== ========
Dividends on preferred stock................ -- -- (2,994) (17,044) (30,270) (22,391) (25,951)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) applicable to common
stock................................... $ 66,712 $ 1,990 $ (7,480) $(23,213) $(11,485) $ (3,275) $(21,657)
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
Broadcast cash flow(5)...................... $ 17,992 $ 24,326 $ 20,759 $ 28,969 $ 36,623 $ 26,293 $ 38,573
Broadcast cash flow margin.................. 44.8% 51.4% 42.7% 48.3% 48.1% 48.2% 54.8%
EBITDA(6)................................... $ 15,108 $ 20,045 $ 17,011 $ 23,374 $ 29,730 $ 21,171 $ 30,915
After-tax cash flow(7)...................... (287) 5,379 70 3,097 7,530 5,848 11,517
Capital expenditures........................ 897 4,888 3,811 2,022 1,645 1,290 1,684
Ratio of Earnings to Fixed Charges(8)....... -- 1.2x -- -- -- -- --
</TABLE>

23
<PAGE> 30

<TABLE>
<CAPTION>
AS OF
----------------------------------------------------------------
9/25/94 9/24/95 9/29/96 9/28/97 9/27/98 6/27/99
-------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 12,137 $ 17,817 $ 5,468 $ 12,288 $ 37,642 $ 20,895
Total assets........................................ 98,733 103,629 176,860 334,367 351,034 359,501
Total debt (including current portion).............. 93,573 95,523 135,914 183,013 171,126 172,767
Preferred stock..................................... -- -- 35,939 171,262 201,368 218,802
Total stockholders' deficiency...................... (2,960) (1,150) (3,569) (32,047) (46,193) (67,848)
</TABLE>

NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

(1) Station operating expenses include engineering, programming, selling and
general and administrative expenses.

(2) Interest expense includes non-cash interest, such as the accretion of
principal, the amortization of discounts on debt and the amortization of
deferred financing costs.

(3) During the 1996 and 1997 fiscal years, we wrote down the value of our land
and building located on Sunset Boulevard in Los Angeles by $697,741 and
$487,973, respectively. For the nine months ended June 27, 1999, we wrote
down the value of this land and building by $451,048. The write-downs were
based on current market values of real estate in the Los Angeles area.
Financing costs are also included in other income (expenses).

(4) On June 29, 1994, we sold 107,059 units, each consisting of $1,000 principal
amount of our 12 1/2% notes and warrants to purchase one share of common
stock per unit. The 12 1/2% notes were issued at a substantial discount from
their principal amount. The sale of the 12 1/2% notes and warrants generated
gross proceeds of $94,000,000 and proceeds to us of $87,774,002, net of
financing costs of $6,225,998. Of the $94,000,000 of gross proceeds from the
sale of the 12 1/2% notes and warrants, $88,603,000 was allocated to the
12 1/2% notes and $5,397,000 was determined to be the value of the warrants.
Of the net proceeds from the sale of the 12 1/2% notes and the warrants,
$83,000,000 was used to satisfy in full our obligations to our two former
principal lenders and the balance was used to settle litigation with a
former stockholder and for general corporate purposes. We realized a gain of
$70,254,772 in connection with our repayment of all obligations to our two
former principal lenders because we were able to satisfy in full these
obligations at substantial discounts to their face amounts in accordance
with restructuring agreements between us and the lenders.

For the fiscal year ended September 28, 1997, we recorded an extraordinary
loss resulting from the redemption of our 12 1/4% senior secured notes due
2001 at par which was approximately $1.5 million in excess of their carrying
value and from the write-off of the related unamortized deferred financing
costs of approximately $1.3 million, net of the related tax benefit of
approximately $1.1 million.

For the fiscal year ended September 27, 1998, we recorded an extraordinary
loss resulting from the repurchase of $13.2 million par value of 12 1/2%
notes, at a premium of approximately $2.2 million in excess of their
carrying value and from the write-off of the related unamortized deferred
financing costs of approximately $0.5 million, net of the related tax
benefit of approximately $1.1 million.

(5) The term "broadcast cash flow" means operating income before depreciation,
amortization and corporate expenses. Broadcast cash flow should not be
considered in isolation from, or as a substitute for, net income or cash
flow and other consolidated income or cash flow statement data or as a
measure of our profitability or liquidity. Although broadcast cash flow

24
<PAGE> 31

is not a measure of performance calculated in accordance with generally
accepted accounting principles, broadcast cash flow is widely used in the
broadcasting industry as a measure of a broadcasting company's operating
performance.

(6) The term "EBITDA" means earnings before extraordinary items, gain on sale of
AM stations, net interest expense, income taxes, depreciation, amortization
and other income or expense. We have included information concerning EBITDA
in this prospectus because it is used by some investors as a measure of a
company's ability to service its debt obligations. Although EBITDA is not a
measure of performance calculated in accordance with generally accepted
accounting principles, EBITDA is widely used in the broadcasting industry as
a measure of a broadcasting company's operating performance.

(7) The term "after-tax cash flow" means income before income tax benefit
(expense) and extraordinary items, minus net gain on sale of AM stations
(net of tax) and the current income tax provision, plus depreciation and
amortization expense. Although after-tax cash flow is not a measure of
performance calculated in accordance with generally accepted accounting
principles, after-tax cash flow is widely used in the broadcasting industry
as a measure of a broadcasting company's operating performance.

(8) For the purpose of calculating the Ratio of Earnings to Fixed Charges,
earnings are defined as earnings or loss before income taxes and
extraordinary items and fixed charges. Fixed charges are the sum of (1)
interest costs, (2) amortization of deferred financing costs, (3) one-third
of operating lease rental expense (deemed to be interest) and (4) dividends
on preferred stock. Earnings were inadequate to cover fixed charges by
$5,774,000, $9,361,000, $34,514,000 and $17,434,000 for fiscal years 1994,
1996, 1997 and 1998, respectively. For the nine months ended June 28, 1998
and June 27, 1999, earnings were inadequate to cover fixed charges by
$4,993,000 and $37,680,000, respectively.

25
<PAGE> 32

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with "Selected
Historical Consolidated Financial Information" and the Financial Statements and
the related notes included elsewhere in this prospectus.

BACKGROUND

We commenced operations with the purchase of our first radio station,
WXLX-AM (formerly WSKQ-AM) serving the New York metropolitan area in 1983. Since
1983 we have purchased 15 stations, including two additional AM stations in six
U.S. markets. Today, we are the second largest Spanish-language radio
broadcasting company in the United States, currently owning and operating a
total of 13 FM radio stations. We have agreed to purchase eight additional radio
stations in Puerto Rico. We also have entered into a memorandum of understanding
to sell our two radio stations located in the Florida Keys. Eleven of our
stations are located in six of the largest Hispanic markets in the United
States, including Los Angeles, Puerto Rico, New York, Miami, Chicago and San
Antonio. In total, our radio stations reach over 51% of the U.S. Hispanic
population.

Our financial results depend on a number of factors, including the strength
of the national economy and the local economies served by our stations, total
advertising dollars dedicated to the markets served by our stations, advertising
dollars targeted to the Hispanic consumers in the markets served by our
stations, our stations' audience ratings, our ability to provide popular
programming, local market competition from other radio stations and other
advertising media, and government regulations and policies.

We report our revenues and expenses on a broadcast month basis. "Broadcast
month basis" means a four or five week period ending on the last Sunday of each
calendar month. For the nine months ended June 27, 1999, and the nine months
ended June 28, 1998, we reported 39 weeks of revenues and expenses. For fiscal
year 1996, we reported 53 weeks of revenues and expenses compared to 52 weeks
for each of fiscal year 1997 and 1998.

As is true of other radio groups, our performance is customarily measured
by our ability to generate broadcast cash flow, EBITDA and after-tax cash flow.
Broadcast cash flow consists of operating income before depreciation,
amortization and corporate expenses. EBITDA consists of earnings before
extraordinary items, gain on sale of AM stations, net interest expense, income
taxes, depreciation, amortization and other income or expenses. After-tax cash
flow consists of income before income tax benefit (expense) and extraordinary
items, minus net gain on sale of AM stations (net of tax) and the current income
tax provision, plus depreciation and amortization expense. Although broadcast
cash flow, EBITDA and after-tax cash flow are not measures of performance
calculated in accordance with generally accepted accounting principles, we
believe that broadcast cash flow, EBITDA and after-tax cash flow are useful in
evaluating us because these measures are accepted by the broadcasting industry
as generally recognized measures of performance and are used by securities
industry analysts who publish reports on the performance of broadcasting
companies. In addition, we have included information concerning broadcast cash
flow, EBITDA and after-tax cash flow in this prospectus because it is used by
some investors as a measure of a company's ability to service its debt
obligations and it is also the basis for determining compliance with certain
covenants contained in the indentures governing our debt securities and in the
certificate of designation governing our preferred stock. Broadcast cash flow,
EBITDA and after-tax cash flow are not intended to be substitutes for

26
<PAGE> 33

operating income as determined in accordance with generally accepted accounting
principles, or alternatives to cash flow from operating activities (as a measure
of liquidity) or net income.

REVENUES

Our primary source of revenue is the sale of advertising time on our radio
stations to local and national advertisers. Our revenues are affected primarily
by the advertising rates that our radio stations are able to charge as well as
the overall demand for radio advertising time in a market. Advertising rates are
based primarily on (1) a radio station's audience share in the demographic
groups targeted by advertisers, as measured principally by periodic reports
developed by Arbitron(C), (2) the number of radio stations in the market
competing for the same demographic groups, and (3) the supply of and demand for
radio advertising time. Advertising rates fluctuate daily and are generally
highest during the morning and afternoon commuting hours. Seasonal net
broadcasting revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures by local and
national advertisers. Our second fiscal quarter (January through March)
generally produces the lowest net broadcasting revenue for the year because of
normal post-holiday decreases in advertising expenditures.

Our advertising contracts are generally short term, usually for periods of
three months or less, and we generate most of our revenues from local
advertising. In the 1998 fiscal year, approximately $63.1 million, or 72.7% of
our gross broadcasting revenues, was generated from local advertising and
approximately $23.7 million, or 27.3% of our gross broadcasting revenues, was
generated from national advertising. Each of our station's local sales staff
solicits advertising directly from local advertisers or through an advertising
agency representing local advertisers. For national advertising sales, we have
engaged Caballero Spanish Media, LLC, a subsidiary of Interep National Radio
Sales, Inc., a national representative company.

In the broadcasting industry, radio stations sometimes utilize trade or
barter agreements to reduce cash expenses by exchanging advertising time for
advertising time with other media, and for goods and services related to
promotional campaigns. In each of our 1996, 1997 and 1998 fiscal years, we sold
approximately 5.9%, 4.4% and 3.1%, respectively, of our available advertising
time for trade or barter. Our percentage of advertising time sold for trade or
barter may increase slightly in the next two years upon completion of the
acquisition of radio stations in Puerto Rico, a market which traditionally has
had higher percentage of trade and barter. However, we believe that after these
stations have been integrated into our existing operations, our percentage of
advertising time sold for trade or barter will continue to decrease.

EXPENSES

Our most significant expenses are employee compensation, rating services,
advertising and promotion expenses, lease expenses for studios and transmission
tower space and music license fees. We strive to control expenses by (1)
centralizing functions such as finance, accounting, payables, budgeting, legal,
human resources, management information systems and the overall programming
management function, and (2) using our multiple stations, market presence and
purchasing power to negotiate favorable rates with certain vendors and national
representative selling agencies. Depreciation of fixed assets and amortization
of costs associated with the acquisition of additional stations and interest
carrying charges are also significant factors in determining our overall expense
level.

27
<PAGE> 34

Our operating results in any period may be affected by advertising and
promotion expenses that do not produce commensurate broadcast revenue in the
period in which such expenses are incurred. We generally incur advertising and
promotion expenses in order to increase listenership and Arbitron(C) ratings.
Increased advertising revenue may wholly or partially lag behind the incurrence
of such advertising and promotion expenses because Arbitron(C) only reports
complete ratings information on a quarterly basis.

CERTAIN TRANSACTIONS

From fiscal year 1996 through fiscal year 1998, we acquired five radio
stations, disposed of all of our AM radio stations and issued and repurchased
certain of our securities. The impact of these transactions on our results of
operations is described below:

- In March 1996, we acquired the FCC broadcast license and substantially
all of the assets of WPAT-FM in New York for $86.4 million, including
closing costs of $1.8 million. The acquisition of WPAT-FM was financed by
cash on hand and by the issuance of senior secured notes and redeemable
preferred stock, each of which was subsequently redeemed in March 1997 in
connection with the refinancing associated with the purchase of WRMA-FM,
WXDJ-FM and WLEY-FM. Pursuant to the terms of a local marketing
agreement, we began operating WPAT-FM on January 26, 1996 and the
revenues and operating expenses of WPAT-FM are included in our operating
results from that date.

- In March 1997, we issued (1) $175.0 million of our 14 1/4% preferred
stock, (2) warrants to purchase 74,900 shares of our Class A Common Stock
(redesignated into shares of Class B Common Stock and subsequently split
on a 50-to-1 basis pursuant to the third amended and restated certificate
of incorporation), and (3) $75.0 million aggregate principal amount of
our 11% notes due 2004 (collectively, the "1997 Financings"). In
connection with the 1997 Financings, we capitalized finance costs of $5.7
million related to the 11% notes due 2004 and charged issuance costs of
$9.0 million related to our preferred stock and warrants. A portion of
the proceeds from the 1997 Financings was used to retire all of our then
outstanding redeemable preferred stock and 12 1/4% senior secured notes
due 2001. We realized a loss on the retirement of the 12 1/4% senior
secured notes due 2001 of approximately $1.6 million, net of taxes of
approximately $1.1 million. This amount has been classified as an
extraordinary item in the accompanying "Consolidated Statement of
Operations" in the financial statements of this prospectus.

- In March 1997, we acquired the FCC broadcast licenses and substantially
all of the assets of WRMA-FM and WXDJ-FM in Miami for $112.1 million,
including closing costs of $1.1 million. The acquisitions of WRMA-FM and
WXDJ-FM were financed by the proceeds we received from the 1997
Financings. Our results include the operation of WRMA-FM and WXDJ-FM from
their respective dates of acquisition.

- In March 1997, we acquired the FCC broadcast license and substantially
all of the assets of WLEY-FM in Chicago for $33.2 million including
closing costs of $0.2 million. The acquisition of WLEY-FM was financed by
the proceeds we received from the 1997 Financings and a note payable to
the seller of WLEY-FM for $3.0 million. Our results include the operation
of WLEY-FM from its date of acquisition.

- In September 1997, we sold the assets and FCC licenses of WXLX-AM
(serving the New York market) and WCMQ-AM (serving the Miami area) for
$26.0 million. We recorded a gain of $18.6 million on the sale which is
classified under other income as

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"Gain on sale of AM stations" in the accompanying "Consolidated Statement
of Operations" in the financial statements of this prospectus.

- In October and November 1997, we repurchased through a tender offer and
open-market purchases $13.2 million in principal amount of our 12 1/2%
senior notes due 2002. The total amount paid by us for these notes was
$15.0 million, plus accrued interest of $0.7 million. We recognized a
loss on the tender offer of $1.6 million, net of income taxes of $1.1
million, due to the premium paid for the notes and the write-off of the
deferred financing costs and original issue discounts related to the
notes purchased. This amount has been classified as an extraordinary item
in the accompanying "Consolidated Statement of Operations" in the
financial statements of this prospectus.

- In December 1997, we sold the assets and FCC license of KXMG-AM (serving
the Los Angeles metropolitan area) for $18.0 million. We recorded a gain
of $17.6 million on the sale which is classified under other income as
"Gain on sale of AM stations" in the accompanying Consolidated Statement
of Operations" in the financial statements of this prospectus.

- On May 13, 1998, we acquired the FCC broadcast license and substantially
all of the assets of KLEY-FM (formerly KRIO-FM) in San Antonio, Texas for
$9.3 million, including closing costs of $0.1 million. The acquisition of
KLEY-FM was financed with cash on hand. Our results include the operation
of this station from the date of its acquisition.

During fiscal year 1999, we acquired three stations, WCMA-FM (formerly
WDOY-FM), WMEG-FM and WEMG-FM (all serving Puerto Rico), and eighty percent of
the issued and outstanding capital stock of JuJu Media, Inc., the owner of
LaMusica.com. The acquisitions of WCMA-FM, WMEG-FM and WEGM-FM were financed by
cash on hand. The acquisition of JuJu Media, Inc. was financed by cash on hand
and the issuance of promissory notes. The results of these acquisitions did not
meet the significance test for pro forma presentation and, consequently, no pro
forma results have been included with respect to these acquisitions. Our results
include the operations of these stations and JuJu Media, Inc. from the date of
their respective acquisitions.

On September 22, 1999, we entered into an agreement to purchase all of the
outstanding capital stock of nine subsidiaries of Chancellor Media Corporation
of Los Angeles. The companies we have agreed to purchase own and operate eight
radio stations in Puerto Rico: WIOA-FM, WIOB-FM, WIOC-FM, WCOM-FM, WZMT-FM,
WZNT-FM, WOYE-FM, and WCTA-FM. The purchase price we have agreed to pay for
these companies is $90.0 million. In connection with this acquisition, we have
made an initial nonrefundable deposit of $10.0 million. The agreement contains
customary representations and warranties, and the closing of our acquisition of
these companies is subject to the satisfaction of certain customary conditions,
including receipt of regulatory approvals from the FCC. We expect to finance the
purchase of these companies from a combination of bank borrowings and cash on
hand. Prior to the closing of these acquisitions, (but following the expiration
of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended), we intend to operate these stations under
a local marketing agreement pursuant to which we will pay a monthly fee in
exchange for the exclusive right to program and sell commercial announcements
for each of the stations. We expect to close our acquisition of these companies
by the end of December 1999. We cannot assure you, however, that we will be able
to complete our acquisition of the

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companies during the expected time frame or at all. The results of operations of
these companies have not been included in our pro forma financial statements.

We have entered into a memorandum of understanding with Mr. Alarcon, Sr.,
our Chairman Emeritus and a member of our board of directors, for the sale by us
of the assets and liabilities of radio station WVMQ-FM operating in Key West,
Florida and radio station WZMQ-FM operating in Key Largo, Florida. The sale
price to be paid by Mr. Alarcon, Sr. for these stations is $700,000. The
definitive agreement will contain customary representations, warranties and
indemnities, and the closing of the sale of these stations will be subject to
the satisfaction of certain conditions, including approval of the FCC, the
completion of the concurrent Class A Common Stock offering and the receipt by
Mr. Alarcon, Sr. of the proceeds of the concurrent Class A Common Stock offering
as a selling stockholder. We cannot assure you that the sale of these stations
will occur during the expected time frame or at all.

RESULTS OF OPERATIONS

Nine Months Ended June 27, 1999 Compared to the Nine Months Ended June 28, 1998

Net Revenues. Our net revenues were $70.4 million for the nine months
ended June 27, 1999, compared to $54.6 million for the nine months ended June
28, 1998, an increase of $15.8 million or 28.9%. The increase in net revenues
was mostly attributable to the Chicago and New York market stations where our
net revenues increased 34.3% and 31.7%, respectively, due to high ratings,
robust local economies and increased advertising rates. All of the markets in
which we operate stations experienced strong increases in net revenues,
including our Los Angeles FM station where net revenue increased by 19.4%.

Station Operating Expenses. Total station operating expenses were $31.8
million for the nine months ended June 27, 1999, compared to $28.3 million for
the nine months ended June 28, 1998, an increase of $3.5 million or 12.4%. The
higher station operating expenses were caused mainly by the inclusion of the
results of the recent acquisitions in San Antonio and Puerto Rico as well as
JuJu Media, Inc. accounting for $2.7 million or 77.1% of the increase in station
operating expenses. To a lesser extent, all of our other radio stations
experienced a 2.7% increase in operating expenses due to higher commissions and
music license fees associated with higher sales. In the New York and Miami
markets, we had an increase in advertising, promotional and audience research
expenses. This increase in operating expenses was offset by lower general and
administrative expenses due to improved collections.

Broadcast Cash Flow. Broadcast cash flow was $38.6 million for the nine
months ended June 27, 1999, compared to $26.3 million for the nine months ended
June 28, 1998, an increase of $12.3 million or 46.8%. This increase was
attributable to strong revenue growth and effective management of operating
expenses. Our broadcast cash flow margin increased to 54.8% for the nine months
ended June 27, 1999 compared to 48.2% for the nine months ended June 28, 1998.

Corporate Expenses. Total corporate expenses were $7.7 million for the
nine months ended June 27, 1999, compared to approximately $5.1 million for the
nine months ended June 28, 1998, an increase of $2.6 million or 51.0%. The
increase in corporate expenses resulted mainly from performance bonuses paid to
our Chief Executive Officer, increases in the number of our employees and
increased travel and other corporate overhead expenses relating to our expansion
into new markets.

EBITDA. EBITDA was $30.9 million for the nine months ended June 27, 1999,
compared to $21.2 million for the nine months ended June 29, 1998, an increase
of $9.7 million or 45.7%. Our EBITDA margin was 43.9% for the nine months ended
June 27, 1999, compared to 38.8%

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for the nine months ended June 28, 1998. The increase in EBITDA and EBITDA
margin was caused by the increase in net revenues which was partially offset by
the increase in station operating expenses and corporate expenses.

Depreciation and Amortization. Depreciation and amortization expense was
$7.2 million for the nine months ended June 27, 1999, compared to $6.9 million
for the nine months ended June 28, 1998, an increase of $0.3 million or 4.3%.
The increase was related to an increase in amortization costs as a result of the
stations purchased in Puerto Rico, WCMA-FM, WMEG-FM and WEGM-FM.

Operating Income. Operating income was $23.7 million for the nine months
ended June 27, 1999, compared to $14.3 million for the nine months ended June
28, 1998, an increase of $9.4 million or 65.7%. The increase was due to the
increase in net revenues, partially offset by the increase in operating
expenses.

Interest Expense, Net. Interest expense was $15.7 million for the nine
months ended June 27, 1999, compared to $16.0 million for the nine months ended
June 28, 1998, a decrease of $0.3 million or 1.9%. This decrease was due to the
repurchase of $13.2 million aggregate principal amount of our 12 1/2% notes due
2002 in the first quarter of fiscal 1998.

Other Income (Expense). We had other expenses of $0.5 million for the nine
months ended June 27, 1999, compared to other income of $36.2 million for the
nine months ended June 28, 1998. The other expenses in 1999 resulted primarily
from an additional write-down of owned vacant real estate in the Los Angeles
area. The other income in 1998 was the result of a gain on the sale of our AM
stations during the nine months ended June 28, 1998.

Net Income. Our net income was $4.3 million for the nine months ended June
27, 1999, compared to $19.1 million for the nine months ended June 28, 1998, a
decrease of $14.8 million or 77.5%. The decrease was caused by the absence of
the gain on the sale of our AM stations.

After-Tax Cash Flow. After-tax cash flow was $11.5 million for the nine
months ended June 27, 1999, compared to $5.8 million for the nine months ended
June 28, 1998, an increase of $5.7 million or 98.3%. This increase was primarily
attributable to an increase in EBITDA offset by higher income taxes.

Fiscal Year 1998 Compared to Fiscal Year 1997

Net Revenues. Net revenues were $76.1 million for fiscal year 1998,
compared to $60.0 million for fiscal year 1997, an increase of $16.1 million or
26.8%. This increase was due primarily to the inclusion of the full year results
of WRMA-FM, WXDJ-FM and WLEY-FM which we purchased on March 27, 1997. The
increase in net revenues also resulted from a significant increase in the net
revenues of our New York stations, WPAT-FM and WSKQ-FM, and our Miami station,
WCMQ-FM, each of whose results were positively impacted by increased ratings.
The increase in net revenues at each of our stations was partially offset by a
decrease in net revenues from our Los Angeles station, KLAX-FM, in addition to
the loss of revenues attributable to the sale of our AM stations in New York,
Miami and Los Angeles.

Station Operating Expenses. Total station operating expenses were $39.5
million for fiscal year 1998, compared to $31.0 million for the fiscal year
1997, an increase of $8.5 million or 27.4%. The increase in operating expenses
was caused mainly by the inclusion of the full year results of WRMA-FM, WXDJ-FM
and WLEY-FM.

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Broadcast Cash Flow. Broadcast cash flow was $36.6 million for fiscal year
1998, compared to $29.0 million for fiscal year 1997, an increase of $7.6
million or 26.2%. This increase was attributable to significant increases in net
revenues partially offset by increased station operating expenses. Our broadcast
cash flow margin was 48.1% for fiscal year 1998, compared to 48.3% for fiscal
year 1997.

Corporate Expenses. Total corporate expenses were $6.9 million for fiscal
year 1998, compared to $5.6 million for fiscal year 1997, an increase of $1.3
million or 23.2%. The increase in corporate expenses was caused mainly by
increased professional fees resulting from potential acquisitions and related
financings.

EBITDA. EBITDA was $29.7 million for fiscal year 1998, compared to $23.4
million for fiscal year 1997, an increase of $6.3 million or 26.9%. The increase
in EBITDA was caused by the increase in net revenues, partially offset by
increases in broadcasting operating expenses and corporate expenses, as
described above. Our EBITDA margin was 39.0% for each of the fiscal years 1998
and 1997.

Depreciation and Amortization. Depreciation and amortization expense was
$8.9 million for fiscal year 1998, compared to $7.6 million for fiscal year
1997, an increase of $1.3 million or 17.1%. The increase was related to an
increase in amortization costs as a result of the acquisitions of WRMA-FM,
WXDJ-FM and WLEY-FM offset by the decrease attributable to the sale of the AM
stations.

Operating Income. Operating income was $20.9 million for fiscal year 1998,
compared to $15.8 million for fiscal year 1997, an increase of $5.1 million or
32.3%. The increase was due to the significant increase in net revenues,
partially offset by the increase in operating expenses.

Interest Expense, Net. Interest expense was $20.9 million for fiscal year
1998 compared to $22.2 million for fiscal year 1997, a decrease of $1.3 million
or 5.9%. The decrease was primarily due to the repurchase of $13.2 million
aggregate principal amount of our 12 1/2% notes due 2002 in the first quarter
of 1998.

Other Income (Expense). Other income was $36.0 million for fiscal year
1998, including gain on sale of AM stations of $36.2 million, compared to other
expense of $0.8 million for fiscal year 1997. The other income in 1998 was due
to the gain on the sale of the AM stations. The other expense in 1997 was due
primarily to an additional write-down of owned vacant real estate in the Los
Angeles area.

Net Income (Loss). Our net income for fiscal year 1998 was $18.8 million,
compared to a net loss of $6.2 million for fiscal year 1997. The net income
resulted from the increase in operating income, the gain from the sale of the AM
stations and a slight decrease in interest expenses, partially offset by
additional income taxes.

After-Tax Cash Flow. After-tax cash flow was $7.5 million for fiscal year
1998, compared to $3.1 million for fiscal year 1997, an increase of $4.4 million
or 141.9%. This increase was primarily attributable to an increase in EBITDA,
decrease in net interest expense and gain offset by higher income taxes.

Fiscal Year 1997 Compared to Fiscal Year 1996

Net Revenues. Net revenues were $60.0 million for fiscal year 1997,
compared to $48.6 million for fiscal year 1996, an increase of $11.4 million, or
23.5%. This increase was due primarily to the inclusion of results of WRMA-FM
and WXDJ-FM, which we purchased on

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March 27, 1997, and the inclusion of the results of WPAT-FM for the entire year.
The increase in net revenues also resulted from an increase of $1.1 million in
net revenues from our Los Angeles stations and our acquisition of WLEY-FM in
Chicago which increased net revenues by $0.4 million. These increases in net
revenues were offset by decreases in net revenues from certain of our existing
stations, including a decrease of $3.0 million from the operations of WCMQ-AM
and WCMQ-FM, and a decrease of $0.5 million from the operations of WSKQ-FM and
WXLX-AM.

Station Operating Expenses. Total station operating expenses were $31.0
million for fiscal year 1997, compared to $27.9 million for fiscal year 1996, an
increase of $3.1 million, or 11.1%. The increase in station operating expenses
was caused mainly by the inclusion of the results of WRMA-FM and WXDJ-FM in
Miami and our station in Chicago, WLEY-FM, as well as the inclusion of a full
year of expenses for WPAT-FM.

Broadcast Cash Flow. Broadcast cash flow was $29.0 million for fiscal year
1997, compared to $20.8 million for fiscal year 1996, an increase of $8.2
million or 39.4%. Our broadcast cash flow margin was 48.3% for fiscal year 1997,
compared to 42.8% for fiscal year 1996. The increases in broadcast cash flow and
broadcast cash flow margin were attributable to our purchase of WRMA-FM and
WXDJ-FM which contributed to an increase in sales generated by our Miami
stations of $4.6 million, partially offset by increased expenses of $0.3
million.

Corporate Expenses. Total corporate expenses were $5.6 million for fiscal
year 1997, compared to $3.7 million for fiscal year 1996, an increase of $1.9
million or 51.4%. The increase in corporate expenses was caused by higher salary
expense and higher professional fees associated with potential acquisitions and
related financings.

EBITDA. EBITDA was $23.4 million for fiscal year 1997, compared to $17.0
million for fiscal year 1996, an increase of $6.4 million or 37.6%. The increase
in EBITDA was caused by the increase in net revenues, partially offset by an
increase in operating expenses, as described above. Our EBITDA margin was 39.0%
for fiscal year 1997, compared to 35.0% for fiscal year 1996. This increase was
attributable to the increased broadcast cash flow margin offset by the increased
corporate expenses related to operating more stations.

Depreciation and Amortization. Depreciation and amortization expense was
$7.6 million for fiscal year 1997, compared to $4.6 million for fiscal year
1996, an increase of $3.0 million or 65.2%. The significant increase was related
to an increase in amortization costs as a result of the acquisition of WRMA-FM,
WXDJ-FM, WLEY-FM and WPAT-FM.

Operating Income. Operating income was $15.8 million for fiscal year 1997,
compared to $12.5 million for fiscal year 1996, an increase of $3.3 million, or
26.4%. The increase was due to the significant increase in net revenues
partially offset by the increase in operating expenses.

Interest Expense, Net. Interest expense was $22.2 million for fiscal year
1997 compared to $16.5 million for fiscal year 1996, an increase of $5.7 million
or 34.5%. The increase was caused primarily by the increase in interest expense
associated with our 11% notes issued to partially finance the acquisitions of
WRMA-FM, WXDJ-FM and WLEY-FM.

Other Expense. Other expense for fiscal year 1997 was $0.8 million
compared to $1.6 million for fiscal year 1996, a decrease of $0.8 million or
50.0%. This expense was due primarily to an additional write-down of owned
vacant real estate in the Los Angeles area.

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Net Loss. Our net loss for fiscal year 1997 was $6.2 million, compared to
a net loss of $4.5 million for fiscal year 1996, an increase in the net loss of
$1.7 million, or 37.8%. The increase in the net loss was a result of an
extraordinary loss on the retirement of old debt for an amount paid in excess of
our carrying value and the write-off of the related unamortized debt issuance
costs.

After-Tax Cash Flow. After-tax cash flow was $3.1 million for fiscal year
1997, compared to $0.1 million for fiscal year 1996, an increase of $3.0
million. This increase was attributable to increased EBITDA offset by higher
interest expense.

LIQUIDITY AND CAPITAL RESOURCES

Our primary source of liquidity is cash provided by operations and, to the
extent necessary, undrawn commitments that will be available under the senior
credit facilities we intend to enter into after the completion of this offering
and the concurrent senior subordinated notes offering. We intend to use a
significant portion of our capital resources to make future acquisitions. These
acquisitions will be funded from the senior credit facility and internally
generated cash flow.

From time to time we may borrow under the senior credit facilities in order
to finance acquisitions, make capital improvements and to pay for other similar
investments and transactions. The purchase price for our pending acquisition in
Puerto Rico is $90.0 million. In connection with this acquisition, we have made
an initial nonrefundable deposit of $10.0 million. We expect to finance this
acquisition from a combination of bank borrowings and cash on hand. Other
sources of liquidity will include amounts available under the revolving credit
line included in the senior credit facilities. Our ability to borrow in excess
of the commitments provided by the senior credit facilities will be limited by
the terms of the indenture governing the notes. Additionally, such terms will
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.

Net cash flows provided by operating activities were $11.7 million and $5.0
million for the nine months ended June 27, 1999 and June 28, 1998, respectively.
Net cash flows provided by operating activities were $10.9 million, $6.4 million
and $8.8 million for fiscal years 1998, 1997 and 1996, respectively. Changes in
our net cash flow from operating activities are primarily a result of changes in
advertising revenues and station operating expenses which are affected by the
acquisition and disposition of stations during those periods.

Net cash flows used in investing activities were $28.0 million for the nine
months ended June 27, 1999 and net cash flows provided by investing activities
were $32.5 million for the nine months ended June 28, 1998. Net cash flows
provided by investing activities were $32.2 million for fiscal year 1998 and net
cash flows used in investing activities were $144.4 million and $90.2 million
for fiscal years 1997 and 1996, respectively. Net cash flows used in financing
activities were $0.4 million and $17.7 million for the nine months ended June
27, 1999 and June 28, 1998, respectively. Net cash flows used in financing
activities were $17.8 million for fiscal year 1998 and net cash flows provided
by financing activities were $144.8 million and $69.0 million for fiscal years
1997 and 1996, respectively.

For fiscal year 1999, management anticipates total capital expenditures to
be between $2.0 million and $2.4 million. We anticipate that these expenditures
will be financed by funds from operations.

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Management believes that cash from operating activities, together with cash
on hand, should be sufficient to permit us to meet our obligations for the
foreseeable future, including: (1) required significant cash interest payments
pursuant to the terms of the senior subordinated notes due 2009, (2) operating
obligations, and (3) capital expenditures. We base these beliefs on the
following assumptions, but cannot assure you that they will be true:

- the economic conditions within the radio broadcasting market and economic
conditions in general will not deteriorate in any material respect;

- we will be able to successfully implement our business strategy;

- we will not incur any material unforeseen liabilities, including, without
limitation, environmental liabilities; and

- no future acquisitions will adversely affect our liquidity.

We continuously review, and are currently reviewing, opportunities to
acquire additional radio stations, 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. Other than the pending
acquisition in Puerto Rico described in this prospectus, we have no written
understandings, letter of intent or contracts to acquire radio stations. We
anticipate that any future radio station acquisitions would be financed
primarily by borrowings under our senior credit facilities and funds generated
from operations, as well as equity financings, additional permitted debt
financings or a combination of these sources. However, there can be no assurance
that financing from any of these sources, if available, will be available on
favorable terms.

IMPACT OF INFLATION, MARKET RISK EXPOSURE, CURRENCY FLUCTUATIONS

We believe that inflation has not had a material impact on our results of
operations for each of our fiscal years in the three-year period ended September
27, 1998 and in the nine month period ended June 27, 1999. However, there can be
no assurance that future inflation would not have an adverse impact on our
operating results and financial condition.

We do not have significant market risk exposure since we do not have any
outstanding variable rate debt or derivative financial and commodity instruments
as of June 27, 1999. We are not subject to currency fluctuations since we do not
have any international operations.

YEAR 2000 ISSUE

The year 2000 issue is the result of computer programs which use two digits
rather than four to define the applicable year. Any of our computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could cause
system failures or miscalculations at our broadcast and corporate locations
which in turn could cause disruptions of our operations, including, among other
things, a temporary inability to: produce broadcast signals, process financial
transactions, or engage in similar normal business activities.

We have performed a preliminary analysis of potential problems related to
the year 2000 issue. Internally, we bear some risks in the following areas:
computer hardware and software for our accounting and administrative functions,
computer-controlled programming of music and the transmission of our signals.
Externally, we are at risk, like most companies, of losing power and phone
lines.

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In the administrative area, the vast majority of our hardware and software
has been purchased over the past two years and is year 2000 compliant. We have
no more than 30 computers that may need to be replaced or upgraded. In the
programming areas we utilize a system which is year 2000 compliant. Studio
equipment, transmitters and other broadcasting equipment are not date sensitive
and, consequently, do not pose a significant year 2000 threat, although we will
continue to seek assurances and/or upgrades from all significant vendors. Our
MIS manager and one of our engineers have visited the majority of our locations
and reported to upper management on definitive problems and solutions. As of
September 1, 1999, they have visited and inspected all of our stations. As of
June 27, 1999 we have spent $0.1 million to upgrade/replace non-compliant
systems and equipment.

The greatest threat to our ability to continue broadcasting on and after
January 1, 2000 comes from the utilities upon which we are dependent. To date,
we are not aware of any external utility vendor with a year 2000 issue that
would materially impact our results of operations, liquidity, or capital
resources. However, we have no means for ensuring that such vendor will be year
2000 compliant. The inability of such vendors to adequately address the year
2000 issue on a timely basis could have a material adverse effect on us,
including loss of revenue, and substantial unanticipated costs and service
interruptions. In addition, disruptions in the economy generally resulting from
the year 2000 issue could also materially adversely affect us.

While we believe our efforts will provide reasonable assurance that
material disruptions will not occur due to internal failure, the possibility of
interruption still exists. We do not anticipate spending more than an additional
$0.2 million to become year 2000 compliant. We are performing this analysis with
our MIS manager, our engineers and our accounting staff. We have anticipated
that all assessments and solutions will be in place by the fourth quarter of
fiscal year 1999. We are in the process of developing a contingency plan to
address possible failures by us or our vendors related to Year 2000 compliance.

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BUSINESS

Spanish Broadcasting System, Inc. was founded in 1983 and is the second
largest Spanish-language radio broadcasting company in the United States. We
currently own and operate 13 FM radio stations and have agreed to purchase eight
additional radio stations in Puerto Rico. We also have entered into a memorandum
of understanding to sell our two stations located in the Florida Keys. Eleven of
our stations are located in six of the largest Hispanic markets in the United
States, including Los Angeles, Puerto Rico, New York, Miami, Chicago and San
Antonio. Our radio stations reach over 51% of the U.S. Hispanic population. Our
WSKQ-FM station in New York is ranked in the Spring 1999 Arbitron(C) ratings as
the number one station in its target demographic group (men and women ages
25-54).

- net revenues grew at a compound annual rate of 29.3%, from $55.0 million
to $91.9 million;

- broadcast cash flow grew at a compound annual rate of 35.8%, from $26.5
million to $48.9 million; and

- EBITDA grew at a compound annual rate of 35.5%, from $21.5 million to
$39.5 million.

SBS is led by Mr. Raul Alarcon, Jr., who has been Chief Executive Officer
since June 1994, and President and a director since October 1985 and who will
become Chairman of the Board of Directors upon completion of the Class A Common
Stock offering. The Alarcon family has been involved in Spanish-language radio
broadcasting since the 1950's, when Mr. Pablo Raul Alarcon, Sr., our Chairman
Emeritus and a member of our board of directors, established his first radio
station in Camaguey, Cuba. Members of our senior management team, on average,
have over 15 years of experience in Spanish-language media and radio
broadcasting.

MARKET OPPORTUNITY

Our radio stations target the largest Hispanic markets in the United
States, including Puerto Rico. We believe that these markets have significant
growth potential for the following reasons:

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<PAGE> 44

become the largest minority group in the United States and by 2010, the
second largest Spanish-speaking population in the world. We believe that
these factors will lead to significant increases in demand for
Spanish-language radio, music and entertainment.

- ATTRACTIVE DEMOGRAPHIC GROUP FOR ADVERTISERS. The U.S. Hispanic
population accounted for consumer spending of $380.0 billion in 1998
(7.2% of total U.S. consumer spending), an increase of 78.4% since 1990.
By 2000, U.S. Hispanics are expected to account for estimated consumer
spending of $457.8 billion (8.2% of total U.S. consumer spending), and by
2010 are expected to account for estimated consumer spending of $965.3
billion (12% of total U.S. consumer spending), far outpacing the expected
growth of overall U.S. consumer spending during the same period. Although
Hispanic consumer spending represented 7.2% of total consumer spending in
the United States in 1998, advertising expenditures targeted at Hispanics
represented only 1.4% of total advertising expenditures. We believe that
as U.S. Hispanic consumer spending continues to grow relative to overall
consumer spending, the advertising expenditures targeted at Hispanics
will increase significantly, eventually closing the gap between the
current level of advertising targeted at Hispanics and the buying power
that the Hispanic population in the United States represents. In addition
to increasing buying power, according to market research and compared to
the population as a whole, U.S. Hispanics (1) generally spend a larger
percentage of their household income on consumer goods, (2) have larger
households (3.6 persons per household compared to the average 2.5
persons), (3) are generally younger (median 26 years compared to 35
years) and, (4) on average, tend to be more brand conscious. These
factors make U.S. Hispanics an attractive target audience for many major
U.S. advertisers.

- GROWTH IN SPANISH-LANGUAGE ADVERTISER SPENDING. In 1998, a total of $1.7
billion was spent on Spanish-language advertising, compared to $1.1
billion in 1995. This represents a compound annual growth rate of 17.2%,
which is more than double the total advertising growth rate over the same
period. Approximately 26% of the $1.7 billion spent on Spanish-language
advertising was directed to Spanish-language radio. We believe that major
advertisers have found that Spanish-language advertising, and
Spanish-language radio advertising in particular, is a more effective
means of reaching the growing U.S. Hispanic audience compared to
English-language media.

- GROWTH IN SPANISH-LANGUAGE ADVERTISING RATES. We believe
Spanish-language advertising rates have been rising at a faster rate in
recent years than rates for general media, yet Spanish-language
advertising rates are still generally lower than for comparable
English-language media. We believe that as advertisers continue to
recognize the buying power of the U.S. Hispanic population, the gap in
advertising rates between Spanish-language and English-language media
will continue to narrow.

38
<PAGE> 45

radio as a source of entertainment, information and culture for the U.S.
Hispanic population.

- INTERNET USAGE. Approximately 36% of the U.S. Hispanic population
(excluding Puerto Rico) currently accesses the Internet, a percentage
which we expect will increase over the next few years. We believe the
Internet represents a complementary medium for our advertisers to reach
our target audience.

BUSINESS STRATEGY

OPERATING STRATEGY

Our operating strategy focuses on maximizing our radio stations' appeal to
our audience and our advertisers while minimizing operating expenses in order to
grow revenue and cash flow. To achieve these goals, we focus on:

Providing High-Quality Spanish-Language Programming. We format the
programming of each of our stations to capture a significant share of the
Spanish-language audience. We use extensive market research including third
party consultants and periodic music testing to assess listener preferences in
each station's target demographic audience. We then refine our programming to
reflect the results of this research and testing. Because the U.S. Hispanic
population is so diverse, consisting of numerous identifiable groups from many
different countries of origin each with its own cultural and musical heritage,
we strive to make ourselves intimately familiar with the musical tastes and the
preferences of each of the various ethnic Hispanic groups and customize our
programming accordingly.

Retaining Strong Local Management Teams. We employ local management teams
in each of our markets who are responsible for the day-to-day operations of our
radio stations. Our key local managers generally consist of a general station
manager, general sales manager and programming director. Stations are staffed
with managers who have experience and knowledge of the local radio market and
the local Hispanic market. Because of the cultural diversity of the Hispanic
population from region to region in the United States, decisions regarding
day-to-day programming, sales and promotional efforts are made by local
managers. We believe this approach improves our flexibility and responsiveness
to changing conditions in each of the markets we serve.

Utilizing Aggressive Sales Efforts. Our sales force focuses on converting
audience share into advertising revenue. In order to encourage an aggressive and
focused sales force, we have developed compensation structures tied to
advertising revenue. We seek to maximize our sales to national advertisers
because national advertising generally commands a higher rate per advertising
spot than does local advertising. We have attracted key sales executives from
general market radio who have applied their expertise and relationships with the
advertising community to increase our share of advertising from leading general
market advertisers. We believe that our focused sales efforts are working to
increase media spending targeted at the U.S. Hispanic consumer market and will
enable us to continue to achieve significant revenue growth, and to narrow the
gap between the level of advertising currently targeted at U.S. Hispanics and
the potential buying power of the U.S. Hispanic population.

39
<PAGE> 46

Controlling Operating Costs. By employing a disciplined approach to
operating our radio stations, we have been able to achieve operating margins
which we believe are among the highest in the radio broadcast industry. We
emphasize control of each station's operating costs through detailed budgeting,
tight control over staffing levels and expense analysis. While local management
is responsible for the day-to-day operation of each station, corporate
management is responsible for long-range and strategic planning, establishing
policies and procedures, maximizing cost savings where centralized activity is
appropriate, allocating resources and maintaining overall control of the
stations.

Making Effective Use of Promotions and Special Events. We believe that
effective promotional efforts play a significant role in both adding new
listeners and increasing listener loyalty. Our promotional and marketing
campaigns focus on increasing Hispanic consumer awareness of advertisers'
products and services. Our goal is to use our expertise at marketing to the
Hispanic consumer in each of the markets in which we own and operate stations,
thereby attracting a large share of advertising revenue. We have organized
special promotional appearances, such as station van appearances at client
events, concerts and tie-ins to major events which form an important part of our
marketing strategy. Many of these events build advertiser loyalty because they
enable us to offer advertisers an additional means of reaching the Hispanic
consumer. In many instances, these events are co-sponsored by local television
and newspapers, allowing our advertisers to reach a larger combined audience.

Maintaining Strong Community Involvement. We have historically been, and
will continue to be, actively involved within the local communities that we
serve. Our radio stations participate in numerous community programs,
fund-raisers and activities benefitting the local community and Hispanics
abroad. Other examples of our community involvement include free public service
announcements, free equal-opportunity employment announcements, tours and
discussions held by radio station personalities with school and community groups
designed to limit drug and gang involvement, free concerts and events designed
to promote family values within the local Hispanic communities, and extended
coverage, when necessary, of significant events which have an impact on the U.S.
Hispanic population. Our stations and members of our management have received
numerous community service awards and acknowledgments from government entities
and community and philanthropic organizations for their service to the
community. We believe that this involvement helps to build and maintain station
awareness and listener loyalty.

ACQUISITION STRATEGY

Our acquisition strategy is to acquire radio stations in the largest U.S.
Hispanic markets. We consider acquisitions of stations in our existing markets,
as well as acquisitions of stations in other markets with a large Hispanic
population, where we can maximize our revenues through aggressive sales to U.S.
Hispanic and general market advertisers. These acquisitions may include stations
which do not currently target the U.S. Hispanic market, but which we believe can
be successfully reformatted.

In analyzing potential radio station acquisition candidates, we consider
many factors including:

- the size of the Hispanic market;

- anticipated growth, demographics, and other characteristics of the
market;

- the nature and number of competitive stations in the market;

- the nature of other media competition in the station's market;

40
<PAGE> 47

- the probability of achieving operating synergies through multiple station
ownership within the target market;

- the existing or potential quality of the broadcast signal and
transmission facility;

- the station's ratings, revenue and operating cash flow; and

- the price and terms of the purchase.

By implementing our operating strategy, we are successful in many markets
where our competitors have greater resources than we do. For example:

- WPAT-FM -- NEW YORK. When we acquired WPAT-FM in March of 1996, the
station had net broadcasting revenues of $8.1 million for the year ended
December 1995. Following our acquisition of WPAT-FM, we changed the
station's format to Spanish Adult Contemporary and integrated the station
into our existing New York operations. For the nine-month period ended
June 27, 1999, WPAT-FM generated net broadcasting revenues of $9.6
million, and according to the Spring 1999 Arbitron(C) Survey was the
number two ranked Spanish-language radio station in the New York market.

- WLEY-FM -- CHICAGO. When we acquired WLEY-FM (formerly WYSY-FM) in March
of 1997, the station had net broadcasting revenues of $5.0 million for
the 12-month period ended December 31, 1996. Following our acquisition of
WLEY-FM, we hired new management, changed the station's format to
Regional Mexican. For the nine-month period ended June 27, 1999, WLEY-FM
generated net broadcasting revenues of $7.4 million and according to the
Spring 1999 Arbitron(C) Survey was the number one ranked Spanish-language
radio station in Chicago.

- KLEY-FM -- SAN ANTONIO. When we acquired KLEY-FM in May of 1998, the
station had net broadcasting revenues of $1.2 million for the 12-month
period ended February 28, 1998, and was the number four ranked
Spanish-language radio station in San Antonio. Following our acquisition
of KLEY-FM, we hired new management, changed the station's format to
Tejano-Regional Mexican. For the nine-month period ended June 27, 1999,
KLEY-FM generated net broadcasting revenues of $1.3 million and according
to the Spring 1999 Arbitron(C) Survey was the number three ranked
Spanish-language radio station in San Antonio.

INTERNET STRATEGY

Our Internet strategy is designed to complement our existing business and
to enable us to capitalize on our U.S. Hispanic market expertise. The core of
our strategy is LaMusica.com, an Internet Web site and on-line community focused
on the U.S. Hispanic market. This Web site offers all of our radio stations'
broadcasts through the use of audio streaming technology and will provide our
advertisers with a complementary means of reaching their target audience.

PENDING TRANSACTIONS

41
<PAGE> 48

including receipt of regulatory approval from the FCC. We expect to finance the
purchase of these companies from a combination of bank borrowings and cash on
hand. Prior to the closing of these acquisitions, (but following the expiration
of the applicable waiting period under the Hart-Scott Rodino Antitrust
Improvements Act of 1976, as amended), we intend to operate these stations under
a local marketing agreement pursuant to which we will pay a monthly fee in
exchange for the exclusive right to program and sell commercial announcements
for each of the stations. We expect to close our acquisition of these companies
by the end of December 1999. We cannot assure you, however, that we will be able
to complete our acquisition of the companies during the expected time frame or
at all. The results of operations of these companies have not been included in
our pro forma financial statements.

We have entered into a memorandum of understanding with Mr. Alarcon, Sr.,
our Chairman Emeritus and a member of our board of directors for the sale by us
of the assets and liabilities of radio station WVMQ-FM operating in Key West,
Florida and radio station WZMQ-FM operating in Key Largo, Florida. The sale
price to be paid by Mr. Alarcon, Sr. for these stations is $700,000. The
definitive agreement will contain customary representations, warranties and
indemnities, and the closing of the sale of these stations will be subject to
the satisfaction of certain conditions, including approval from the FCC, the
completion of the concurrent Class A Common Stock offering and the receipt by
Mr. Alarcon, Sr. of all payments due to him as a selling stockholder in the
concurrent Class A Common Stock offering. We cannot assure you that the sale of
these stations will occur during the expected time frame or at all.

TOP 10 HISPANIC RADIO MARKETS IN THE UNITED STATES

The shaded areas in the table below indicate markets where we currently own
and operate radio stations in the United States. Population estimates are for
1998 and are based upon statistics provided by the U.S. Bureau of the Census and
the Strategy Research Corporation -- 1998 U.S. Hispanic Market Report.

<TABLE>
<CAPTION>
HISPANIC % HISPANIC OF % OF TOTAL
POPULATION TOTAL POPULATION U.S. HISPANIC
RANK MARKET (000) IN THE MARKET POPULATION
- ---- --------------------------- ---------- ---------------- -------------
<C> <S> <C> <C> <C>
1. Los Angeles 6,325.9 38.7% 18.4%
2. Puerto Rico 3,811.7 99.6 11.1
3. New York 3,645.1 18.1 10.6
4. Miami 1,422.6 38.1 4.1
5. San Francisco/San Jose 1,243.0 18.4 3.6
6. Chicago 1,198.3 12.7 3.5
7. Houston 1,141.0 24.2 3.3
8. San Antonio 1,064.7 51.6 3.1
9. McAllen/Brownsville (Texas) 823.7 89.5 2.4
10. Dallas/Ft. Worth 786.9 14.9 2.3
-------- ----
TOP 10 HISPANIC MARKETS 21,462.9 29.3% 62.4%
======== ====
</TABLE>

PROGRAMMING

We format the programming of each of our stations to capture a substantial
share of the U.S. Hispanic audience. The U.S. Hispanic population is diverse,
consisting of numerous identifiable groups from many different countries of
origin, each with its own musical and cultural heritage. The music, culture,
customs and Spanish dialects vary from one radio market to another. We strive to
be very familiar with the musical tastes and preferences of each of the various
ethnic Hispanic groups and customize our programming to match the local
preferences of

42
<PAGE> 49

our target demographic audience in each market we serve. We have an in-house
research department in Miami of 16 employees who conduct extensive radio market
research on a daily, weekly, monthly and annual basis. By employing listener
study groups and telephone surveys modeled after Arbitron(C) written survey
methodology, but with even larger sample sizes than Arbitron(C), we are able to
assess listener preferences, track trends and gauge our success on a daily
basis, well before Arbitron(C) results are published. In this manner, we can
respond immediately to changing listener preferences and trends by refining our
programming to reflect the results of our research and testing. Each of our
programming formats is described below.

- Spanish Tropical. The Spanish Tropical format primarily consists of
salsa, merengue, and cumbia music. Salsa is dance music combining Latin
Caribbean rhythms with jazz originating from Puerto Rico, Cuba and the
Dominican Republic, which is popular with Hispanics living in New York
and Miami. Merengue music is up-tempo dance music originating from the
Dominican Republic. Cumbia is a festive, folkloric music which originated
in Colombia.

- Regional Mexican. The Regional Mexican format consists of various types
of music played in different regions of Mexico such as ranchera, nortena,
banda and cumbia. Ranchera music, originating from Jalisco, Mexico, is a
traditional folkloric sound commonly referred to as mariachi music.
Mariachi music features acoustical instruments and is considered the
music indigenous to Mexicans who live in country towns. Nortena means
northern, and is representative of Northern Mexico. Featuring an
accordion, nortena has a polka sound with a distinct Mexican flavor.
Banda is a regional format from the state of Sinaloa, Mexico and is
popular in California. Banda resembles up-tempo marching band music with
synthesizers.

- Tejano. The Tejano format consists of music based on Mexican themes but
which originated in Texas. Tejano music is a combination of contemporary
rock, ranchera and country music, the lyrics of which are primarily sung
in Spanish.

- Spanish Adult Contemporary. The Spanish Adult Contemporary format
includes pop, Latin rock, and ballads. This format is similar to English
Adult Contemporary featured on contemporary hit radio stations.

- Spanish Adult Top 40. The Spanish Adult Top 40 format consists of a
variety of Latin hit songs from the 1980's and 1990's.

- Spanish Oldies. The Spanish Oldies format includes a variety of Latin
music mainly from the 1950's, 1960's and 1970's.

- Dance. The Dance format consists of upbeat dance and house rhythms,
mainly from the 1980's and 1990's, that are played in dance clubs, and it
includes English-language music.

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<PAGE> 50

The programming formats of our radio stations and the target demographic of
each station are as follows:

<TABLE>
<CAPTION>
TARGET
DEMOGRAPHIC
CITY STATION FORMAT (BY AGE)
---- ------- -------------------------- -----------
<S> <C> <C> <C>
New York WSKQ-FM Spanish Tropical 25-54
WPAT-FM Spanish Adult Contemporary 25-54
Los Angeles KLAX-FM Regional Mexican 18-34
Puerto Rico WCMA-FM Spanish Adult Top 40 18-34
WMEG-FM Dance 18-34
WEGM-FM Dance 18-34
Miami WRMA-FM Spanish Adult Contemporary 25-49
WXDJ-FM Spanish Tropical 18-34
WCMQ-FM Spanish Oldies 35-54
Chicago WLEY-FM Regional Mexican 18-34
San Antonio KLEY-FM Tejano-Regional Mexican 18-34
</TABLE>

RADIO STATION PORTFOLIO

The following is a general description of each of our markets and our radio
stations within each of these markets. Audience share and audience share rank
data for the New York, Los Angeles, Miami, Chicago and San Antonio markets are
from the Spring 1999 Arbitron(C) Survey based on surveys reported four times a
year. Audience share and audience share rank data for the Puerto Rico market are
from the Spring 1999 Arbitron(C) Survey, based on surveys reported twice a year.
Estimated revenue share information for our Chicago market is derived from
Hungerford data, and for all other markets, revenue share information is derived
from BIA Research and Miller Kaplan data. Revenue rank and revenue share
information are reported cumulatively for each calendar quarter and, therefore,
include the period from January 1 through the date indicated.

NEW YORK

The New York market is the second largest radio market in terms of
advertising revenues which are projected to be $688.1 million in 1999. In 1998,
the New York market had the third largest U.S. Hispanic population, with
approximately 3.6 million Hispanics, which is approximately 18.1% of the New
York market's total population. We believe that we own the strongest franchise
in terms of audience share and number of Spanish-language radio stations in the
New York market, with two of the three FM Spanish-language radio stations. New
York experienced annual radio revenue growth of 10.3% between 1992 and 1998, and
radio revenue in New York is expected to continue growing at an annual rate of
9.7% between 1999 and 2002.

<TABLE>
<CAPTION>
SUMMER
SPRING 1999 WINTER 1999 FALL 1998 1998
WSKQ-FM ----------- ----------- --------- ------
<S> <C> <C> <C> <C>
Audience share (12-plus)............................. 4.8 4.5 5.2 6.0
Audience share rank (12-plus)........................ 3 3 3 1
Audience share (25-54)............................... 5.9 5.6 6.2 7.2
Audience share rank (25-54).......................... 1 2 2 1
</TABLE>

<TABLE>
<CAPTION>
YTD YTD YTD YTD
6/30/99 3/31/99 12/31/98 9/30/98
----------- ----------- --------- -------
<S> <C> <C> <C> <C>
Estimated revenue share.............................. 5.2 4.7 4.8 4.6
Revenue rank......................................... 8 10 11 11
</TABLE>

44
<PAGE> 51

<TABLE>
<CAPTION>
SUMMER
SPRING 1999 WINTER 1999 FALL 1998 1998
WPAT-FM ----------- ----------- --------- ------
<S> <C> <C> <C> <C>
Audience share (12-plus)............................. 3.2 2.9 3.0 3.2
Audience share rank (12-plus)........................ 11 13 12 12
Audience share (25-54)............................... 3.6 3.3 3.6 4.0
Audience share rank (25-54).......................... 11 12 9 7
</TABLE>

<TABLE>
<CAPTION>
YTD YTD YTD YTD
6/30/99 3/31/99 12/31/98 9/30/98
----------- ----------- --------- -------
<S> <C> <C> <C> <C>
Estimated revenue share.............................. 2.1 1.9 2.0 1.9
Revenue rank......................................... 21 20 19 19
</TABLE>

- WSKQ-FM. In January 1989, we acquired WSKQ-FM for $52.5 million. WSKQ-FM
was the first Spanish-language FM station to serve the New York market,
making its debut in 1989. In 1993, after extensive research, we changed
the station's format to Spanish Tropical. This format is a mix of salsa
and merengue rhythms. The Spanish Tropical format has proven to be very
successful and according to the Spring 1999 Arbitron(C) Survey, WSKQ-FM
is New York's number one ranked Spanish-language radio station and the
number three ranked station overall. WSKQ-FM is ranked number one in its
targeted audience, the 25-54 age demographic, with a 5.9 share.

- WPAT-FM. In March 1996, we purchased WPAT-FM for $86.4 million,
including closing costs of $1.8 million, because we believed that the New
York Spanish-language radio market was underserved. Consequently, we
reformatted WPAT-FM with a Spanish Adult Contemporary format designed to
complement WSKQ-FM's upbeat salsa and merengue format. According to the
Spring 1999 Arbitron(C) Survey, WPAT-FM is New York's number two ranked
Spanish-language radio station and the number eleven ranked station
overall. WPAT-FM is ranked number eleven in its targeted audience, the
25-54 age demographic, with a 3.6 share.

LOS ANGELES

The Los Angeles market is the largest radio market in terms of advertising
revenues which are projected to be $726.5 million in 1999. In 1998, the Los
Angeles market had the largest U.S. Hispanic population, with approximately 6.3
million Hispanics, which is approximately 38.7% of the Los Angeles market's
total population. Los Angeles experienced annual radio revenue growth of 7.5%
between 1992 and 1998, and radio revenue in Los Angeles is expected to continue
growing at an annual rate of 10.3% between 1999 and 2002.

<TABLE>
<CAPTION>
SUMMER
SPRING 1999 WINTER 1999 FALL 1998 1998
KLAX-FM ----------- ----------- --------- ------
<S> <C> <C> <C> <C>
Audience share (12-plus)............................. 3.0 3.3 4.1 3.2
Audience share rank (12-plus)........................ 9 9 3 11
Audience share (18-34)............................... 4.6 5.0 6.3 5.1
Audience share rank (18-34).......................... 8 8 4 6
</TABLE>

<TABLE>
<CAPTION>
YTD YTD YTD YTD
6/30/99 3/31/99 12/31/98 9/30/98
----------- ----------- --------- -------
<S> <C> <C> <C> <C>
Estimated revenue share.............................. 2.7 2.4 2.4 2.3
Revenue rank......................................... 19 18 20 19
</TABLE>

- KLAX-FM. In February 1988, we acquired KLAX-FM for $15.0 million. The
station features a Regional Mexican format. According to the Spring 1999
Arbitron(C) Survey, KLAX-FM is Los Angeles' number three ranked
Spanish-language radio station and the number nine ranked station
overall. KLAX-FM is ranked number eight in its targeted audience, the
18-34 age demographic, with a 4.6 share.

45
<PAGE> 52

PUERTO RICO

The Puerto Rico market is the twenty-eighth largest radio market in terms
of advertising revenues which are projected to be $90.0 million in 1999. In
1998, the Puerto Rico market had the second largest U.S. Hispanic population,
with approximately 3.8 million Hispanics, which is approximately 99.6% of the
Puerto Rico market's total population. Puerto Rico experienced annual radio
revenue growth of 5.4% between 1992 and 1998, and radio revenue in Puerto Rico
is expected to continue growing at an annual rate of 5.7% between 1999 and 2002.
We have not included results for Fall 1998 because we did not own the Puerto
Rico stations during that rating period. Additionally, estimated revenue share
and revenue rank data are not yet available.

<TABLE>
<CAPTION>
SPRING 1999
WCMA-FM -----------
<S> <C>
Audience share (12-plus).................................. 2.3
Audience share rank (12-plus)............................. 11
Audience share (18-34).................................... 3.0
Audience share rank (18-34)............................... 12
YTD 6/30/99
---
Estimated revenue share................................... N/A
Revenue rank.............................................. N/A
WMEG-FM SPRING 1999
---
Audience share (12-plus).................................. 3.8
Audience share rank (12-plus)............................. 7
Audience share (18-34).................................... 7.4
Audience share rank (18-34)............................... 2
YTD 6/30/99
---
Estimated revenue share................................... N/A
Revenue rank.............................................. N/A
WEGM-FM SPRING 1999
---
Audience share (12-plus).................................. 0.6
Audience share rank (12-plus)............................. 38
Audience share (18-34).................................... 1.2
Audience share rank (18-34)............................... 25
YTD 6/30/99
---
Estimated revenue share................................... N/A
Revenue rank.............................................. N/A
</TABLE>

- WCMA-FM. In December 1998, we acquired WCMA-FM (formerly WDOY-FM) for
$8.3 million. WCMA-FM's format is Spanish Adult Top 40. According to the
Spring 1999 Arbitron(C) Survey, WCMA-FM is Puerto Rico's number eleven
ranked radio station. WCMA-FM is ranked number twelve in its targeted
audience, the 18-34 age demographic, with a 3.0 share.

- WMEG-FM. In April 1999, we acquired WMEG-FM and WEGM-FM for $16.1
million. The format of WMEG-FM is Dance. According to the Spring 1999
Arbitron(C) Survey, WMEG-FM is Puerto Rico's number seven ranked radio
station. WMEG-FM is ranked number two in its targeted audience, the 18-34
age demographic, with a 7.4 share.

- WEGM-FM. The format of WEGM-FM, which is simulcast with WMEG-FM, is
Dance. According to the Spring 1999 Arbitron(C) Survey, WEGM-FM is Puerto
Rico's number thirty-eight ranked radio station. WEGM-FM is ranked number
twenty-five in its targeted audience, the 18-34 age demographic, with a
1.2 share.

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<PAGE> 53

We have entered into an agreement to purchase nine companies owned by
Chancellor Media Corporation of Los Angeles. The companies we have agreed to
purchase own and operate eight radio stations in Puerto Rico: WIOA-FM, WIOB-FM,
WIOC-FM, WCOM-FM, WZMT-FM, WZNT-FM, WOYE-FM and WCTA-FM. We cannot assure you,
however, that we will be able to complete our acquisition of the companies
during the expected time frame or at all.

MIAMI

The Miami market is the twelfth largest radio market in terms of
advertising revenues which are projected to be $233.0 million in 1999. In 1998,
the Miami market had the fourth largest U.S. Hispanic population, with
approximately 1.4 million Hispanics, which is approximately 38.1% of the Miami
market's total population. Miami experienced annual radio revenue growth of
12.1% between 1992 and 1998, and radio revenue in Miami is expected to continue
growing at an annual rate of 9.0% between 1999 and 2002.

<TABLE>
<CAPTION>
SUMMER
SPRING 1999 WINTER 1999 FALL 1998 1998
WCMQ-FM ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Audience share (12-plus)............................ 2.4 3.1 2.8 2.7
Audience share rank (12-plus)....................... 18 13 18 17
Audience share (35-54).............................. 4.1 4.2 4.4 3.4
Audience share rank (35-54)......................... 10 8 6 12
</TABLE>

<TABLE>
<CAPTION>
YTD YTD YTD YTD
6/30/99 3/31/99 12/31/98 9/30/98
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Estimated revenue share............................. 2.4 2.4 2.1 2.1
Revenue rank........................................ 17 17 19 20
</TABLE>

<TABLE>
<CAPTION>
SUMMER
SPRING 1999 WINTER 1999 FALL 1998 1998
WRMA-FM ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Audience share (12-plus)............................ 3.1 2.9 3.3 3.3
Audience share rank (12-plus)....................... 13 18 10 12
Audience share (25-49).............................. 3.0 3.5 3.4 3.7
Audience share rank (25-49)......................... 14 14 14 11
</TABLE>

<TABLE>
<CAPTION>
YTD YTD YTD YTD
6/30/99 3/31/99 12/31/98 9/30/98
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Estimated revenue share............................. 3.8 3.7 4.1 14.7
Revenue rank........................................ 15 15 14 3
</TABLE>

<TABLE>
<CAPTION>
SUMMER
SPRING 1999 WINTER 1999 FALL 1998 1998
WXDJ-FM ----------- ----------- --------- ------
<S> <C> <C> <C> <C>
Audience share (12-plus)............................. 3.9 3.4 3.1 2.9
Audience share rank (12-plus)........................ 8 10 12 14
Audience share (18-34)............................... 5.0 4.4 3.1 3.4
Audience share rank (18-34).......................... 7 8 10 11
</TABLE>

<TABLE>
<CAPTION>
YTD YTD YTD YTD
6/30/99 3/31/99 12/31/98 9/30/98
------- ------- -------- -------
<S> <C> <C> <C> <C>
Estimated revenue share.............................. 5.5 5.0 5.5 20.0
Revenue rank......................................... 7 11 8 2
</TABLE>

- WCMQ-FM. In November 1986, we acquired WCMQ-FM (and WCMQ-AM) for $15.0
million. In 1997, we sold WCMQ-AM for $8.0 million. In October 1996, to
complement WRMA-FM and WXDJ-FM, we reformatted WCMQ-FM by implementing a
Spanish Oldies format. According to the Spring 1999 Arbitron(C) Survey,
WCMQ-FM is Miami's number five ranked Spanish-language radio station and
the number eighteen

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<PAGE> 54

ranked station overall. WCMQ-FM is ranked number ten in its targeted
audience, the 35-54 age demographic, with a 4.1 share.

- WRMA-FM. In March 1997, we purchased WRMA-FM and WXDJ-FM for $112.2
million, including closing costs of $1.1 million. A Spanish Adult
Contemporary station, WRMA-FM features a blend of ballads and pop songs
from the 1970's to the present. According to the Spring 1999 Arbitron(C)
Survey, WRMA-FM is Miami's number four ranked Spanish-language radio
station and the number thirteen ranked station overall. WRMA-FM is ranked
number fourteen in its targeted audience, the 25-49 age demographic, with
a 3.0 share.

- WXDJ-FM. By blending salsa and merengue, this station's Spanish Tropical
format targets the emerging musical tastes of the rapidly changing Miami
Hispanic population. According to the Spring 1999 Arbitron(C) Survey,
WXDJ-FM is Miami's number three ranked Spanish-language radio station and
the number eight ranked station overall. WXDJ-FM is ranked number seven
in its targeted audience, the 18-34 age demographic, with a 5.0 share.

CHICAGO

The Chicago market is the third largest radio market in terms of
advertising revenues which are projected to be $471.0 million in 1999. In 1998,
the Chicago market had the sixth largest U.S. Hispanic population, with
approximately 1.2 million Hispanics, which is approximately 12.7% of the Chicago
market's total population. We believe that we own the strongest franchise in the
Chicago market with the number one ranked FM Spanish-language radio station.
Chicago experienced annual radio revenue growth of 8.7% between 1992 and 1998,
and radio revenue in Chicago is expected to continue growing at an annual rate
of 9.0% between 1999 and 2002.

<TABLE>
<CAPTION>
SUMMER
SPRING 1999 WINTER 1999 FALL 1998 1998
WLEY-FM ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Audience share (12-plus)............................ 2.4 2.6 2.3 1.9
Audience share rank (12-plus)....................... 18 15 18 21
Audience share (18-34).............................. 4.2 4.4 4.1 3.3
Audience share rank (18-34)......................... 7 6 7 10
</TABLE>

<TABLE>
<CAPTION>
YTD YTD YTD YTD
6/30/99 3/31/99 12/31/98 9/30/98
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Estimated revenue share............................. 2.6 2.3 2.5 2.5
Revenue rank........................................ 18 20 20 19
</TABLE>

- WLEY-FM. In March 1997, we acquired WLEY-FM (formerly WYSY-FM) for $33.0
million because we believed that the Chicago Spanish-language radio
market was underserved and offered significant opportunities for growth.
In July 1997, after extensive research, we changed WLEY-FM's format from
70's rock to a Regional Mexican format. According to the Spring 1999
Arbitron(C) Survey, WLEY-FM is Chicago's number one ranked
Spanish-language radio station and the number eighteen ranked station
overall. WLEY-FM is ranked number seven in its targeted audience, the
18-34 age demographic, with a 4.2 share.

SAN ANTONIO

The San Antonio market is the thirty-second largest radio market in terms
of advertising revenues which are projected to be $78.4 million in 1999. In
1998, San Antonio had the eighth largest U.S. Hispanic population, with
approximately 1.1 million Hispanics, which is approximately 51.6% of the San
Antonio market's total population. San Antonio experienced annual

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<PAGE> 55

radio revenue growth of 8.8% between 1992 and 1998, and radio revenue in San
Antonio is expected to continue growing at an annual rate of 7.7% between 1999
and 2002.

<TABLE>
<CAPTION>
SUMMER
SPRING 1999 WINTER 1999 FALL 1998 1998
KLEY-FM ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Audience share (12-plus)............................ 2.5 3.5 3.2 1.9
Audience share rank (12-plus)....................... 15 13 12 16
Audience share (18-34).............................. 4.0 4.4 3.3 1.8
Audience share rank (18-34)......................... 8 8 9 12
</TABLE>

<TABLE>
<CAPTION>
YTD YTD YTD YTD
6/30/99 3/31/99 12/31/98 9/30/98
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Estimated revenue share............................. 2.7 2.1 1.5 1.4
Revenue rank........................................ 14 14 16 16
</TABLE>

- KLEY-FM. In May 1998, we acquired KLEY-FM (formerly KRIO-FM) for $9.3
million. At the time, KLEY-FM was programmed as a strictly Tejano
station. In July 1998, we expanded the format to Regional Mexican and
Tejano. According to the Spring 1999 Arbitron(C) Survey, KLEY-FM is San
Antonio's number three ranked Spanish-language radio station and the
number fifteen ranked station overall. KLEY-FM is ranked number eight in
its targeted audience, the 18-34 age demographic, with a 4.0 share.

LATIN MUSIC ON-LINE ("LAMUSICA.COM")

LaMusica.com is a bilingual Spanish-English Internet Web site and on-line
community that focuses on the U.S. Hispanic market. LaMusica.com is a provider
of original information and interactive content related to Latin music,
entertainment, news and culture. We believe that LaMusica.com, together with our
radio station portfolio, enables our audience to enjoy additional targeted and
culturally-specific entertainment options, such as concert listings, CD reviews,
local entertainment calendars, and interactive content on popular Latin
recording artists and musicians. Similarly, LaMusica.com enables our advertisers
to cost-effectively reach their targeted Hispanic consumer through an
additional, dynamic and rapidly growing medium.

LaMusica.com has links to the Web sites for all of our radio stations. This
network of Web sites among other things, permit our target audiences to listen
to streaming audio of live radio broadcasts from each of our radio stations from
anywhere in the United States and the world. In addition to our network of
station Web sites and our production of original interactive content relating to
Latin music and entertainment, we plan to offer enhanced community features on
LaMusica.com such as branded e-mail, bulletin boards, fan clubs, chat rooms,
personals and horoscopes.

We anticipate LaMusica.com will generate revenues primarily from two
distinct sources: (1) advertising and sponsorship and (2) electronic commerce
opportunities, such as on-line music sales. We will use our stations' on-air
marketing power to draw visitors to LaMusica.com. We are currently initiating a
nationwide advertising campaign on our radio stations in order to increase
audience awareness of LaMusica.com. We will also utilize our strong
relationships with advertisers and the music industry to develop banner
advertising and sponsorships. With respect to electronic commerce, we are
developing a business model to sell music directly to consumers on our Web
sites, as music represents the most frequently purchased item on-line. We plan
to utilize the services of a leading music order fulfillment company in order to
facilitate our on-line music sales. As music technology and industry standards
evolve, we will explore additional opportunities for the sale of music on-line,
including downloads of digital music and the sale of

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<PAGE> 56

customized compact discs. We also plan to sell t-shirts, posters and other Latin
music-related merchandise.

In addition to the rapidly growing U.S. Hispanic population, we believe
that LaMusica.com will benefit from the following:

- the percentage of Hispanics in the United States (excluding Puerto Rico)
accessing the Internet either at home or at work is currently estimated
at 36%, a percentage which we believe will increase substantially over
the next few years;

- the percentage of Hispanic households in the United States (excluding
Puerto Rico) that own a computer is estimated at 26%;

- $571.0 million was spent on Latin music CDs, cassettes and music videos
in the United States (excluding Puerto Rico) during 1998, an increase in
dollar terms of 16.0% from 1997, representing the fastest growing segment
of the music industry;

- approximately two-thirds of respondents in Arbitron(C) surveys expressed
interest in purchasing music from Web sites maintained by radio stations;
and

- we believe that the U.S. Hispanic market is currently underserved by the
Internet and that there are a limited number of on-line businesses
targeting the U.S. Hispanic consumer.

We plan to use our knowledge of our Internet user base to help advertisers
create more effective on-line advertising campaigns. In addition, we intend to
use advertising techniques and tracking technologies to:

- target advertising to users with specific demographic profiles;

- gather extensive data on our users; and

- use daily tracking data to analyze a particular campaign's effectiveness.

Our management team has been developing LaMusica.com for the past four
years and has extensive technological knowledge and experience in the
development and creation of original content. LaMusica.com has been recognized
for its excellence in Latin music content on the Internet and received a "Top
5%" award from Lycos(R), has been named a "Top Latino" Web site by Tesoros del
Web, received a "Best of the Web" award from Home PC and is a snap.com editor's
choice for Latin music on-line.

MANAGEMENT AND PERSONNEL

As of September 24, 1999, we had 398 full-time employees, 11 of whom were
primarily involved in senior management, 158 in programming, 134 in sales, 83 in
general administration and 12 in technical activities.

To facilitate efficient management from our Miami, Florida headquarters, we
access and utilize computerized accounting systems from our properties to
provide current information to management on station operations and to assist in
cost control and the preparation of monthly financial statements. Corporate
executives regularly visit each station to monitor its operations and ensure
that our policies are properly followed.

SEASONALITY

Seasonal net broadcasting revenue fluctuations are common in the radio
broadcasting industry and are due primarily to fluctuations in advertising
expenditures by local and national advertisers. Our second fiscal quarter
(January through March) generally produces the lowest net

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<PAGE> 57

broadcasting revenue for the year because of normal post-holiday decreases in
advertising expenditures.

ADVERTISING

Virtually all radio station revenue is derived from advertising. This
revenue is usually classified in one of two categories -- "national" or "local."
"National" refers to advertising that is solicited by a national representative
firm that represents the station and is paid commissions based on collected net
revenues. Our national sales representative is Caballero Spanish Media, LLC, a
division of Interep National Radio Sales, Inc. "Local" refers to advertising
purchased by advertisers in the local community served by a particular station.

We believe that radio is one of the most efficient and cost-effective means
for advertisers to reach targeted demographic groups. Advertising rates charged
by a radio station are based primarily on the station's ability to attract
listeners in a given market and on the attractiveness to advertisers of the
station's listener demographics. Rates vary depending upon a program's
popularity among the listeners an advertiser is seeking to attract, the number
of advertisers vying for available air time and the availability of alternative
media in the market. Radio advertising rates generally are highest during the
morning and afternoon drive-time hours which are the peak hours for radio
audience listening. We believe that having multiple stations in a market is
desirable to national advertisers enabling the broadcaster to command higher
advertising rates. We believe we will be able to increase our rates as new and
existing advertisers recognize the increasing desirability of targeting the
growing Hispanic population in the United States.

Each station broadcasts a predetermined number of advertisements each hour
with the actual number depending upon the format of a particular station. We
determine the number of advertisements broadcast hourly that can maximize the
station's available revenue dollars without jeopardizing its audience listener
levels. While there may be shifts from time to time in the number of
advertisements broadcast during a particular time of the day, the total number
of advertisements broadcast on a particular station generally does not vary
significantly from year to year.

Our revenue mix between local and national advertising varies significantly
by market. We strive to increase the level of national advertising since
national advertising generally commands a higher dollar rate per advertising
spot than does local advertising. Currently, approximately 73% of our
advertising is local and 27% is national.

Although the majority of our advertising contracts are short-term
(generally running for less than three months), we have long-term relationships
with some of our advertisers. In each of our broadcasting markets, we employ
salespeople to obtain local advertising revenues. We believe that our local
sales force is crucial to maintaining relationships with key local advertisers
and agencies and identifying new advertisers. We generally pay sales commissions
to our local sales staff upon the receipt from advertisers of the payments
related to these sales. We offer assistance to local advertisers by providing
them with studio facilities to produce 60-second commercials free of charge.

COMPETITION

The success of each of our stations depends significantly upon its audience
ratings and its share of the overall advertising revenue within its market. The
radio broadcasting industry is a highly competitive business. Each of our radio
stations competes with both Spanish-language and English-language radio stations
in its market as well as with other advertising media such as newspapers,
broadcast television, cable television, the Internet, magazines, outdoor
advertising,

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<PAGE> 58

transit advertising and direct mail marketing. Several of the stations with
which we compete are subsidiaries of large national or regional companies that
have substantially greater resources than we do. Factors which are material to
competitive position include management experience, the station's rank in its
market, signal strength and frequency, and audience demographics, including the
nature of the Spanish market targeted by a particular station.

Although the radio broadcasting industry is highly competitive, some
barriers to entry exist. These barriers can be mitigated to some extent by
changing existing radio station formats and upgrading power, among other
actions. The operation of a radio station requires a license or other
authorization from the FCC, and the number of radio stations that can operate in
a given market is limited by the availability of FM and AM radio frequencies
allotted by the FCC to communities in that market. In addition, the FCC's
multiple ownership rules regulate the number of stations that may be owned and
controlled by a single entity in a given market. However, in recent years, these
rules have changed significantly. For a discussion of FCC regulation, see
"Federal Regulation of Radio Broadcasting."

The radio industry is also subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems, by satellite and by terrestrial
delivery of digital audio broadcasting (known as "DAB"). DAB may deliver to
nationwide and regional audiences, multi-channel, multi-format, digital radio
services with sound quality equivalent to that of compact discs. The FCC has
recently authorized spectrum for the use of a new technology, satellite digital
audio radio services (known as "SDARS"), to deliver audio programming. SDARS may
provide a medium for the delivery by satellite of multiple new audio programming
formats to local and national audiences. It is not known at this time whether
digital technology also may be used in the future by existing radio broadcast
stations either on existing or alternate broadcasting frequencies. There are
also proposals before the FCC to permit a new "low power" radio or
"microbroadcasting" service which could open up opportunities for low cost
neighborhood service on frequencies which would not interfere with existing
stations. No FCC action has been taken on these proposals to date.

The delivery of information through the presently unregulated Internet also
could create a new form of competition. The radio broadcasting industry
historically has grown despite the introduction of new technologies for the
delivery of entertainment and information, such as television broadcasting,
cable television, audio tapes and compact discs. A growing population and the
greater availability of radios, particularly car and portable radios, have
contributed to this growth. We cannot assure you, however, that the development
or introduction in the future of any new media technology will not have an
adverse effect on the radio broadcasting industry.

We cannot predict what other matters might be considered in the future by
the FCC, nor can we assess in advance what impact, if any, the implementation of
any of these proposals or changes might have on our business. See "Federal
Regulation of Radio Broadcasting."

ANTITRUST

An important part of our growth strategy is the acquisition of additional
radio stations. After the passage of the Telecommunications Act of 1996, the
Justice Department has become more aggressive in reviewing proposed acquisitions
of radio stations and radio station networks. The Justice Department is
particularly aggressive when the proposed buyer already owns one or more radio
stations in the market of the station it is seeking to buy. Recently, the
Justice Department has challenged a number of radio broadcasting transactions.
Some of those challenges ultimately resulted in consent decrees requiring, among
other things, divestitures of certain stations. In general, the Justice
Department has more closely scrutinized radio broadcasting acquisitions that

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result in local market shares in excess of 40% of radio advertising revenue.
Similarly, the FCC staff has announced new procedures to review proposed radio
broadcasting transactions even if the proposed acquisition otherwise complies
with the FCC's ownership limitations. In particular, the FCC may invite public
comment on proposed ratio transactions that the FCC believes, based on its
initial analysis, may present ownership concentration concerns in a particular
local radio market.

FEDERAL REGULATION OF RADIO BROADCASTING

The radio broadcasting industry is subject to extensive and changing
regulation by the FCC of programming, technical operations, employment and other
business practices. The FCC regulates radio broadcast stations pursuant to the
Communications Act. The Communications Act permits the operation of radio
broadcast stations only in accordance with a license issued by the FCC upon a
finding that the grant of a license would serve the public interest, convenience
and necessity. The Communications Act provides for the FCC to exercise its
licensing authority to provide a fair, efficient and equitable distribution of
broadcast service throughout the United States. Among other things, the FCC:

- assigns frequency bands for radio broadcasting;

- determines the particular frequencies, locations and operating power of
radio broadcast stations;

- issues, renews, revokes and modifies radio broadcast station licenses;

- establishes technical requirements for certain transmitting equipment
used by radio broadcast stations;

- adopts and implements regulations and policies that directly or
indirectly affect the ownership, operation, program content and
employment and business practices of radio broadcast stations; and

- has the power to impose penalties, including monetary forfeitures, for
violations of its rules and the Communications Act.

The Communications Act prohibits the assignment of an FCC license, or other
transfer of control of an FCC licensee, without the prior approval of the FCC.
In determining whether to approve assignments or transfers, and in determining
whether to grant or renew a radio broadcast license, the FCC considers a number
of factors pertaining to the licensee (and any proposed licensee), including
restrictions on foreign ownership, compliance with FCC media ownership limits
and other FCC rules, licensee character and compliance with the Anti-Drug Abuse
Act of 1988.

The following is a brief summary of certain provisions of the
Communications Act and specific FCC rules and policies. This summary does not
purport to be complete and is subject to the text of the Communications Act, the
FCC's rules and regulations, and the rulings of the FCC. You should refer to the
Communications Act and these FCC rules and rulings for further information
concerning the nature and extent of federal regulation of radio broadcast
stations.

A licensee's failure to observe the requirements of the Communications Act
or FCC rules and policies may result in the imposition of various sanctions,
including admonishment, fines, the grant of renewal terms of less than eight
years, the grant of a license with conditions or, for particularly egregious
violations, the denial of a license renewal application, the revocation of an
FCC license or the denial of FCC consent to acquire additional broadcast
properties.

Congress and the FCC have had under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could, directly

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or indirectly, affect the operation, ownership and profitability of SBS's radio
stations, result in the loss of audience share and advertising revenue for our
radio broadcast stations or affect our ability to acquire additional radio
broadcast stations or finance these acquisitions. Such matters may include:

- changes to the license authorization and renewal process;

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

- auction of new broadcast licenses;

- changes to the FCC's equal employment opportunity regulations and other
matters relating to involvement of minorities and women in the
broadcasting industry;

- proposals to change rules relating to political broadcasting including
proposals to grant free air time to candidates, and other changes
regarding program content;

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

- technical and frequency allocation matters, including creation of a new
low power radio broadcast service;

- the implementation of digital audio broadcasting on both a satellite and
terrestrial basis;

- changes in broadcast cross-interest, multiple ownership, foreign
ownership, cross-ownership and ownership attribution policies;

- proposals to allow telephone companies to deliver audio and video
programming to homes in their service areas; and

- proposals to alter provisions of the tax laws affecting broadcast
operations and acquisitions.

We cannot predict what changes, if any, might be adopted, nor can we
predict what other matters might be considered in the future, nor can we judge
in advance what impact, if any, the implementation of any particular proposals
or changes might have on our business.

FCC LICENSES

The Communications Act provides that a broadcast station license may be
granted to any applicant if the public interest, convenience and necessity will
be served thereby, subject to certain limitations. In making licensing
determinations, the FCC considers an applicant's legal, technical, financial and
other qualifications. The FCC grants radio broadcast station licenses for
specific periods of time and, upon application, may renew them for additional
terms. Under the Communications Act, radio broadcast station licenses may be
granted for a maximum term of eight years.

Generally, the FCC renews radio broadcast licenses without a hearing upon a
finding that:

- the radio station has served the public interest, convenience and
necessity;

- there have been no serious violations by the licensee of the
Communications Act or FCC rules and regulations; and

- there have been no other violations by the licensee of the Communications
Act or FCC rules and regulations which, taken together, indicate a
pattern of abuse.

After considering these factors, the FCC may grant the license renewal
application with or without conditions, including renewal for a term less than
the maximum term otherwise permitted by law, or hold an evidentiary hearing.

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In addition, the Communications Act authorizes the filing of petitions to
deny a license renewal application during specific periods of time after a
renewal application has been filed. Interested parties, including members of the
public, may use these petitions to raise issues concerning a renewal applicant's
qualifications. If a substantial and material question of fact concerning a
renewal application is raised by the FCC or other interested parties, or if for
any reason the FCC cannot determine that granting a renewal application would
serve the public interest, convenience and necessity, the FCC will hold an
evidentiary hearing on the application. If as a result of an evidentiary hearing
the FCC determines that the licensee has failed to meet the requirements
specified above and that no mitigating factors justify the imposition of a
lesser sanction, then the FCC may deny a license renewal application.
Historically, our licenses have been renewed without any conditions or sanctions
being imposed, but we cannot assure you that the licenses of each of our
stations will continue to be renewed or will continue to be renewed without
conditions or sanctions.

The FCC classifies each AM and FM radio station. An AM radio station
operates on either a clear channel, regional channel or local channel. A clear
channel is one on which AM radio stations are assigned to serve wide areas,
particularly at night.

The minimum and maximum facilities requirements for an FM radio station are
determined by its class. Possible FM class designations depend upon the
geographic zone in which the transmitter of the FM radio station is located. In
general, commercial FM radio stations are classified as follows, in order of
increasing power and antenna height: Class A, B1, C3, B, C2, C1 or C radio
stations. The FCC recently has proposed to divide Class C stations into two
subclasses based on antenna height. Stations not meeting the minimum height
requirement within a three-year transition period would be downgraded
automatically to the new Class C0 category.

Ownership Matters. The Communications Act requires prior approval of the
FCC for the assignment of a broadcast license or the transfer of control of a
corporation or other entity holding a license. In determining whether to approve
an assignment of a radio broadcast license or a transfer of control of a
broadcast licensee, the FCC considers, among other things:

- the financial and legal qualifications of the prospective assignee or
transferee, including compliance with FCC restrictions on non-U.S.
citizen or entity ownership and control;

- compliance with FCC rules limiting the common ownership of attributable
interests in broadcast and newspaper properties;

- the history of compliance with FCC operating rules; and

- the character qualifications of the transferee or assignee and the
individuals or entities holding attributable interests in them.

Applications to the FCC for assignments and transfers are subject to petitions
in favor of denying the assignment and transfer by interested parties.

To obtain the FCC's prior consent to assign or transfer a broadcast
license, appropriate applications must be filed with the FCC. The application
must be placed on public notice for a period of 30 days during which petitions
to deny the application may be filed by interested parties, including members of
the public. Informal objections may be filed any time up until the FCC acts upon
the application. If the FCC grants an assignment or transfer application,
interested parties have 30 days from public notice of the grant to seek
reconsideration of that grant. The FCC usually has an additional ten days to set
aside such grant on its own motion. When ruling on an assignment or transfer
application, the FCC is prohibited from considering

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whether the public interest might be served by an assignment or transfer to any
party other than the assignee or transferee specified in the application.

Under the Communications Act, a broadcast license may not be granted to or
held by any corporation that has more than 20% of its capital stock owned or
voted by non-U.S. citizens or entities or their representatives, by foreign
governments or their representatives, or by non-U.S. corporations. Furthermore,
the Communications Act provides that no FCC broadcast license may be granted to
or held by any corporation directly or indirectly controlled by any other
corporation of which more than 25% of its capital stock is owned of record or
voted by non-U.S. citizens or entities or their representatives, or foreign
governments or their representatives or by non-U.S. corporations, if the FCC
finds the public interest will be served by the refusal or revocation of such
license. These restrictions apply in modified form to other forms of business
organizations, including partnerships and limited liability companies. Thus, the
licenses for our stations could be revoked if more than 25% of our outstanding
capital stock is issued to or for the benefit of non-U.S. citizens.

The FCC generally applies its other broadcast ownership limits to
"attributable" interests held by an individual, corporation, partnership or
other association or entity, including limited liability companies. In the case
of a corporation holding broadcast licenses, the interests of officers,
directors and those who, directly or indirectly, have the right to vote five
percent or more of the stock of a licensee corporation are generally deemed
attributable interests, as are positions as an officer or director of a
corporate parent of a broadcasting licensee. The FCC treats all partnership
interests as attributable, except for those limited partnership interests that
under FCC policies are considered insulated from material involvement in the
management or operation of the media-related activities of the partnership. The
FCC currently treats limited liability companies like limited partnerships for
purposes of attribution. Stock interests held by insurance companies, mutual
funds, bank trust departments and certain other passive investors that hold
stock for investment purposes only become attributable with the ownership of ten
percent or more of the voting stock of the corporation holding broadcast
licenses.

To assess whether a voting stock interest in a direct or an indirect parent
corporation of a broadcast licensee is attributable, the FCC uses a "multiplier"
analysis in which non-controlling voting stock interests are deemed
proportionally reduced at each non-controlling link in a multi-corporation
ownership chain. A time brokerage agreement with another radio station in the
same market creates an attributable interest in the brokered radio station as
well for purposes of the FCC's local radio station ownership rules, if the
agreement affects more than 15% of the brokered radio station's weekly broadcast
hours.

Debt instruments, non-voting stock, options and warrants for voting stock
that have not yet been exercised, insulated limited partnership interests where
the limited partner is not materially involved in the media-related activities
of the partnership, and minority voting stock interests in corporations where
there is a single holder of more than 50% of the outstanding voting stock whose
vote is sufficient to affirmatively direct the affairs of the corporation,
generally do not subject their holders to attribution. However, the FCC's rules
also specify other exceptions to these general principles for attribution. The
FCC is currently evaluating whether to:

- raise the benchmark for voting stock from five to ten percent;

- raise the benchmark for passive investors holding voting stock from ten
to twenty percent;

- continue the single 50% stockholder exception; and/or

- attribute non-voting stock or perhaps only when combined with other
rights such as voting shares or contractual relationships.

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<PAGE> 63

More recently, the FCC has solicited comment on proposed rules that would:

- treat an otherwise non-attributable ownership equity or debt interest in
a licensee as an attributable interest where the interest holder is a
program supplier or the owner of a broadcast station in the same market
and the equity and/or debt holding is greater than a specified benchmark;
and

- in some circumstances, treat the licensee of a broadcast station that
sells advertising time of another station in the same market pursuant to
a joint sales agreement as having an attributable interest in the station
whose advertising is being sold.

Communications Act and FCC rules generally restrict ownership, operation or
control of, or the common holding of attributable interests in:

- radio broadcast stations above certain limits servicing the same local
market;

- a radio broadcast station and a television broadcast station servicing
the same local market; and

- a radio broadcast station and a daily newspaper serving the same local
market.

These rules include specific signal contour overlap standards to determine
compliance, and the FCC defined market will not necessarily be the same market
used by Arbitron(C) or other surveys, or for purposes of the HSR Act. Under
these "cross-ownership" rules, we, absent waivers, would not be permitted to own
a radio broadcast station and acquire an attributable interest in any daily
newspaper or television broadcast station, other than a low-powered television
station, in the same market where we then owned any radio broadcast station. Our
stockholders, officers or directors, absent a waiver, may not hold an
attributable interest in a daily newspaper or television broadcast station in
those same markets.

The FCC is currently reviewing the ban on common ownership of a radio
station and a daily newspaper in the same market. The FCC's rules provide for
the liberal grant of a waiver of the rule prohibiting common ownership of radio
and television stations in the same geographic market in the top 25 television
markets if specific conditions are satisfied, and the FCC will consider waivers
in other markets under more restrictive standards. The FCC is reviewing its ban
on the common ownership of a radio station and a television station or newspaper
including extending the policy of liberal waivers of common ownership of radio
and television stations to the top 50 television markets.

Although current FCC nationwide radio broadcast ownership rules allow one
entity to own, control or hold attributable interests in an unlimited number of
FM radio stations and AM radio stations nationwide, the Communications Act and
the FCC's rules limit the number of radio broadcast stations in local markets in
which a single entity may own an attributable interest as follows:

- In a radio market with 45 or more commercial radio stations, a party may
own, operate or control up to eight commercial radio stations, not more
than five of which are in the same service (AM or FM).

- In a radio market with between 30 and 44 (inclusive) commercial radio
stations, a party may own, operate or control up to seven commercial
radio stations, not more than four of which are in the same service (AM
or FM).

- In a radio market with between 15 and 29 (inclusive) commercial radio
stations, a party may own, operate or control up to six commercial radio
stations, not more than four of which are in the same service (AM or FM).

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- In a radio market with 14 or fewer commercial radio stations, a party may
own, operate or control up to five commercial radio stations, not more
than three of which are in the same service (AM or FM), except that a
party may not own, operate, or control more than 50 percent of the radio
stations in such market.

Because of these multiple and cross-ownership rules, if a stockholder,
officer or director of SBS holds an attributable interest in SBS, such
stockholder, officer or director may violate the FCC's rules if such person or
entity also holds or acquires an attributable interest in other television,
radio stations or daily newspapers, depending on their number and location. If
an attributable stockholder, officer or director of SBS violates any of these
ownership rules, we may be unable to obtain from the FCC one or more
authorizations needed to conduct our radio station business and may be unable to
obtain FCC consents for future acquisitions. As long as one person or entity
holds more than 50% of the voting power of the common stock of SBS where the
vote of such person or entity is sufficient to affirmatively direct the affairs
of SBS, another stockholder, unless serving as an officer and/or director,
generally would not hold an attributable interest in SBS. However, as described
above, the FCC is currently evaluating whether to continue the exception for a
single majority stockholder of more than 50% of a licensee's voting stock. As of
June 27, 1999, Raul Alarcon, Jr. held more than 50% of the total voting power of
our common stock.

Under its cross-interest policy, the FCC considers meaningful relationships
among competing media outlets that serve substantially the same area, even if
the ownership rules do not specifically prohibit the relationship. Under this
policy, the FCC may consider whether to prohibit one party from holding an
attributable interest and a substantial non-attributable interest (including
non-voting stock, limited partnership and limited liability company interests)
in a media outlet in the same market, or from entering into a joint venture or
having common key employees with competitors. The cross-interest policy does not
necessarily prohibit all of these interests, but requires that the FCC consider
whether, in a particular market, the meaningful relationships between
competitors could have a significant adverse effect upon economic competition
and program diversity. In a rule making proceeding concerning the attribution
rules, the FCC has sought comment on, among other things, (1) whether the
cross-interest policy should be applied only in smaller markets, and (2) whether
non-equity financial relationships, such as debt, when combined with multiple
business relationships, such as local marketing agreements or joint sales
arrangements, raise concerns under the cross-interest policy.

Programming and Operations. The Communications Act requires broadcasters
to serve the public interest. A broadcast licensee is required to present
programming in response to community problems, needs and interests and to
maintain certain records demonstrating its responsiveness. The FCC will consider
complaints from listeners about a broadcast station's programming when it
evaluates the licensee's renewal application, but listeners' complaints also may
be filed and considered at any time. Stations also must pay regulatory and
application fees, and follow various FCC rules that regulate, among other
things, political advertising, the broadcast of obscene or indecent programming,
sponsorship identification, the broadcast of contests and lotteries and
technical operation.

The FCC requires that licensees not discriminate in hiring practices,
develop and implement programs designed to promote equal employment
opportunities and submit reports to the FCC on these matters annually and in
connection with each license renewal application.

The FCC rules also prohibit a broadcast licensee from simulcasting more
than 25% of its programming on another radio station in the same broadcast
service (that is, AM/AM or FM/FM). The simulcasting restriction applies if the
licensee owns both radio broadcast stations

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or owns one and programs the other through a local marketing agreement, provided
that the contours of the radio stations overlap in a certain manner.

Local Marketing Agreements. Often radio stations enter into LMAs or time
brokerage agreements. These agreements take various forms. Separately owned and
licensed radio stations may agree to function cooperatively in programming,
advertising sales and other matters, subject to compliance with the antitrust
laws and the FCC's rules and policies, including the requirement that the
licensee of each radio station maintain independent control over the programming
and other operations of its own radio station.

Joint Sales Agreements. Over the past few years, a number of radio
stations have entered into cooperative arrangements commonly known as joint
sales agreements or JSAs. The FCC has determined that issues of joint
advertising sales should be left to enforcement by antitrust authorities, and
therefore does not generally regulate joint sales practices between stations.
Currently, stations for which another licensee sells time under a JSA are not
deemed by the FCC to be an attributable interest of that licensee. However, in
connection with its ongoing rulemaking proceedings concerning the attribution
rules, the FCC is considering whether JSAs should be considered attributable
interests or within the scope of the FCC's cross-interest policy, particularly
when JSAs contain provisions for the supply of programming services and/or other
elements typically associated with local marketing agreements.

RF Radiation. In 1985, the FCC adopted rules based on a 1982 American
National Standards Institute (ANSI) standard regarding human exposure to levels
of radio frequency (RF) radiation. These rules require applicants for renewal of
broadcast licenses or modification of existing licenses to inform the FCC at the
time of filing such applications whether an existing broadcast facility would
expose people to RF radiation in excess of certain limits. In 1992, ANSI adopted
a new standard for RF exposure that, in some respects, was more restrictive in
the amount of environmental RF exposure permitted. The FCC has since adopted
more restrictive radiation limits which became effective October 15, 1997, and
which are based in part on the revised ANSI standard.

Digital Audio Radio Service. The FCC has allocated spectrum to a new
technology, digital audio radio service (DARS), to deliver satellite-based audio
programming to a national or regional audience and issued regulations for a DARS
service in early 1997. The nationwide reach of satellite DARS could allow niche
programming aimed at diverse communities that SBS is targeting. Two companies
that hold licenses for authority to offer multiple channels of digital,
satellite-delivered S-Band aural services could compete with conventional
terrestrial radio broadcasting. The licensees will be permitted to sell
advertising and lease channels in these media. The FCC's rules require that
these licensees launch and begin operating at least one space station by 2001
and be fully operational by 2003.

Low Power Radio Broadcast Service. The FCC recently adopted a Notice of
Proposed Rulemaking seeking public comment on a proposal to establish two
classes of a low power radio service both of which would operate in the existing
FM radio band: a primary class with a maximum operating power of 1 kW and a
secondary class with a maximum power of 100 watts. These proposed low power
radio stations would have limited service areas of 8.8 miles and 3.5 miles,
respectively. Implementation of a low power radio service or microbroadcasting
would provide an additional audio programming service that could compete with
SBS's radio stations for listeners, but we cannot predict the effect upon SBS.

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PROPERTIES

Our corporate headquarters is located in Miami, Florida. The types of
properties required to support each of our radio stations include offices,
broadcasting studios and antenna towers where broadcasting transmitters and
antenna equipment are located. We own the building housing the office and
studios in New York for WSKQ-FM and WPAT-FM, and in Los Angeles for KLAX-FM.
Additionally, we still own a building in Los Angeles that we previously used as
the office for our Los Angeles operations. We own the auxiliary transmitter site
for KLAX-FM in Long Beach, California and lease our other transmitter sites,
with lease terms that expire between 1999 and 2035, assuming all renewal options
are exercised. The studios and offices of our Miami and South Florida stations
are currently located in leased facilities with lease terms that respectively
expire in 2000 and 2012. See "Certain Relationships and Related Transactions."
We lease the office and studio facilities for our stations in Chicago, San
Antonio and Puerto Rico.

The transmitter sites for our stations are material to our overall
operations. Management believes that our properties are in good condition and
are suitable for our operations; however, we continually seek opportunities to
upgrade our properties. We own substantially all of the equipment used in our
radio broadcasting business.

LEGAL PROCEEDINGS

From time to time we are involved in litigation incidental to the conduct
of our business, such as contract matters and employee-related matters. We are
not currently a party to litigation which, in the opinion of management, is
likely to have a material adverse effect on our business.

ENVIRONMENTAL MATTERS

We assigned the lease of the transmitter for WXLX-AM in Lyndhurst, New
Jersey, to the purchaser of the station. The transmitter is located on a former
landfill which ceased operations in the late 1960's. Although WXLX-AM has been
sold, we retain potential exposure relating to possible environmental
liabilities relating to the transmitter site. Because the lessee of the property
is under a long-term lease, we may become liable for costs associated with
remediation of the site. We are unable to assess the likelihood that any claim
for remediation of the site will arise and no amounts have been accrued in the
consolidated financial statements relating to this contingent liability.

On September 28, 1999, we received notice from the purchaser of KXMG-AM
that it would make a claim against us for indemnification under the asset
purchase agreement, pursuant to which it purchased the station, for the removal
of an underground fuel storage tank. The notice did not specify the amount of
the indemnification claim. We do not have sufficient information to assess the
potential exposure and no amounts have been accrued in the consolidated
financial statements relating to this contingent liability.

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MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth the names, ages and positions of the
directors, executive officers and certain key employees of SBS upon completion
of this offering. Each of our directors serves until his successor is elected
and qualifies.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH SBS UPON COMPLETION OF THIS OFFERING
- ---- --- --------------------------------------------------
<S> <C> <C>
Pablo Raul Alarcon, Sr............... 73 Chairman Emeritus and Director
Raul Alarcon, Jr..................... 43 Chairman of the Board of Directors, Chief Executive
Officer and President
Jose Grimalt......................... 70 Secretary Emeritus and Director
Joseph A. Garcia..................... 53 Chief Financial Officer, Executive Vice President and
Secretary
Luis Diaz-Albertini.................. 47 Vice President/Group Sales
Jesus Salas.......................... 23 Vice President of Programming
Roman Martinez IV.................... 51 Director Nominee
Jason L. Shrinsky.................... 62 Director Nominee
</TABLE>

PABLO RAUL ALARCON, SR. has been Chairman of the Board of Directors since
March 1983. Upon the completion of the Class A Common Stock offering, Mr.
Alarcon, Sr. will become Chairman Emeritus and will continue to be a member of
our board of directors. He also serves as the Chairman of the Board of Directors
of SBS-NJ, and those of SBS's other subsidiaries that own and operate SBS's
radio stations. Mr. Alarcon, Sr. has been involved in Spanish-language radio
broadcasting for much of his life. He started his broadcasting career in Cuba in
the early 1950's when he established a radio station chain in Camaguey, Cuba.
Upon his arrival in the United States, Mr. Pablo Raul Alarcon, Sr. continued his
career in radio broadcasting and was an on-air personality in a New York radio
station before being promoted to programming director. Mr. Pablo Raul Alarcon,
Sr. subsequently owned and operated a recording studio and an advertising
agency. In 1983, he purchased our first radio station. Mr. Alarcon, Sr. is Raul
Alarcon, Jr.'s father.

RAUL ALARCON, JR. has been Chief Executive Officer since June 1994 and
President and a director since October 1985. Upon completion of the Class A
Common Stock offering, Mr. Alarcon, Jr. will become Chairman of the Board of
Directors and will continue as our Chief Executive Officer and President. He
also serves as the President and a Director of Spanish Broadcasting System,
Inc., a New Jersey corporation that is wholly-owned by SBS, and President or
Vice President of those of SBS's other subsidiaries that own and operate our
radio stations. Mr. Alarcon, Jr. joined SBS-NJ as a sales manager in 1983 and
became a director and the Chief Executive Officer and President of SBS-NJ in
1986. Mr. Alarcon, Jr. is responsible for our long-range strategic planning and
was instrumental in the acquisition and financing of each of our radio stations.
Mr. Alarcon, Jr. is the son of Mr. Alarcon, Sr. and the son-in-law of Mr.
Grimalt.

JOSE GRIMALT has been Secretary and a member of our board of directors
since June 1994. Upon completion of the Class A Common Stock offering, Mr.
Grimalt will become Secretary Emeritus and will continue to be a member of our
board of directors. From 1969 to 1986, Mr. Grimalt owned and operated
Spanish-language station WLVH-FM in Hartford, Connecticut. In 1984, Mr. Grimalt
became a stockholder and the President of SBS's California subsidiary which
operated KXMG-AM in Los Angeles. Mr. Grimalt is Mr. Alarcon, Jr.'s
father-in-law.

JOSEPH A. GARCIA has been Chief Financial Officer, Executive Vice President
and Assistant Secretary since June 1994. Upon completion of the Class A Common
Stock offering, Mr. Garcia

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will become Secretary and will continue to be our Chief Financial Officer and
Executive Vice-President. He was appointed Executive Vice President in March
1996. He joined SBS-NJ in 1984 and since then has served as the Chief Financial
Officer of SBS-NJ and those of SBS's subsidiaries that own and operate SBS's
radio stations. Before joining SBS-NJ, Mr. Garcia spent thirteen years in
financial positions with Philip Morris and Revlon, where he was Manager of
Financial Planning for Revlon-Latin America.

JESUS SALAS has been the Vice President of Programming since April 1998. He
joined SBS in March 1997 as the Programming Director for the Miami stations.
Prior to joining SBS he worked for New Age Broadcasting, Inc., where he began
his career in November 1993 as a disc jockey and was eventually promoted to
programming director.

LUIS DIAZ-ALBERTINI has been the Vice President of Sales since September
1998. He began his employment with SBS as the General Manager of WLEY-FM in
Chicago in March 1997. Prior to joining SBS, Mr. Diaz-Albertini's experience
included being VP/General Manager of the four stations located in Miami for
Hispanic Broadcasting Corporation (formerly Heftel Broadcasting Corporation).
Mr. Diaz-Albertini has worked in the broadcasting industry for 26 years.

ROMAN MARTINEZ IV has been nominated to become a director upon completion
of the Class A Common Stock offering. Mr. Martinez is a Managing Director for
the investment banking firm of Lehman Brothers Inc. where he has held his title
since 1978. Mr. Martinez has been an investment banker advising corporations on
financings, mergers and acquisitions and related financial matters since 1971.
Mr. Martinez sits on the Board of Governors of New York-Presbyterian Healthcare
System, Inc. and on the Board of Directors of the International Rescue
Committee. Lehman Brothers Inc. has been engaged by us as financial advisor,
lead underwriter for this offering and the concurrent offering of our senior
subordinated notes due 2009, Dealer-Manager for the tender offers and consent
solicitations relating to our 11% and 12 1/2% notes and sole lead arranger and
book running manager with respect to the senior credit facilities. An affiliate
of Lehman Brothers Inc., Lehman Commercial Paper Inc., will act as
administrative agent in connection with the senior credit facilities.

JASON L. SHRINSKY has been nominated to become a director upon completion
of the Class A Common Stock offering. Mr. Shrinsky is a partner of the law firm
of Kaye, Scholer, Fierman, Hays & Handler, LLP, where he has been a partner
since January 1, 1986. Mr. Shrinsky has been a lawyer counseling corporations
and high net worth individuals on financings, mergers and acquisitions, other
related financial transactions and regulatory procedures since 1964. Kaye,
Scholer, Fierman, Hays & Handler, LLP has served as counsel to us for more than
15 years, including in connection with this offering, the concurrent senior
subordinated notes offering, the tender offers for our 11% and 12 1/2% notes and
the pending purchase of the eight radio stations in Puerto Rico. The fees paid
by us to Kaye, Scholer, Fierman, Hays & Handler, LLP do not exceed five percent
of such law firm's consolidated gross revenues for its last full fiscal year.

COMMITTEES OF THE BOARD OF DIRECTORS

The board of directors intends to establish an Audit Committee whose
members will be our two independent director nominees, Roman Martinez IV and
Jason L. Shrinsky.

The board of directors also maintains a Compensation Committee, whose
members will consist of Mr. Alarcon, Jr. and the independent director nominees.
Mr. Alarcon, Jr. is our Chief Executive Officer and President. The Compensation
Committee has not met in fiscal year 1999. Compensation for our executive
officers for fiscal 1999 was determined by Mr. Alarcon, Jr. See "Certain
Relationships and Related Transactions."

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EXECUTIVE COMPENSATION

The following sets forth all compensation awarded to, earned by or paid for
services rendered to SBS and its subsidiaries in all capacities during the
fiscal years 1998, 1997 and 1996 by our Chief Executive Officer and President
and our next four highest paid executive officers at September 27, 1998, whose
annual salary and bonus exceeded $100,000. When reading this table you should
note that we intend to enter into new employment agreements with Messrs.
Alarcon, Jr., Garcia and Diaz-Albertini which will become effective upon the
offering of the Class A Common Stock, and will provide for the payment of
salaries and bonuses that may differ from those set forth below. For a
description of these agreements see "Employment Agreements and Arrangements."
Effective upon completion of the Class A Common Stock offering Messrs. Alarcon,
Sr. and Grimalt will be retiring as salaried executives of SBS but will remain
as members of our board of directors.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
OTHER ANNUAL
NAME PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ---- ----------------------------- ---- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Raul Alarcon, Jr............. Chief Executive Officer and 1998 $1,633,743(1) $215,000 $63,624(2)
President 1997 1,361,647 -- 86,774(2)
1996 746,584 237,000 78,036(2)
Pablo Raul Alarcon, Sr....... Chairman of the Board of 1998 492,577(4) 25,000 50,745(2)
Directors 1997 474,000 200,000 (3)
1996 464,000 112,000 (3)
Jose Grimalt................. Secretary and Director 1998 250,000(4) 25,000 (3)
1997 310,184 -- (3)
1996 250,000 12,000 (3)
Joseph A. Garcia............. Executive Vice President and 1998 266,346 27,500 (3)
Chief Financial Officer 1997 244,671 53,000 (3)
1996 214,659 5,000 (3)
Luis Diaz-Albertini.......... Vice President/Group Sales 1998 200,000 25,000 (3)
1997 69,231 -- (3)
</TABLE>

- ---------------
(1) Excludes amounts paid by us in connection with our lease of an apartment in
Manhattan owned by Mr. Alarcon, Jr. which is used primarily by Mr. Alarcon,
Jr. while on SBS business in New York. Excludes the payment of a dividend to
our stockholders, of which Mr. Alarcon, Jr. received $3.1 million. See
"Certain Relationships and Related Transactions." Excludes relocation
expenses made in connection with relocation of our headquarters. Based on
preliminary financial data, for the fiscal year ended 1999, it is
anticipated that Mr. Alarcon, Jr.'s salary and bonus pursuant to his
existing employment agreement will total approximately $3.7 million.

(2) Messrs. Alarcon, Jr. and Alarcon, Sr. receive personal benefits in addition
to their salaries and bonuses, including use of automobiles. We paid $23,400
in each of 1998, 1997, and 1996 for an automobile used primarily by Mr.
Alarcon, Jr. We paid $30,170, $54,253 and $54,636 in each of 1998, 1997 and
1996, respectively, for use of a limousine (including driver's salary) used
primarily by Mr. Alarcon, Jr. We paid $39,569 in 1998 for an automobile
(including driver's salary) used primarily by Mr. Alarcon, Sr. Based on
preliminary financial data, for fiscal year ended 1999, Mr. Alarcon, Jr.,
received personal benefits estimated at $121,200, including the use of
automobiles and an apartment in Key Biscayne, Florida. We intend to
terminate the lease for his apartment in Key Biscayne after completion of
construction of his new home.

(3) Excludes perquisites and other personal benefits, securities or property
which aggregate the lesser of $50,000 or 10% of the total of annual salary
and bonus.
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(4) Messrs. Alarcon, Sr. and Grimalt have agreed with us that effective upon
completion of the Class A Common Stock offering, they will no longer be
entitled to receive any compensation from us other than reimbursement of
their out-of-pocket expenses as members of the board of directors. Messrs.
Alarcon, Sr. and Grimalt will also be entitled to the use of automobiles
and, in the case of Mr. Alarcon, Sr., a driver at our expense. We have also
entered into a memorandum of understanding to purchase annuities for the
retirement of Messrs. Alarcon, Sr. and Grimalt. See "Employment Agreements
and Arrangements -- Annuity."

DIRECTOR COMPENSATION

Directors who are officers or former officers do not receive any additional
compensation for serving on our board of directors. All directors are reimbursed
for their out-of-pocket expenses incurred in connection with their service as
directors. All of our non-employee directors will be eligible to receive options
under our stock plans as described below. In connection with their election to
the board of directors, we are granting to Messrs. Roman Martinez IV and Jason
L. Shrinsky options for 50,000 shares of Class A Common Stock exercisable at the
public offering price, of which 10,000 shall vest immediately. Mr. Shrinsky will
hold his options for the benefit of his law firm, Kaye, Scholer, Fierman, Hays &
Handler, LLP. See "Stock Plans -- Non-Employee Director Stock Option Plan."

Arnold Sheiffer, who served as a director from 1996 until August 1999, will
receive a cash payment of $250,000 and options to purchase 250,000 shares of
Class A Common Stock exercisable at the offering price (which vest upon
completion of the Class A Common Stock offering), for his services as a
director.

EMPLOYMENT AGREEMENTS AND ARRANGEMENTS

Raul Alarcon, Jr.

We intend to enter into an amended and restated employment agreement with
Raul Alarcon, Jr. pursuant to which Mr. Alarcon, Jr. will serve as our Chairman
of the Board of Directors, Chief Executive Officer and President. This new
agreement would become effective upon the completion of the Class A Common Stock
offering, expire December 31, 2004 and renew for successive one-year periods
after December 31, 2004, unless notice of termination is delivered by either
party 90 days prior to the termination date. The agreement will provide for a
base salary of not less than $1.0 million for each year of the employment term,
which may be increased by the board of directors. Under the terms of the
agreement, Mr. Alarcon, Jr. will be paid an annual cash performance bonus
determined by the board of directors based on same station broadcast cash flow
growth. Mr. Alarcon, Jr. will receive options to purchase 100,000 shares of
Class A Common Stock each year of employment with the initial grant to be made
on the pricing date of the Class A Common Stock offering (and which vest upon
completion of the Class A Common Stock offering) at an exercise price equal to
the offering price, and thereafter on each anniversary of the effective date of
the agreement at an exercise price equal to the then fair market value of our
Class A Common Stock. Mr. Alarcon, Jr. will also be entitled to participate in
our employee benefit plans and to receive other non-salary benefits, such as
health insurance, life insurance, reimbursement for business related expenses
and reimbursement for personal tax and accounting expenses. The agreement will
provide that Mr. Alarcon, Jr.'s employment may be terminated at the election of
the board of directors upon his disability or for

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cause (as defined in the agreement). Pursuant to the agreement, Mr. Alarcon, Jr.
will be entitled to the use of one automobile and driver at our expense.

Joseph A. Garcia and Luis Diaz-Albertini

We intend to enter into an employment agreement with each of Joseph A.
Garcia and Luis Diaz-Albertini pursuant to which Mr. Garcia will serve as our
Chief Financial Officer, Executive Vice President and Secretary and Mr.
Diaz-Albertini will serve as our Vice President/Group Sales. These employment
agreements would become effective upon completion of the Class A Common Stock
offering, terminate on September 30, 2002 and automatically renew for successive
one-year periods after September 30, 2002, unless notice of termination is
delivered by either party within 90 days prior to the termination date or any
succeeding September 30. Mr. Garcia and Mr. Diaz-Albertini will receive an
annual base salary of $300,000 and $225,000, respectively, which may be
increased by the board of directors. In addition, Mr. Garcia shall be entitled
to receive (i) an annual cash bonus to be determined by the board of directors,
based on performance, and (ii) options to purchase 250,000 shares of Class A
Common Stock for past performance to be granted on the pricing date of the Class
A Common Stock offering, with 50,000 shares to vest upon completion of the Class
A Common Stock offering, and 200,000 shares to vest ratably over a four-year
period. Mr. Diaz-Albertini shall receive (i) an annual cash bonus to be
determined by the board of directors, based on performance, and (ii) options to
purchase 50,000 shares of Class A Common Stock for past performance to be
granted on the pricing date of the Class A Common Stock offering, with 10,000
shares to vest upon completion of the Class A Common Stock offering and 40,000
shares of to vest ratably over a four-year period. Messrs. Garcia and
Diaz-Albertini will also receive standard employee benefits provided to all of
our executives, such as health, life and long-term disability insurance and
reimbursement for business related expenses.

Annuity

We have entered into a memorandum of understanding with Messrs. Alarcon,
Sr. and Grimalt to purchase an annuity from The Canada Life Assurance Company as
a retirement vehicle for the benefit of Messrs. Alarcon, Sr. and Grimalt. We
will pay approximately $10.6 million for such annuity and Messrs. Alarcon, Sr.
and Grimalt will receive annual payments of approximately $700,000 and $300,000,
respectively.

STOCK PLANS

1999 Option Plan

We have adopted an option plan to incentivize our present and future
executive, managerial and other employees through equity ownership. The option
plan will provide for the granting of stock options to individuals selected by
the compensation committee of the board of directors (or by the board if such
committee is not appointed). An aggregate of 3,000,000 shares of Class A Common
Stock have been reserved for issuance under this option plan. The option plan
will allow us to tailor incentive compensation for the retention of personnel,
to support corporate and business objectives, and to anticipate and respond to a
changing business environment and competitive compensation practices.

The compensation committee or such other committee as the board of
directors shall determine, has discretion to select the participants, to
determine the type, size and terms of each

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award, to modify the terms of awards, to determine when awards will be granted
and paid, and to make all other determinations which it deems necessary or
desirable in the interpretation and administration of the option plan. The
option plan terminates ten years from the date that it was approved and adopted
by the stockholders of SBS. Generally, a participant's rights and interest under
the option plan are not transferable except by will or by the laws of descent
and distribution.

Options, which include non-qualified stock options and incentive stock
options, are rights to purchase a specified number of shares of Class A Common
Stock at a price fixed by the compensation committee. The option price may be
less than, equal to or greater than the fair market value of the underlying
shares of Class A Common Stock, but in no event will the exercise price of an
incentive stock option be less than the fair market value on the date of grant.

Options will expire no later than ten years after the date on which they
are granted (five years in the case of incentive stock options granted to 10%
stockholders). Options will become exercisable at such times and in such
installments as the compensation committee or other designated committee shall
determine. Notwithstanding this, any nonexercisable options shall immediately
vest and become exercisable upon a change in control of SBS. Upon termination of
a participant's employment with SBS, options that are not exercisable will be
forfeited immediately and options that are exercisable will remain exercisable
for twelve months following any termination by reason of an optionholder's
death, disability or retirement. If termination is for any other reason other
than cause, exercisable options will remain exercisable for three months
following such termination. Payment of the option price must be made in full at
the time of exercise in such form (including, but not limited to, cash or common
stock of SBS) as the compensation committee may determine.

In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure of shares of SBS, the
compensation committee will have the discretion to make any adjustments it deems
appropriate in the number and kind of shares reserved for issuance upon the
exercise of options and vesting of grants under the option plan and in the
exercise price of outstanding options.

Non-Employee Director Stock Option Plan

We have also adopted a separate option plan for our non-employee directors.
The terms of the plan provide that the board of directors has the discretion to
grant stock options to any non-employee director. An aggregate of 300,000 shares
of Class A Common Stock have been reserved for issuance under this option plan.
The plan is administered by the board of directors. In connection with their
election as directors, we are granting each of Messrs. Shrinsky and Martinez an
option under this plan to purchase 50,000 shares of Class A Common Stock
exercisable at the offering price. Of these 50,000 shares, 10,000 shall vest
immediately and 10,000 shall vest each year over the next four years on the
anniversary of the grant so long as they remain directors. Mr. Shrinsky will
hold his options for the benefit of his law firm, Kaye, Scholer, Fierman, Hays &
Handler, LLP. Any non-exercisable options shall immediately vest and become
exercisable upon a change in control of SBS. If their service as directors is
terminated for any reason, all options held by non-employee directors which have
not then vested shall terminate automatically.

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401(k) Plan

We offer a tax-qualified employee savings and retirement plan (the "401(k)
Plan") covering our employees. Pursuant to the 401(k) Plan, an employee may
elect to reduce his annual salary by 1%-15% not to exceed the statutorily
prescribed annual limit which is $10,000 for 1999, and have the amount of such
reduction contributed to the 401(k) Plan. We may, at our option and in our sole
discretion, make matching and/or profit sharing contributions to the 401(k) Plan
on behalf of all participants. The 401(k) Plan is intended to qualify under
Section 401(a) of the Code so that contributions by employees or by us to the
401(k) Plan and income earned on plan contributions are not taxable to employees
until distributed to them and contributions by us will be deductible by us when,
and if, made. The trustees under the 401(k) Plan, at the direction of each
participant, invest such participant's assets in the 401(k) Plan in selected
investment options.

LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY

Our third amended and restated certificate of incorporation has a provision
which limits the liability of directors and officers to us to the maximum extent
permitted by Delaware law. The third amended and restated certificate of
incorporation specifies that our directors and officers will not be personally
liable for monetary damages for breach of fiduciary duty as a director or
officer, as applicable. This limitation does not apply to actions by a director
or officer that do not meet the standards of conduct which make it permissible
under the Delaware General Corporation Law for us to indemnify such director or
officer.

Our amended and restated by-laws provide for indemnification of directors
and officers (and others) in the manner, under the circumstances and to the
fullest extent permitted by the Delaware General Corporation Law. This generally
authorizes indemnification as to all expenses incurred or imposed as a result of
actions, suits or proceedings if the indemnified parties act in good faith and
in a manner they reasonably believe to be in or not opposed to the best
interests of SBS. Upon completion of the Class A Common Stock offering, it is
intended that each director will enter into an indemnification agreement with us
that provides for indemnification to the fullest extent provided by law. We
believe that these provisions are necessary or useful to attract and retain
qualified persons as directors and officers.

We have obtained insurance for the benefit of our directors and officers
that provides for coverage of up to $100.0 million.

There is no pending litigation or proceeding involving a director or
officer as to which indemnification is being sought.

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PRINCIPAL STOCKHOLDERS

The following table sets forth information concerning the beneficial
ownership of our Class A and Class B Common Stock before and after giving effect
to this offering and the Class A Common Stock offering, but without giving
effect to the exercise of the underwriters' overallotment option, by:

- each person known to us to own beneficially more than 5% of any class of
common stock; and

- each director and each named executive officer.

All shares are owned with sole voting and investment power. Prior to
completion of this offering and the Class A Common Stock offering, none of the
principal stockholders will own any shares of Class A Common Stock.

<TABLE>
<CAPTION>
CLASS B SHARES CLASS B SHARES CLASS A SHARES
PRIOR TO BOTH UPON COMPLETION OF UPON COMPLETION OF
OFFERINGS(2) BOTH OFFERINGS(2) BOTH OFFERINGS(2)
----------------------- ----------------------- ---------------------- PERCENT OF
PERCENT OF PERCENT OF PERCENT OF TOTAL PERCENT OF
NUMBER OF CLASS B NUMBER OF CLASS B NUMBER OF CLASS A ECONOMIC TOTAL VOTING
NAME AND ADDRESS(1) SHARES SHARES SHARES SHARES SHARES SHARES INTEREST POWER
- ------------------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pablo Raul Alarcon,
Sr..................... 1,820,000 4.6% 1,070,000 3.0% -- 0% 1.9% 2.9%
Raul Alarcon, Jr......... 27,906,750 70.7% 26,156,750 74.4% 100,000(5) * 46.1% 70.1%
Jose Grimalt............. 571,650 1.5% 511,650 1.5% -- 0% * 1.4%
Joseph A. Garcia......... 5,000 * 5,000 * 50,000(5) * * *
Luis Diaz-Albertini...... -- 0% -- 0% 10,000(5) * * *
Roman Martinez IV........ -- 0% -- 0% 10,000(5) * * *
Jason L. Shrinsky........ -- 0% -- 0% 10,000(5)(6) * * *
All executive officers
and directors as a
group.................. 30,303,400 76.8% 27,743,400 78.9% 180,000(5) * 49.0% 74.3%
CIBC World Markets
Inc.(3)................ 2,271,250 5.8% 2,271,250 6.5% -- 0% 4.0% 6.1%
The Mainstay Funds, on
Behalf of its High
Yield Corporate Bond
Fund Series(4)......... 2,655,750 6.7% 1,041,350 3.0% -- 0% 1.8% 2.8%
</TABLE>

- ---------------
* Indicates less than 1%.

(1) The address of all directors and executive officers in this table, unless
otherwise specified, is c/o Spanish Broadcasting System, Inc., 3191 Coral
Way, Miami, Florida 33145.

(2) As used in this table, "beneficial ownership" means the sole or shared power
to vote or direct the voting of a security, or the sole or shared power to
dispose, or direct the disposition, of a security. A person is deemed as of
any date to have beneficial ownership of any security that the person has
the right to acquire within 60 days after that date. For purposes of
computing the percentage of outstanding shares held by each person named
above, any security that the person has the right to acquire within 60 days
of the date of calculation is deemed to be outstanding, but is not deemed to
be outstanding for purposes of computing the percentage ownership of any
other person.

(3) The address of CIBC World Markets Inc. is 425 Lexington Avenue, 6th Floor,
New York, New York 10017.

(4) The address of The Mainstay Funds, on Behalf of its High Yield Corporate
Bond Fund Series is c/o MacKay Shields LLC, 9 West 57th Street, New York,
New York.

(5) Indicates Class A Common Stock issuable upon the exercise of options that
are exercisable within 60 days of the completion of the Class A Common Stock
offering and does not include shares issuable upon exercise of options that
have not yet vested.

(6) Mr. Shrinsky will hold his options for the benefit of his law firm, Kaye,
Scholer, Fierman, Hays & Handler, LLP.

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<PAGE> 75

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See "Committees of the Board of Directors."

We have a memorandum of understanding with Messrs. Alarcon, Sr. and Grimalt
to purchase an annuity from The Canada Life Assurance Company as a retirement
vehicle for the benefit of Messrs. Alarcon, Sr. and Grimalt. We will pay
approximately $10.6 million for such annuity and Messrs. Alarcon, Sr. and
Grimalt will receive annual payments of approximately $700,000 and $300,000,
respectively.

We have entered into a memorandum of understanding with Mr. Alarcon, Sr.,
our Chairman Emeritus and a member of our board of directors, for the sale by us
of the assets and liabilities of radio station WVMQ-FM operating in Key West,
Florida and radio station WZMQ-FM operating in Key Largo, Florida. The sale
price to be paid by Mr. Alarcon, Sr. for these stations is $700,000. The
definitive agreement will contain customary representations, warranties and
indemnities, and the closing of the sale of these stations will be subject to
the satisfaction of certain conditions, including approval of the FCC, the
completion of the Class A Common Stock offering and the receipt by Mr. Alarcon,
Sr. of his portion of the proceeds of the Class A Common Stock offering as a
selling stockholder. We cannot assure you that the sale of these stations will
occur during the expected time frame or at all.

We lease a two-bedroom furnished condominium apartment in midtown Manhattan
from Mr. Alarcon, Jr. for a monthly rent of $9,000. The lease commenced in
August 1987 and will expire in August 2007. During fiscal years 1999 and 1998,
we renovated the apartment and incurred approximately $0.2 million in renovation
expenses. Generally, the apartment is used by Mr. Alarcon, Jr. while on SBS
business in New York. We believe that the lease for this apartment is at the
market rate.

For the year ended September 27, 1998, SBS paid operating expenses
aggregating $0.1 million for a boat owned by CMQ Radio, an entity owned equally
by Messrs. Alarcon, Sr. and Alarcon, Jr. The boat is used by SBS for business
entertainment. For the year ended September 27, 1998, the amount paid by SBS for
our use of the boat owned by CMQ Radio was comparable to amounts we would have
paid had we leased the boat from an unaffiliated party. In connection with the
Class A Common Stock offering, we will discontinue our arrangement with respect
to this boat. We do not expect to make any further payments to CMQ Radio, Inc.

In connection with Mr. Alarcon, Jr.'s relocation from the New York
metropolitan area to the Miami metropolitan area, SBS advanced to Mr. Alarcon,
Jr. an aggregate of $1.1 million to pay for various expenses. On July 16, 1997,
Mr. Alarcon, Jr. executed a promissory note to SBS for the principal amount of
$1.1 million to evidence these advances. The note was payable on demand and bore
interest at a rate of 7% per annum. SBS declared and paid a dividend in 1998,
and Mr. Alarcon, Jr. used his portion of the proceeds of the dividend to repay
this promissory note in full.

Effective July 1993, Messrs. Alarcon, Sr. and Alarcon, Jr. executed
promissory notes to SBS for the principal amounts of $0.5 million and $1.6
million, respectively. These promissory notes evidenced loans made by SBS to
Messrs. Alarcon, Sr. and Alarcon, Jr. over several prior years. The notes were
to mature in 2001 and bore interest at the rate of 6% percent per annum until
July 19, 1994 and after that at the lesser of 9% percent per annum or the prime
rate charged by the Chase Manhattan Bank, N.A. Interest on the unpaid principal
amount of the notes was payable annually. In December 1995, SBS exchanged these
promissory notes for amended and restated notes in the principal amounts of $0.6
million and $1.9 million due from

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Messrs. Alarcon, Sr. and Alarcon, Jr., respectively. The amended and restated
notes bear interest at the rate of 6.36% per annum, and mature on December 30,
2025, and the interest is payable in 30 equal annual installments of $43,570 and
$143,158, respectively, on December 30th of each year starting December 30,
1996. As of June 27, 1999, $0.6 million and $1.9 million, plus accrued and
unpaid interest of $0.1 million and $0.4 million to date, was outstanding,
respectively, on these promissory notes. In connection with the Class A Common
Stock offering, Messrs. Alarcon, Sr. and Alarcon, Jr. have agreed to pay all
remaining amounts outstanding under these notes using their portion of the
proceeds they receive as selling stockholders in this offering.

In 1992, Messrs. Alarcon, Sr. and Alarcon, Jr. acquired a building in Coral
Gables, Florida, for the purpose of housing the studios of WCMQ-AM and WCMQ-FM.
In June 1992, SBS-Florida, a subsidiary of SBS, entered into a 20-year net lease
with Messrs. Alarcon, Sr. and Alarcon, Jr. for the Coral Gables building which
provides for a base monthly rent of $9,000. Effective June 1, 1998, the lease on
this building was assigned to SBS Realty Corp., a realty management company
owned by Messrs. Alarcon, Sr. and Alarcon, Jr. This building currently houses
the offices and studios of all of the Miami stations. The lease on the stations'
previous studios expired in October 1993, was for less than half the space of
the stations' present studios and had a monthly rental of approximately $7,500.
Based upon our prior lease for studio space, we believe that the lease for the
current studio is at market rates.

In 1992, Mr. Alarcon, Jr. organized Nuestra Telefonica, Inc., a New York
corporation, to operate long distance telephone service in Spanish aimed at the
Hispanic population in the markets served by our radio stations. In February
1993, Nuestra Telefonica entered into an access agreement with a common carrier
and commenced operations. Nuestra Telefonica advertised its Spanish-language
long distance telephone service on our radio stations in Los Angeles and New
York and purchased this air time at standard station rates. Since early 1994,
Nuestra Telefonica has not utilized any air time on our radio stations. As of
September 28, 1997 and September 27, 1998, Nuestra Telefonica owed SBS $0.4
million related to unpaid air time and $0.3 million related to certain expenses
paid by SBS on Nuestra Telefonica's behalf. The amounts due are recorded on our
books as a receivable and due from related party asset, respectively. Mr.
Alarcon, Jr. has personally guaranteed the payment of $0.5 million of Nuestra
Telefonica's obligations to SBS. Mr. Alarcon, Jr. is Nuestra Telefonica's
Chairman and majority shareholder. Joseph A. Garcia is Nuestra Telefonica's
President and a minority shareholder. Nuestra Telefonica is no longer an
operating entity and, therefore, upon the completion of the Class A Common Stock
offering we will forgive the loans and cancel the guarantees described above.

Mr. Grimalt's son is employed by SBS as an operations manager. He was paid
$128,345 and a bonus of $5,000 for the fiscal year ended September 27, 1998. Mr.
Alarcon, Jr.'s uncle is currently employed by us as an operations manager and
his salary is $76,200.

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DESCRIPTION OF OTHER INDEBTEDNESS

SENIOR CREDIT FACILITIES

Upon completion of this offering and the offering of our Class A Common
Stock, we intend to enter into the senior credit facilities described below. The
documentation relating to the facilities has not been completed. Accordingly,
the description below is a preliminary description of the principal terms of the
senior credit facilities and is subject to, and qualified in its entirety by
reference to, the definitive documentation.

We have entered into a commitment letter for the arrangement of financing
in an amount of up to $200 million with Lehman Commercial Paper Inc., as
administrative agent and Lehman Brothers Inc., as sole lead arranger and book
running manager. This financing is expected to consist of senior credit
facilities including: (1) a $50.0 million six-year revolving credit facility,
maturing in 2005 and (2) a $150.0 million six-year delayed draw (15-months to
draw) senior term loan facility, maturing in 2005. The senior credit facilities
are conditioned upon, among other things, (1) the execution of definitive
documentation on or before November 12, 1999 in form and substance satisfactory
to the senior lenders, (2) the completion of this offering and the offering of
our Class A Common Stock, and (3) the redemption of our preferred stock. The
senior credit facilities will be available to finance working capital, issue
letters of credit, make permitted acquisitions and for other general corporate
purposes. The senior credit facilities will contain customary covenants which,
among other things will require us to maintain specified financial ratios such
as debt to EBITDA, senior debt to EBITDA, minimum interest coverage, minimum
fixed interest coverage and limits on capital expenditures. Subject to certain
exceptions, we will be required to repay some or all of the amount outstanding
under the senior credit facilities upon our issuance of debt or equity, asset
sales and certain excess cash flow. The senior credit facilities will be (1)
guaranteed by our subsidiaries (other than our foreign subsidiaries created or
acquired after the date of the indenture governing the notes); (2) secured by
all of our assets and all material assets of each guarantor (except to the
extent prohibited by law, broadcast licenses); (3) secured by the stock of our
domestic subsidiaries, including the stock of our broadcasting license
subsidiaries; and (4) secured by two-thirds of the stock of our foreign
subsidiaries (created or acquired after the completion of this offering) that
are not guarantors, including the stock of our broadcasting license
subsidiaries. In connection with the senior credit facilities, we intend to
transfer our FCC broadcasting licenses to single-purpose subsidiaries which will
be wholly-owned by our direct subsidiaries. The stock of these single-purpose
subsidiaries will, to the extent permitted under applicable law, and in
accordance with items (3) and (4) of the preceding sentence, secure our
obligations under the senior credit facilities, but not under the notes.

12 1/2% NOTES

The following summary of our 12 1/2% notes does not purport to be complete
and is subject to the terms of the indenture governing the 12 1/2% notes. On
September 30, 1999, we commenced consent solicitations and tender offers to
repurchase our 12 1/2% notes. We have received consents and tenders from the
holders of 99.7% of our 12 1/2% notes. We and the trustee under each of the
indentures have executed and delivered supplemental indentures deleting many of
the financial covenants from the respective indentures. However, the
supplemental indentures will not become operative until we accept and pay for
the notes. We cannot assure you that the tender for the 12 1/2% notes will be
completed in the anticipated time period or at all.

In June 1994, we issued approximately $107.1 million of 12 1/2% notes due
2002 ($93.9 million of which are outstanding as of June 27, 1999), under the
Indenture dated as of June 29,

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1994 among SBS, the guarantors named in the indenture, which were the
subsidiaries of SBS, and The Bank of New York, as successor to IBJ Whitehall
Bank & Trust Company (formerly known as IBJ Schroder Bank & Trust Company), as
trustee. The 12 1/2% notes bear cash interest at a rate of 12 1/2% per annum on
their principal amount until maturity. The 12 1/2% notes are senior unsecured
obligations of SBS. The 12 1/2% notes rank senior to all future subordinated
indebtedness of SBS. The 12 1/2% notes are unconditionally guaranteed, on a
senior basis, as to the payment of principal, premium, if any, and interest,
jointly and severally, by all of the active direct and indirect subsidiaries of
SBS. The 12 1/2% notes are not redeemable. There are no mandatory redemption
requirements with respect to the 12 1/2% notes.

In the event of a change of control of SBS, as defined in the indenture
governing the 12 1/2% notes, we are required to make an offer to purchase all of
the outstanding 12 1/2% notes at a purchase price equal to 101% of the principal
amount of the 12 1/2% notes, plus accrued and unpaid interest. The 12 1/2% notes
indenture restricts, among other things, the incurrence of additional
indebtedness, the payment of dividends and distributions, the creation of liens,
the issuance of stock of subsidiaries, transactions with affiliates, the making
of certain investments, asset sales, merger or consolidation of SBS and its
subsidiaries or the transfer of their assets, subject to certain exceptions.

11% NOTES

The following summary of the 11% notes does not purport to be complete and
is subject to the terms of the indenture governing the 11% notes. On September
30, 1999, we commenced consent solicitations and tender offers to repurchase our
11% notes. We have received consents and tenders from the holders of 100% of our
11% notes. We and the trustee under each of the indentures have executed and
delivered supplemental indentures deleting many of the financial covenants from
the respective indentures. However, the supplemental indentures will not become
operative until we accept and pay for the notes. We cannot assure you that the
tender for the 11% notes will be completed in the anticipated time period or at
all.

In March 1997, we issued $75.0 million of 11% notes due 2004 under the
Indenture dated as of March 15, 1997 among SBS, the guarantors named in the
indenture, which were the subsidiaries of SBS, and The Bank of New York, as
successor to IBJ Whitehall Bank & Trust Company (formerly known as IBJ Schroder
Bank & Trust Company), as trustee. The 11% notes bear cash interest at a rate of
11% per annum on their principal amount until maturity. The 11% notes are senior
unsecured obligations of SBS. The 11% notes rank senior to all future
subordinated indebtedness of SBS. The 11% notes are unconditionally guaranteed,
on a senior basis, as to the payment of principal, premium, if any, and
interest, jointly and severally, by all of the active direct and indirect
subsidiaries of SBS. The 11% notes are redeemable at our option as follows: (1)
any time on or after March 15, 2001 we may redeem the 11% notes at 105.50% of
their principal amount; (2) from and after March 15, 2002 we may redeem the 11%
notes at 102.75% of their principal amount; and (3) from and after March 15,
2003 we may redeem the 11% notes at 100% of their principal amount plus, in each
case, accrued and unpaid interest. There are no mandatory redemption
requirements with respect to the 11% notes.

In the event of a change of control, as defined in the indenture governing
the 11% notes, we are required to make an offer to purchase all of the
outstanding 11% notes at a purchase price equal to 101% of the principal amount
of the 11% notes, plus accrued and unpaid interest. The 11% notes indenture
restricts, among other things, the incurrence of additional indebtedness, the
payment of dividends and distributions, the creation of liens, the issuance of
stock of subsidiaries, transactions with affiliates, the making of certain
investments, asset sales, merger or consolidation of SBS and its subsidiaries or
the transfer of their assets, subject to certain exceptions.

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DESCRIPTION OF NOTES

You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the words
"Company" and "SBS" refer only to Spanish Broadcasting System, Inc. and not to
any of its subsidiaries. The term "Notes" refers to the SBS senior subordinated
notes being offered hereby.

The Notes will be issued by SBS under the Indenture dated November 2, 1999
(the "Indenture") among itself, the Guarantors (described under the section
entitled "Subsidiary Guarantees") and The Bank of New York, as trustee (the
"Trustee"). The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act").

The following description is a summary of the material provisions of the
Indenture. It does not restate the Indenture in its entirety. Because this is a
summary, we urge you to read the Indenture and the relevant portions of the
Trust Indenture Act because they, and not this description, define your rights
as holders of the notes. We have filed copies of the Indenture as an exhibit to
the registration statement which includes this prospectus.

GENERAL

The Notes are:

- general unsecured obligations of SBS;

- subordinated in right of payment to all existing and future Senior Debt
of SBS;

- pari passu in the right of payment with any future senior subordinated
indebtedness of SBS; and

- unconditionally guaranteed by the Guarantors on a senior subordinated
basis.

As of June 27, 1999, after giving pro forma effect to the issuance of the
Notes, the consummation of the proposed equity offering and the application of
the proceeds from the offerings, SBS would have had no Senior Debt outstanding.
The Indenture does not limit the aggregate amount of debt securities that SBS
may issue thereunder. The Indenture provides that SBS may issue debt securities
from time to time, in one or more series, each in an aggregate principal amount
authorized by SBS prior to issuance. The Indenture permits SBS to incur
additional debt, including additional Senior Debt, subject to certain
restrictions. See "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock."

PRINCIPAL, MATURITY AND INTEREST

SBS will issue Notes in denominations of $1,000 and integral multiples of
$1,000. The Notes will mature on November 1, 2009.

Interest on the Notes will accrue at the rate of 9 5/8% per annum and will
be payable semi-annually in arrears on May 1 and November 1 of each year,
commencing on May 1, 2000. SBS will make each interest payment to the holders of
record of these Notes on the immediately preceding April 15 and October 15.

Interest on the Notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.

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METHODS OF RECEIVING PAYMENTS ON THE NOTES

If a holder of a Note has given wire transfer instructions to SBS, SBS will
make all principal, premium and interest payments on those Notes in accordance
with those instructions. All other payments on these Notes will be made at the
office or agency of the Paying Agent and Registrar within the City and State of
New York unless SBS elects to make interest payments by check mailed to the
holders at their address set forth in the register of holders.

SUBORDINATION

The payment of principal, premium and interest on the Notes will be
subordinated to the prior payment in full in cash or Cash Equivalents of all
Senior Debt of SBS.

If any payment or distribution to SBS's creditors occurs:

(1) in a liquidation or dissolution of SBS;

(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to SBS or its property;

(3) in an assignment for the benefit of creditors; or

(4) in any marshaling of SBS's assets or liabilities,

the holders of Senior Debt of SBS will be entitled to receive payment in full in
cash or Cash Equivalents of all Obligations due in respect of such Senior
Debt -- including interest after the commencement of any such proceeding at the
rate and on the terms specified in the applicable Senior Debt whether or not the
claim for such interest is allowed or enforceable in any such
proceeding -- before the holders of Notes will be entitled to receive any
payment or distribution with respect to the Notes. However, holders of Notes may
receive Permitted Junior Securities and payments made from the trust described
under "-- Legal Defeasance and Covenant Defeasance."

Any payment or distribution to which the holders of Notes would otherwise
be entitled in any such proceeding shall be made directly to the holder of
Senior Debt until all Obligations in respect of the Senior Debt (including all
such interest) are paid in full in cash or Cash Equivalents. SBS also may not
make any payment in respect of the Notes except in Permitted Junior Securities
or from the trust described under the caption "-- Legal Defeasance and Covenant
Defeasance," if:

(1) a payment default on any Credit Facility occurs and is continuing
beyond any applicable grace period; or

(2) any other default occurs and is continuing with respect to any
Designated Senior Debt that permits holders of that Designated Senior Debt
to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from SBS or the holders of such
Designated Senior Debt.

Payments on the Notes may and must be resumed:

(1) in the case of a payment default, upon the date on which such
default is cured or waived or has ceased to exist or such Designated Senior
Debt has been discharged or repaid in full; and

(2) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment

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Blockage Notice is received or has ceased to exist or such Designated
Senior Debt has been discharged or repaid in full, unless the maturity of
any Designated Senior Debt has been accelerated.

No new period of payment blockage may be commenced unless and until 360
days have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such default has
been cured or waived.

SBS must promptly notify holders of Senior Debt if payment of the Notes is
accelerated because of an Event of Default.

As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of Notes may recover less than creditors
of SBS who are holders of Senior Debt. See "Risk
Factors -- Subordination -- Your right to receive payments on these notes is
junior to our existing indebtedness and possibly all of our future borrowings."

SUBSIDIARY GUARANTEES

Each of SBS's current and future domestic Restricted Subsidiaries (the
"Guarantors"), except for the Non-Guarantor Subsidiaries, will jointly and
severally guarantee SBS's obligations under the Notes (the "Subsidiary
Guarantees"). See "Risk Factors -- Substantial Debt -- Our substantial level of
debt could limit our ability to grow and compete." Each Subsidiary Guarantee
will be subordinated in right of payment to all existing and future Senior Debt
of such Guarantor on the same terms as the Notes are subordinated to the Senior
Debt of SBS. The Indenture will permit the Guarantors to incur additional
indebtedness, including additional Senior Debt, subject to certain restrictions.
See "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock."

A Guarantor may not consolidate with or merge with or into, whether or not
such Guarantor is the surviving Person, another corporation, Person or entity
unless:

(1) the Person formed by or surviving any such consolidation or
merger, if other than such Guarantor, assumes all the obligations of such
Guarantor pursuant to a supplemental indenture reasonably satisfactory to
the Trustee under the Notes and the Indenture;

(2) immediately after giving effect to such transaction, no Default or
Event of Default exists; and

(3) SBS would be permitted by virtue of SBS's pro forma Debt to Cash
Flow Ratio, immediately after giving effect to such transaction, to incur
at least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow
Ratio test set forth in the covenant described below under the caption
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock."

The Subsidiary Guarantee of a Guarantor will be released:

(1) in connection with any Asset Sale or other disposition of all or
substantially all of the assets of that Guarantor, including by way of
merger or consolidation or otherwise, if SBS complies with the applicable
provisions of the Indenture; or

(2) in connection with any sale of the capital stock of a Guarantor,
if SBS complies with the applicable provisions of the Indenture.

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OPTIONAL REDEMPTION

Before November 1, 2002, SBS may, on any one or more occasions, redeem up
to 35% of the aggregate principal amount of Notes originally issued under the
Indenture at a redemption price of 109.625% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the redemption date, with the net
cash proceeds of an offering of common equity of SBS, other than Disqualified
Stock; provided that:

(1) at least 65% of the aggregate principal amount of the Notes
originally issued in the Offering remain outstanding immediately after the
occurrence of each such redemption, excluding Notes held by SBS and its
Subsidiaries; and

(2) each such redemption shall occur within 75 days after the date of
the closing of any such offering of common equity of SBS.

Except pursuant to the preceding paragraph, SBS will not be able to redeem
the Notes prior to November 1, 2004.

On or after November 1, 2004, SBS may redeem all or a part of the Notes
upon not less than 30 nor more than 60 days' notice, at the redemption prices,
expressed as percentages of principal amount, set forth below, plus accrued and
unpaid interest, if any, thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on November 1 of the years indicated
below:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004........................................................ 104.813%
2005........................................................ 103.208%
2006........................................................ 101.604%
2007 and thereafter......................................... 100.000%
</TABLE>

SELECTION AND NOTICE

If less than all of the Notes are to be redeemed at any time, the Trustee
will select Notes for redemption in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed.
If the Notes are not so listed, the Trustee will make the selection of Notes for
redemption on a pro rata basis, by lot or by such method as the Trustee shall
deem fair and appropriate. No Notes of $1,000 or less shall be redeemed in part.
Notices of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at its registered address. Notices of redemption may not be
conditional.

If any Note is to be redeemed in part only, the notice of redemption that
relates to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note. Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on Notes
or portions of them called for redemption.

MANDATORY REDEMPTION

Except as set forth below under the caption "-- Repurchase at the Option of
Holders," SBS is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.

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REPURCHASE AT THE OPTION OF HOLDERS

Change Of Control

If a Change of Control occurs, SBS will make an offer (a "Change of Control
Offer") to each holder of Notes to repurchase all or any part, equal to $1,000
or an integral multiple thereof, of such holder's Notes. In the Change of
Control Offer, SBS will offer payment in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the date of
purchase (the "Change of Control Payment"). Within ten days following a Change
of Control, SBS will mail a notice to each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. SBS will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.

On the Change of Control Payment Date, SBS will, to the extent lawful:

(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;

(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered;
and

(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by SBS.

The Paying Agent will promptly mail to each holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail, or cause to be transferred by book entry, to each holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof.

The provisions described above that require SBS to make a Change of Control
Offer following a Change of Control will be applicable whether or not any other
provisions of the Indenture are applicable. Except as described above with
respect to a Change of Control, the Indenture does not contain provisions that
permit the holders of the Notes to require SBS to repurchase or redeem the Notes
in the event of a takeover, recapitalization or similar transaction.

The Senior Credit Facilities prohibit SBS from purchasing any Notes
following a Change of Control and provide that certain change of control events
with respect to SBS would constitute a default thereunder. Any other future
credit agreements or other agreements relating to Senior Debt to which SBS
becomes a party may contain similar restrictions. If a Change of Control occurs
at a time when SBS is prohibited from purchasing Notes, SBS could seek the
consent of its lenders to the purchase of Notes or could attempt to refinance
the borrowings that contain such prohibition. If SBS does not obtain such a
consent or repay such borrowings, SBS will remain prohibited from purchasing
Notes. SBS's failure to purchase tendered Notes following a Change of Control
would constitute an Event of Default under the Indenture which, in turn, is
expected to constitute a default under the Senior Credit Facilities. In such
circumstances, the

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<PAGE> 84

subordination provisions in the Indenture would restrict payments to the holders
of Notes. See "-- Subordination."

SBS will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by SBS and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.

ASSET SALES

SBS will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:

(1) SBS or the Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair
market value (as determined in good faith by the Board of Directors of SBS
or such Subsidiary) of the assets or Equity Interests issued or sold or
otherwise disposed of; and

(2) at least 75% of the consideration therefor received by SBS or such
Restricted Subsidiary is in the form of cash. For purposes of this
provision, each of the following shall be deemed cash:

(a) any liabilities, as shown on SBS's or such Restricted
Subsidiary's most recent balance sheet, of SBS or such Restricted
Subsidiary, other than contingent liabilities and liabilities that are
by their terms subordinated to the Notes or any guarantee thereof, that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases SBS or such Restricted Subsidiary from
further liability; and

(b) any securities, notes or other obligations received by SBS or
such Restricted Subsidiary from such transferee that are converted by
SBS or such Restricted Subsidiary into cash, to the extent of the cash
received, within 90 days following the closing of such Asset Sale.

However, SBS and its Restricted Subsidiaries will be permitted to
consummate an Asset Sale without complying with the preceding paragraph if:

(1) SBS or the applicable Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or other property sold, issued or otherwise
disposed of; and

(2) at least 75% of the consideration for such Asset Sale constitutes
a controlling interest in a Permitted Business, long-term assets used or
useful in a Permitted Business and/or cash or Cash Equivalents; provided
that any cash or Cash Equivalents received by SBS or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated
under this paragraph shall constitute Net Proceeds subject to the
provisions of the next paragraph.

Within 365 days of the receipt of any Net Proceeds from an Asset Sale, SBS
may apply such Net Proceeds, at its option:

(1) to repay Senior Debt;

(2) to acquire a controlling interest in another Permitted Business;
and

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<PAGE> 85

(3) to make a capital expenditure or to acquire long-term assets that
are used or useful in a Permitted Business.

Pending the final application of any such Net Proceeds, SBS may temporarily
reduce Senior Debt or otherwise invest such Net Proceeds in any manner that is
not prohibited by the Indenture.

Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10 million, SBS will be required to
make an offer to all holders of Notes and all holders of other pari passu
Indebtedness containing provisions similar to those set forth in the Indenture
with respect to offers to purchase or redeem such other pari passu Indebtedness
with the proceeds of sales of assets (an "Asset Sale Offer"). The offer price in
any Asset Sale Offer will be equal to 100% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase and will be paid in
cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer,
SBS may use such Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of Notes and such other pari passu
Indebtedness surrendered by holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis. Upon completion of an Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.

CERTAIN COVENANTS

Restricted Payments

SBS will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly:

(1) declare or pay any dividend or make any other payment or
distribution on account of SBS's or any of its Restricted Subsidiary's
Equity Interests, including, without limitation, any payment in connection
with any merger or consolidation involving SBS or any Restricted
Subsidiary, or to any direct or indirect holders of SBS's Equity Interests
in their capacity as such, other than dividends or distributions payable in
Equity Interests, other than Disqualified Stock, of SBS to SBS or any
Restricted Subsidiary of SBS;

(2) purchase, redeem or otherwise acquire or retire for value,
including, without limitation, in connection with any merger or
consolidation involving SBS, any Equity Interests of SBS or any of its
Restricted Subsidiaries or any direct or indirect parent of SBS, other than
any such Equity Interests owned by SBS or any Restricted Subsidiary of SBS;

(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness of SBS or
any Restricted Subsidiary that is subordinated to the Notes or any
guarantee of the Notes, except a payment of interest or principal at Stated
Maturity; or

(4) make any Restricted Investment, all such payments and other
actions set forth in clauses (1) through (4) above being collectively
referred to as "Restricted Payments";

unless, at the time of and after giving effect to such Restricted Payment:

(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;

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(2) SBS would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Debt to
Cash Flow Ratio test set forth in the first paragraph of the covenant
described below under caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and

(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by SBS and its Restricted Subsidiaries after
the date of the Indenture, excluding Restricted Payments permitted by
clauses (2), (3) and (4) of the next paragraph, is less than the sum,
without duplication, of:

(a) an amount equal to the Consolidated Cash Flow of SBS for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the Indenture to the end of
SBS's most recently ended full fiscal quarter for which financial
statements have been filed with the Commission (the "Basket Period")
less the product of 1.4 times the Consolidated Interest Expense of SBS
for the Basket Period; plus

(b) 100% of the aggregate net cash proceeds received by SBS as a
contribution to its common equity capital or from the issue or sale
since the date of the Indenture of Equity Interests of SBS, other than
Disqualified Stock, or from the issue or sale of Disqualified Stock or
debt securities of SBS that have been converted into such Equity
Interests, other than Equity Interests, or Disqualified Stock or
convertible debt securities, sold to a Subsidiary of SBS; plus

(c) to the extent that any Restricted Investment that was made
after date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (i) the cash return of capital with
respect to such Restricted Investment, less the cost of disposition, if
any, and (ii) the initial amount of such Restricted Investment.

The preceding provisions will not prohibit:

(1) the payment of any dividend within 60 days after its date of
declaration, if at the date of declaration such payment would have complied
with the provisions of the Indenture;

(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests of SBS or subordinated Indebtedness of
SBS or any Guarantor in exchange for, or out of the net cash proceeds of
the substantially concurrent sale, other than to a Subsidiary of SBS, of
other Equity Interests of SBS, other than any Disqualified Stock; provided
that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (3)(b) of the preceding paragraph; and
provided further that no Default or Event of Default shall have occurred
and be continuing immediately after such transaction;

(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; provided that no Default or Event of
Default shall have occurred and be continuing immediately after such
transaction;

(4) the payment of any dividend by a Restricted Subsidiary of SBS to
the holders of its Equity Interests on a pro rata basis;

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(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of SBS or any Restricted Subsidiary of SBS
held by any member of SBS's -- or any of its Restricted
Subsidiaries' -- management or board of directors pursuant to any
management equity subscription agreement, stock option agreement or other
similar agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $5 million (excluding for purposes of calculating such amounts
during any period, loans incurred to finance the purchase of such Equity
Interests that are repaid contemporaneously) in any twelve-month period and
no Default or Event of Default shall have occurred and be continuing
immediately after such transaction;

(6) repurchases of stock deemed to have occurred by virtue of the
exercise of stock options; and

(7) other Restricted Payments in an aggregate amount not to exceed $5
million in any twelve-month period so long as no default or Event of
Default shall have occurred and be continuing.

The amount of all Restricted Payments, other than cash, shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by SBS or such Restricted Subsidiary, as
the case may be, pursuant to the Restricted Payment. The Board of Directors
shall determine in good faith the fair market value of any non-cash Restricted
Payment. The Board of Directors' resolution with respect thereto shall be
delivered to the Trustee. Not later than the date of making any Restricted
Payment, SBS shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which any
calculations required by the covenant "Restricted Payments" were computed.

The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, the aggregate fair market value of all
outstanding Investments by SBS and its Restricted Subsidiaries in the Subsidiary
so designated will be deemed to be a Restricted Payment at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. Such designation will only be permitted if
such Restricted Payment would be permitted at such time and if such Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.

Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions. If, at any time, any
Unrestricted Subsidiary would fail to meet the definition of an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture. Any Indebtedness of such Subsidiary shall be deemed
to be incurred by a Restricted Subsidiary of SBS as of such date, and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption "-- Incurrence of Indebtedness and Issuance of
Preferred Stock," SBS shall be in default of such covenant. The Board of
Directors of SBS may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary. However, such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted

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<PAGE> 88

Subsidiary of SBS of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if:

(1) such Indebtedness is permitted under the covenant described under
the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock," calculated on a pro forma basis as if such designation had occurred
at the beginning of the four-quarter reference period; and

(2) no Default or Event of Default would be in existence immediately
following such designation.

Incurrence Of Indebtedness And Issuance Of Preferred Stock

SBS will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness, including Acquired Debt, and SBS will
not issue any shares of Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; provided, that,
if no Default or Event of Default has occurred and is continuing, SBS may incur
Indebtedness, including Acquired Debt, or issue shares of Disqualified Stock and
the Guarantors may issue shares of preferred stock if, SBS's Debt to Cash Flow
Ratio at such time after giving pro forma effect to such incurrence or issuance
as of such date and to the use of the proceeds therefrom as if the same had
occurred at the beginning of the most recently ended four full fiscal quarter
period of SBS for which internal financial statements are available, would have
been no greater than 7.0 to 1.0.

So long as no Default shall have occurred and be continuing or would be
caused thereby, the preceding paragraph will not apply to the incurrence of any
of the following types of Indebtedness (collectively, "Permitted Debt"):

(1) the incurrence by SBS, and the guarantee thereof by any Restricted
Subsidiary, of Indebtedness and Letters of Credit under one or more Credit
Facilities; provided that the aggregate principal amount at any time
outstanding does not exceed $250.0 million, with letters of credit being
deemed to have a principal amount equal to the maximum potential liability
of SBS and the Restricted Subsidiaries thereunder, less the aggregate
amount of all mandatory repayments of the principal of any term
Indebtedness under a Credit Facility that have been made since the date of
the Indenture (other than from the proceeds of any other Credit Facility)
and less the aggregate amount of all commitment reductions of any revolving
Indebtedness under a Credit Facility pursuant to clause (1) of the third
paragraph of the covenant described above under the caption "-- Repurchase
at the Option of Holders -- Asset Sales";

(2) the incurrence by SBS and the guarantee thereof by the Guarantors
of Indebtedness represented by the Notes and the Subsidiary Guarantees;

(3) the incurrence by SBS and its Restricted Subsidiaries of the
Existing Indebtedness;

(4) the incurrence by SBS or its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or Purchase Money Indebtedness, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of SBS or

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such Restricted Subsidiary, in an aggregate amount not to exceed $5 million
at any time outstanding;

(5) the incurrence by SBS or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness, other than
intercompany Indebtedness, that was permitted by the Indenture to be
incurred by the first paragraph of this covenant, or by clauses (2), (3),
(4), (5), (7), (8), (9), (10), (11) or (12) of this paragraph;

(6) the incurrence of Indebtedness between or among SBS and any of its
Restricted Subsidiaries; provided that:

(a) if SBS is the obligor on such Indebtedness, such Indebtedness
is expressly subordinated to the prior payment in full of all Senior
Debt and all Obligations with respect to the Notes; and

(b) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than SBS
or a Restricted Subsidiary, and any sale or other transfer of any such
Indebtedness to a Person that is not either SBS or a Restricted
Subsidiary, shall be deemed, in each case, to constitute an incurrence
of such Indebtedness by SBS or such Restricted Subsidiary, as the case
may be;

(7) the incurrence by SBS or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;

(8) the guarantee by SBS or any of the Guarantors (or, in the case of
a Credit Facility, any Restricted Subsidiary) of Indebtedness that was
permitted to be incurred by another provision of this covenant;

(9) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock;

(10) the incurrence by SBS or any of its Restricted Subsidiaries of
Indebtedness consisting of performance, bid or advance payment bonds,
surety bonds, custom bonds, utility bonds and similar obligations arising
in the ordinary course of business;

(11) the incurrence by SBS or any of its Restricted Subsidiaries of
Indebtedness arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, in each case incurred
or assumed in connection with the disposition of any business, asset or
Subsidiary of SBS, provided that the maximum assumable Indebtedness shall
at no time exceed the gross proceeds actually received by SBS and its
Restricted Subsidiaries in connection with the disposition of any business,
asset or Subsidiary of SBS; and

(12) the incurrence by SBS or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount at any time
outstanding, including all Permitted Refinancing Indebtedness incurred
pursuant to clause (5) above to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (12), not to exceed $10
million.

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For purposes of determining compliance with this covenant, if an item of
Indebtedness meets the criteria of more than one of the categories of Permitted
Debt described in clauses (1) through (12) above or is entitled to be incurred
pursuant to the first paragraph of this covenant, SBS shall, in its sole
discretion, classify and reclassify such item of Indebtedness in whole or in
part in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been incurred pursuant to such clauses or
pursuant to the first paragraph hereof.

Asset Swaps

The Indenture provides that SBS will not, and will not permit any of its
Restricted Subsidiaries to, in one or a series of related transactions, directly
or indirectly, engage in any Asset Swaps, unless: (i) at the time of entering
into the agreement to swap assets and immediately after giving effect to the
proposed Asset Swap, no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; (ii) SBS would, after giving
pro forma effect to the proposed Asset Swap, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow Ratio
in the covenant "Incurrence of Indebtedness and Issuance of Preferred Stock;"
(iii) the respective fair market values of the assets being purchased and sold
by SBS or any of its Restricted Subsidiaries (as determined in good faith by the
management of SBS or, if such Asset Swap includes consideration in excess of
$1.0 million by the Board of Directors of SBS, as evidenced by a Board
Resolution) are substantially the same at the time of entering into the
agreement to swap assets; and (iv) at the time of the consummation of the
proposed Asset Swap, the percentage of any decline in the fair market value
(determined as aforesaid) of the asset or assets being acquired by SBS and its
Restricted Subsidiaries shall not be significantly greater than the percentage
of any decline in the fair market value (determined as aforesaid) of the assets
being disposed of by SBS or its Restricted Subsidiaries, calculated from the
time the agreement to swap assets was entered into.

Limitation On Other Senior Subordinated Debt

The Indenture provides that:

(1) SBS will not directly or indirectly incur any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in
any respect in right of payment to the Notes; and

(2) no Guarantor will incur any Indebtedness that is subordinate or
junior in right of payment to its Guarantor Senior Debt and senior in any
respect in right of payment to such Guarantor's Subsidiary Guarantee.

Liens

SBS will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness or trade payables on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.

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Sale And Leaseback Transactions

SBS will not, and will not permit any of its Restricted Subsidiaries to,
enter into any sale and leaseback transaction; provided that SBS and the
Guarantors may enter into a sale and leaseback transaction if:

(1) SBS or such Guarantor could have

(a) incurred Indebtedness in an amount equal to the Attributable
Debt relating to such sale and leaseback transaction pursuant to the
Debt to Cash Flow Ratio test set forth in the first paragraph of the
covenant described above under the caption "-- Incurrence of
Indebtedness and Issuance of Preferred Stock"; and

(b) incurred a Lien to secure such Attributable Debt pursuant to
the covenant described above under the caption "-- Liens";

(2) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the fair market value (as determined by the Board of
Directors in good faith) of the property that is the subject of such sale
and leaseback transaction; and

(3) the transfer of assets in such sale and leaseback transaction is
permitted by, and the proceeds of such transaction are applied in
compliance with, the covenant described above under the caption
"-- Repurchase at the Option of Holders--Asset Sales."

Dividend And Other Payment Restrictions Affecting Subsidiaries

SBS will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:

(1) pay dividends or make any other distributions on its Capital Stock
to SBS or any of its Restricted Subsidiaries, or with respect to any other
interest or participation in, or measured by, its profits, or pay any
indebtedness owed to SBS or any of its Restricted Subsidiaries;

(2) make loans or advances to SBS or any of its Restricted
Subsidiaries; or

(3) transfer any of its properties or assets to SBS or any of its
Restricted Subsidiaries.

However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:

(1) Existing Indebtedness as in effect on the date of the Indenture;

(2) the Senior Credit Facilities and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, and any other agreement governing or relating to
Senior Debt, provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings
and other agreements are, taken as a whole, no more restrictive with
respect to such dividend and other payment restrictions than those
contained in the Senior Credit Facilities;

(3) the Indenture, the Notes and the Subsidiary Guarantees;

(4) applicable law;

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(5) any instrument governing Indebtedness or Capital Stock of a Person
acquired by SBS or any of its Restricted Subsidiaries as in effect at the
time of such acquisition, except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired; provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture
to be incurred;

(6) customary non-assignment provisions in leases and other agreements
entered into in the ordinary course of business and consistent with past
practices;

(7) purchase money obligations (including Capital Lease Obligations)
for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (3) above on the property so
acquired;

(8) Permitted Refinancing Indebtedness; provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;

(9) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the
caption "-- Liens" that limits the right of the debtor to dispose of the
assets securing such Indebtedness;

(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;

(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
and

(12) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition.

Merger, Consolidation Or Sale Of Assets

SBS may not consolidate or merge with or into another Person, whether or
not SBS is the surviving corporation, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person; unless:

(1) either

(a) SBS is the surviving corporation or

(b) the Person formed by or surviving any such consolidation or
merger, if other than SBS, or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia;

(2) the Person formed by or surviving any such consolidation or
merger, if other than SBS, or the Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made
assumes all the obligations of SBS under the Notes and the Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to
the Trustee;

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(3) immediately after such transaction no Default or Event of Default
exists; and

(4) except in the case of a merger of SBS with or into a Wholly Owned
Restricted Subsidiary of SBS, SBS or the Person formed by or surviving any
such consolidation or merger, if other than SBS, or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have
been made would, both immediately prior to and immediately after giving pro
forma effect thereto as if such transaction had occurred at the beginning
of the applicable four-quarter period, be permitted to incur at least $1.00
of additional Indebtedness pursuant to the Debt to Cash Flow Ratio test set
forth in the first paragraph of the covenant described above under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock."

Transactions With Affiliates

SBS will not, and will not permit any of its Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless:

(1) such Affiliate Transaction is on terms that are no less favorable
to SBS or such Restricted Subsidiary than those that would have been
obtained in a comparable transaction by SBS or such Restricted Subsidiary
with an unrelated Person; and

(2) SBS delivers to the Trustee:

(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$2.5 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with clause (1) above and that a majority of the disinterested
members of the Board of Directors approved such Affiliate Transaction;
and

(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10 million, an opinion as to the fairness to SBS of such Affiliate
Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.

The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:

(1) any transaction approved by the Board of Directors of SBS, with an
officer or director of SBS or of any of its Subsidiaries in his or her
capacity as an officer or director entered into in the ordinary course of
business;

(2) transactions between or among SBS and/or its Restricted
Subsidiaries;

(3) payment of reasonable directors fees to the Board of Directors of
SBS and of its Restricted Subsidiaries;

(4) fees and compensation paid to, and indemnity provided on behalf
of, officers, directors or employees of SBS or any of its Restricted
Subsidiaries, as determined in good faith by the Board of Directors of SBS
or of any such Restricted Subsidiary, to the extent the same are reasonable
and customary;

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(5) any Restricted Payment that is permitted by the provisions of the
Indenture described above under the caption "-- Restricted Payments"; and

(6) agreements in effect on the date of the Indenture and any
modification thereto or any transaction contemplated thereby (including
pursuant to any modification thereto) in any replacement agreement therefor
so long as such modification or replacement is not more disadvantageous to
the holders of the Notes in any material respect than the original
agreement as in effect on the date of the Indenture.

Additional Subsidiary Guarantees

If SBS or any of its Restricted Subsidiaries acquires or creates another
domestic Restricted Subsidiary after the date of the Indenture, other than the
Non-Guarantor Subsidiaries, or if any domestic Unrestricted Subsidiary becomes a
Restricted Subsidiary of SBS, then such Subsidiary will execute a Subsidiary
Guarantee of the Notes and deliver an opinion of counsel, in accordance with the
terms of the Indenture.

Payments For Consent

SBS will not, and will not permit any of its Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration to any holder of any Notes
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered to
be paid to all holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.

Reports

Whether or not required by the Commission, so long as any Notes are
outstanding, SBS will furnish to the holders of Notes, within the time periods
specified in the Commission's rules and regulations:

(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition
and results of operations of SBS and its consolidated Subsidiaries and,
with respect to the annual information only, a report thereon by SBS's
certified independent accountants; and

(2) all current reports that would be required to be filed with the
Commission on Form 8-K.

In addition, whether or not required by the Commission, SBS will file a
copy of all such information and reports referred to in clauses (1) and (2)
above with the Commission for public availability within the time periods
specified in the Commission's rules and regulations, unless the Commission will
not accept such a filing, and make such information available to securities
analysts and prospective investors upon request.

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EVENTS OF DEFAULT AND REMEDIES

Each of the following constitutes an Event of Default:

(1) default for 30 days in the payment when due of interest on the
Notes, whether or not prohibited by the subordination provisions of the
Indenture;

(2) default in payment when due of the principal of or premium, if
any, on the Notes, whether or not prohibited by the subordination
provisions of the Indenture;

(3) failure by SBS or any Restricted Subsidiary to comply with the
provisions described under the captions "-- Repurchase at the Option of
Holders -- Change of Control" or "-- Certain Covenants -- Merger,
Consolidation or Sale of Assets";

(4) failure by SBS or any Restricted Subsidiary for 30 days after
written notice by the Trustee or the holders of at least 25% in principal
amount of the then outstanding Notes to comply with the provisions
described under the captions "-- Repurchase at the Option of
Holders -- Asset Sales," "-- Certain Covenants -- Restricted Payments" or
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock";

(5) failure by SBS or any Restricted Subsidiary for 60 days after
written notice by the Trustee or the holders of at least 25% in principal
amount of the then outstanding Notes to comply with any of its other
agreements in the Indenture or the Notes;

(6) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by SBS or any of its Significant
Subsidiaries, or the payment of which is guaranteed by SBS or any of its
Significant Subsidiaries, whether such Indebtedness or guarantee now exists
or is created after the date of the Indenture, if that default:

(a) is caused by a failure to pay (a "Payment Default") principal
of or premium, if any, or interest on such Indebtedness when due (after
giving effect to any applicable grace period provided in such
Indebtedness on the date of such default); or

(b) results in the acceleration of such Indebtedness prior to its
express maturity;

and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates $5
million or more;

(7) failure by SBS or any of its Significant Subsidiaries to pay final
judgments aggregating in excess of $5 million (net of amounts covered by
insurance), which judgments are not paid, discharged or stayed for a period
of 60 days;

(8) except as permitted by the Indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any Guarantor,
or any Person acting on behalf of any Guarantor, shall deny or disaffirm
its obligations under its Subsidiary Guarantee; and

(9) certain events of bankruptcy or insolvency with respect to SBS or
any of SBS's Restricted Subsidiaries that constitutes a Significant
Subsidiary or any group of Restricted Subsidiaries of SBS that, taken
together, would constitute a Significant Subsidiary.

If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. However, if an Event of
Default arises from certain events of bankruptcy

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or insolvency, with respect to SBS, any Restricted Subsidiary of SBS that
constitutes a Significant Subsidiary or any group of Restricted Subsidiaries of
SBS that, taken together, would constitute a Significant Subsidiary, all
outstanding Notes automatically will become due and payable immediately.

Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from holders of the
Notes notice of any continuing Default or Event of Default, except a Default or
Event of Default relating to the payment of principal or interest, if it
determines that withholding notice is in their interest.

If an Event of Default occurs by reason of any willful action or inaction
taken or not taken by or on behalf of SBS with the intention of avoiding payment
of the premium that SBS would have had to pay if SBS then had elected to redeem
the Notes pursuant to the optional redemption provisions of the Indenture, an
equivalent premium will also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes. If an Event of Default
occurs prior to September 30, 2004 by reason of any willful action or inaction
taken or not taken by or on behalf of SBS with the intention of avoiding the
prohibition on redemption of the Notes prior to such date, then the Make Whole
Premium specified in the Indenture will also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.

The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.

SBS is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture. Upon becoming aware of any Default or Event of
Default, SBS is required to deliver to the Trustee a statement specifying such
Default or Event of Default.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS

No director, officer, employee or stockholder of SBS or any Guarantor, as
such, will have any liability for any obligations of SBS or any Guarantor under
the Notes, the Subsidiary Guarantees, the Indenture or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each holder
of Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. The waiver
may not be effective to waive liabilities under the federal securities laws.

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

SBS may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes and to have each
Guarantor's obligation discharged with respect to its Subsidiary Guarantee
("Legal Defeasance"), except for:

(1) the rights of holders of outstanding Notes to receive payments in
respect of the principal of and premium and interest, if any, on the Notes
when such payments are due from the trust referred to below;

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(2) SBS's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment;

(3) the rights, powers, trusts, duties and immunities of the Trustee,
and SBS's obligations in connection therewith; and

(4) the Legal Defeasance provisions of the Indenture.

In addition, SBS may, at its option and at any time, elect to have the
obligations of SBS and each Guarantor released with respect to certain covenants
that are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. If Covenant Defeasance occurs, certain
events, not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events, described under the caption "Events of Default and Remedies"
will no longer constitute an Event of Default with respect to the Notes.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1) SBS must irrevocably deposit with the Trustee, in trust, for the
benefit of the holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of and premium, and interest, if
any, on the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and SBS must specify whether the Notes
are being defeased to maturity or to a particular redemption date;

(2) in the case of Legal Defeasance, SBS shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that:

(a) SBS has received from, or there has been published by, the
Internal Revenue Service a ruling or

(b) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such opinion of counsel shall confirm that, the
holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;

(3) in the case of Covenant Defeasance, SBS shall have delivered to
the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;

(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit, other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit, or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;

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(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument, other than the Indenture, to which SBS or any of
its Subsidiaries is a party or by which SBS or any of its Subsidiaries is
bound;

(6) SBS shall have delivered to the Trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;

(7) SBS shall have delivered to the Trustee an Officers' Certificate
stating that the deposit was not made by SBS with the intent of preferring
the holders of Notes over the other creditors of SBS with the intent of
defeating, hindering, delaying or defrauding creditors of SBS or others;
and

(8) SBS shall have delivered to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent
provided for relating to the Legal Defeasance or the Covenant Defeasance
have been complied with.

TRANSFER AND EXCHANGE

A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and SBS may require a
holder to pay any taxes and fees required by law or permitted by the Indenture.
SBS is not required to transfer or exchange any Note selected for redemption.
Also, SBS is not required to transfer or exchange any Note for a period of 15
days before a selection of Notes to be redeemed. The registered holder of a Note
will be treated as the owner of it for all purposes.

AMENDMENT, SUPPLEMENT AND WAIVER

The Indenture, the Notes and the Subsidiary Guarantees may be amended or
supplemented with the consent of the holders of at least a majority in principal
amount of the Notes then outstanding, including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Notes. Any existing default or compliance with any provision of the
Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent
of the holders of a majority in principal amount of the then outstanding Notes,
including consents obtained in connection with a tender offer or exchange offer
for Notes.

However, without the consent of each holder affected, an amendment or
waiver may not, with respect to any Notes held by a non-consenting holder:

(1) reduce the principal amount of Notes whose holders must consent to
an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes, other
than provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders";

(3) reduce the rate of or change the time for payment of interest on
any Note;

(4) waive a Default or Event of Default in the payment of principal of
or premium or interest, if any, on the Notes except a rescission of
acceleration of the Notes by the holders

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of at least a majority in aggregate principal amount of the Notes and a
waiver of the payment default that resulted from such acceleration;

(5) make any Note payable in money other than that stated in the
Notes;

(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Notes to receive
payments of principal of or premium or interest, if any, on the Notes;

(7) waive a redemption payment with respect to any Note, other than a
payment required by one of the covenants described above under the caption
"-- Repurchase at the Option of Holders";

(8) release any Guarantor from its Subsidiary Guarantee; or

(9) make any change in the foregoing amendment and waiver provisions.

In addition, any amendment to the provisions of Article 10 of the Indenture
relating to subordination will require the consent of the holders of at least
75% in aggregate principal amount of the Notes then outstanding if such
amendment would adversely affect the rights of holders of Notes.

Notwithstanding the preceding, without the consent of any holder of Notes,
SBS, a Guarantor, with respect to a Subsidiary Guarantee or the Indenture to
which it is a party, and the Trustee may amend or supplement the Indenture, the
Notes or any Subsidiary Guarantee:

(1) to cure any ambiguity, defect or inconsistency;

(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;

(3) to provide for the assumption of SBS's or any Guarantor's
obligations to holders of Notes in the case of a merger or consolidation or
sale of substantially all of SBS's assets;

(4) to make any change that would provide any additional rights or
benefits to the holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such holder; or

(5) to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture
Act.

CONCERNING THE TRUSTEE

If the Trustee becomes a creditor of SBS, the Indenture limits its right to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The Trustee will
be permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.

The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that if an Event of Default occurs
and continues, the Trustee will be required, in the exercise of its power, to
use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any holder of
Notes, unless such holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.

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BOOK-ENTRY, DELIVERY AND FORM

The Notes are represented by one or more Notes in registered, global form
without interest coupons (collectively, the "Global Notes"). The Global Notes
have been deposited with the Trustee as custodian for the Depository Trust
Company ("DTC"), in New York, New York, and are registered in the name of Cede &
Co. (DTC's partnership nominee), in each case, for credit to an account of a
direct or indirect participant in DTC.

Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below.

Some transfers of beneficial interests in the Global Notes are subject to
the applicable rules and procedures of DTC and its direct or indirect
participants.

Initially, the Trustee will act as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.

DEPOSITORY PROCEDURES

The following description of the operations and procedures of DTC, is
provided solely as a matter of convenience. These operations and procedures are
solely within the control of DTC's settlement systems and are subject to changes
by it.

DTC has advised SBS that it is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the "Direct
Participants") and to facilitate the settlement of transactions in those
securities among Direct Participants through electronic computerized book-entry
changes in accounts of its Direct Participants. The Direct Participants include
securities brokers and dealers, including the Underwriters, banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Direct
Participants may beneficially own securities held by or on behalf of DTC only
through the Direct Participants or the Indirect Participants.

DTC has also advised SBS that, pursuant to procedures established by it:

(1) upon deposit of the Global Notes, DTC has credited the accounts of
Direct Participants designated by the Underwriters with portions of the
principal amount of the Global Notes; and

(2) ownership of such interests in the Global Notes is shown on, and
the transfer of ownership thereof may be effected only through, records
maintained by DTC, with respect to the Direct Participants, or by the
Direct Participants and the Indirect Participants, with respect to other
owners of beneficial interest in the Global Notes.

Investors in the Global Notes may hold their interests therein directly
through DTC, if they are Direct Participants in such system, or indirectly
through organizations, which are Direct Participants in such system. All
interests in a Global Note, may be subject to the procedures and requirements of
DTC.

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Except as described below, owners of interests in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of
Notes in certificated form and will not be considered the registered owners or
"Holders" thereof under the Indenture for any purpose.

To facilitate subsequent transfers, all Notes deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. or such other name as may be requested by an authorized
representative of DTC. The deposit of Notes with DTC and their registration in
the name of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Notes; DTC's records reflect only the identity of the Direct Participants to
whose accounts such Notes are credited, which may or may not be the Beneficial
Owners. Transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in same-day funds. The
Direct and Indirect Participants will remain responsible for keeping account of
their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or
vote with respect to the Notes. Under its usual procedures, DTC mails an Omnibus
Proxy to SBS as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Notes are credited on the record date (identified in a
listing attached to the Omnibus Proxy).

Payments in respect of the principal of, and premium, if any, and interest
on a Global Note registered in the name of DTC or its nominee will be payable to
DTC in its capacity as the registered holder under the Indenture. Under the
terms of the Indenture, SBS and the Trustee will treat the persons in whose
names the Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, neither SBS, the Trustee nor any agent of SBS
or the Trustee has or will have any responsibility or liability for:

(1) any aspect of DTC's records or any Direct Participant's or
Indirect Participant's records relating to or payments made on account of
any beneficial ownership interest in the Global Notes, or for maintaining,
supervising or reviewing any of DTC's records or any Direct Participant's
or Indirect Participant's records relating to the beneficial ownership
interests in the Global Notes; or

(2) any other matter relating to the actions and practices of DTC or
any of its Direct Participants or Indirect Participants.

DTC has advised SBS that its current practice, upon receipt of any payment
in respect of securities such as the Notes, including principal and interest, is
to credit the accounts of the relevant Direct Participants with the payment on
the payment date, in amounts proportionate to their respective holdings in the
principal amount of beneficial interest in the relevant security as shown on the
records of DTC unless DTC has reason to believe it will not receive payment on
such payment date. Payments by the Direct Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practices and will be the responsibility of the
Direct Participants or the Indirect Participants and will not be

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the responsibility of DTC, the Trustee or SBS. Neither SBS nor the Trustee will
be liable for any delay by DTC or any of its Direct Participants in identifying
the beneficial owners of the Notes, and SBS and the Trustee may conclusively
rely on and will be protected in relying on instructions from DTC or its nominee
for all purposes.

Interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will, therefore,
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and it participants.

DTC has advised SBS that it will take any action permitted to be taken by a
holder of Notes only at the direction of one or more Direct Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Direct Participant or Direct Participants has or have given such
direction. However, if there is an Event of Default under the Notes, DTC
reserves the right to exchange the Global Notes for legended Notes in
certificated form, and to distribute such Notes to its Direct Participants.

Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among Participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time by giving reasonable notice to Issuer
or agent. Under such circumstances, in the event that a successor securities
depository is not obtained, certificates representing the Notes are required to
be printed and delivered. Neither SBS nor the Trustee nor any of their
respective agents will have any responsibility for the performance by DTC or its
participants or indirect participants of its obligations under the rules and
procedures governing their operations.

DTC's management is aware that some computer applications, systems and the
like for processing data, referred to as "Systems," that are dependent upon
calendar dates, including dates before, on and after January 1, 2000, may
encounter "Year 2000 problems." DTC has informed its participants and other
members of the financial community, referred to as the "Industry," that it has
developed and is implementing a program so that its Systems, as the same relate
to the timely payment of distributions (including principal and income payments)
to securityholders, book-entry deliveries, and settlement of trades within DTC,
referred to as "DTC Services," continue to function appropriately. This program
includes a technical assessment and a remediation plan, each of which is
complete. Additionally, DTC's plan includes a testing phase, which is expected
to be completed within appropriate time frames.

However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunications and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to: (i)
impress upon them the importance of such services being Year 2000 compliant; and
(ii) determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.

According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.

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SBS may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, certificates
representing the Notes will be printed and delivered.

The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that SBS believes to be reliable, but SBS takes
no responsibility for the accuracy thereof.

CERTIFICATED NOTES

If:

(1) DTC

(a) notifies SBS that it is unwilling or unable to continue as
depositary for the Global Notes and SBS fails to appoint a successor
depositary or

(b) has ceased to be a clearing agency registered under the
Exchange Act;

(2) SBS, at its option, notifies the Trustee in writing that it elects
to cause the issuance of the certificated notes; or

(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the Notes,

a Global Note will be exchangeable for definitive Notes in registered form
("Certificated Notes"). Upon any such issuance, the Trustee is required to
register such Certificated Notes in the name of, and cause the same to be
delivered to, such person or persons, or the nominee of any thereof.

In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon request but only upon prior written notice given to the
Trustee by or on behalf of DTC in accordance with the Indenture. Further,
Certificated Notes may be exchanged for beneficial interests in Global Notes
upon a delivery by the holder of a certificate to the Trustee that the transfer
will comply with the transfer restrictions of the Note.

Neither SBS nor the Trustee will be liable for any delay by the Global Note
holder or the depositary in identifying the beneficial owners of Notes and SBS
and the Trustee may conclusively rely on, and will be protected in relying on,
instructions from the Global Note holder or the depositary for all purposes.

SAME DAY SETTLEMENT AND PAYMENT

The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, and interest) be made by
wire transfer of immediately available funds to the accounts specified by the
Global Note holder. With respect to Certificated Notes, SBS will make all
payments of principal, premium, if any, and interest, if any, by wire transfer
of immediately available funds to the accounts specified by the holder thereof
or, if no such account is specified, by mailing a check to each such holder's
registered address. SBS expects that secondary trading in the Certificated Notes
will also be settled in immediately available funds.

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CERTAIN DEFINITIONS

Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.

"Acquired Debt" means, with respect to any specified Person:

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

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

"Acquisition Indebtedness" means Indebtedness incurred by SBS or by a
Restricted Subsidiary the proceeds of which are used for the acquisition of a
Permitted Business and related facilities and assets or for the construction of
a facility pursuant to a construction permit issued by the FCC.

"Affiliate" of any specified Person means any other Person which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that (a) beneficial ownership of at least 10% of the Voting
Stock of a Person shall be deemed to be control and (b) for purposes of the
"Transactions with Affiliates" covenant, for so long as Raul Alarcon, Sr., Raul
Alarcon Jr. or Jose Grimalt are directors, officers or shareholders of SBS,
they, their respective spouses, lineal descendants and any Person controlled by
any of them shall be Affiliates of SBS and its Subsidiaries.

"Asset Sale" means:

(1) the sale, lease, conveyance or other disposition of any assets or
rights -- including, without limitation, by way of a sale and
leaseback -- excluding sales of services and goods in the ordinary course
of business consistent with past practices; provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets
of SBS and its Restricted Subsidiaries taken as a whole will be governed by
the provisions of the Indenture described above under the caption
"-- Repurchase at the Option of Holders -- Change of Control" and/or the
provisions described above under the caption "-- Certain Covenants --
Merger, Consolidation or Sale of Assets" and not by the provisions of the
Asset Sale covenant; and

(2) the issue or sale by SBS or any of its Subsidiaries of Equity
Interests of any of SBS's Subsidiaries,

in the case of either clause (1) or (2), whether in a single transaction or
a series of related transactions that have a fair market value in excess of
$5 million, or for net proceeds in excess of $5 million.

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Notwithstanding the preceding, the following items will not be deemed to be
an Asset Sale:

(1) a transfer of assets by SBS to a Guarantor or by a Guarantor to
SBS or to another Guarantor;

(2) an issuance of Equity Interests by a Guarantor to SBS or to
another Guarantor;

(3) the sale, lease or other disposition of equipment or other assets
in the ordinary course of business;

(4) the sale and leaseback of any assets within 90 days of the
acquisition of such assets;

(5) a Restricted Payment that is permitted by the covenant described
above under the caption "-- Certain Covenants -- Restricted Payments";

(6) a transfer of any FCC license to a Non-Guarantor Subsidiary
described in clause (i) of the definition thereof; and

(7) an Asset Swap.

"Asset Swap" means the execution of a definitive agreement, subject only to
regulatory approval and other customary closing conditions, that SBS in good
faith believes will be satisfied, for a substantially concurrent purchase and
sale, or exchange, of assets used or useful in a Permitted Business between SBS
or any of its Restricted Subsidiaries and another person or group of affiliated
persons; provided that any amendment to or waiver of any closing conditions
which individually or in the aggregate is material to the Asset Swap shall be
deemed to be a new Asset Swap.

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

"Bank Indebtedness" means (i) Indebtedness of SBS incurred in accordance
with the Indenture owing to one or more commercial banking institutions that are
members of the Federal Reserve System and (ii) any guarantee by a Guarantor of
any Indebtedness of SBS of the type set forth in clause (i) of this definition.

"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person," as such term is used in Section 13(d)(3)
of the Exchange Act, such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.

"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board of Directors.

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

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"Capital Stock" means:

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

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

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

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

"Cash Equivalents" means:

(1) United States dollars;

(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
having maturities of not more than one year from the date of acquisition;

(3) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500.0 million and a Thompson Bank Watch Rating of "B"
or better;

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

(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poors' Corporation and in each case
maturing within 270 days after the date of acquisition; and

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

"Change of Control" means the occurrence of any of the following:

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

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

(3) the consummation of any transaction, including, without
limitation, any merger or consolidation, the result of which is that any
"person," as defined above, other than the Principal and his Related
Parties, becomes the Beneficial Owner, directly or indirectly, of more than
35% of the Voting Stock of SBS; or

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

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"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, without
duplication:

(1) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale, to the extent such losses were
deducted in computing such Consolidated Net Income; plus

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

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

(4) depreciation expense for such period, to the extent the same was
deducted in computing such Consolidated Net Income; plus

(5) all amortization expense and other non-cash expenses -- excluding
any such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period -- for such period, to the
extent the same was deducted in computing such Consolidated Net Income;
minus

(6) non-cash items increasing such Consolidated Net Income for such
period.

Consolidated Cash Flow shall be calculated on a pro forma basis after giving
effect to any acquisition as if such acquisition (including any Consolidated
Cash Flow associated with such acquisition) occurred on the first day of the
most recently ended four quarter period, giving pro forma effect to any
non-recurring expenses, non-recurring costs and cost reductions within the first
year after such acquisition which SBS anticipates if SBS delivers to the Trustee
an officer's certificate executed by its chief financial or accounting officer
certifying to and describing and quantifying with reasonable specificity such
non-recurring expenses, non-recurring costs and cost reductions.

"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum, without duplication, of:

(1) the total amount of Indebtedness and Attributable Debt of such
Person and its Restricted Subsidiaries; plus

(2) the total amount of Indebtedness and Attributable Debt of any
other Person, to the extent that such Indebtedness or Attributable Debt has
been guaranteed by the referent Person or by one or more of its Restricted
Subsidiaries or is secured by a Lien on assets of the referent Person or
any of its Restricted Subsidiaries; plus

(3) the aggregate liquidation value of all Disqualified Stock of such
Person and all preferred stock of Restricted Subsidiaries of such Person,
in each case, determined on a consolidated basis in accordance with GAAP.

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"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of:

(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letters of credit or bankers' acceptance financing, and net payments (if
any) pursuant to Hedging Obligations); and

(2) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period; and

(3) any interest expense on Indebtedness or Attributable Debt of
another Person that is guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such guarantee or Lien is called
upon).

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

(1) Except as provided in (5) below, the positive Net Income of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent Person or
a Restricted Subsidiary thereof;

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

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

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

(5) the Net Income of any Unrestricted Subsidiary shall be excluded,
whether or not distributed to SBS or one of its Restricted Subsidiaries.

"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of SBS who:

(1) was a member of such Board of Directors on the date of the
Indenture; or

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

"Credit Facility" or "Credit Facilities" means one or more debt facilities,
including, without limitation, the Senior Credit Facilities, or commercial paper
facilities with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing,

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including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables, or letters
of credit, in each case, as now in effect or at any time hereafter entered into
and as amended, restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which Notes are first issued and authenticated under
the Indenture shall be deemed to have been incurred on such date in reliance on
the exception provided by clause (1) of the definition of Permitted Debt.

"Debt to Cash Flow Ratio" means, with respect to any Person as of any date
of determination (the "Calculation Date"), the ratio of the Consolidated
Indebtedness of such Person as of such date, to the Consolidated Cash Flow of
such Person for the four most recent full fiscal quarters ending immediately
prior to such date for which internal financial statements are available. Such
determination is made on a pro forma basis after giving effect to all
acquisitions and dispositions of assets made by such Person and its Restricted
Subsidiaries from the beginning of such four-quarter period through and
including such date of determination, including any related financing
transactions, as if such acquisitions and dispositions had occurred at the
beginning of such four-quarter period.

For purposes of making the computation referred to above:

(1) acquisitions that have been made by such Person or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be deemed to have occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (3) of
the proviso set forth in the definition of Consolidated Net Income; and

(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of by SBS or any of its Restricted Subsidiaries prior
to the Calculation Date, will be excluded.

"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.

"Designated Senior Debt" means any Indebtedness outstanding under the
Senior Credit Facilities until the Senior Credit Facilities have been paid in
full and discharged and thereafter means any Credit Facility designated as such
by SBS.

"Disqualified Stock" means any Capital Stock that, by its terms, or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof, or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature. Notwithstanding the preceding sentence, any Capital
Stock that would constitute Disqualified Stock solely because the holders
thereof have the right to require SBS to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale will not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Issuer
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with the covenant described above
under the caption "-- Certain Covenants -- Restricted Payments."

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"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.

"Existing Indebtedness" means Indebtedness in existence on the date of the
Indenture, other than Indebtedness under Credit Facilities, until such
Indebtedness is repaid.

"FCC License" means licenses, permits and authorizations issued by the FCC
for the operation of stations.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.

"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets (other than pledges of Equity Interests in Unrestricted Subsidiaries to
secure Non-Recourse Debt) or through letters of credit and reimbursement
agreements in respect thereof, of all or any part of any Indebtedness.

"Guarantor" means any Subsidiary that executes a Subsidiary Guarantee.

"Hedging Obligations" means the obligations of any Person under:

(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and

(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.

"Indebtedness" means, with respect to any Person without duplication, any
indebtedness of such Person, whether or not contingent, in respect of

(1) borrowed money;

(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit, or reimbursement agreements in respect thereof;

(3) banker's acceptances;

(4) representing Capital Lease Obligations; or

(5) the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable,

if and to the extent any of the foregoing indebtedness, other than letters of
credit and Hedging Obligations, would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP. In addition, "Indebtedness"
includes (i) all indebtedness of others secured by a Lien on any asset of such
Person, whether or not such indebtedness is assumed by such Person, and (ii) to
the extent not otherwise included, the guarantee by such Person of any
indebtedness of the sort described in clauses (1) through (5) above of any other
Person. Notwithstanding the foregoing, the term "Indebtedness" shall not include
Non-Recourse Debt or

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indebtedness that constitutes "Indebtedness" merely by virtue of a pledge of
Equity Interests of an Unrestricted Subsidiary.

The amount of any Indebtedness outstanding as of any date will be:

(A) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount,

(B) the principal amount of the Indebtedness secured, together with
any interest thereon that is more than 30 days past due, in the case of any
Indebtedness of the type described in clause (i) above,

(C) the principal amount of the Indebtedness guaranteed, together with
any interest thereon that is more than 30 days past due, in the case of any
Indebtedness of the type described in clause (ii) above,

(D) the amount of the net settlement payment payable on termination,
in the case of any Indebtedness constituting a Hedging Obligation (assuming
for this purpose that the Hedging Obligation was terminated on the date as
of which the calculation of the amount of Indebtedness is being made), and

(E) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.

"Investments" means, with respect to any Person, all investments by such
Person in other Persons, including Affiliates, in the forms of direct or
indirect loans, including guarantees of Indebtedness or other obligations,
advances or capital contributions, excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business,
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If SBS or any Subsidiary of SBS sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of SBS such that, after giving
effect to any such sale or disposition, such Person is no longer a Subsidiary of
SBS, SBS shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
third paragraph of the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments."

"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code, or equivalent statutes of any jurisdiction.

"Make-Whole Premium" means, with respect to any Note, an amount equal to
the excess, if any, of the Discounted Value of the Remaining Scheduled Payments
with respect to the Called Principal of such Note over the amount of such Called
Principal, provided that the Make-Whole Premium may in no event be less than
zero. For the purposes of determining the Make-Whole Premium, the following
terms have the following meanings:

"Called Principal" means, with respect to any Note, the principal of
such Note that is declared to be immediately due and payable.

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"Discounted Value" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.

"Reinvestment Yield" means, with respect to the Called Principal of
any Note, 0.5% over the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (Eastern Standard time) on the second Business
Day preceding the Settlement Date with respect to such Called Principal, on
the display designated as "Page 678" on the Telerate Access Service (or
such other display as may replace Page 678 on the Telerate Access Service)
for actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date,
or (ii) if such yields are not reported as of such time or the yields
reported as of such time are not ascertainable, the Treasury Constant
Maturity Series Yields reported, for the latest day for which such yields
have been so reported as of the second Business Day preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication)
for actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield will be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b) interpolating linearly
between (1) the actively traded U.S. Treasury security with the duration
closest to and greater than the Remaining Average Life and (2) the actively
traded U.S. Treasury security with the duration closest to and less than
the Remaining Average Life.

"Remaining Average Life" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.

"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date.

"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is declared to be immediately
due and payable.

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"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:

(1) any gain, but not loss, together with any related provision for
taxes on such gain, but not loss, realized in connection with:

(a) any Asset Sale, including, without limitation, dispositions
pursuant to sale and leaseback transactions; or

(b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and

(2) any extraordinary gain, but not loss, together with any related
provision for taxes on such extraordinary gain, but not loss.

"Net Proceeds" means the aggregate cash proceeds received by SBS or any of
its Restricted Subsidiaries in respect of any Asset Sale, including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale, net of the direct costs relating to
such Asset Sale or disposition, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, after
taking into account any available tax credits or deductions and any tax sharing
arrangements, amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for indemnities, reimbursements or adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.

"Non-Guarantor Subsidiaries" means (i) those single-purpose SBS Restricted
Subsidiaries created or acquired after the date of the Indenture which own one
or more FCC Licenses and related rights and no other material assets, (ii) SBS
Subsidiaries created or acquired after the date of the Indenture that are not
incorporated under the laws of the United States of America or a state of the
United States of America, and (iii) JuJu Media, Inc., a New York corporation.

"Non-Recourse Debt" means Indebtedness:

(1) as to which neither SBS nor any of its Restricted Subsidiaries

(a) provides credit support of any kind, including any undertaking,
agreement or instrument that would constitute Indebtedness,

(b) is directly or indirectly liable, as a guarantor or otherwise,
or

(2) no default with respect to which, including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary, would permit, upon notice, lapse of time or both, any holder of
any other Indebtedness, other than the Notes being offered hereby, of SBS
or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and

(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of SBS or any of its
Restricted Subsidiaries.

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"Obligations" means any principal, interest, prepayment or make-whole
premium, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness or any
guarantee thereof.

"Permitted Business" means the media business and any business reasonably
similar, complementary, ancillary or related thereto, including, the operation
of latin music Web sites and internet portals.

"Permitted Investments" means:

(1) any Investment in SBS or in a Restricted Subsidiary;

(2) any Investment in Cash Equivalents;

(3) any Investment by SBS or any Restricted Subsidiary of SBS in a
Person engaged in a Permitted Business, if:

(a) as a result of, or concurrently with, such Investment such
Person becomes a Restricted Subsidiary; or

(b) as a result of, or concurrently with, such Investment such
Person is merged, consolidated or amalgamated with or into, or transfers
or conveys substantially all of its assets to, or is liquidated into,
SBS or a Restricted Subsidiary; or

(c) SBS or a Restricted Subsidiary has entered into a binding
agreement to acquire such Person or all or substantially all of the
assets of such Person, which agreement is in effect on the date of such
Investment, and such Person becomes a Restricted Subsidiary or such
transaction is consummated, in each case within 180 days of the date of
such Investment;

(4) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales";

(5) any obligations or shares of Capital Stock received in connection
with or as a result of a bankruptcy, workout or reorganization of the
issuer of such obligations or shares of Capital Stock;

(6) any Investment received involuntarily;

(7) any acquisition of assets solely in exchange for the issuance of
Equity Interests, other than Disqualified Stock, of SBS;

(8) other Investments in Persons engaged in Permitted Businesses,
measured on the date each such Investment was made and without giving
effect to subsequent changes in value, when taken together with all other
Investments made pursuant to this clause (8) that are at the time
outstanding, not to exceed $7.5 million;

(9) Investments by SBS or any of its Restricted Subsidiaries in any
other person pursuant to the terms of a "local marketing agreement" or
similar arrangement relating to a radio station owned or licensed by such
Person;

(10) Hedging Obligations;

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(11) the incurrence by SBS or any of its Restricted Subsidiaries of
performance, bid or advance payment bonds, surety bonds, custom bonds,
utility bonds and similar obligations arising in the ordinary course of
business;

(12) endorsements of instruments for collection or deposit in the
ordinary course of business;

(13) loans and advances to employees and officers not to exceed $2.5
million outstanding in the aggregate at any time;

(14) loans to employees, directors and officers in connection with the
purchase by such Persons of Equity Interests of SBS;

(15) investments in account debtors received in connection with the
bankruptcy or reorganization, or in settlement of delinquent obligations,
of customers; and

(16) investments in existence on the date of the Indenture.

"Permitted Junior Securities" means Equity Interests in SBS or debt
securities of SBS or the relevant Guarantor that are subordinated to all Senior
Debt, and any debt securities issued in exchange for Senior Debt, or Guarantor
Senior Debt, and any debt securities issued in exchange for Guarantor Senior
Debt, as applicable, to substantially the same extent as, or to a greater extent
than, the Notes are subordinated to Senior Debt or the Subsidiary Guarantees are
subordinated to Guarantor Senior Debt, as applicable, pursuant to the Indenture.

"Permitted Liens" means:

(1) Liens securing Senior Debt that was permitted by the terms of the
Indenture to be incurred;

(2) Liens in favor of SBS or any of its Restricted Subsidiaries;

(3) Liens on property of a Person existing at the time such Person is
merged into or consolidated with SBS or any Restricted Subsidiary of SBS,
provided that such Liens were not incurred in contemplation of such merger
or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with SBS;

(4) Liens on property existing at the time of acquisition thereof by
SBS or any Restricted Subsidiary of SBS, provided that such Liens were in
existence prior to the contemplation of such acquisition;

(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;

(6) Liens existing on the date of the Indenture;

(7) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;

(8) Liens incurred in the ordinary course of business of SBS or any
Restricted Subsidiary of SBS with respect to obligations that do not exceed
$2.5 million at any one time outstanding;

(9) Liens securing industrial revenue bonds;

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(10) Liens to secure Purchase Money Indebtedness that is otherwise
permitted under the Indenture, provided that (a) any such Lien is created
solely for the purpose of securing Indebtedness representing, or incurred
to finance, refinance or refund, the cost (including sales and excise
taxes, installation and delivery charges and other direct costs of, and
other direct expenses paid or charged in connection with, such purchase or
construction) of such Property, (b) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such costs, and
(c) such Lien does not extend to or cover any Property other than such item
of Property and any improvements on such item or proceeds thereon;

(11) Liens securing Obligations in respect of the Senior Credit
Facilities;

(12) Liens securing Bank Indebtedness;

(13) Liens securing Acquisition Indebtedness, provided that such Liens
do not extend to or cover any Property other than the Property acquired
with the proceeds of such Acquisition Indebtedness and any improvements
thereto;

(14) Liens securing Permitted Refinancing Indebtedness; and

(15) Liens securing Ratio Indebtedness.

(16) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted to be incurred by the section entitled "Incurrence
of Indebtedness and Issuance of Preferred Stock," covering only the assets
acquired with such Indebtedness;

(17) zoning restrictions, easements, licenses, covenants and other
similar restrictions and encumbrances affecting the use of real property
not interfering in any material respect with the ordinary conduct of
business of SBS and its Restricted Subsidiaries;

(18) judgment liens not giving rise to an Event of Default;

(19) Liens, rights to setoff and credit balances with respect to
deposit accounts and other Cash Equivalents;

(20) deposits with the owner or lessor of premises leased and operated
in the ordinary course of business;

(21) nonconsensual liens that do not individually or in the aggregate
detract materially from the value of transferability of the assets of SBS
or any of its Restricted Subsidiaries, or impair materially the use of any
such assets in the operation of the respective businesses of SBS and its
Restricted Subsidiaries; and

(22) Liens securing Hedging Obligations.

"Permitted Refinancing Indebtedness" means any Indebtedness of SBS or any
of its Restricted Subsidiaries or any Disqualified Stock of SBS issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund other Indebtedness of SBS or any of its Restricted
Subsidiaries; provided that:

(1) the principal amount, or accreted value or liquidation preference,
if applicable, of such Permitted Refinancing Indebtedness does not exceed
the principal amount of, or accreted value, if applicable, plus accrued
interest on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded, plus the amount of reasonable expenses and premiums
incurred in connection therewith;

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(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;

(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is pari passu with the Notes, such Permitted
Refinancing Indebtedness is pari passu with or subordinated in right of
payment to the Notes or is Disqualified Stock;

(4) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness is subordinated in right of payment to
the Notes on terms at least as favorable to the holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded or is Disqualified
Stock; and

(5) such Indebtedness is incurred either by SBS or by the Restricted
Subsidiary that is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded, or such Disqualified
Stock is issued by SBS, as applicable.

"Principal" means Raul Alarcon, Jr.

"Property" of any Person means all types of real, Personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.

"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.

"Ratio Indebtedness" means (i) Indebtedness of SBS incurred in compliance
with the first paragraph of the section entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock" which is not Permitted Refinancing Indebtedness and
(ii) any guarantee by a Restricted Subsidiary of SBS of any Indebtedness of SBS
of the type set forth in clause (i) of this definition,

"Related Party" with respect to the Principal means:

(1) any spouse or immediate family member of the Principal; or

(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding a 50% or more controlling interest of which consist of the
Principal and/or such other Persons referred to in the immediately
preceding clause (1).

"Restricted Investment" means an Investment other than a Permitted
Investment.

"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.

"Senior Credit Facilities" means the senior credit facilities contemplated
to be entered into by the Company, Lehman Brothers Inc. and Lehman Commercial
Paper Inc. as amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time.

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"Senior Debt" means:

(1) all Indebtedness outstanding under Credit Facilities and all
Hedging Obligations with respect thereto;

(2) any other Indebtedness of SBS or any Guarantor permitted to be
incurred under the terms of the Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes or the
Subsidiary Guarantees; and

(3) all Obligations of SBS or any Guarantor with respect to the
foregoing.

Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include:

(1) any liability for federal, state, local or other taxes owed or
owing by SBS;

(2) any Indebtedness of SBS or any Guarantor to any of its
Subsidiaries or other Affiliates;

(3) any trade payables; or

(4) any Indebtedness that is incurred in violation of the Indenture;
provided that Indebtedness under Credit Facilities will not cease to be
Senior Debt if incurred based upon a written certificate from a purported
officer of SBS to the effect that such Indebtedness was permitted by the
Indenture to be incurred.

"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.

"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.

"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled, without regard to the occurrence of
any contingency, to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person, or a combination
thereof.

"Unrestricted Subsidiary" means any Subsidiary that is designated by the
board of directors as an Unrestricted Subsidiary pursuant to a Board Resolution,
but only to the extent that such Subsidiary:

(1) has no Indebtedness other than Non-Recourse Debt;

(2) is not party to any agreement, contract, arrangement or
understanding with SBS or any Restricted Subsidiary unless the terms of any
such agreement, contract, arrangement or understanding are no less
favorable to SBS or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of SBS;

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(3) is a Person with respect to which neither SBS nor any of its
Restricted Subsidiaries has any direct or indirect obligation

(a) to subscribe for additional Equity Interests or

(b) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results;

(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of SBS or any of its Restricted
Subsidiaries; and

(5) has at least one director on its board of directors that is not a
director or executive officer of SBS or any of its Restricted Subsidiaries
and has at least one executive officer that is not a director or executive
officer of SBS or any of its Restricted Subsidiaries.

"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying

(a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by

(b) the number of years, calculated to the nearest one-twelfth,
that will elapse between such date and the making of such payment; by

(2) the then outstanding principal amount of such Indebtedness.

"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which, other than directors' qualifying shares, will at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.

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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

GENERAL

The following discussion summarizes the material U.S. federal income tax
considerations generally applicable to purchasers of the notes. The U.S. federal
income tax considerations described below are based upon (1) currently existing
provisions of the Internal Revenue Code of 1986 (the "Code"), (2) applicable
permanent, temporary and proposed Treasury regulations, (3) judicial authority,
and (4) current administrative rulings and pronouncements of the IRS. There can
be no assurance that the IRS will not take a contrary view to, and no ruling
from the IRS has been, or will be, sought on the issues discussed in this
summary. Legislative, judicial, or administrative changes or interpretations may
be adopted that could alter or modify the statements and conclusions described
in this section of the prospectus. Any of those changes or interpretations may
or may not be retroactive and could affect the tax consequences discussed below.

The summary is not a complete analysis or description of all potential U.S.
federal income tax considerations that may be relevant to, or of the actual tax
effect that any of the matters described herein will have on, particular
purchasers. This summary does not address foreign, state, local or other tax
consequences and it does not purport to address special classes of taxpayers
(such as S corporations, mutual funds, insurance companies, financial
institutions, small business investment companies, regulated investment
companies, broker-dealers and tax-exempt organizations) who are subject to
special treatment under the U.S. federal income tax laws, or persons that hold
notes that are a hedge against, or that are hedged against, currency risk or
that are part of a straddle or conversion transaction, or persons whose
functional currency within the meaning of section 985 of the Code is not the
U.S. dollar. Furthermore, estate and gift tax consequences are not discussed
herein. No opinion of counsel will be requested with respect to any of the
matters discussed herein. Our discussion assumes that the notes will be held as
capital assets within the meaning of section 1221 of the Code.

As used in this summary, the term "U.S. Holder" means (1) a citizen or
resident of the United States for U.S. federal income tax purposes, (2) a
corporation or a partnership (or entity treated as a corporation or partnership
for U.S. tax purposes) created or organized in or under the laws of the United
States or any political subdivision thereof (including the District of
Columbia), (3) an estate, the income of which is includible in gross income for
U.S. federal income tax purposes regardless of its source, or (4) a trust if (a)
a U.S. court can exercise primary supervision over the administration of such
trust and (b) one or more U.S. fiduciaries has the authority to control all of
the substantial decisions of such trust (a "U.S. Holder"). As used in this
summary, the term "Non-U.S. Holder" means a beneficial holder of notes that is
not a U.S. Holder.

Because individual circumstances may differ, each prospective purchaser of
the notes is strongly urged to consult his or her own tax advisor with respect
to his or her particular tax situation and as to any U.S. federal, foreign,
state, local or other tax considerations (including any possible changes in tax
law) affecting the purchase, holding and disposition of the notes.

FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS

This section describes certain U.S. federal income tax considerations
applicable to U.S. Holders. Non-U.S. Holders should see the discussion below
under the heading "Federal Income Tax Consequences to Non-U.S. Holders" for a
discussion of certain tax considerations applicable to them.

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Interest and Additional Amounts. Interest on the notes generally will be
taxable to a U.S. Holder as ordinary interest income at the time such amounts
are accrued or received, in accordance with the U.S. Holder's method of
accounting for U.S. federal income tax purposes.

In the event that the notes are treated as having original issue discount
("OID"), a U.S. Holder (including a cash basis holder) generally would be
required to include the OID on the notes in income for U.S. federal income tax
purposes under the accrual method on a constant yield basis resulting in the
inclusion of interest in income in advance of the receipt of cash attributable
to that income. We do not believe that the notes will be treated as having OID.

Acquisition Premium. If a U.S. Holder acquires a note (generally other
than in an original issue) for an amount in excess of its "adjusted issue price"
but less than or equal to the sum of all amounts payable on the note after the
date of such purchase other than "qualified stated interest," such note will
have an acquisition premium to the extent of such excess. A qualified stated
interest payment is generally any one of a series of stated interest payments on
a note that are unconditionally payable at least annually at a single fixed rate
(with certain exceptions for lower rates paid during some periods) applied to
the outstanding principal amount of the note. The U.S. Holder of a note with an
acquisition premium would be entitled to reduce the daily portion of OID, if
any, includible in income by a fraction, the numerator of which is the excess of
the adjusted tax basis of the note immediately after its acquisition over the
adjusted issue price of the note and the denominator of which is the excess of
the sum of all payments (other than payments of qualified stated interest) after
the purchase date over such note's adjusted issue price.

Market Discount on Resale of the Notes. The market discount provisions of
sections 1276-1278 of the Code may affect the resale of the notes. If a U.S.
Holder acquires a note (generally other than in an original issue) at a market
discount that exceeds a statutorily defined de minimis amount and thereafter
recognizes gain upon a disposition (or makes a gift) of the note, the lesser of
(1) such gain (or appreciation, in the case of a gift) or (2) the portion of the
market discount that accrued while the note was held by such U.S. Holder, will
be treated as ordinary income at the time of the disposition. For these
purposes, market discount equals the excess of the "stated redemption price at
maturity" (or, if the note is issued with OID, its "revised issued price" as
defined in the Code) over the basis of the note in the hands of such U.S. Holder
immediately after its acquisition. The stated redemption price at maturity of a
note is the total of all payments provided by the note that are not qualified
stated interest. A U.S. Holder of a note may elect to include any market
discount in income currently as it accrues rather than upon disposition of the
note. This election is revocable only with the consent of the IRS and applies to
all market discount bonds acquired by the U.S. Holder on or after the first day
of the taxable year in which the holder makes the election. In addition,
although market discount generally accrues on a straight line basis over the
term of the note, at the election of the U.S. Holder, it may accrue on a
constant yield basis. If this election is made, the holder is deemed to make the
election to take market discount into income as it accrues.

A U.S. Holder of any note who acquired it at a market discount may be
required to defer the deduction of all or a portion of any interest paid or
accrued on any indebtedness incurred or continued to purchase or carry the note
until the market discount is recognizable upon a subsequent disposition of the
note. Such a deferral is not required, however, if the U.S. Holder elects to
include accrued market discount in income currently.

Amortizable Bond Premium. Generally, a U.S. Holder who purchases a note
upon its original issuance for more than its principal amount (or, if the note
is issued with OID, its stated redemption price at maturity) will be subject to
the premium amortization rules of the Code.

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We do not believe that the notes will be treated as subject to the premium
amortization rules of the Code.

Disposition of the Notes. Unless a nonrecognition provision applies, the
sale, exchange, redemption (including pursuant to an offer by the Company) or
other disposition of a note, will be a taxable event for U.S. federal income tax
purposes. In such event, in general, a U.S. Holder of notes will recognize gain
or loss equal to the difference between (1) the amount of cash plus the fair
market value of property received (except to the extent attributable to any
accrued interest on the notes) and (2) the U.S. Holder's tax basis in the notes
(as increased by any OID and market discount previously included in income by
the U.S. Holder and decreased by any amortizable bond premium deducted over the
term of the notes). Subject to the market discount rules discussed above, any
such gain or loss generally will be long-term capital gain or loss, provided the
notes have been held for more than one year. The deductibility of capital losses
is subject to limitations.

Backup Withholding. Under section 3406 of the Code and applicable Treasury
regulations, a noncorporate holder of the notes may be subject to backup
withholding at the rate of 31 percent with respect to "reportable payments,"
which include interest paid on, or, in certain cases, the proceeds of a sale,
exchange or redemption of, the notes. The payor will be required to deduct and
withhold the prescribed amounts if (1) the payee fails to furnish a taxpayer
identification number ("TIN") to the payor in the manner required, (2) the IRS
notifies the payor that the TIN furnished by the payee is incorrect, (3) there
has been a "notified payee underreporting" described in section 3406(c) of the
Code or (4) there has been a failure of the payee to certify under penalty of
perjury that the payee is not subject to withholding under section 3406(a)(1)(C)
of the Code. Amounts paid as backup withholding do not constitute an additional
tax and will be refunded (or credited against the holder's U.S. federal income
tax liability, if any) so long as the required information is provided to the
IRS. The Company will report to the holders of the notes and to the IRS the
amount of any "reportable payments" for each calendar year and the amount of tax
withheld, if any, with respect to payment on those securities.

FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following information describes the U.S. federal income tax treatment
of "Non-U.S. Holders." This section does not cover the U.S. federal tax rules
that apply to Non-U.S. Holders whose income or gain from the notes is
effectively connected with the conduct of a U.S. trade or business, as defined
by applicable U.S. federal income tax rules.

Interest on the Notes. Interest on the notes held by Non-U.S. Holders may
be subject to withholding of up to 30% of each payment made to the holders or
other payee unless the "portfolio interest exemption" applies. The interest paid
on the notes generally should qualify for the portfolio interest exemption.
Accordingly, interest paid on the notes to a Non-U.S. Holder should not be
subject to withholding if (1) the U.S. person who would otherwise be required to
deduct and withhold the tax receives from the Non-U.S. Holder who is the
beneficial owner of the obligation a statement signed by such person under
penalties of perjury, certifying that such owner is not a U.S. person on IRS
Form W-8 (or successor form); (2) such Non-U.S. Holder does not actually or
constructively own 10 percent or more of the capital or profits interests in the
Company; (3) such Non-U.S. Holder is not a "controlled foreign corporation"
(within the meaning of section 957 of the Code) related to the Company; and (4)
the Non-U.S. Holder is not a foreign "bank" receiving the interest on an
extension of credit pursuant to a loan agreement entered into in the ordinary
course of their trade or business.

116
<PAGE> 123

If you do not claim, or do not qualify for, the benefit of the portfolio
interest exception, you may be subject to a 30% withholding tax on interest
payments on the notes. However, you may be able to claim the benefit of a
reduced withholding tax rate under an applicable income tax treaty. The required
information for claiming treaty benefits is generally submitted, under current
regulations, on Form 1001. Successor forms required under new Treasury
regulations, discussed below, will require additional information.

We may report annually to the IRS and to you the amount of interest paid,
and the tax withheld, if any, on the notes with respect to you.

Sale or other Disposition of the Notes. You will generally not be subject
to U.S. federal income tax or withholding tax on gain recognized on a sale,
exchange, redemption, retirement, or other disposition of the notes. You may,
however, be subject to tax on such gain if: (1) you are a nonresident alien
individual who was present in the United States for 183 days or more in the
taxable year of the disposition; (2) you are an individual who is a former
citizen or long-term resident of the United States subject to certain U.S. tax
rules relevant to such status; or (3) the gain is effectively connected with the
conduct of a U.S. trade or business, as provided in applicable U.S. tax rules.

Backup Withholding and Information Reporting. If you receive payments of
interest or principal directly from us or through the U.S. office of a
custodian, nominee, agent or broker, there is a possibility that you will be
subject to both backup withholding at a rate of 31 percent and information
reporting. Backup withholding and information reporting generally will not apply
to payments on the notes if you certify, on a Form W-8, or successor form, that
you are not a U.S. person, provided that the payor does not have actual
knowledge that the you are, in fact, a U.S. person. Any amounts withheld under
the backup withholding rules my be refunded or credited against the Non-U.S.
Holder's U.S. federal income tax liability, if any, provided that the required
information is furnished to the IRS.

New Treasury Regulations. New Treasury regulations relating to withholding
tax or income paid to non-U.S. persons will generally be effective for payments
made after December 31, 2000. The new Treasury regulations modify the way in
which you establish your status as a non-U.S. "beneficial owner" eligible for
withholding exemptions including the portfolio interest exemption, a reduced
treaty rate or an exemption from backup withholding. You may be required to
provide certifications that comply with the provisions of the new Treasury
regulations, where required, not later than December 31, 2000, if you remain as
a holder of the notes on such date. If you are a Non-U.S. Holder claiming
benefits under an income tax treaty you should be aware that you may be required
to obtain a taxpayer identification number and to certify your eligibility under
the applicable treaty's limitations on benefits article in order to comply with
the new Treasury regulations' certification requirements. The new Treasury
regulations are complex and this summary does not completely describe them.
Please consult your tax advisor to determine how the new Treasury regulations
will affect your particular circumstances.

The foregoing summary is included herein for general information only and
does not discuss all aspects of U.S. federal income taxation that may be
relevant to a particular holder of notes in light of his or her particular
circumstances and income tax situation. Prospective investors are urged to
consult their own tax advisors as to any tax consequences to them from the
purchase, ownership, and disposition of notes, including the application and
effect of state, local, foreign, and other tax laws.

117
<PAGE> 124

UNDERWRITING

Pursuant to an Underwriting Agreement (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters") have agreed, severally and not
jointly, with us, subject to the satisfaction of certain conditions, to purchase
from us the aggregate principal amount of notes set forth opposite their names
below:

<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
- ------------ -------------------
<S> <C>
Lehman Brothers Inc. ....................................... $141,000,000
CIBC World Markets Corp. ................................... 94,000,000
------------
Total....................................................... $235,000,000
============
</TABLE>

The Underwriting Agreement provides that the obligation of each Underwriter
to pay for and accept delivery of the notes is subject to certain conditions,
including delivery of certain legal opinions by our and their counsel. Subject
to the terms and conditions of the Underwriting Agreement, the Underwriters are
committed to take and pay for all of the notes if any are taken.

The Underwriters for the notes propose to offer the notes inside the United
States directly and outside the United States through their selling agents.

We have been advised by the Underwriters that they propose to offer the
notes offered hereby initially at the public offering price set forth on the
cover page of this prospectus and to certain selected dealers (who may include
the Underwriters) at such public offering price less a concession not to exceed
0.25% of the aggregate principal amount of the notes. The Underwriters or such
selected dealers may reallow a commission to certain other dealers not to exceed
0.12% of the aggregate principal amount of the notes. After the initial public
offering of the notes, the public offering price, the concession to selected
dealers and the reallowance to the dealers may be changed by the Underwriters.

The following table shows the underwriting discount and commission to be
paid to the Underwriters by us in connection with the offering:

<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- ----------
<S> <C> <C>
Underwriting Discount........................... 3.00% $7,050,000
</TABLE>

We estimate that the total expenses of the offering, excluding underwriting
discounts and commissions, will be approximately $1,000,000.

The Underwriting Agreement provides that we will indemnify the Underwriters
against certain liabilities, including liabilities under the federal securities
acts, and will contribute to payments the Underwriters may be required to make
in respect hereof.

We do not intend to list the notes on any national securities exchange or
to seek the admission thereof to trading on the Nasdaq National Market System.
We have been advised by the Underwriters that following the completion of this
offering, the Underwriters currently intend to make a market in the notes.
However, the Underwriters are not obligated to do so. Any market making
activities with respect to the notes may be discontinued at any time without
notice. In addition, such market-making activity will be subject to the limits
imposed by the Securities Act of 1933, as amended, and the Securities Exchange
Act of 1934, as amended.

In connection with this offering, the Underwriters may engage in certain
transactions that stabilize the price of the notes. Such transactions may
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the notes. If the Underwriters create a short position in the notes
in connection with this offering (i.e., if they sell more notes than are set
forth on the cover page of this prospectus) the Underwriters may reduce that
short position by purchasing notes in open market.

118
<PAGE> 125

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might otherwise be in the absence of such purchases.

Neither we nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither we nor
any of the Underwriters makes any representation that anyone will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.

It is expected that delivery of the Notes will be made against payment
therefor on or about the date specified in the last paragraph of the cover page
of this prospectus supplement.

Upon completion of the Class A Common Stock offering, we intend to appoint
Mr. Roman Martinez IV, a managing director of Lehman Brothers Inc., to our board
of directors. As compensation for his services, Mr. Martinez will receive
options to purchase shares of Class A Common Stock pursuant to our Non-Employee
Director Stock Option Plan. See "Executive Compensation -- Stock
Plans -- Non-Employee Director Stock Option Plan." Lehman Brothers Inc. has been
engaged by us to act as lead manager of our concurrent initial public offering
of Class A Common Stock, to act as dealer-manager in connection with the tender
offers and consent solicitations for our 11% and 12 1/2% notes and to provide
other financial advisory services. In addition, Lehman Brothers Inc. will act as
sole lead arranger and sole running manager and an affiliate of Lehman Brothers
Inc., Lehman Commercial Paper Inc., will act as administrative agent of the
senior credit facilities. Lehman Brothers Inc. and Lehman Commercial Paper Inc.
will receive customary fees for their services in connection with the senior
subordinated notes offering and the senior credit facilities. CIBC World Markets
Inc., an affiliate of CIBC World Markets Corp., owns 2,271,250 shares of our
outstanding Class B Common Stock, representing 6.5% of our outstanding Class B
Common Stock (6.1% of total voting power of all of our Class A Common Stock and
Class B Common Stock) after giving effect to this offering and the Class A
Common Stock offering.

Each of Lehman Brothers Inc. and CIBC World Markets Corp. has from time to
time provided, and in the future may provide, certain investment banking
services to us and our affiliates, for which they have received, and in the
future would receive, customary fees.

LEGAL MATTERS

The validity of the notes being offered by this prospectus and legal
matters regarding FCC issues will be passed upon for us by Kaye, Scholer,
Fierman, Hays & Handler, LLP, New York, New York. Rogers & Wells LLP, New York,
New York will pass upon the validity of the notes being offered by this
prospectus for the underwriters. Jason L. Shrinsky, one of our nominee-
directors, is a member of Kaye, Scholer, Fierman, Hays & Handler, LLP, which
firm has regularly represented us as our legal counsel and will continue to do
so. Additionally, Mr. Shrinsky will receive options to purchase shares of our
Class A Common Stock pursuant to our Non-Employee Director Stock Option Plan.
Mr. Shrinsky will hold his options for the benefit of his law firm, Kaye,
Scholer, Fierman, Hays & Handler, LLP. See "Executive Compensation -- Stock
Plans -- Non-Employee Director Stock Option Plan."

119
<PAGE> 126

EXPERTS

The consolidated financial statements and schedule of SBS and its
subsidiaries as of September 28, 1997, September 27, 1998, and June 27, 1999 and
for each of the fiscal years in the three-year period ended September 27, 1998,
and for the nine months ended June 27, 1999 have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein and upon the authority
of said firm as experts in accounting and auditing.

120
<PAGE> 127

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES:
Report of KPMG LLP, independent auditors.................... F-2
Consolidated Balance Sheets as of September 28, 1997,
September 27, 1998 and June 27, 1999...................... F-3
Consolidated Statements of Operations for each of the fiscal
years in the three-year period ended September 27, 1998
and the nine months ended June 28, 1998 (unaudited) and
June 27, 1999............................................. F-5
Consolidated Statements of Changes in Stockholders'
Deficiency for each of the fiscal years in the three-year
period ended September 27, 1998 and the nine months ended
June 27, 1999............................................. F-6
Consolidated Statements of Cash Flows for each of the fiscal
years in the three-year period ended September 27, 1998
and the nine months ended June 28, 1998 (unaudited) and
June 27, 1999............................................. F-7
Notes to Consolidated Financial Statements.................. F-9
Financial Statement Schedule -- Valuation and Qualifying
Accounts.................................................. F-31
</TABLE>

F-1
<PAGE> 128

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Spanish Broadcasting System, Inc.:

We have audited the consolidated financial statements of Spanish
Broadcasting System, Inc. and subsidiaries as listed in the accompanying index.
In connection with our audits of the consolidated financial statements, we have
also audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Spanish
Broadcasting System, Inc. and subsidiaries as of September 28, 1997, September
27, 1998 and June 27, 1999 and the results of their operations and their cash
flows for each of the fiscal years in the three-year period ended September 27,
1998 and for the nine months ended June 27, 1999, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

/s/ KPMG LLP
--------------------------------------

Miami, Florida
September 3, 1999, except as to
note 11 which is as of September 29, 1999,
note 15a which is as of September 22, 1999,
note 15b which is as of September 30, 1999
and note 15c which is as of September 24, 1999

F-2
<PAGE> 129

SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999

<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 27, JUNE 27,
1997 1998 1999
------------- ------------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 12,287,764 $ 37,642,227 $ 20,895,220
Receivables:
Trade............................................... 17,226,345 20,777,151 24,462,861
Barter.............................................. 3,290,728 3,582,751 2,058,957
------------ ------------ ------------
20,517,073 24,359,902 26,521,818
Less allowance for doubtful accounts................... 5,405,095 7,770,060 6,030,687
------------ ------------ ------------
Net receivables................................ 15,111,978 16,589,842 20,491,131
Other current assets................................... 1,409,906 1,822,584 2,675,530
------------ ------------ ------------
Total current assets........................... 28,809,648 56,054,653 44,061,881
Property and equipment, net.............................. 18,409,415 14,942,933 14,838,400
Intangible assets, net of accumulated amortization of
$22,048,929 in 1997, $27,563,051 in 1998 and
$33,347,195 in 1999.................................... 273,631,766 272,261,440 293,656,711
Deferred financing costs, net of accumulated amortization
of $3,038,202 in 1997, $4,257,074 in 1998 and
$5,377,349 in 1999..................................... 9,262,314 7,275,980 6,064,968
Due from related party................................... 289,869 289,869 289,869
Deferred income taxes.................................... 3,674,287 -- --
Deferred offering costs.................................. -- -- 403,334
Other assets............................................. 289,784 209,301 185,666
------------ ------------ ------------
$334,367,083 $351,034,176 $359,500,829
============ ============ ============
</TABLE>

F-3
<PAGE> 130

<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 27, JUNE 27,
1997 1998 1999
------------- ------------- ------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current portion of Senior unsecured notes.............. $ 15,000,000 $ -- $ --
Current portion of other long-term debt................ 44,644 47,496 1,049,791
Accounts payable....................................... 1,367,572 2,612,952 1,195,949
Accrued expenses....................................... 3,722,777 5,838,808 7,339,362
Accrued interest....................................... 4,536,627 3,941,088 3,069,431
Deferred commitment fee................................ 1,551,255 2,141,456 2,533,310
Dividends payable...................................... 960,761 1,124,360 9,640,271
------------ ------------ ------------
Total current liabilities...................... 27,183,636 15,706,160 24,828,114
12 1/2% Senior unsecured notes due 2002, net of
unamortized discount of $3,238,037 in 1997, $2,224,535
in 1998 and $1,779,173 in 1999......................... 88,820,963 91,668,465 92,113,827
11% Senior unsecured notes due 2004...................... 75,000,000 75,000,000 75,000,000
Other long-term debt, less current portion............... 4,147,676 4,410,505 4,603,251
Deferred income taxes.................................... -- 9,074,596 12,002,078
Redeemable Preferred Stock:
14 1/4% Series A Senior Exchangeable Preferred Stock,
$.01 par value. Authorized 1,000,000 shares, issued
and outstanding 186,706 shares (liquidation value
$186,706,000) in 1997, 214,260 shares (liquidation
value $214,260,000) in 1998 and 229,477 shares
(liquidation value $229,477,000) in 1999............ 171,261,919 201,367,927 218,801,691
Stockholders' deficiency
Class A common stock, $.0001 par value. Authorized
100,000,000 shares; none issued and outstanding..... -- -- --
Class B common stock, $.0001 par value. Authorized
50,000,000 shares; issued and outstanding 30,333,400
shares in 1997 and 1998 and 39,448,550 shares in
1999................................................ 3,033 3,033 3,945
Additional paid-in capital............................. 6,593,506 6,867,334 6,869,241
Accumulated deficit.................................... (35,119,184) (50,604,436) (72,261,910)
------------ ------------ ------------
(28,522,645) (43,734,069) (65,388,724)
Less loans receivable from stockholders.................. (3,524,466) (2,459,408) (2,459,408)
------------ ------------ ------------
Total stockholders' deficiency................. (32,047,111) (46,193,477) (67,848,132)
Commitments and contingencies (notes 10 and 12)
------------ ------------ ------------
$334,367,083 $351,034,176 $359,500,829
============ ============ ============
</TABLE>

See accompanying notes to consolidated financial statements.
F-4
<PAGE> 131

SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL YEARS ENDED SEPTEMBER 29, 1996, SEPTEMBER 28, 1997,
SEPTEMBER 27, 1998 AND NINE MONTHS ENDED JUNE 28, 1998 (UNAUDITED) AND JUNE 27,
1999

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED --------------------------
------------------------------------------ JUNE 28, JUNE 27,
1996 1997 1998 1998 1999
------------ ------------ ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues................. $ 55,337,720 $ 67,981,407 $ 86,766,158 $62,098,840 $ 80,437,296
Less agency commissions........ 6,702,302 7,971,827 10,623,062 7,508,229 10,082,341
------------ ------------ ------------ ----------- ------------
Net revenues.............. 48,635,418 60,009,580 76,143,096 54,590,611 70,354,955
------------ ------------ ------------ ----------- ------------
Operating expenses:
Engineering.................. 1,773,027 2,099,116 1,924,744 1,380,656 1,547,904
Programming.................. 5,864,066 7,081,521 8,462,258 5,996,108 7,435,754
Selling...................... 13,864,695 14,980,035 18,574,529 13,108,606 16,055,795
General and administrative... 6,374,622 6,879,443 10,558,965 7,811,811 6,742,324
Corporate expenses........... 3,747,714 5,595,403 6,892,705 5,122,297 7,658,456
Depreciation and
amortization.............. 4,555,978 7,618,921 8,876,876 6,866,961 7,222,573
------------ ------------ ------------ ----------- ------------
36,180,102 44,254,439 55,290,077 40,286,439 46,662,806
------------ ------------ ------------ ----------- ------------
Operating income.......... 12,455,316 15,755,141 20,853,019 14,304,172 23,692,149
Other income (expense):
Interest expense, net........ (16,533,278) (22,201,114) (20,860,210) (16,002,451) (15,735,550)
Other, net................... (1,574,320) (790,548) (213,239) -- (485,018)
Gain on sale of AM
stations.................. -- -- 36,241,947 36,246,947 --
------------ ------------ ------------ ----------- ------------
Income (loss) before
income taxes and
extraordinary item...... (5,652,282) (7,236,521) 36,021,517 34,548,668 7,471,581
Income tax expense (benefit)... (1,165,800) (2,714,411) 15,624,032 13,819,467 3,177,482
------------ ------------ ------------ ----------- ------------
Income (loss) before
extraordinary item........... (4,486,482) (4,522,110) 20,397,485 20,729,201 4,294,099
Extraordinary item-loss on
extinguishment of debt, net
of income taxes of $1,097,836
in 1997, $1,075,149 in
1998......................... -- (1,646,753) (1,612,723) (1,612,723) --
------------ ------------ ------------ ----------- ------------
Net income (loss)......... $ (4,486,482) $ (6,168,863) $ 18,784,762 $19,116,478 $ 4,294,099
============ ============ ============ =========== ============
Net loss applicable to common
stockholders [note 2(o)]..... $ (7,480,808) $(23,212,494) $(11,484,845) $(3,274,875) $(21,657,474)
============ ============ ============ =========== ============
Basic and Diluted Loss Per
Common Share:
Net loss per common share
before extraordinary
item...................... $ (0.25) $ (0.71) $ (0.33) $ (0.06) $ (0.68)
Net loss per common share for
extraordinary item........ $ -- $ (0.06) $ (0.05) $ (0.05) $ --
Net loss per common share.... $ (0.25) $ (0.77) $ (0.38) $ (0.11) $ (0.68)
Weighted average common
shares outstanding (basic
and diluted).............. 30,333,400 30,333,400 30,333,400 30,333,400 31,629,918
</TABLE>

See accompanying notes to consolidated financial statements.
F-5
<PAGE> 132

SPANISH BROADCASTING SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FISCAL YEARS ENDED SEPTEMBER 29, 1996, SEPTEMBER 28, 1997
AND SEPTEMBER 27, 1998 AND THE NINE MONTHS ENDED JUNE 27, 1999

<TABLE>
<CAPTION>
CLASS B
COMMON STOCK LESS: LOANS
------------------- ADDITIONAL RECEIVABLE TOTAL
NO. OF PAR PAID-IN ACCUMULATED FROM STOCKHOLDERS'
SHARES VALUE CAPITAL DEFICIT STOCKHOLDERS DEFICIENCY
---------- ------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 24, 1995................. 30,333,400 $3,033 $ 5,693,967 $(4,425,882) $(2,421,272) $ (1,150,154)
Increase in loans receivable from
stockholders................................ -- -- -- -- (52,964) (52,964)
Costs associated with issuance of Redeemable
Series A Preferred Stock.................... -- -- (1,718,437) -- -- (1,718,437)
Issuance of warrants.......................... -- -- 6,833,507 -- -- 6,833,507
Accretion of preferred stock.................. -- -- -- (541,416) -- (541,416)
Preferred stock dividends..................... -- -- -- (2,452,910) -- (2,452,910)
Net loss...................................... -- -- -- (4,486,482) -- (4,486,482)
---------- ------ ------------ ------------ ----------- ------------
Balance at September 29, 1996................. 30,333,400 3,033 10,809,037 (11,906,690) (2,474,236) (3,568,856)
Retirement of preferred stock and warrants.... -- -- (11,887,981) -- -- (11,887,981)
Issuance of warrants.......................... -- -- 16,625,000 -- -- 16,625,000
Accretion of preferred stock.................. -- -- -- (1,659,695) -- (1,659,695)
Preferred stock dividends..................... -- -- -- (15,383,936) -- (15,383,936)
Issuance costs for preferred stock............ -- -- (8,952,550) -- -- (8,952,550)
Increase in loans receivable from
stockholders................................ -- -- -- -- (1,050,230) (1,050,230)
Net loss...................................... -- -- -- (6,168,863) -- (6,168,863)
---------- ------ ------------ ------------ ----------- ------------
Balance at September 28, 1997................. 30,333,400 3,033 6,593,506 (35,119,184) (3,524,466) (32,047,111)
Preferred stock dividends..................... -- -- -- (27,717,142) -- (27,717,142)
Accretion of preferred stock.................. -- -- -- (2,552,465) -- (2,552,465)
Decrease in loans receivable from
stockholders................................ -- -- -- -- 14,827 14,827
Cash dividends on common stock................ -- -- -- (3,726,579) 1,050,231 (2,676,348)
Issuance of warrants as dividends............. -- -- 273,828 (273,828) -- --
Net income.................................... -- -- -- 18,784,762 -- 18,784,762
---------- ------ ------------ ------------ ----------- ------------
Balance at September 27, 1998................. 30,333,400 3,033 6,867,334 (50,604,436) (2,459,408) (46,193,477)
Preferred stock dividends..................... -- -- -- (23,727,120) -- (23,727,120)
Accretion of preferred stock.................. -- -- -- (2,224,453) -- (2,224,453)
Exercised warrants for common stock........... 9,115,150 912 1,907 -- -- 2,819
Net income.................................... -- -- -- 4,294,099 -- 4,294,099
---------- ------ ------------ ------------ ----------- ------------
Balance at June 27, 1999 ..................... 39,448,550 $3,945 $ 6,869,241 $(72,261,910) $(2,459,408) $(67,848,132)
========== ====== ============ ============ =========== ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 133

SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED SEPTEMBER 29, 1996,
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND NINE MONTHS ENDED
JUNE 28, 1998 (UNAUDITED) AND JUNE 27, 1999

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED ---------------------------
------------------------------------------- JUNE 28, JUNE 27,
1996 1997 1998 1998 1999
------------ ------------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................... $ (4,486,482) $ (6,168,863) $ 18,784,762 $ 19,116,478 $ 4,294,099
------------ ------------- ------------ ------------ ------------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Loss on extinguishment of debt....... -- 2,744,589 2,687,872 2,687,872 --
Gain on sale of AM stations.......... -- -- (36,241,947) (36,246,947) --
Depreciation and amortization........ 4,555,978 7,618,921 8,876,876 6,866,961 7,222,573
Provision for doubtful accounts...... 4,908,699 3,530,259 2,634,509 2,779,443 1,743,705
Amortization of debt discount........ 5,591,004 4,772,539 658,297 477,029 445,362
Interest satisfied through issuance
of notes.......................... 2,199,121 1,185,722 -- -- --
Amortization of deferred financing
costs............................. 984,001 1,390,736 1,555,016 1,013,387 1,211,012
Write down of fixed assets........... 697,741 487,973 -- -- 451,048
Accretion of interest to principal on
long-term debt.................... -- 161,523 307,200 230,400 230,400
Deferred income taxes................ (1,357,722) (4,062,247) 12,748,883 11,245,578 2,927,482
Changes in operating assets and
liabilities:
Increase in receivables........... (4,538,861) (7,812,211) (4,112,373) (3,493,803) (5,644,994)
Increase in other current
assets.......................... (762,897) (294,574) (412,678) (973,270) (852,946)
Decrease (increase) in other
assets.......................... 148,272 (158,490) 80,483 72,724 23,635
Increase (decrease) in accounts
payable......................... 310,374 (196,443) 1,245,380 314,751 (1,417,003)
Increase in accrued expenses...... 292,468 368,585 2,116,031 2,119,491 1,500,554
Increase (decrease) in accrued
interest........................ 52,702 2,142,006 (595,539) (1,467,195) (871,656)
Increase in unearned revenue...... 218,381 675,999 590,201 254,610 391,854
------------ ------------- ------------ ------------ ------------
Total adjustments............... 13,299,261 12,554,887 (7,861,789) (14,118,969) 7,361,026
------------ ------------- ------------ ------------ ------------
Net cash provided by operating
activities.................... 8,812,779 6,386,024 10,922,973 4,997,509 11,655,125
------------ ------------- ------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of AM stations, net
of disposal costs of $838,167........ -- -- 43,161,833 43,165,854 --
Additions to property and equipment.... (3,811,436) (2,022,344) (1,644,533) (1,290,128) (1,684,292)
Acquisition of radio licenses.......... (86,383,942) (142,335,513) (9,327,713) (9,327,713) (26,280,067)
------------ ------------- ------------ ------------ ------------
Net cash provided by (used in)
investing activities.......... (90,195,378) (144,357,857) 32,189,587 32,548,013 (27,964,359)
------------ ------------- ------------ ------------ ------------
</TABLE>

F-7
<PAGE> 134

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED ---------------------------
------------------------------------------- JUNE 28, JUNE 27,
1996 1997 1998 1998 1999
------------ ------------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Dividends on common stock.............. $ -- $ -- $ (2,676,348) $ (2,676,348) $ --
Purchase of Senior unsecured notes..... -- -- (15,055,055) (15,000,055) --
Retirement of Senior secured notes..... -- (38,414,562) -- -- --
Retirement of Series A preferred
stock................................ -- (42,699,590) -- -- --
Redemption of warrants................. -- (8,323,000) -- -- --
Exercise of warrants................... -- -- -- -- 2,819
Repayments of debt, including accrued
interest............................. (120,691) (56,143) (41,521) (37,654) (37,258)
Proceeds from senior notes, net of
financing costs of $1,605,426 in 1996
and $5,712,407 in 1997............... 33,394,574 69,287,593 -- -- --
Proceeds from Redeemable Series A
Preferred stock and warrants, net of
issuance cost of $1,718,437 in 1996
and $8,952,550 in 1997............... 35,781,563 166,047,450 -- -- --
Decrease in deferred financing costs... 33,999 -- -- -- --
Increase in deferred offering costs.... -- -- -- -- (403,334)
Decrease (increase) in loans receivable
from stockholders.................... (52,964) (1,050,230) 14,827 14,827 --
Advances to related party.............. (2,922) -- -- -- --
------------ ------------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities.......... 69,033,559 144,791,518 (17,758,097) (17,699,230) (437,773)
------------ ------------- ------------ ------------ ------------
Net (decrease) increase in cash
and cash equivalents.......... (12,349,040) 6,819,685 25,354,463 19,846,292 (16,747,007)
Cash and cash equivalents at beginning of
period................................. 17,817,119 5,468,079 12,287,764 12,287,764 37,642,227
------------ ------------- ------------ ------------ ------------
Cash and cash equivalents at end of
period................................. $ 5,468,079 $ 12,287,764 $ 37,642,227 $ 32,134,056 $ 20,895,220
============ ============= ============ ============ ============
Supplemental cash flow information:
Interest paid during the period........ $ 8,254,402 $ 13,175,308 $ 20,561,613 $ 15,913,831 $ 15,861,624
============ ============= ============ ============ ============
Income taxes paid during the period.... $ 632,990 $ 294,262 $ 1,787,191 $ 1,693,335 $ 1,253,915
============ ============= ============ ============ ============
Noncash investing and financing
activities:
Issuance of notes as payment for
interest............................. $ 2,199,122 $ 1,185,722 $ -- $ -- $ --
============ ============= ============ ============ ============
Dividends declared on preferred
stock................................ $ 2,452,910 $ 15,383,936 $ 27,717,142 $ 20,507,976 $ 23,727,120
============ ============= ============ ============ ============
Issuance of preferred stock as payment
of preferred stock dividends......... $ (2,452,910) $ (13,030,211) $(27,553,543) $(13,302,857) $(15,217,047)
============ ============= ============ ============ ============
Issuance of warrants as payment of
dividends............................ $ -- $ -- $ 273,828 $ 273,828 $ --
============ ============= ============ ============ ============
Issuance of note as payment towards
purchase price of radio station...... $ -- $ 3,000,000 $ -- $ -- $ 1,000,000
============ ============= ============ ============ ============
Repayment of stockholder loan and
accrued interest through dividend
withholding.......................... $ -- $ -- $ 1,098,368 $ 1,098,368 $ --
============ ============= ============ ============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-8
<PAGE> 135

SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

(1) ORGANIZATION AND NATURE OF BUSINESS

Spanish Broadcasting System, Inc., a Delaware corporation and subsidiaries
(the "Company") owns and operates thirteen Spanish-language radio stations
serving the New York, Puerto Rico, Miami, Chicago, San Antonio and Los Angeles
markets through its subsidiaries, SBS of Greater New York, Inc., Spanish
Broadcasting System of Florida, Inc., Spanish Broadcasting System of California,
Inc., Spanish Broadcasting System of Greater Miami, Inc., Spanish Broadcasting
System of San Antonio, Inc., Spanish Broadcasting System of Illinois, Inc. SBS
Funding, Inc., a Delaware corporation, JuJu Media, Inc., a New York corporation
and Spanish Broadcasting System of Puerto Rico, Inc., a Puerto Rico corporation.
Additionally, the Company's other subsidiaries include Spanish Broadcasting
System, Inc., a New Jersey corporation, Spanish Broadcasting System of Puerto
Rico, Inc., a Delaware corporation, Alarcon Holdings, Inc. ("Alarcon"), Spanish
Broadcasting System Network, Inc. ("SBS Network") and SBS Promotions, Inc. ("SBS
Promotions"). Alarcon owns and operates the building where the Company's New
York offices are located. SBS Network and SBS Promotions are currently dormant.
SBS Network was formerly the Company's exclusive agency representative for
national advertising sales. SBS Promotions formerly performed promotional
services for the Company's radio stations.

The domestic broadcasting industry is subject to extensive federal
regulation which, among other things, requires approval by the Federal
Communications Commission ("FCC") for the issuance, renewal, transfer and
assignment of broadcasting station operating licenses and limits the number of
broadcasting properties the Company may acquire. The Company operates in the
domestic radio broadcasting industry which is subject to extensive and changing
regulation by the FCC.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS

(a) BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.

The Company's subsidiaries (hereinafter referred to in this paragraph
collectively as "Subsidiary Guarantors") are fully, unconditionally, and jointly
and severally liable for the Company's senior unsecured notes referred to in
note 6. The Company has not included separate financial statements of the
Subsidiary Guarantors because (i) the Subsidiary Guarantors are wholly owned and
constitute substantially all of the Company's direct or indirect subsidiaries,
and (ii) the Company is a holding company with no independent assets or
operations other than its investments in the Subsidiary Guarantors.

The Company's fiscal year is the 52-week period which ends on the last
Sunday of September and the nine month interim is a 39 week period which ends on
the last Sunday of June.

F-9
<PAGE> 136
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

(b) INTERIM INFORMATION

The accompanying unaudited condensed consolidated financial statements for
the nine months ended June 28, 1998 reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
fairly state the financial position and the results of operations for the
periods presented and the disclosures herein are adequate to make the
information presented not misleading. Operating results for the interim periods
presented are not indicative of the results that can be expected for a full
year.

Revenues are recognized when advertisements are aired.

(d) PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. The Company depreciates the cost
of its property and equipment using the straight-line method over the respective
estimated useful lives. Leasehold improvements are amortized on a straight-line
basis over the shorter of the remaining life of the lease or the useful life of
the improvements.

(e) LONG-LIVED ASSETS

The Company follows the provisions of Statement of Financial Accounting
Standards No. 121, (Statement 121) "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." Statement 121 requires that
long-lived assets and certain identifiable intangibles to be held and used or
disposed of by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. See note 5 for impairment losses related to fixed assets.

(F) INTANGIBLE ASSETS

Intangible assets represent the portion of the purchase price of station
acquisitions allocated to FCC licenses of those stations and are amortized on a
straight-line basis over 40 years, based on the industry practice of renewing
FCC licenses periodically. The Company assesses the recoverability of this
intangible asset by determining whether the amortization of the intangible asset
balance over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired station. The assessment of the
recoverability of the intangible asset will be impacted if estimated future
operating cash flows are not achieved.

(g) DEFERRED FINANCING COSTS

Deferred financing costs relate to the refinancing of the Company's debt
and additional debt financing obtained in connection with Company's acquisition
of WXDJ-FM and WRMA-FM in Miami and WLEY-FM in Chicago (see note 6).

F-10
<PAGE> 137
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

Deferred financing costs are being amortized using a method which
approximates the effective interest method over the respective lives of the
related indebtedness.

(h) BARTER TRANSACTIONS

Barter transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment and services. Revenues from barter
transactions are recognized as income when advertisements are broadcast.
Expenses are recognized when goods or services are received or used. The Company
records barter transactions at the fair value of goods or services received.

(i) CASH EQUIVALENTS

Cash equivalents, consisting primarily of interest-bearing money market
accounts and certificates of deposits which have an original maturity date of
less than three months, totaled $12.3 million, $37.6 million and $20.9 million
at September 28, 1997, September 27, 1998 and June 27, 1999, respectively.

(j) INCOME TAXES

The Company files a consolidated Federal income tax return with its
subsidiaries. The Company accounts for income taxes under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

(k) ADVERTISING COSTS

The Company incurs various marketing and promotional costs to add and
maintain listenership. These costs are charged to expense in the period
incurred.

(l) DEFERRED COMMITMENT FEE

On December 30, 1996 the Company entered into an agreement with a national
advertising agency (the "Agency") whereby the Agency would serve as the
Company's exclusive sales representative for all national sales for a seven-year
period. Pursuant to this agreement, the Agency agreed to pay a commitment fee of
$5.1 million to the Company, of which $1.0 million was paid upon execution of
the agreement and $4.1 million is to be remitted on a monthly basis over a
three-year period. The commitment fee is recognized on a straight-line basis
over the seven-year contractual term of the arrangement as a reduction of Agency
commissions. Deferred commitment fee represents the excess of payments received
from the Agency over the amount recognized.

F-11
<PAGE> 138
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

(m) USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles 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.

(n) CONCENTRATION OF RISK

All of the Company's business is conducted in the New York, Miami, Los
Angeles, Chicago, San Antonio and Puerto Rico markets. Net revenue earned from
radio stations in these markets as a percentage of total revenue for the fiscal
years ended September 29, 1996, September 28, 1997, and September 27, 1998 and
nine months ended June 27, 1999 is as follows:

<TABLE>
<CAPTION>
1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
New York................................................. 51% 49% 44% 45%
Miami.................................................... 17% 22% 28% 25%
Los Angeles.............................................. 32% 28% 17% 16%
Chicago.................................................. -- 1% 11% 11%
San Antonio.............................................. -- -- -- 2%
Puerto Rico.............................................. -- -- -- 1%
--- --- --- ---
100% 100% 100% 100%
=== === === ===
</TABLE>

The increase in market concentration risk in Miami and Chicago in fiscal
1997 and 1998 results from the acquisitions of WRMA-FM and WXDJ-FM in Miami and
WYSY-FM in Chicago as discussed in note 3.

(o) BASIC AND DILUTED NET LOSS PER COMMON SHARE

The Company has presented net loss per common share pursuant to SFAS No.
128, Earnings Per Share and the Securities and Exchange Commission Staff
Accounting Bulletin No. 98.

In accordance with Securities and Exchange Commission ("SEC") Staff
Accounting Bulletin No. 98, certain common stock and common stock equivalents
issued for nominal consideration prior to the initial filing of a registration
statement relating to an initial public offering are treated as outstanding for
the entire period. The Company had no nominal issuances during this period.

Basic net loss per common share was computed by dividing net loss by the
weighted average number of shares of common stock outstanding for each period
presented. Diluted net loss per common share is computed by giving effect to
common stock equivalents as if they were

F-12
<PAGE> 139
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

outstanding for the entire period. Common stock equivalents were not considered
for the years presented since their effect would be antidilutive.

<TABLE>
<CAPTION>
1996 1997 1998 6/28/98 6/27/99
----------- ------------ ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income (loss) before
extraordinary item......... $(4,486,482) $ (4,522,110) $ 20,397,485 $20,729,201 $ 4,294,099
Less accretion of preferred
stock...................... 541,416 1,659,695 2,552,465 1,883,377 2,224,453
Less dividends on preferred
stock...................... 2,452,910 15,383,936 27,717,142 20,507,976 23,727,120
----------- ------------ ------------ ----------- ------------
Loss before extraordinary
item....................... (7,480,808) (21,565,741) (9,872,122) (1,662,152) (21,657,474)
Extraordinary item........... -- (1,646,753) (1,612,723) (1,612,723) --
----------- ------------ ------------ ----------- ------------
Net loss applicable to common
stockholders............... $(7,480,808) $(23,212,494) $(11,484,845) $(3,274,875) $(21,657,474)
=========== ============ ============ =========== ============
Weighted average common
shares outstanding (basic
and diluted)............... 30,333,400 30,333,400 30,333,400 30,333,400 31,629,918
=========== ============ ============ =========== ============
BASIC AND DILUTED LOSS PER
COMMON SHARE
Net loss per common share
before extraordinary
item....................... $ (0.25) $ (0.71) $ (0.33) $ (0.06) $ (0.68)
Net loss per common share for
extraordinary item......... -- (0.06) (0.05) (0.05) --
----------- ------------ ------------ ----------- ------------
Net loss per common share.... $ (0.25) $ (0.77) $ (0.38) $ (0.11) $ (0.68)
=========== ============ ============ =========== ============
</TABLE>

(p) FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of fair value of
certain financial instruments. Cash and cash equivalents, receivables, other
current assets and due from related party, as well as accounts payable, accrued
expenses and other current liabilities, as reflected in the consolidated
financial statements, approximate fair value because of the short-term maturity
of these instruments. The estimated fair value of the Company's other long-term
debt instruments approximate the carrying amount as the interest rates
approximates the Company's current borrowing rate for similar debt instruments
of comparable maturity.

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

F-13
<PAGE> 140
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

The estimated fair value of the Company's unsecured notes and preferred
stock is as follows (in millions):

<TABLE>
<CAPTION>
1997 1998 JUNE 27, 1999
----------------- ----------------- -----------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
12 1/2% Senior unsecured notes............... $103.8 $103.8 $ 91.6 $ 91.6 $ 92.1 $102.2
11% Senior unsecured notes................... 75.0 75.0 75.0 75.0 75.0 81.0
14 1/4% Series A senior exchangeable
preferred stock............................ 171.2 171.2 201.3 201.3 218.8 236.9
</TABLE>

The fair value estimates of the unsecured notes and preferred stock were
based upon quotes from major financial institutions taking into consideration
current rates offered to the Company for debt instruments of the same remaining
maturities.

(q) REDEEMABLE PREFERRED STOCK

Redeemable preferred stock is stated at redemption value less the
unamortized discount. The discount is accreted into the carrying value of the
preferred stock through the date at which the preferred stock is mandatorily
redeemable with a charge to accumulated deficit using the effective interest
method.

(r) RECLASSIFICATION

Certain prior year amounts have been reclassified to conform with the
current year presentation.

(3) ACQUISITIONS

On March 25, 1996, the Company acquired the FCC broadcast license and
substantially all of the assets used or useful in the operation of radio station
WPAT-FM for $84.6 million, plus financing and closing costs of $1.8 million. The
Company assumed operational responsibility of WPAT-FM on January 26, 1996 under
an interim agreement, at which time the Company changed the musical format of
WPAT-FM to Spanish language adult contemporary. The Company financed the
acquisition of WPAT-FM through the issuance of senior notes and preferred stock
in March 1996 (see note 6).

On March 27, 1997, the Company acquired the FCC broadcast licenses and
substantially all of the assets used or useful in the operation of WYSY-FM in
Chicago for $33.0 million plus financing and closing costs of $0.2 million.

On March 27, 1997, the Company acquired the FCC broadcast licenses and
substantially all of the assets used or useful in the operation of WRMA-FM and
WXDJ-FM in Miami for $111.0 million plus financing and closing costs of $1.1
million.

The Company financed the purchases of WYSY-FM, WRMA-FM and WXDJ-FM with
proceeds from a combination of issuances consisting of 175,000 shares of the
Company's 14 1/4% Series A Senior Exchangeable Preferred Stock (see note 6) and
warrants to purchase 3,745,000 shares of the Company's Class B Common Stock (par
value $.0001 per share) and $75 million

F-14
<PAGE> 141
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

aggregate principal amount of the Company's 11% Senior Notes due 2004 (see note
6), plus a note payable to the seller of WLEY-FM (formerly WYSY-FM) for $3.0
million.

The following unaudited proforma summary presents the consolidated results
of operations as if the acquisitions of WPAT-FM, WRMA-FM and WXDJ-FM had
occurred as of the beginning of fiscal 1997 after giving effect to certain
adjustments, including amortization of intangible assets and interest expense on
the acquisition debt. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would have occurred
had the acquisitions been made as of that date or of results which may occur in
the future. The results of WYSY-FM prior to its respective acquisition date has
not been included in the proforma summary as this acquisition was not considered
material.

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 28, 1997
------------------
(UNAUDITED)
<S> <C>
Net revenues................................................ $66,762,000
Loss before extraordinary item.............................. (3,498,000)
Net loss.................................................... (5,145,000)
</TABLE>

On May 13, 1998, the Company acquired the FCC broadcast license and
substantially all of the assets used or useful in the operation of radio station
KRIO-FM serving the San Antonio area for $9.2 million, plus closing costs of
$0.1 million. The Company financed this purchase from cash on hand and cash from
operations. The Company subsequently changed the call letters to KLEY-FM. The
aforementioned acquisition was not deemed material in fiscal 1998 for financial
pro forma presentation purposes.

On December 1, 1998, the Company acquired from Pan Caribbean Broadcasting
Corporation the FCC broadcast license and substantially all of the assets of
WDOY-FM in Puerto Rico for $8.3 million. The acquisition of WDOY-FM was financed
from cash on hand and cash from operations.

On April 30, 1999, the Company acquired the FCC broadcast licenses and
substantially all of the assets used or useful in the operation of WMEG-FM and
WEGM-FM, in Puerto Rico for $16.0 million. The Company financed this purchase
from cash on hand and cash from operations.

On April 26, 1999, the Company acquired eighty percent of the issued and
outstanding capital stock of JuJu Media, Inc., the owner and operator of
LaMusica.com, an Internet Web site and "portal" targeting the U.S. Hispanic
market, for $2.0 million in cash and the issuance of a promissory note for $1.0
million.

The aforementioned acquisitions are not deemed material in fiscal 1999 for
financial pro forma presentation purposes.

The Company's consolidated results of operations include the results of
WPAT-FM, WYSY-FM, WRMA-FM, WXDJ-FM, KRIO-FM, WDOY-FM, WMEG-FM, WEGM-FM, and JuJu
Media, Inc. from the respective dates of acquisition. These acquisitions have
been

F-15
<PAGE> 142
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

accounted for under the purchase method of accounting. The purchase price has
been allocated to the assets acquired, principally FCC licenses.

(4) SALE OF AM STATIONS

On July 2, 1997, the Company entered into a definitive agreement (as
amended, the "One-on-One Agreement") with One-on-One Sports, Inc. ("One-on-One")
for the sale of the assets and FCC licenses of radio stations WXLX-AM, serving
the New York metropolitan area, KXMG-AM, serving the Los Angeles metropolitan
area, and WCMQ-AM, serving the Miami metropolitan area. The One-on-One Agreement
contained customary representations, warranties and conditions, including
receipt of FCC approval to the transfer of the FCC licenses. Pursuant to the
One-on-One Agreement, on September 29, 1997, the Company sold the assets and FCC
licenses of WXLX-AM and WCMQ-AM to One-on-One for a sales price of $26.0 million
and recorded a gain of $18.6 million. On December 2, 1997, the Company
consummated the sale of the assets and FCC license of KXMG-AM to One-on-One for
a sales price of $18.0 million and recorded a gain of $17.6 million. These
transactions are classified under other income as Gain on sale of AM stations.

Pursuant to the 1994 12 1/2% Senior Notes due 2002 (the "12 1/2% Notes")
(see note 6) the Company is required to use the greater of $25.0 million or 50%
of the net proceeds from any disposition of certain asset sales including the
FCC broadcast licenses of the aforementioned AM stations to make offers to
purchase the 12 1/2% Notes at 110% of the principal value thereof.

On October 17, 1997, the Company made a tender offer to purchase for cash
any and all of the 12 1/2% Notes up to $22.7 million plus accrued interest up
to, but not including the payment date. The amount payable by the Company was
110% of the principal amount of the 12 1/2% Notes. The Company paid $6.3 million
to the noteholders who responded to the tender offer and purchased $5.5 million
in principal amount of 12 1/2% Notes for $6.0 million plus accrued interest of
$0.3 million in November 1997. The Company also repurchased $7.7 million in
principal amount of 12 1/2% Notes for $9.0 million plus accrued interest of $0.4
million in November 1997. The Company recognized a loss on the tender offer and
repurchased notes of $1.6 million, net of income tax benefit of $1.1 million,
due to the premium paid for the 12 1/2% Notes and the subsequent write-off of
the deferred financing costs and original issue discounts related to the 12 1/2%
Notes purchased. This amount has been classified as an extraordinary item in the
accompanying Consolidated Statement of Operations.

Prior to the sale of the assets of WCMQ-AM, the Station operated on the
frequency of 1210 kHz. As part of the sale of WCMQ-AM, the Company entered into
a five-year local marketing agreement ("LMA") with One-on-One in November 1997.
Under the terms of the LMA, the Company began programming and selling
advertising on WCMQ-AM using a newly-authorized frequency of 1700 kHz. The 1700
kHz transmitter is co-located at the 1210 kHz transmitter/antenna site which was
part of the aforementioned asset sale.

F-16
<PAGE> 143
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

(5) PROPERTY AND EQUIPMENT

Property and equipment consist of the following at September 28, 1997,
September 27, 1998 and June 27, 1999:

<TABLE>
<CAPTION>
ESTIMATED
1997 1998 1999 USEFUL LIVES
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Land................................... $ 1,413,287 $ 1,368,407 $ 1,000,000 --
Building and building leasehold
improvements......................... 15,324,227 11,250,742 10,898,370 20 years
Tower and antenna systems.............. 6,709,991 2,138,824 2,221,399 7-15 years
Studio and technical equipment......... 4,874,321 5,135,586 5,504,547 10 years
Furniture and fixtures................. 1,549,749 1,685,745 1,905,024 3-10 years
Transmitter equipment.................. 1,266,747 931,750 1,216,890 7-10 years
Leasehold improvements................. 1,135,176 1,405,759 1,757,377 5-13 years
Computer equipment..................... 1,378,908 1,333,888 1,657,184 5 years
Other.................................. 205,276 520,369 592,567 5 years
----------- ----------- -----------
33,857,682 25,771,070 26,753,358
Less accumulated depreciation and
amortization......................... 15,448,267 10,828,137 11,914,958
----------- ----------- -----------
$18,409,415 $14,942,933 $14,838,400
=========== =========== ===========
</TABLE>

During fiscal 1996 and 1997, and the nine months ended June 27, 1999, the
Company wrote down the value of one of its properties in Los Angeles (which was
part of the assets acquired in the purchase of the Los Angeles AM radio station)
by $0.7 million, $0.4 million, and $0.5 million respectively. The write downs
were based on current market values of real estate in the Los Angeles area. This
amount is included in other, net in the accompanying consolidated statements of
operations.

(6) SENIOR NOTES AND PREFERRED STOCK

12 1/2% SENIOR UNSECURED NOTES

On June 29, 1994, the Company, through a private placement offering (the
"Offering") completed the sale of 107,059 units (the "Units"), each consisting
of $1,000 principal amount of 12 1/2% Senior Notes (the "12 1/2% Notes") due
2002 and warrants to purchase 5,352,950 shares of Class B Common Stock. The
12 1/2% Notes and warrants are separately transferable. The 12 1/2% Notes were
issued at a discount and generated proceeds to the Company of $87.8 million, net
of financing costs of $6.2 million. Of the $94.0 million of gross proceeds,
$88.6 million was allocated to the 12 1/2% Notes and $5.4 million was determined
to be the value of the warrants.

The 12 1/2% Notes bear interest at a rate of 12 1/2% per annum until
maturity on June 15, 2002. Interest is payable semiannually on June 15 and
December 15. The 12 1/2% Notes are not

F-17
<PAGE> 144
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

redeemable at the option of the Company. The 12 1/2% Notes are senior unsecured
obligations of the Company and are unconditionally guaranteed, on a senior
unsecured basis, as to payment of principal, premium, if any, and interest,
jointly and severally, by each subsidiary of the Company. In the event of a
change of control, as defined in the offering, the Company will be required to
make an offer to purchase all of the outstanding 12 1/2% Notes at a purchase
price equal to 101% of the principal amount thereof, in each case plus accrued
and unpaid interest to the date of purchase. The indenture pursuant to which the
12 1/2% Notes are issued contains covenants restricting the insurance of
additional indebtedness, the payment of dividends and distributions, the
creation of liens, asset sales, mergers or consolidations, among other things.
The 12 1/2% Notes are registered with the Securities and Exchange Commission.
The discount on the 12 1/2% Notes is being amortized over their term to result
in an effective interest rate of 12 1/2% per annum.

REDEEMABLE SERIES A PREFERRED STOCK AND 12 1/4% SENIOR SECURED NOTES DUE 2001

On March 25, 1996 the Company financed the purchase of radio station
WPAT-FM with a combination of the proceeds from the sale in a private placement
of 37,500 shares of the Company's Redeemable Series A Preferred Stock and $35.0
million of the Company's 12 1/4% Senior Secured Notes due 2001 together with
cash on hand.

On March 27, 1997, these financial instruments were redeemed and retired
with a portion of the proceeds from issuance of the Series A Preferred Stock and
11% Senior Unsecured Notes described below. The Company realized a loss on the
extinguishment of the 12 1/4% Senior Secured Notes which has been classified as
an extraordinary item in the accompanying fiscal 1997 consolidated statement of
operations.

14 1/4% SERIES A SENIOR EXCHANGEABLE PREFERRED STOCK AND 11% SENIOR UNSECURED
NOTES

On March 27, 1997, the Company financed the purchase of radio stations
WYSY-FM (renamed WLEY-FM by the Company), WRMA-FM and WXDJ-FM with proceeds from
the sale through a private placement of 175,000 shares of the Company's 14 1/4%
Series A Senior Exchangeable Preferred Stock ("Series A Preferred Stock") and
warrants to purchase 3,745,000 shares of the Company's Class B Common Stock. The
Series A Preferred Stock and the warrants are separately transferable. The gross
proceeds from the issuance of the Series A Preferred Stock and warrants,
amounted to $175.0 million. The value of the warrants was determined to be $16.6
million. The Company also issued $75.0 million aggregate principal amount of the
Company's 11% Senior Unsecured Notes (the "11% Senior Notes") due 2004. In
connection with this transaction, the Company capitalized financing costs of
$5.7 million related to the 11% Senior Notes and charged issuance costs of $9.0
million related to the Series A Preferred Stock and warrants to paid-in-capital.

The 11% Senior Notes are guaranteed by each of the Company's subsidiaries.
The 11% Senior Notes are senior obligations of the Company that rank senior in
right of payment to all subordinated indebtedness of the Company and are equally
ranked with all existing and future

F-18
<PAGE> 145
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

senior indebtedness of the Company including the 12 1/2% Notes. The 11% Senior
Notes are due on March 15, 2004 and bear interest at a rate of 11% per annum
payable on each March 15 and September 15.

The 11% Senior Notes will be redeemable at the option of the Company, in
whole or in part at any time, at the following redemption (expressed as a
percentage of liquidation preference) if redeemed during the twelve month period
commencing March 15, in the applicable year set forth below plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends to
the redemption date:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................................ 105.50 %
2002........................................................ 102.75 %
2003........................................................ 100.00 %
</TABLE>

In addition, the Company, at its option, may redeem in the aggregate up to 25%
of the original principal amount of 11% Senior Notes at any time prior to March
15, 2000, at a redemption price equal to 110% of the principal amount plus
accrued and unpaid interest to the redemption date.

Convenants under the indebentures governing the 11% Senior Notes and Series
A Preferred Stock are substantially identical to the covenants of the 12 1/2%
Notes.

The Series A Preferred Stock is entitled to dividends at the rate of
14 1/4% per annum payable semi-annually beginning September 15, 1997. The
Company, at its option, may pay dividends on any dividend payment date occurring
on or before March 15, 2002 either in cash or by the issuance of additional
shares of Series A Preferred Stock. The Company has elected to satisfy all or
some portion of the dividends due through the issurance of additional preferred
shares for the fiscal years 1997 and 1998 and the nine month period June 27,
1999 of 11,706, 27,554 and 15,217 shares, respectively.

The Series A Preferred Stock is exchangeable at the option of the Company,
on any dividend payment date for the Company's 14 1/4% Exchange Debentures
("Exchange Debentures") due March 15, 2005. Once issued the 14 1/4% Exchange
Debentures are redeemable, at the option of the Company, at any time, on or
prior to March 15, 2000 at a redemption price equal to 105% of the aggregate
principal amount thereof, plus accrued interest to the date of redemption. After
March 15, 2000 and prior to March 15, 2002 the 14 1/4% Exchange Debentures are
not redeemable. On or after March 15, 2002, the 14 1/4% Exchange Debentures are
redeemable at the option of the Company.

The 14 1/4% Exchange Debentures are issuable in an aggregate principal
amount equal to the liquidation preference of the Series A Preferred Stock so
exchanged, plus accumulated and unpaid dividends to the date fixed for the
exchange thereof, plus any additional 14 1/4% Exchange debentures issued from
time to time in lieu of cash interest. The maturity date is March 15, 2005. The
Company has not exercised its option to exchange the Series A Preferred Stock
for the 14 1/4% Exchange Debentures.

F-19
<PAGE> 146
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

The Series A Preferred Stock is redeemable, at the option of the Company,
in whole or in part, at any time on or prior to March 15, 2000 at the redemption
price equal to 105% of the liquidation preference thereof, plus accumulated and
unpaid dividends to the date of redemption. After March 15, 2000 and prior to
March 15, 2002, the Series A Preferred Stock is not redeemable. On or after
March 2002, the Series A Preferred Stock will be redeemable, at the option of
the Company, in whole or in part at any time, at the following redemption prices
(expressed as a percentage of liquidation preference) if redeemed during the
twelve-month period commencing March 15, of the applicable year set forth below
plus, without duplication, an amount in cash equal to all accumulated and unpaid
dividends to the redemption date:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002........................................................ 107%
2003........................................................ 105%
2004 and thereafter......................................... 100%
</TABLE>

The Company is required, subject to certain conditions, to redeem all of
the Series A Preferred Stock outstanding on March 15, 2005 at a redemption price
equal to 100% of the liquidation preference thereof, plus accumulated and unpaid
dividends to the date of the redemption.

(7) WARRANTS

Warrants consist of the following:

<TABLE>
<CAPTION>
NUMBER OF CLASS B COMMON SHARES REPRESENTED
BY OUTSTANDING WARRANTS
------------------------------------------------
JUNE 27,
1996 1997 1998 1999
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Issued in connection with:
12 1/2% Senior Notes(a)........................... 5,352,950 5,352,950 2,469,950 --
Redeemable Series A Preferred Stock and 12 1/4%
Senior Secured Notes(b)......................... 2,141,150 -- -- --
14 1/4% Series A Senior Exchangeable Preferred
Stock(c)........................................ -- 3,745,000 3,745,000 750
Replacement warrants(a)........................... -- -- 2,910,450 9,500
--------- --------- --------- ------
Total................................... 7,494,100 9,097,950 9,125,400 10,250
========= ========= ========= ======
</TABLE>

- ---------------
(a) In 1994, in conjunction with the issuance of 12 1/2% Senior Notes, the
Company issued warrants exercisable for 5,352,950 shares of Class B Common
Stock at an exercise price of $.01 per warrant share which are subject to
adjustment upon the occurrence of certain events, as defined in the warrant
agreement. In connection with the declaration of a cash dividend on common
stock, in March 1998, holders of these warrants were given the option to
participate in such dividends in lieu of maintaining their anti-dilution
rights with respect to such dividends. Holders of warrants representing
2,910,450 shares of Class B Common Stock exercised this option and received
cash dividends of $0.326 million and replacement warrants representing
2,910,450 shares of Class B Common Stock which have an exercise

F-20
<PAGE> 147
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

price of $.01 per share. The remaining warrant holders had their underlying
shares adjusted upward resulting in an increase to additional paid in
capital and a charge to accumulated deficit of $0.274 million. The remaining
warrant holders exercised the warrants during the nine month period ended
June 27, 1999. During the nine month period ended June 27, 1999 replacement
warrants were exercised for 2,900,950 shares of Class B Common Stock. The
remaining replacement warrants expired on June 30, 1999 representing 9,500
shares of common stock.

(b) In 1996, in conjunction with the issuance of Redeemable Series A Preferred
Stock and 12 1/4% Senior Secured Notes, the Company issued warrants
exercisable for 6% at the Company's Class B Common Stock on a fully diluted
basis. In 1997 these warrants were redeemed with proceeds from the Company's
14 1/4% Series A Exchangeable Preferred Stock.

(c) In 1997, in conjunction with the issuance of the 14 1/4% Series A Senior
Exchangeable Preferred Stock, the Company issued warrants that entitle the
holder to acquire 21.4 shares of Class B Common Stock or 3,745,000 shares at
a price equal to $0.01 per 21.4 shares, subject to adjustment from time to
time upon to occurrence of certain changes of common stock, certain common
stock distributions, certain issuances of options or convertible securities,
certain dividends and distributions and certain other increases in the
number of shares or common stock. During the nine month period ended June
27, 1999 warrants were exercised for 3,744,250 shares of Class B Common
Stock. The remaining warrants expired on June 30, 1999 representing 750
shares of common stock.

(8) OTHER LONG-TERM DEBT

Other long-term debt consists of the following at September 28, 1997,
September 27, 1998 and June 27, 1999:

<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Obligation under capital lease with related party
payable in monthly installments of $9,000, including
interest at 6.25%, commencing June 1992 (see note
12)................................................. $1,030,797 $ 989,278 $ 953,920
Note payable due on March 27, 2003 including interest
which accrues at an annual rate of three month LIBOR
plus 450 basis points............................... 3,161,523 3,468,723 3,699,122
Note payable due on April 26, 2000 including interest
which accrues at an annual rate of 6%............... -- 1,000,000
---------- ---------- ----------
4,192,320 4,458,001 5,653,042
Less current portion.................................. 44,644 47,496 1,049,791
---------- ---------- ----------
$4,147,676 $4,410,505 $4,603,251
========== ========== ==========
</TABLE>

F-21
<PAGE> 148
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

The scheduled maturities of other long-term debt are as follows at June 27,
1999:

<TABLE>
<CAPTION>
THREE MONTHS ENDING SEPTEMBER AMOUNT
- ----------------------------- ------
<S> <C>
1999...................................................... $ 12,159

FISCAL YEAR ENDING SEPTEMBER
2000...................................................... 1,050,572
2001...................................................... 53,825
2002...................................................... 57,287
2003...................................................... 3,760,094
2004...................................................... 64,894
Thereafter................................................ 654,211
----------
$5,653,042
==========
</TABLE>

(9) LOANS RECEIVABLE FROM STOCKHOLDERS AND RELATED PARTY TRANSACTIONS

Loans receivable from stockholders are comprised of loans receivable from
the Company's Chief Executive Officer (CEO) and Chairman of the Board of
Directors (Chairman), and consist of notes which bear interest at 6.36% per
annum, mature on December 30, 2025 and are payable in 30 equal annual
installments of $0.2 million. Loans receivable have been classified as an
increase in stockholders' deficiency in the accompanying consolidated balance
sheets. Interest receivable of $0.2 million, $0.4 million and $0.5 million,
respectively, at September 28, 1997, September 27, 1998 and June 27, 1999 is
included in other current assets.

At September 28, 1997, September 27, 1998 and June 27, 1999, the Company
has advances totaling $0.3 million due from a party related through common
ownership. Payment of this balance is guaranteed by the CEO. Additionally, at
September 28, 1997, September 27, 1998, and June 27, 1999, the Company had trade
receivables totaling $0.4 million due from this related party which have been
fully reserved as being uncollectible.

The Company pays the operating expenses for a boat owned by a party related
through common ownership which is used by the Company for business entertainment
purposes. Such expenses approximated $0.1 million for each of the fiscal years
ended September 29, 1996, September 28, 1997 and September 27, 1998 and for the
nine months ended June 27, 1999.

The Company leases an apartment from its CEO for annual rentals of $0.1
million through August 2007. Certain renovation expenses were paid for by the
Company totaling $0.2 million during 1998 and 1999. Additionally, the Company
occupies a building under a capital lease agreement with certain stockholders
(see note 12). The building lease expires in 2012 and calls for an annual base
rent of approximately $0.1 million.

In connection with the relocation of offices from the New York metropolitan
area to the Miami metropolitan area, the Company advanced the CEO an aggregate
of $1.1 million to pay for various expenses. On July 16, 1997, the CEO executed
a promissory note to the Company for the principal amount of $1.1 million to
evidence these advances. The note was payable on

F-22
<PAGE> 149
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

demand and bore interest at a rate of 7% per annum. The Company declared and
paid a dividend in 1998 and applied a portion of the proceeds of such dividend
which were otherwise payable to the CEO to the repayment in full of this
promissory note.

(10) STOCK OPTION PLAN

The Company maintains a stock option plan pursuant to which the Company has
reserved up to 1,337,500 shares of Class B Common Stock for issuance upon the
exercise of options granted under the plan. The plan covers all regular salaried
employees of the Company and its subsidiaries. No options have been granted
under this plan to date.

(11) CAPITAL STOCK

On September 29, 1999, the Company amended and restated its Certificate of
Incorporation, resulting in a conversion of all existing shares of Class A
Common Stock into shares of Class B Common Stock equal to the number of shares
representing a 50 to 1 stock split for each share. The number of authorized
shares of capital stock was increased to 151 million comprised of 100 million
shares of Class A Common Stock, 50 million shares of Class B Common Stock and 1
million shares of Preferred Stock, and the par values of both the Class A Common
Stock and Class B Common Stock were changed from $.01 per share to $.0001 per
share. In addition, Class B Common Stockholders are entitled to ten votes per
share and Class A Common Stockholders are entitled to one vote per share. Upon
transfer or sale of stock by Class B Stockholders to non affiliate parties, as
defined, such shares automatically convert to shares of Class A Common Stock.

The accompanying consolidated financial statements have been retroactively
restated to reflect these actions.

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.
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 the
Series A Preferred Stock with respect to dividend rights and rights on
liquidation, winding up and dissolution of the Company.

(12) COMMITMENTS AND CONTINGENCIES

COMMITMENTS

The Company occupies a building under a capital lease agreement with
certain stockholders of the Company expiring in June 2012. The amount
capitalized under this lease agreement and

F-23
<PAGE> 150
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

included in property and equipment at September 27, 1997, September 27, 1998 and
June 27, 1999 is as follows:

<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Building under capital lease.......................... $1,230,440 $1,230,440 $1,230,440
Less: Accumulated depreciation........................ (328,011) (389,533) (430,548)
---------- ---------- ----------
$ 902,429 $ 840,907 $ 799,892
========== ========== ==========
</TABLE>

The Company leases office space and facilities and certain equipment under
operating leases, one of which is with a related party (see note 9), that expire
at various dates through 2035. Certain leases provide for base rental payments
plus escalation charges for real estate taxes and operating expenses.

At June 27, 1999, future minimum lease payments under such leases are as
follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
THREE MONTHS ENDING SEPTEMBER LEASE LEASES
- ----------------------------- ---------- ----------
<S> <C> <C>
1999...................................................... $ 37,250 $ 244,100
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER
- ----------------------------
<S> <C> <C>
2000...................................................... 149,000 793,100
2001...................................................... 149,000 594,700
2002...................................................... 149,000 542,000
2003...................................................... 149,000 463,000
2004...................................................... 149,000 332,900
Thereafter.................................................. 1,142,364 2,922,800
---------- ----------
Total minimum lease payments................................ 1,924,614 $5,892,600
==========
Less executory costs........................................ (529,614)
----------
1,395,000
Less interest at 6.25%...................................... (441,080)
----------
Present value of minimum lease payments..................... $ 953,920
==========
</TABLE>

Total rent expense for the fiscal years ended September 29, 1996, September
28, 1997 and September 27, 1998 and the nine months ended June 27, 1999 amounted
to $1.1 million, $1.6 million, $1.1 million and $0.9 million, respectively.

The Company has agreements to sublease its radio frequencies and portions
of its tower sites. Such agreements provide for payments through 2002. The
future minimum rental income to be received under these agreements as of June
27, 1999 is as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDING SEPTEMBER AMOUNT
- ----------------------------- --------
<S> <C>
1999...................................................... $166,685
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER
- ----------------------------
<S> <C>
2000...................................................... 320,674
2001...................................................... 259,893
2002...................................................... 109,330
----------
$ 856,582
==========
</TABLE>

F-24
<PAGE> 151
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

At June 27, 1999, the Company is committed to employment contracts for
certain executives, on-air talent and general managers expiring through 2003.
Future payments under such contracts are as follows:

<TABLE>
<CAPTION>
AMOUNT
THREE MONTHS ENDING SEPTEMBER ------
<S> <C>
1999...................................................... $ 767,733
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER
<S> <C>
2000...................................................... 2,247,950
2001...................................................... 1,886,433
2002...................................................... 1,282,917
2003...................................................... 62,500
----------
$6,247,533
==========
</TABLE>

Included in the future payments schedule above is a five-year employment
agreement with the CEO. The agreement provides for a base salary of not less
than $1.3 million, which may be increased by the board of directors in its sole
discretion. Under the terms of the agreement, the CEO is paid a cash bonus equal
to the sum of (a) 2.5% of the dollar increase in same station revenue in the
aggregate for any fiscal year and (b) 5.0% of the dollar increase in same
station broadcast cash flow for any fiscal year.

Certain employees' contracts provide for additional amounts to be paid if
station ratings or cash flow targets are met.

CONTINGENCIES

In connection with the sale of the AM stations (see note 4), the Company
assigned a lease for a transmitter site which is located on a former landfill
which ceased operations in the late 1960s. As part of the sales agreement, the
Company retained potential exposure relating to possible environmental
liabilities relating to this site. Management is unable to assess the likelihood
that any claim for remediation of this site will arise and no amounts have been
accrued in the consolidated financial statements relating to this contingent
liability.

(13) INCOME TAXES

Income tax expense (benefit) for the fiscal years ended September 29, 1996,
September 28, 1997 and September 27, 1998 and the nine months ended June 27,
1999 consists of the following and were allocated as follows:

<TABLE>
<CAPTION>
1996
---------------------------------------------------
CURRENT-
STATE AND CURRENT DEFERRED
LOCAL FEDERAL FEDERAL TOTAL
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Loss from operations....................... $191,922 $ -- $(1,357,722) $(1,165,800)
======== ======== =========== ===========
</TABLE>

F-25
<PAGE> 152
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

<TABLE>
<CAPTION>
1997
---------------------------------------------------
CURRENT-
STATE AND CURRENT DEFERRED
LOCAL FEDERAL FEDERAL TOTAL
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Loss from operations....................... $250,000 $ -- $(2,964,411) $(2,714,411)
Extraordinary item -- loss on
extinguishment of debt................... -- -- (1,097,836) (1,097,836)
-------- -------- ----------- -----------
$250,000 $ -- $(4,062,247) $(3,812,247)
======== ======== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
1998
---------------------------------------------------
CURRENT-
STATE AND CURRENT DEFERRED
LOCAL FEDERAL FEDERAL TOTAL
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Income from operations..................... $950,000 $850,000 $13,824,032 $15,624,032
Extraordinary item -- loss on
extinguishment of debt................... -- -- (1,075,149) (1,075,149)
-------- -------- ----------- -----------
$950,000 $850,000 $12,748,883 $14,548,883
======== ======== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
1999
---------------------------------------------------
CURRENT-
STATE AND CURRENT DEFERRED
LOCAL FEDERAL FEDERAL TOTAL
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Income from operations..................... $200,000 $ 50,000 $ 2,927,482 $ 3,177,482
======== ======== =========== ===========
</TABLE>

During fiscal 1996, 1997 and 1998 and the nine months ended June 27, 1999,
the Company utilized net operating loss carryforwards of approximately $0.8
million, $0.7 million, $38.8 million and $1.4 million, respectively.

F-26
<PAGE> 153
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

The tax effect of temporary differences and carryforwards that give rise to
deferred tax assets and deferred tax liabilities at September 28, 1997,
September 27, 1998 and June 27, 1999 is as follows:

<TABLE>
<CAPTION>
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................. $32,955,490 $ 16,919,249 $ 16,366,440
Deferred interest................................. 5,717,617 6,080,278 6,358,461
Allowance for doubtful accounts................... 2,162,038 3,108,024 3,376,640
Fixed assets...................................... 474,286 474,286 474,286
Unearned revenue.................................. -- 856,582 1,091,856
AMT credit........................................ -- 850,000 850,000
----------- ------------ ------------
Total gross deferred tax assets................ 41,309,431 28,288,419 28,517,683
Less valuation allowance....................... (17,396,470) (17,396,470) (17,396,470)
----------- ------------ ------------
Total net deferred tax assets.................. 23,912,961 10,891,949 11,121,213
----------- ------------ ------------
Deferred tax liabilities:
Depreciation and amortization..................... 11,776,023 14,463,595 17,620,341
Intangible assets................................. 8,382,950 5,502,950 5,502,950
Unearned revenue.................................. 79,701 -- --
----------- ------------ ------------
Total gross deferred tax liabilities........... 20,238,674 19,966,545 23,123,291
----------- ------------ ------------
Net deferred tax asset (liability)............. $ 3,674,287 $ (9,074,596) $(12,002,078)
=========== ============ ============
</TABLE>

Total income tax expense (benefit) differed from the amounts computed by
applying the U.S. Federal income tax rate of 35% for fiscal years 1996, 1997 and
1998 and the nine months ended June 27, 1999 as a result of the following:

<TABLE>
<CAPTION>
JUNE 27,
1996 1997 1998 1999
----- ----- ---- -----------
<S> <C> <C> <C> <C>
Computed "expected" tax expense (benefit)................ (35.0)% (35.0)% 35.0% 35.0%
State Income taxes, net of federal income tax benefit.... 2.2% (2.8)% 6.5% 6.4%
Non-deductible expenses.................................. 9.0% 1.4% 0.4% 1.2%
Other.................................................... 3.2% (1.8)% 1.8% 0.1%
----- ----- ---- ----
20.6% 38.2% 43.7% 42.7%
</TABLE>

The valuation allowance for deferred tax assets as of September 28, 1997,
September 27, 1998 and June 27, 1999 was $17,396,470. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment.

F-27
<PAGE> 154
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

Based upon the level of historical taxable income and projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences, net of the existing
valuation allowances. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced.

At June 27, 1999, the Company has net operating loss carryforwards
available to offset future taxable income expiring as follows:

<TABLE>
<CAPTION>
NET
OPERATING
LOSS
EXPIRING IN SEPTEMBER CARRYFORWARDS
- --------------------- --------------
<S> <C>
2007...................................................... $ 5,772,000
2008...................................................... 12,213,000
2009...................................................... 11,445,000
2010...................................................... 12,868,000
-----------
$42,298,000
===========
</TABLE>

(14) LITIGATION

The Company is the defendant in a number of lawsuits and claims incidental
in its ordinary course of business, certain of which have been brought by former
employees. The litigation which is probable to result in an unfavorable outcome
and can be reasonably estimated amounts to $0.3 million which the Company has
accrued. The Company does not believe the outcome of any litigation, current or
pending, would have a material adverse impact on the financial position on the
results of operations of the Company.

(15) SUBSEQUENT EVENTS

(a) PURCHASE OF PUERTO RICO STATIONS

On September 22, 1999, the Company entered into a definitive agreement to
purchase all of the outstanding capital stock of nine subsidiaries of Chancellor
Media Corporation of Los Angeles. The Company has agreed to purchase, own and
operate eight radio stations in Puerto Rico, including stations WIOA-FM,
WIOP-FM, WIOC-FM, WCOM-FM, WZMT-FM, WZNT-FM, WOYE-FM, AND WCTA-FM. The purchase
price is $90.0 million. In connection with this acquisition, the Company made a
$10.0 million nonrefundable deposit on the purchase price into escrow. The
closing of this acquisition is subject to the satisfaction of certain customary
conditions, including receipt of regulatory approvals from the FCC and
Department of Justice. The Company expects to finance the purchase of these
companies from a combination of bank borrowings and cash on hand. Prior to the
closing of these acquisitions (but following approval of the Department of
Justice), the Company intends to operate these stations under a local marketing
agreement pursuant to which the Company will pay a monthly fee in exchange

F-28
<PAGE> 155
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

for the exclusive right to program and sell commercial announcements for each of
the stations. The Company expects to close the acquisition of these companies by
the end of December 1999. However, there can be no assurance that this
acquisition can be completed during the expected time frame or at all.

(b) TENDER OFFER

On September 30, 1999, the Company commenced tender offers and consent
solicitations offers (the "Tender Offers") relating to any and all of its
outstanding 11% Notes and 12 1/2% Notes, at approximately 111% and 114%,
respectively, of their par values. The Tender Offers are contingent upon
completion of the Company's planned IPO and debt offering, and the valid tender
of not less than a majority in aggregate principal amount of both the 11% Notes
and the 12 1/2% Notes. The Tender Offers expire on November 2, 1999.

On September 24, 1999, the Company entered into letters of understanding
with its then Chairman and Secretary. These letters outline the mutual
intentions of the Company and these individuals in connection with the Company's
planned IPO, and are contingent upon the completion of the IPO. These letters
provide for the following:

- the sale by these individuals of $14.0 million of Class B Common Stock in
the IPO;

- the purchase by the Company of annuities providing aggregate annual
retirement compensation of $1.0 million to these individuals. These
annuities are estimated to cost the Company $10.6 million;

- the retention of these individuals as members of the Company's Board of
Directors, with titles of Chairman Emeritus and Secretary Emeritus,
respectively;

- an agreement to sell to the Chairman, the Company's two radio stations
located in the Florida Keys for $0.7 million;

- the repayment by the Chairman of a stockholder loan for approximately
$0.6 million, plus accrued interest of approximately $0.1 million;

- an agreement by the Chairman to assume responsibility for a boat
currently leased by the Company; and,

- the use by the Chairman of a car and driver, and by the Secretary of a
car, to be provided by the Company.

(d) NEW BENEFIT PLANS (UNAUDITED)

In September 1999, the Company adopted an employee incentive stock option
plan ("the 1999 ISO Plan"), a non-employee director stock option plan ("the 1999
NQ Plan"), and a tax-qualified employee savings and retirement plan ("the 401(k)
Plan"). Options granted under the 1999 ISO Plan will vest according to terms to
be determined by the Compensation Committee

F-29
<PAGE> 156
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 28, 1997, SEPTEMBER 27, 1998 AND JUNE 27, 1999
(INTERIM INFORMATION FOR NINE MONTHS ENDED JUNE 28, 1998 IS UNAUDITED)

of the Company's Board of Directors, and will have a contractual life of five to
ten years from 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 the Company, as defined. 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.

The 401(k) Plan provides for Company contributions to match 25% of an
eligible employee's contributions, up to 5% of the employee's base monthly
earnings. All employees over the age of 21 that have completed at least 500
hours of service are eligible to participate in the 401(k) Plan.

(e) PLANNED INITIAL PUBLIC OFFERING (UNAUDITED)

The Company intends to conduct an initial public offering (IPO) for a yet
to be determined number of shares of Class A Common Stock. Concurrently with
this offering the Company plans to offer $235.0 million aggregate principal
amount of senior subordinated notes due 2009. The Company has also entered into
a commitment letter with a lender for the arrangement of senior credit
facilities in an amount of up to $200.0 million. The senior credit facilities
are contingent upon completion of a definitive agreement with the lender on or
before November 12, 1999, the completion of the IPO and the concurrent offering
of the senior subordinated notes due 2009, and the redemption of the Company's
preferred stock. There is no assurance that these offerings will occur, or that
the senior credit facilities will be obtained.

In connection with these offerings, the Company intends to amend its
employment agreement with its CEO and enter into employment agreements with two
other executive officers of the Company. In addition the CEO intends to repay a
shareholder loan for approximately $1.9 million, plus accrued interest of
approximately $0.4 million.

(f) CONTINGENCY (UNAUDITED)

On September 28, 1999, the Company received notice from the purchaser of
KXMG-AM that it would make a claim against the Company for indemnification under
the agreement pursuant to which KXMG-AM was sold, for the removal of an
underground fuel storage tank located on the site of KXMG-AM's transmitter. The
notice did not specify the amount involved in the indemnification claim. The
Company does not have sufficient information to assess the potential exposure
related to this matter, and no amounts have been accrued in the consolidated
financial statements relating to this contingent liability.

F-30
<PAGE> 157

SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEARS ENDED SEPTEMBER 29, 1996,
SEPTEMBER 28, 1997 AND SEPTEMBER 27, 1998
AND NINE MONTHS ENDED JUNE 27, 1999

<TABLE>
<CAPTION>
COLUMN C ADDITIONS
COLUMN B ----------------------- COLUMN E
BALANCE CHARGED TO CHARGED TO BALANCE AT
COLUMN A BEGINNING COST AND OTHER COLUMN D END
DESCRIPTION OF PERIOD EXPENSE ACCOUNTS DEDUCTIONS(1) OF PERIOD
- ----------- ---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Fiscal year 1996:
Allowance for doubtful accounts.... $5,184,886 $4,908,699 -- $5,582,822 $4,510,763
Fiscal year 1997:
Allowance for doubtful accounts.... $4,510,763 $3,530,259 -- $2,635,927 $5,405,095
Fiscal year 1998:
Allowance for doubtful accounts.... $5,405,095 $2,634,509 -- $ 269,544 $7,770,060
Nine month ended June 27, 1999:
Allowance for doubtful accounts.... $7,770,060 $1,743,705 -- $3,483,078 $6,030,687
</TABLE>

- ---------------
(1) Write-offs, net of recoveries.

F-31
<PAGE> 158

LOGO

$235,000,000

[SBS LOGO]
SPANISH BROADCASTING SYSTEM, INC.
9 5/8% Senior Subordinated Notes due 2009
----------------------------
PROSPECTUS
October 28, 1999
----------------------------
LEHMAN BROTHERS
CIBC WORLD MARKETS