SFX ENTERTAINMENT INC, S-1/A, 1998-05-05

SFX ENTERTAINMENT INC
S-1/A, 1998-05-05
AMUSEMENT & RECREATION SERVICES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 1998

REGISTRATION NO. 333-50079
===============================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------

AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------

SFX ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 7922 13-3977880
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>

650 MADISON AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10022
(212) 838-3100
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)

ROBERT F.X. SILLERMAN, EXECUTIVE CHAIRMAN
SFX ENTERTAINMENT, INC.
650 MADISON AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10022
(212) 838-3100
(Name, Address, Including Zip Code, and Telephone Number, Including Area
Code, of Agent For Service)
---------
Copies to:

AMAR BUDARAPU KIRK A. DAVENPORT
BAKER & MCKENZIE LATHAM & WATKINS
805 THIRD AVENUE 885 THIRD AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022
(212) 751-5700 (212) 906-1200
---------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
===============================================================================

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF OFFERING PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) SHARE PRICE REGISTRATION FEE
- -------------------------------- -------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Class A Common Stock, $.01 par
value.......................... 5,750,000 $27.3125 $157,046,875 $46,328.3(3)
- -------------------------------- -------------- ---------------- ------------------ ----------------
Class A Common Stock, $.01 par
value.......................... 2,300,000 $35.13(2) $ 80,799,000(2) $23,856
- -------------------------------- -------------- ---------------- ------------------ ----------------
</TABLE>

===============================================================================
(1) Includes 1,050,000 shares that may be sold pursuant to an
over-allotment option granted to the Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based upon the average of the high and low
sales prices of the Class A Common Stock on May 1, 1998, as reported on
the Nasdaq National Market.
(3) The amount of $46,328.83 was previously paid.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.

SUBJECT TO COMPLETION, DATED MAY 5, 1998

7,000,000 SHARES

[SFX ENTERTAINMENT LOGO]

CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)

All of the shares of Class A Common Stock offered hereby are being sold by
the Company. See "Underwriting."

The Company has two classes of authorized common stock, the Class A Common
Stock and the Class B Common Stock. The economic rights of each class of
Common Stock are identical, but the voting rights differ in that the holders
of Class A Common Stock are entitled to one vote per share while the holders
of Class B Common Stock are generally entitled to ten votes per share on most
matters submitted to a vote of the stockholders. In addition, the holders of
shares of Class A Common Stock, voting as a separate class, are entitled to
elect two-sevenths of the Company's directors. The holders of Class A Common
Stock and Class B Common Stock, voting as a single class, with each share of
Class A Common Stock entitled to one vote and each share of Class B Common
Stock entitled to ten votes, are entitled to elect the remaining directors.
As a result, holders of Class B Common Stock will have substantial control
over most matters submitted to a vote of the stockholders, including the
election of directors. After the consummation of the Offering and the Pending
Acquisitions, Robert F.X. Sillerman, the Executive Chairman of the Company,
will beneficially own approximately 38.1%, and all directors and executive
officers together will beneficially own approximately 44.9%, of the combined
voting power of the Common Stock. See "Risk Factors--Control by Management,"
"Management," "Principal Stockholders" and "Description of Capital Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE CLASS A COMMON STOCK.

The Class A Common Stock is quoted on The Nasdaq Stock Market's National
Market under the symbol "SFXE." On May 4, 1998, the last reported sales price
of the Class A Common Stock on the Nasdaq National Market was $40.00 per share.
See "Price Range of Class A Common Stock."

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
------------------ ---------------- ---------------
<S> <C> <C> <C>
Per Share..... $ $ $
Total(3)...... $ $ $
</TABLE>

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

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting."
(2) Before deducting estimated expenses of $2.5 million payable by the
Company.
(3) The Company has granted the Underwriters an option for 30 days to
purchase up to an additional 1,050,000 shares of Class A Common Stock
at the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. If such option is exercised
in full, the total initial public offering price, underwriting discount
and proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."

The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about , 1998, against payment therefor in immediately available
funds.

GOLDMAN, SACHS & CO. LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
COWEN & COMPANY
MORGAN STANLEY DEAN WITTER
PRUDENTIAL SECURITIES INCORPORATED

---------
The date of this Prospectus is , 1998.

<PAGE>
[INSERT MAP SHOWING LOCATION OF VENUES]

---------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS
IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH
THE OFFERING. IN ADDITION, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS,
IF ANY) ALSO MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS A
COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 UNDER
THE SECURITIES EXCHANGE ACT OF 1934. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the
more detailed information and consolidated financial statements appearing
elsewhere in this Prospectus. Unless the context requires otherwise (a) "SFX
Entertainment" or the "Company" means SFX Entertainment, Inc. and its
subsidiaries, after giving effect to the Pending Acquisitions (as defined
herein) and (b) "SFX Broadcasting" means SFX Broadcasting, Inc., the parent
of the Company prior to the Spin-Off (as defined herein), and its
subsidiaries. Except as otherwise indicated, all information in this
Prospectus (a) assumes consummation of the Pending Acquisitions and the SFX
Merger (as defined herein) and (b) assumes no exercise of the Underwriters'
over-allotment option. For all periods presented, except where otherwise
indicated, the discussions on a pro forma basis give effect to the 1997
Acquisitions, the Recent Acquisitions and the Pending Acquisitions as if they
had occurred on January 1, 1997. There can be no assurance that any of the
Pending Acquisitions will be consummated on the terms described herein or at
all. The closing of the Offering is not conditioned on the prior consummation
of any of the Pending Acquisitions or the SFX Merger. See "Risk
Factors--Risks Related to the Pending Acquisitions," "Description of Capital
Stock" and "Underwriting." Industry data used throughout this Prospectus was
obtained from industry publications and has not been independently verified
by the Company.

THE COMPANY

SFX Entertainment is a leading integrated promoter, producer and venue
operator in the live entertainment industry. In addition, upon consummation
of the acquisition of FAME (as defined herein), the Company will be a leading
full-service marketing and management company specializing in the
representation of team sports athletes, primarily in professional basketball.
The Company believes that it currently controls the largest network of venues
used principally for music concerts and other live entertainment events in
the United States, with 45 venues either directly owned or operated under
lease or exclusive booking arrangements in 22 of the top 50 markets,
including 11 amphitheaters in 7 of the top 10 markets. Through its large
number of venues, its strong, branded presence in each market served and its
long operating history, the Company is able to provide an integrated offering
of promotion and production services across a broad variety of live
entertainment events locally, regionally and nationally. During 1997,
approximately 27 million people attended 9,600 events promoted and/or
produced by the Company and the businesses to be acquired in the Pending
Acquisitions, including approximately 4,200 music concerts, 4,900
theatrical shows and over 200 specialized motor sports events. These events
included: (a) music concerts featuring artists such as The Rolling Stones,
Phish, Fleetwood Mac, Ozzy Osbourne and Alanis Morissette, (b) music
festivals such as the George Strait Country Music Festival, (c) touring
theatrical productions such as The Phantom of the Opera, Jekyll & Hyde, Rent
and The Magic of David Copperfield and (d) specialized motor sports events,
such as Truck Fest and American Motorcycle Association Supercross racing
events. In addition, the Company's event marketing programs interfaced with
over 15 million people in 1997. The Company believes that its ability to
provide integrated live entertainment services will, among other things,
encourage wider use of its venues by performers and allow the Company to
capture a greater percentage of revenues from national tours and ancillary
revenue sources. On a pro forma basis, the Company would have had revenues
and Adjusted EBITDA (as defined herein) of $827.9 million and $104.9 million,
respectively, for the twelve months ended March 31, 1998. For a description
of Adjusted EBITDA, see footnote 5 to "Summary Consolidated Financial
Statements."

<PAGE>

it controls. The Company also derives ancillary revenues from operations
related to its live entertainment events, including the sale of corporate
sponsorships and advertising, the sale of concessions and the merchandising
of a broad range of products. In addition, upon consummation of the
acquisition of FAME, the Company will represent, approximately 75
professional athletes, primarily in basketball. On a pro forma basis, the
Company's music businesses, theatrical operations, specialized motor sports
operations and other operations would have comprised approximately 67%, 13%,
6% and 14%, respectively, of the Company's total revenues for the twelve
months ended March 31, 1998.

The Company has benefited from significant growth in the live
entertainment industry over the last several years. According to Amusement
Business, an entertainment industry journal, ticket sales for North American
music concert tours have grown at a 10.9% compound annual growth rate
("CAGR") since 1985, from approximately $321.7 million in 1985 to
approximately $1.1 billion in 1997. Box office receipts from Touring Broadway
Shows and Broadway shows in the United States have grown at a 11.7% CAGR
since the 1986-1987 season, from $431.5 million to $1.3 billion in the
1996-1997 season, according to Variety Magazine. The increasing popularity of
specialized motor sports over the last several years has coincided with and,
in part, been due to the increased popularity of other professional motor
sports events such as professional auto racing, including NASCAR, CART and
Indy Car Racing.

VENUES

The Company believes that it owns and/or operates the largest number of
venues in the United States used principally for music concerts and other
live entertainment events. The following table summarizes the 45
amphitheaters, theaters and other venues owned and/or operated under lease or
exclusive booking arrangements by the Company on a pro forma basis. There can
be no assurance that any of the Pending Acquisitions will be completed on the
terms described herein or at all. See "Risk Factors--Risks Related to the
Pending Acquisitions."

<TABLE>
<CAPTION>
NUMBER OF TOTAL
MARKET NUMBER OF THEATERS AND TOTAL SEATING
MARKET RANK(1)AMPHITHEATERS(2) CLUBS(2) VENUES(2) CAPACITY(3)
- ------------------------------ -------- -------------- -------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
New York--Northern New
Jersey--Long Island .......... 1 2 2 4 37,600
Los Angeles--Riverside--Orange
County ....................... 2 2 1 3 44,100(4)
San Francisco--Oakland--San
Jose.......................... 5 2 4 6 49,500(5)
Philadelphia--Wilmington
--Atlantic City .............. 6 1 -- 1 25,000
Boston--Mansfield.............. 7 2 1 3 27,400
Dallas--Fort Worth ............ 9 1 -- 1 20,100
Houston--Galveston--Brazoria . 10 1 1 2 15,800
Atlanta ....................... 12 2 2 4 28,250
St. Louis ..................... 17 1 2 3 24,100
Phoenix--Mesa ................. 18 1 -- 1 20,000
Pittsburgh .................... 19 1 -- 1 22,500
Kansas City ................... 24 1 2 3 30,000
Sacramento--Yolo .............. 26 -- 1 1 N/A(5)
Indianapolis .................. 28 1 1 2 23,700
Columbus ...................... 30 1 -- 1 20,000
Charlotte--Gastonia--Rock Hill 32 1 -- 1 18,000
Hartford--Wallingford ......... 36 1 1 2 29,800
Rochester ..................... 38 1 -- 1 12,700
Nashville ..................... 40 1 -- 1 20,100
Oklahoma City ................. 42 1 -- 1 9,000
Raleigh--Durham--Chapel Hill . 47 1 -- 1 20,000
West Palm Beach--Boca Raton .. 50 1 -- 1 20,000
Reno .......................... 119 1 -- 1 8,500
-------------- -------------- --------- ---------------
Total......................... 27 18 45 526,150(4),(5)
</TABLE>

(see footnotes on next page)

3
<PAGE>

- ------------
(1) Based on the July 1994 population of metropolitan statistical areas as
set forth in the 1997 Statistical Abstracts of the United States.
(2) Does not include venues in the 31 markets where the Company sells
subscriptions for Touring Broadway Shows. See "Business--The Company's
Live Entertainment Activities--Production."
(3) Does not include the approximately 16,000 seat Camarillo Creek
Amphitheater in Los Angeles and the approximately 20,000 seat White
River Amphitheater in Seattle each of which currently under
construction. Completion of these facilities is currently scheduled for
the summer of 1999.
(4) Additional seating of approximately 40,000 is available for certain
events.
(5) Club seating, which cannot be accurately determined because clubs
typically have either open or reserved seating for any given event, is
not reflected.

OPERATING STRATEGY

The Company's principal objectives are to maximize revenue and cash flow
growth opportunities by (a) being a leading promoter and producer of live
entertainment events and a leading provider of talent representation services
and (b) owning and/or operating leading live entertainment venues in the
United States. The Company's specific strategies include the following:

OWN AND/OR OPERATE LEADING LIVE ENTERTAINMENT VENUES IN NATION'S TOP 50
MARKETS

A key component of the Company's strategy is to own and/or operate a
network of leading live entertainment venues in the nation's top 50 markets.
The Company believes that this strategy will enable it to (a) utilize its
nationwide venue footprint, significant industry expertise and access to a
large aggregate audience to secure more events and distribute content on a
national scale, (b) sell additional products and maximize numerous other
related revenue sources, (c) position itself to produce national tours by
leading music performers in order to capture a greater percentage of revenues
from those tours and (d) encourage wider use by performers of the Company's
venues by providing centralized access to a nationwide network of venues. The
Company believes that it controls the largest network of venues used
principally for music concerts and other live entertainment events in the
United States. Upon consummation of the Pending Acquisitions, the Company
will own and/or operate under exclusive booking arrangements 45 venues in 22
of the top 50 markets, including 11 amphitheaters in 7 of the top 10 markets.

MAXIMIZE ANCILLARY REVENUE OPPORTUNITIES

The Company intends to enhance revenues and cash flows by maximizing
revenue sources arising from and related to its leadership position in the
live entertainment business. On a pro forma basis for the 1997 and Recent
Acquisitions, these ancillary revenues comprised approximately 19% of the
Company's music businesses' total revenues for the year ended December 31,
1997. Management believes that these related revenue sources generally have
higher margins than promotion and production revenues and include, among
others, (a) the sale of corporate sponsorship, naming and other rights,
concessions, merchandise, parking and other products and services and (b) the
sale of rights to advertise to the Company's large aggregate national
audience. Categories available for sponsorship arrangements include the
naming of the venue itself (e.g., the PNC Bank Arts Center) and the
designation of "official" event or tour sponsors, concessions providers
(e.g., beer and soda), credit card companies, phone companies, film
manufacturers and radio stations, among others. Sponsorship arrangements can
provide significant additional revenues at negligible incremental cost, and
many of the Company's venues currently have no sponsorship arrangements in
many of the available categories (including naming rights). The Company also
intends to maximize related revenues by developing and exploiting
intellectual property rights associated with (a) its production of musical
concert tours and themed events (such as regional music festivals) and (b)
branded characters created as an integral part of the content, marketing and
merchandising of certain motor sports events.

4
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EXPLOIT SYNERGIES OF THE ACQUIRED BUSINESSES

The Company plans to maximize revenues by exploiting synergies among its
various existing businesses and the businesses to be acquired in the Pending
Acquisitions. The Company believes that it can utilize the best business
practices of the businesses acquired in the Recent Acquisitions (the
"Acquired Businesses"), the 1997 Acquisitions and the Pending Acquisitions on
a national scale. For example, the Atlanta-based regional Music Midtown
Festival, created and promoted by Concert/Southern Promotions (one of the
Acquired Businesses), is a highly successful music festival concept that drew
approximately 200,000 attendees in 1997; the Company believes that it can use
the event as a model for other markets. In addition, the Company believes that
the radio industry trade publications of Network (as defined herein, another of
the Acquired Businesses) will enable the Company to introduce new acts and new
musical releases to radio programming directors nationwide. This exposure can
enhance recorded music sales and, in turn, music concert attendance,
particularly for artists having relationships with the Company. In addition,
upon the consummation of the FAME acquisition, the Company believes that it
will be able to capitalize on the cross-marketing opportunities that may arise
by virtue of representing prominent team athletes while selling corporate
sponsorships and other marketing rights at its existing venues.

INCREASE USE OF VENUES; DIVERSIFICATION OF ACTS AND VENUES

Typically, a venue is not utilized for many of the dates available for
live entertainment events in any given season. The Company believes that it
will be able to increase the utilization of its venues through its ability to
affect scheduling on a nationwide basis, its local knowledge, relationships
and expertise and its presentation of a variety of additional events,
including comedy acts, magic acts, motivational speeches, national figure
skating and gymnastics competitions and exhibitions and bull riding
competitions, among others. The Company believes that a diversified portfolio
of performers, events and venues reduces reliance on the commercial success
of any one performer, event or venue.

INNOVATIVE EVENT MARKETING

The Company plans to use innovative event marketing to increase
admissions, sponsorship and advertising revenues and, to a limited extent,
average ticket prices at its venues. In particular, the Company believes that
it can increase the profitability of its venues by offering premium ticket
packages, including (a) season ticket packages that include amenities such as
preferred seating, VIP parking, waiter service, private club and/or "upscale"
concession menus, (b) subscription series packages allowing customers to
purchase tickets for a set of performances and (c) preferred seating, such as
box seating and VIP seating areas, which typically generate higher revenues
per seat. Moreover, the market research and audience demographics databases
that the Company acquired through certain of the Recent Acquisitions, when
combined with the Company's existing audience data collection efforts, will
permit highly-effective targeted marketing, such as direct-mail and
subscription series campaigns, which the Company believes will increase
ticket pre-sales and overall sales in a cost-efficient manner.

STRICT COST CONTROLS; NATIONALLY COORDINATED BOOKING, MARKETING & ACCOUNTING

The Company's senior management imposes strict financial reporting
requirements and expense budget limitations on all of its businesses,
enabling senior management to monitor the performance and operations of all
of its businesses, to eliminate duplicative administrative costs and to
realize expense savings. Moreover, the Company believes that its size will
enable it to achieve substantial economies of scale by (a) implementing a
nationally coordinated booking system (for contracting for and scheduling
acts), while continuing to utilize the substantial local expertise of the
Company, (b) establishing a centralized marketing team to exploit ancillary
revenue streams on local, regional and national levels, including from
sponsorship, advertising and merchandising opportunities, and (c)
implementing a centralized accounting system.

PURSUE COMPLEMENTARY ACQUISITION OPPORTUNITIES

The live entertainment business is characterized by numerous participants,
including booking agents, promoters, producers, venue owners and venue
operators, many of which are entrepreneurial,

5
<PAGE>

capital-constrained local or regional businesses that do not achieve
significant economies of scale from their operations. The Company believes
that the fragmented nature of the industry presents attractive acquisition
opportunities, and that its larger size will provide it with improved access
to the capital markets that will give it a competitive advantage in
implementing its acquisition strategy. Through consolidation, the Company
believes that it will be better able to coordinate negotiations with
performers and talent agents, addressing what the Company believes is a
growing desire among performers and talent agents to deal with fewer, more
sophisticated promoters. The Company intends to pursue additional strategic
acquisitions of (a) amphitheaters and other live entertainment venues, (b)
local and regional promoters and producers of music concert, theatrical,
specialized motor sports and other live entertainment events and (c)
companies in the talent representation industry. The Company is currently in
the process of negotiating certain additional acquisitions of live
entertainment and related businesses; however, it has not entered into
definitive agreements with respect to any of such acquisitions and there can
be no assurance that it will do so. See "--Recent Developments" and "Risk
Factors--Expansion Strategy; Need for Additional Funds."

MANAGEMENT

Most of the Company's senior management team has worked together for a
number of years at SFX Broadcasting and have managed the concert promotion
operations of Delsener/Slater Enterprises, Ltd. ("Delsener/Slater"), the
predecessor of the Company, since its acquisition by SFX Broadcasting in
January 1997. Senior management plans to continue to apply to its live
entertainment businesses many of the same operating strategies that it has
successfully utilized in the radio business, including a focus on revenue
maximization through the cultivation of sponsorship and advertising
relationships, cost containment and other strategies in order to maximize
revenue and cash flow growth. Moreover, senior management believes that the
Company will benefit from the consolidation of the live entertainment
industry, much as SFX Broadcasting benefited from the consolidation of the
radio broadcasting industry. The Company's senior management team, most of
whom will continue to act as senior management of SFX Broadcasting until
consummation of the SFX Merger, is comprised of Robert F.X. Sillerman,
Executive Chairman, Michael G. Ferrel, Chief Executive Officer, Brian Becker,
Executive Vice President, Howard J. Tytel, Executive Vice President and
Thomas P. Benson, Chief Financial Officer. The Company has entered into an
employment agreement with Mr. Becker and has reached agreements in principle
with Messrs. Sillerman, Ferrel, Tytel and Benson to enter into employment
agreements with such officers, which agreements will be effective upon the
consummation of the SFX Merger. In addition, upon consummation of the
acquisition of FAME, David Falk the co-founder, Chairman and Chief Executive
Officer of FAME will join senior management of the Company as a Member of the
Office of the Chairman and as a Director. See "Risk Factors--Control by
Management," "--Dependence on Key Personnel" and "Management." The Company has
also entered into long-term employment agreements with substantially all of the
senior executives at each of the Recent and Pending Acquisitions.

FORMATION OF THE COMPANY

The Company was formed as a wholly-owned subsidiary of SFX Broadcasting in
December 1997 as the parent company of SFX Concerts, Inc. ("Concerts").
Concerts was formed by SFX Broadcasting to acquire and hold SFX
Broadcasting's live entertainment operations. In January 1997, Concerts
entered the live entertainment business with the acquisition of
Delsener/Slater. In March 1997, Concerts acquired certain entities which hold
a 37-year lease to operate the Meadows Theater ("Meadows"), a 25,000-seat
indoor/outdoor complex located in Hartford, Connecticut. In June 1997,
Concerts acquired Sunshine Promotions, Inc., a concert promoter in the
Midwest, and certain other related companies ("Sunshine Promotions" and,
together with the acquisitions of Delsener/Slater and the Meadows lease, the
"1997 Acquisitions").

In January 1998, the Company acquired Westbury Music Fair ("Westbury") for
an aggregate consideration consisting of $3.0 million in cash and an agreement
to issue 75,019 in shares of Class A Common Stock. In February and March of
1998, the Company completed its acquisitions of PACE Entertainment

6
<PAGE>

Corporation ("PACE"); Contemporary Group ("Contemporary"); BG Presents, Inc.
("BGP"); Album Network, Inc., SJS Entertainment Corporation and The Network
40 (collectively, "Network"); Concert/ Southern Promotions
("Concert/Southern") and certain related entities for an aggregate
consideration consisting of approximately $442.1 million in cash and 4.2
million shares of Class A Common Stock. In March, the Company acquired United
Sports of America Motor Sports ("USA Motor Sports") for a purchase price of
approximately $4.0 million. The acquisitions of Westbury, PACE, Contemporary,
BGP, Network, Concert/Southern and USA Motor Sports are collectively referred
to herein as the "Recent Acquisitions." See "Business--Recent Acquisitions."

In February 1998, the Company completed the private placement of $350.0
million of 9 1/8% Senior Subordinated Notes due 2008 (the "Notes") and
borrowed $150.0 million under the Company's $300.0 million senior credit
facility (the "Credit Facility"). The proceeds from the offering of the Notes
(the "Note Offering") and the initial borrowings under the Credit Facility
were used to consummate the Recent Acquisitions.

PENDING ACQUISITIONS

In April and May of 1998, the Company entered into agreements and/or
letters of intent to acquire the following live entertainment and talent
representation businesses:

FAME

The Company has entered into an agreement to acquire Falk Associates
Management Enterprises, Inc. and Financial Advisory Management Enterprises,
Inc. (collectively, "FAME"), a leading full-service marketing and management
company which specializes in the representation of team sports athletes,
primarily in professional basketball. The aggregate purchase price for FAME
will be approximately $82.9 million in cash (including approximately $7.9
million which the Company anticipates paying in connection with certain taxes
which FAME and the FAME sellers will be subject to) and 1.0 million shares of
Class A Common Stock. The agreement provides for payments by the Company to
the FAME sellers of additional amounts up to $15.0 million in equal annual
installments over five years contingent on the achievement of certain EBITDA
targets. The agreement also provides for additional payments by the Company
if FAME's EBITDA performance exceeds the targets by certain amounts. FAME was
founded in 1992 by David Falk and Curtis Polk and currently represents some
of the premier athletes in professional team sports, including, among others,
Michael Jordan, Patrick Ewing, Alonzo Mourning, Juwan Howard and Allen
Iverson. In addition, FAME provides specialized financial advisory services
to professional athletes and entertainers. Upon the consummation of the FAME
acquisition, Mr. Falk will continue to serve as the Chairman of FAME and will
be appointed as a Member of the Office of the Chairman and a Director of the
Company. The Company believes that, through its acquisition of FAME, it will
be able to capitalize on the cross-marketing opportunities that may arise by
virtue of representing prominent team athletes while selling corporate
sponsorships and other marketing rights at its existing venues.

DON LAW

The Company has entered into an agreement to acquire certain assets of
Blackstone Entertainment, LLC ("Don Law"), a leading concert and theater
promoter in New England, for an aggregate consideration of approximately
$90.0 million (subject to adjustment under certain circumstances), including
the repayment of approximately $10.0 million in debt. The Company may, at its
option, pay up to $16.0 million of the purchase price in shares of Class A
Common Stock. Don Law currently owns and/or operates three venues in New
England with an aggregate seating capacity of 27,400. Don Law also acts as
the sole ticket operator for all of its own venues as well as several third
party venues. The Don Law acquisition will expand the Company's geographic
presence into the significant Boston market. The assets to be acquired from
Don Law will be subject, for two years following their acquisition, to a
right of first offer and refusal in favor of the Don Law seller.

7
<PAGE>
AVALON

On March 6 and 9, 1998, the Company entered into two binding letters of
intent to acquire all of the outstanding equity interests of Irvine Meadows
Amphitheater, New Avalon, Inc., TBA Media, Inc. and West Coast Amphitheater
(collectively, "Avalon") for a cash purchase price of approximately $27.4
million, including approximately $400,000 which the Company expects to pay to
the Avalon sellers to reimburse them for their third party out of pocket
costs and expenses incurred in the development of the Camarillo Creek
Amphitheater. Avalon is a leading concert promoter and producer that operates
predominantly in the Los Angeles area. The Company may also be obligated to
pay an additional $1.0 million to the Avalon sellers if the Camarillo Creek
Amphitheater has been completed pursuant to certain budget projections and
the production of entertainment events at the site has commenced.

OAKDALE

The Company has entered into an agreement to acquire certain assets of
Oakdale Concerts, LLC and Oakdale Development Limited Partnership
(collectively, "Oakdale''), a promoter and producer of concerts in
Connecticut and the owner of the 4,800 seat Oakdale Theater, for a purchase
price of $11.9 million in cash. At the closing, the Company will also make a
non-recourse loan to the Oakdale sellers in the amount of $11.4 million. In
addition, the Company may be obligated to make an additional payment based on
the combined EBITDA (as defined in the acquisition agreement) of the Oakdale
Theater and Meadows for 1999. The Company believes that it will be able to
exploit significant management, booking and promotional synergies between the
Oakdale Theater and the Company's Meadows amphitheater located in Hartford,
Connecticut.

EMI

The Company has entered into an agreement to acquire an approximately 80%
interest in Event Merchandising, Inc. ("EMI"), a leading event merchandising
contractor in the United States for approximately $8.5 million. In addition,
the Company is required to make a loan to the EMI sellers in an amount equal
to 20% of certain taxes incurred by the EMI sellers in connection with the
transaction. The Company expects that the amount of the loan will be
approximately $750,000. EMI has concession contracts for the sale of
merchandise with 26 amphitheaters, including 13 venues owned and/or operated
by the Company.

The acquisitions of FAME, Don Law, Avalon, Oakdale and EMI are
collectively referred to herein as the "Pending Acquisitions." See
"Business--Pending Acquisitions," and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Pending Acquisitions." The
terms of the acquisition agreements related to the Pending Acquisitions are
subject to change, both in terms of the consideration to be paid by the
Company for each acquisition and otherwise, upon the occurrence of certain
events. See "Agreements Related to the Pending Acquisitions."

The Company intends to use a portion of the proceeds of the Offering and
additional borrowings under the Credit Facility (collectively, the
"Financing") to consummate the Pending Acquisitions. The Company expects to
complete all of the Pending Acquisitions in the second quarter of 1998.
However, the timing and completion of the Pending Acquisitions are subject to
a number of conditions, certain of which are beyond the Company's control and
there can be no assurance that any of the Pending Acquisitions will be
consummated during such period, on the terms described herein, or at all. In
addition, there can be no assurance that the Company will be able to enter
into a definitive agreement with respect to Avalon. The Company is also
currently in the process of negotiating certain additional acquisitions of
live entertainment and related businesses; however, it has not entered into
any definitive agreements with respect to such acquisitions and there can be no
assurance that it will do so. See "Risk Factors--Risks Related to the Pending
Acquisitions" and "--Expansion Strategy; Need for Additional Funds" and
"Agreements Related to the Pending Acquisitions."

8
<PAGE>

RECENT DEVELOPMENTS

The Company has indicated to The Marquee Group, Inc. ("Marquee"), a
publicly-traded company, its potential interest in acquiring Marquee. Marquee
provides integrated event management, television production, marketing and
consulting services in the sports, news and entertainment industries. In
addition, Marquee represents various entertainers, including athletes in team
sports, and books tours and appearances for a variety of entertainers. Mr.
Sillerman, the Executive Chairman of the Company, has an aggregate equity
interest of approximately 9.1% in Marquee and is the chairman of its board of
directors, and Mr. Tytel, a Director and Executive Vice President of the
Company, is one of its directors. The Company has been informed that Marquee
has formed a committee of independent directors to consider the proposal, as
well as other strategic alternatives. However, the Company has not entered
into, and there can be no assurance that the Company will enter into, any
agreement, arrangement or understanding with Marquee. See "Risk
Factors--Potential Conflicts of Interest" and "--Expansion Strategy; Need for
Additional Funds."

THE SPIN-OFF AND THE SFX MERGER

SFX Broadcasting was formed in 1992 principally to acquire and operate
radio broadcasting stations. In August 1997, SFX Broadcasting entered into a
merger agreement (the "SFX Merger Agreement") pursuant to which it agreed to
merge (the "SFX Merger") with an affiliate of Hicks, Muse Tate & Furst
Incorporated ("SFX Buyer"), and to spin-off the Company to certain
stockholders of SFX Broadcasting on a pro rata basis (the "Spin-Off"). The
Spin-Off was consummated on April 27, 1998. The Spin-Off separated the
entertainment business from SFX Broadcasting's radio broadcasting business
and will enable SFX Buyer to acquire only SFX Broadcasting's radio
broadcasting business in the SFX Merger. SFX Broadcasting has indicated that
it expects the SFX Merger to be completed in the second quarter of 1998.

Prior to the Spin-Off, pursuant to the Distribution Agreement entered into
among the Company, SFX Broadcasting and SFX Buyer (the "Distribution
Agreement"), SFX Broadcasting contributed to the Company all of its assets
relating to the entertainment business. In addition, the Company, SFX
Broadcasting and SFX Buyer also entered into a tax sharing agreement (the
"Tax Sharing Agreement") and an employee benefits agreement (the "Employee
Benefits Agreement"). Each of these agreements provides for certain
indemnification obligations by the Company and SFX Broadcasting. Pursuant to
the Distribution Agreement, at the time of the SFX Merger, SFX Broadcasting
will contribute any positive Working Capital (as defined herein) to the
Company. If Working Capital is negative, the Company must pay the amount of
the shortfall to SFX Broadcasting. In addition, pursuant to the Tax Sharing
Agreement, the Company is required to indemnify SFX Broadcasting for certain
tax obligations, including a tax obligation of approximately $120.0 million
in connection with the Spin-Off. The tax liability relates to certain
deferred intercompany transactions which management believes will give rise
to significant additional tax basis which will be available to offset
future taxable income. Management's estimates of the amount of the indemnity
payment and the additional basis are based on certain assumptions which
management believes are reasonable. However, the actual amount of such
obligations could vary significantly. The Company intends to use a portion of
the net proceeds from the Offering to make such tax indemnity payments. See
"Risk Factors--Future Contingent Payments," "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

In the Spin-Off, (a) 13,579,024 shares of Class A Common Stock were
distributed to holders on the Spin-Off record date of SFX Broadcasting's
Class A common stock, Series D preferred stock and interests in the director
deferred stock ownership plan, (b) 1,047,037 shares of Class B Common Stock
were distributed to holders on the Spin-Off record date of SFX Broadcasting
Class B common stock and (c) 609,856 shares were placed in escrow to be
issued upon the exercise of certain warrants of SFX Broadcasting. See
"Certain Relationships and Related Transactions--Employment Agreements."

The address and telephone number of the Company's principal executive
offices are: 650 Madison Avenue, 16th Floor, New York, New York 10022; (212)
838-3100.

9
<PAGE>
FINANCING PLAN

The net proceeds received by the Company from the Offering, after
deducting the underwriting discount and estimated Offering expenses, are
estimated to be approximately $262.1 million (approximately $301.8 million if
the Underwriters' over-allotment option is exercised in full), assuming a
public offering price of $40 per share. The Company intends to use the net
proceeds from the Offering, together with expected borrowings under the
Credit Facility, to make an anticipated tax indemnity payment, to pay the
cash portion of the purchase price of the Pending Acquisitions, to repay debt
in connection with the Pending Acquisitions and to make certain other
payments described below. The following table represents the Company's best
estimate of the allocation of the net proceeds of the Offering based on the
current status of its business. Future events, including the actual amount of
the tax indemnity payment, the actual amount of the cash purchase price of
the Pending Acquisitions or any other potential acquisitions, the
availability of other financing and funds generated from operations and the
status of the Company's business from time to time, may make changes in the
allocation of the net proceeds of the Offering necessary or desirable. See
"Risk Factors--Discretionary Use of Funds."

<TABLE>
<CAPTION>
(IN
SOURCES OF FUNDS: THOUSANDS)
-------------
<S> <C>
The Offering......................................... $280,000
The Credit Facility(1) .............................. 84,950
-------------
Total Sources of Funds............................ $364,950
=============

USES OF FUNDS:
Tax Indemnity Payment(2)............................. $120,000
Cash Portion of the Pending Acquisitions:
FAME Acquisition(3)............................... 82,900
Don Law Acquisition(4)............................ 74,000
Avalon Acquisition(5) ............................ 27,400
Oakdale Acquisition(6)............................ 23,250
EMI Acquisition................................... 8,500
Fees and Expenses Related to the Financing(7) ...... 17,900
Fees and Expenses Related to the Pending
Acquisitions ....................................... 6,000
Other Payment Obligations(8)......................... 5,000
Total Uses of Funds............................... $364,950
=============
</TABLE>

(2) Pursuant to the Tax Sharing Agreement, the Company is required to
indemnify SFX Broadcasting for certain tax obligations, including a tax
obligation of approximately $120.0 million in connection with the
Spin-Off. The tax liability relates to certain deferred intercompany
transactions which management believes will give rise to significant
additional tax basis which will be available to offset future taxable
income. Management's estimates with respect to the amount of the
indemnity payment and the additional basis are based on certain
assumptions which management believes are reasonable. However, the
actual amounts of such obligations could vary materially. See
"Management's, Discussion and Analysis of Financial Condition and
Results of Operations."

(3) Includes approximately $7.9 million which the Company anticipates
paying in connection with certain taxes which FAME and the FAME sellers
will be subject to. See "Agreements Related to the Pending
Acquisitions."

(4) Includes the repayment of $10.0 million in debt. Assumes that the
Company pays $16.0 million of the purchase price for Don Law in shares
of Class A Common Stock. See "Agreements Related to the Pending
Acquisitions."

(5) Includes approximately $400,000 which the Company expects to pay to the
Avalon sellers to reimburse their third party out of pocket expenses
incurred in the development of the Camarillo Creek Amphitheater. See
"Agreements Related to the Pending Acquisitions."

(6) Includes a loan to the Oakdale sellers in the amount of $11.4 million,
a portion of which will be used to repay Oakdale's senior mortgage
indebtedness. See "Agreements Related to the Pending Acquisitions."

10
<PAGE>

(7) Consists of approximately $15.4 million underwriting discount and $2.5
million of other fees and expenses related to the Financing. The fees
and expenses are based on management's estimates, and may not be
indicative of, and are likely to vary from, the actual amount of fees
and expenses incurred by the Company.

(8) Consists of change of control payments under the employment agreements
of Messrs. Sillerman, Ferrel and Benson assumed by the Company pursuant
to the Distribution Agreement, aggregating approximately $3.3 million,
$1.5 million and $0.2 million, respectively. See "Certain Relationships
and Related Transactions--Assumption of Employment Agreements; Certain
Change of Control Payments."

Certain of the Company's agreements provide for future contingent payments
in certain circumstances. There can be no assurance that the Company will
have sufficient sources of funds to make such payments should they come due.
In addition, the Company is currently negotiating additional acquisitions
which, if consummated, will require additional financing. See "Risk
Factors--Future Contingent Payments," "--Risks Related to the Pending
Acquisitions" and "--Expansion Strategy; Need for Additional Funds"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Relationships and Related Transactions--
Indemnification of Mr. Sillerman."

11
<PAGE>
THE OFFERING

<TABLE>
<CAPTION>
<S> <C>
Class A Common Stock offered 7,000,000 shares
by the Company ................................
Common Stock to be outstanding
after the Offering and Pending Acquisitions:
Class A Common Stock (1)...................... 27,118,971 shares
Class B Common Stock.......................... 1,697,037 shares
----------
Total (1)................................... 28,816,008 shares
----------
Relative rights of shares ...................... The economic rights of the Class A Common Stock and the Class B Common
Stock are identical, but the voting rights differ. The holders of
the Class A Common Stock are entitled to one vote per share while
the holders of Class B Common Stock, par value $.01 per share (the
"Class B Common Stock" and, together with the Class A Common Stock,
the "Common Stock"), are generally entitled to ten votes per share
on most matters submitted to a vote of the stockholders. In addition,
the holders of shares of Class A Common Stock, voting as a separate
class, are entitled to elect two-sevenths of the Company's directors.
The holders of Class A Common Stock and Class B Common Stock, voting
as a single class, with each share of Class A Common Stock entitled
to one vote and each share of Class B Common Stock entitled to ten
votes, are entitled to elect the remaining directors. As a result,
holders of Class B Common Stock will have substantial control over
most matters submitted to a vote of the stockholders, including the
election of directors. See "Risk Factors--Control by Management"
and "Description of Capital Stock."

Class B Common Stock conversion................. Each share of Class B Common Stock is convertible at any time, at
the holder's option, into one share of Class A Common Stock. Each
share of Class B Common Stock converts automatically into one share
of Class A Common Stock (a) at the time of its sale or transfer to
a party not affiliated with Mr. Sillerman or the Company or (b) in
the case of shares held by Mr. Sillerman or any of his affiliates,
at the time of Mr. Sillerman's death. See "Risk Factors--Control
by Management" and "Descrip-tion of Capital Stock."

Use of proceeds ................................ To make an anticipated tax indemnity payment, to pay a portion of
the purchase price of the Pending Acquisitions, to repay debt in
connection with the Pending Acquisitions and to make certain other
payments. See "Use of Proceeds."

Nasdaq National Market symbol .................. SFXE.
</TABLE>

- ---------

(1) Includes (a) 1,531,782 shares of Class A Common Stock expected to be
issued pursuant to the Pending Acquisitions and (b) 75,019 shares of
Class A Common Stock which the Company agreed to issue in connection
with its acquisition of Westbury Music Fair. Excludes (a) 2,000,000
shares of Class A Common Stock reserved

12
<PAGE>

for issuance under Company's 1998 Stock Option and Restricted Stock
Plan, under which the Board of Directors has approved the issuance of
stock options for an aggregate of 1,002,500 shares, (b) 1,697,037 shares
issuable, subject to certain conditions, upon conversion of shares of
Class B Common Stock and (c) 1,050,000 shares of Class A Common Stock
issuable upon exercise of the Underwriters' over-allotment option. See
"Management--Employment Agreements and Arrangements with Certain
Officers and Directors" and "Underwriting."

RISK FACTORS

See "Risk Factors" for a discussion of certain considerations relevant to
an investment in the Class A Common Stock offered hereby.

13
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share amounts)

The Summary Consolidated Financial Data of the Company includes the
historical financial statements of Delsener/Slater and affiliated companies,
the predecessor of the Company, for each of the four years ended December 31,
1996 and the historical financial statements of the Company for the year
ended December 31, 1997 and the three months ended March 31, 1997 and 1998.
The statement of operations data with respect to Delsener/Slater for the year
ended December 31, 1993 and the balance sheet data as of December 31, 1993
and 1994 are unaudited. The financial information presented below should be
read in conjunction with the information set forth in "Unaudited Pro Forma
Condensed Combined Financial Statements" and the notes thereto and the
historical financial statements and the notes thereto of the Company, the
1997 Acquisitions, the Recent Acquisitions and the Pending Acquisitions
included herein. The financial information has been derived from the audited
and unaudited financial statements of the Company, the 1997 Acquisitions, the
Recent Acquisitions and the Pending Acquisitions. The 1997 Acquisitions, the
Recent Acquisitions, the Note Offering and the $150.0 million in initial
borrowings under the Credit Facility used to fund the Recent Acquisitions,
the Spin-Off and the SFX Merger are collectively referred to herein as the
"Transactions."The pro forma summary data for the year ended December 31,
1997, the three months ended March 31, 1998 and the twelve months ended March
31, 1998 have been derived from the unaudited pro forma condensed combined
financial statements, which, in the opinion of management, reflect all
adjustments necessary for a fair presentation of the transactions for which
such pro forma financial information is given.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
PREDECESSOR
----------------------------------
1997
PRO FORMA
FOR THE
TRANSACTIONS,
1997 THE PENDING
PRO FORMA ACQUISITIONS
FOR THE AND THE
TRANSACTIONS FINANCING
1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
------- ------- ------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenue................ $46,526 $92,785 $47,566 $50,362 $ 96,144 $646,719 $779,014
Operating expenses .... 45,635 90,598 47,178 50,686 83,417 576,913 688,430
Depreciation &
amortization.......... 762 755 750 747 5,431 39,639 56,392
Corporate expenses
(1)................... -- -- -- -- 2,206 4,206 5,206
------- ------- ------- -------- -------- ------------ -------------
Operating income
(loss)................ $ 129 $ 1,432 $ (362) $(1,071) $ 5,090 $ 25,961 $ 28,986
Interest expense....... (148) (144) (144) (60) (1,590) (47,296) (54,198)
Other income
(expense)............. 85 138 178 198 295 633 1,226
Equity income (loss)
from investments ..... -- (9) 488 524 509 5,417 5,347
------- ------- ------- -------- -------- ------------ -------------
Income (loss) before
income taxes.......... $ 66 $ 1,417 $ 160 $ (409) $ 4,304 $(15,285) $(18,639)
Income tax provision . (57) (5) (13) (106) (490) (3,500) (4,200)
------- ------- ------- -------- -------- ------------ -------------
Net income (loss)...... $ 9 $ 1,412 $ 147 $ (515) $ 3,814 $(18,785) $(22,839)
======= ======= ======= ======== ========
Accretion on
temporary
equity--stock subject
to redemption (2)..... (3,300) (3,300)
------------ -------------
Net loss applicable to
common shares ........ $(22,085) $(26,139)
============ =============
Net loss per common
share (3)............. $ (1.12) $ (0.92)
============ =============
Weighted average
common shares
outstanding (3)(4) ... 20,209 28,816
============ =============
OTHER OPERATING DATA:
EBITDA (5)............. $ 891 $ 2,187 $ 388 $ (324) $ 10,521 $ 65,600 $ 85,378
======= ======= ======== ======== ============ =============
Cash flow from:
Operating activities . $ 2,959 $ (453) $ 4,214 $ 1,005
Investing activities . -- -- (435) (73,296)
Financing activities . (477) (216) (1,431) 78,270
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDED
THREE MONTHS ENDED MARCH 31, MARCH 31,
---------------------------------- ------------

1998 1998
PRO FORMA PRO FORMA
FOR THE FOR THE
TRANSACTIONS, TRANSACTIONS,
THE PENDING THE PENDING
ACQUISITIONS ACQUISITIONS
AND THE AND THE
1997 1998 FINANCING FINANCING
(UNAUDITED)(UNAUDITED) (UNAUDITED) (UNAUDITED)
--------- --------- ------------- --------------
<S> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenue................ $ 7,789 $ 60,994 $187,345 $827,916
Operating expenses .... 7,738 58,175 172,422 729,485
Depreciation &
amortization.......... 660 4,428 14,098 56,392
Corporate expenses
(1)................... 858 1,314 1,617 5,565
-------- --------- ---------- --------
Operating income
(loss)................ $(1,467) $ (2,923) $ (792) $ 36,474
Interest expense....... (103) (6,748) (13,549) (54,198)
Other income
(expense)............. 26 (17,570) (17,250) (17,136)
Equity income (loss)
from investments ..... -- 445 77 6,362
-------- --------- ---------- --------
Income (loss) before
income taxes.......... $(1,544) $ (26,796) $(31,514) $(28,498)
Income tax provision . -- (500) (650) (3,000)
-------- --------- ---------- --------
Net income (loss)...... $(1,544) $ (27,296) $(32,164) $(31,498)
========
Accretion on
temporary
equity--stock subject
to redemption (2)..... (275) (825) (3,300)
-------- --------- ---------- --------
Net loss applicable to
common shares ........ $ (27,571) $(32,989) $(34,798)
======== ========= ========== ========
Net loss per common
share (3)............. $ (1.17) $ (1.23)
======== ========= ========== ========
Weighted average
common shares
outstanding (3)(4) ... 28,816 28,816
======== ========= ========== ========
OTHER OPERATING DATA:
EBITDA (5)............. $ (807) $ 1,505 $ 13,306 $ 92,866
======== ========= ========== ========
Cash flow from:
Operating activities . $ 307 $ 9,140
Investing activities . (22,612) (379,782)
Financing activities . 24,927 458,654
</TABLE>

14
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
PREDECESSOR
-------------------------------------
1993 1994 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.................... $1,823 $4,453 $3,022 $6,191
Property and equipment, net ...... 4,484 3,728 2,978 2,231
Intangible assets, net............ -- -- -- --
Total assets...................... 6,420 8,222 6,037 8,879
Current liabilities............... 4,356 3,423 3,138 7,973
Long-term debt, including current
portion.......................... -- 1,830 -- --
Temporary equity--stock subject
to redemption (2)................ -- -- -- --
Shareholders' equity (deficit) ... 6,420 2,969 2,900 907
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
PRO FORMA
FOR THE
SPIN-OFF, THE
SFX MERGER, THE
PENDING
ACQUISITIONS
AND THE
ACTUAL FINANCING
1997 (UNAUDITED) (UNAUDITED)
---- ----------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.................... $ 11,220 $149,375 $ 167,021
Property and equipment, net ...... 59,685 196,732 243,824
Intangible assets, net............ 60,306 470,721 695,238
Total assets...................... 146,942 858,426 1,158,007
Current liabilities............... 21,514 260,165 139,216
Long-term debt, including current
portion.......................... 16,178 543,003 615,651
Temporary equity--stock subject
to redemption (2)................ -- 16,500 16,500
Shareholders' equity (deficit) ... 102,144 (5,046) 311,315(6)
</TABLE>

(2) The PACE acquisition agreement provides that each PACE seller shall
have an option (a "Fifth Year Put Option"), exercisable during a period
beginning on the fifth anniversary of the closing of the PACE
Acquisition and ending 90 days thereafter, to require the Company to
purchase up to one-third of the Class A Common Stock received by that
PACE seller (representing 500,000 shares in the aggregate) for a cash
purchase price of $33.00 per share. With certain limited exceptions,
the Fifth Year Put Option rights are not assignable by the sellers. The
maximum amount payable under all Fifth Year Put Options ($16,500,000)
has been presented as temporary equity on the pro forma balance sheet.
See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations--Liquidity and Capital Resources."

(3) Includes 500,000 shares of the Class A Common Stock issued to the PACE
sellers in connection with the Fifth Year Put Option; these shares are
not included in calculating the net loss per common share.

(4) Reflects the assumed issuance of 7,000,000 shares of Class A Common
Stock in connection with the Offering and the approximately 1.5 million
shares of Class A Common Stock to be issued in connection with the
Pending Acquisitions.

(5) "EBITDA" is defined as earnings before interest, taxes, other income,
net, equity income (loss) from investments and depreciation and
amortization. Although EBITDA is not a measure of performance
calculated in accordance with generally accepted accounting principals
("GAAP"), the Company believes that EBITDA is accepted by the
entertainment industry as a generally recognized measure of performance
and is used by analysts who report publicly on the performance of
entertainment companies. Nevertheless, this measure should not be
considered in isolation or as a substitute for operating income, net
income, net cash provided by operating activities or any other measure
for determining the Company's operating performance or liquidity which
is calculated in accordance with GAAP.

There are other adjustments that could affect EBITDA but have not been
reflected herein. Had such adjustments been made, Adjusted EBITDA on a
pro forma basis would have been approximately $96,465,000 for the year
ended December 31, 1997 and $104,883,000 for the twelve months ended
March 31, 1998, an increase of $8,418,000. The adjustments include the
expected cost savings in connection with the Recent Acquisitions
associated with the elimination of duplicative staffing and general and
administrative expenses of $5,740,000 and $5,655,000, and include
equity income from investments of $5,347,000 and $6,362,000, for the
year ended December 31, 1997 and the twelve months ended March 31, 1998,
respectively. While management believes that such cost savings are
achievable, the Company's ability to fully achieve such cost savings is
subject to numerous factors, certain of which may be beyond the
Company's control.

(6) Stockholders' equity on a pro forma basis have not been adjusted for
future charges to earnings which will result from the issuance of stock
and options granted to certain executive officers and other employees
of the Company or certain other costs. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity
and Capital Resources--Future Charges to Earnings."

<PAGE>
RISK FACTORS

Stockholders should carefully consider and evaluate the following risk
factors together with the other information set forth in this Prospectus.

Certain statements, estimates, predictions and projections contained in
this Prospectus under "Prospectus Summary," "Risk Factors," "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in addition to certain statements contained elsewhere in this
Prospectus, are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These forward-looking statements are prospective, involving risks and
uncertainties. While these forward-looking statements, and any assumptions on
which they are based, are made in good faith and reflect the Company's
current judgment regarding the direction of its business, actual results will
almost always vary, sometimes materially, from any estimates, predictions,
projections, assumptions or other future performance suggested herein. Some
important factors (but not necessarily all factors) that could affect the
Company's revenues, growth strategies, future profitability and operating
results, or that otherwise could cause actual results to differ materially
from those expressed in or implied by any forward-looking statement, are
discussed below as well as elsewhere in this Prospectus. Stockholders are
urged to carefully consider these factors in connection with the
forward-looking statements. The Company does not undertake to release
publicly any revisions to forward-looking statements that may be made to
reflect events or circumstances after the date of this Prospectus or to
reflect the occurrence of unanticipated events.

ABSENCE OF COMBINED OPERATING HISTORY; POTENTIAL INABILITY TO INTEGRATE
ACQUIRED BUSINESSES

The business of the Company has been developed principally through the
acquisition of established live entertainment businesses, all of which have
been acquired since January 1997. The Company consummated the 1997
Acquisitions between January and June of 1997 and the Recent Acquisitions in
February through April of 1998. Prior to their acquisition by the Company,
these acquired companies operated independently. In addition, each of the
businesses to be acquired in the Pending Acquisitions currently operates
independently. Each of the Acquired Businesses has, and the Pending
Acquisitions will, significantly increase the size and operations of the
Company. The Unaudited Pro Forma Condensed Combined Financial Statements
include the combined operating results of the Acquired Businesses and the
Pending Acquisitions during periods when they were not under common control
or management, and therefore may not necessarily be indicative of the results
that would have been attained had the Company and the Acquired Businesses
operated on a combined basis during those periods. On a pro forma basis, as
of and for the twelve months ended March 31, 1998, the Recent Acquisitions
and the Pending Acquisitions represented 71% and 16% of the Company's revenues
and 52% and 25% of its assets, respectively. The Company's prospects should
be considered in light of the numerous risks commonly encountered in business
combinations. Although the anticipated management of the Company has
significant experience in other industries, there can be no assurance that
the Company's management group will be able to effectively integrate the
Acquired Businesses and the businesses to be acquired in the Pending
Acquisitions. The Company's business, financial condition and results of
operations could be materially adversely affected if the Company is unable to
retain the key personnel that have contributed to the historical performances
of the Acquired Businesses, the Company or the businesses to be acquired in
the Pending Acquisitions. See "--Dependence on Key Personnel" and "Business."

FUTURE CONTINGENT PAYMENTS

RELATED TO RECENT ACQUISITIONS

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<PAGE>
unvested options) granted to him by the Company and/or pay him an amount
equal to the present value of the compensation payable during the remaining
term of his employment agreement. See "Management--Employment Agreements and
Arrangements with Certain Officers and Directors." Moreover, pursuant to the
Contemporary acquisition agreement, if the average trading price of the
1,402,850 shares of Class A Common Stock issued in the Contemporary
acquisition is less than $13.33 during the 20 days prior to the second
anniversary of the Contemporary acquisition, the Company will be required to
pay one-half of such difference for each share held by the sellers of
Contemporary on such date. Pursuant to the Network acquisition agreement, the
Company has agreed to increase the purchase price for Network based on
Network's actual 1998 EBITDA (as defined in the acquisition agreement) as
follows: (a) by $4.0 million if the 1998 EBITDA equals or exceeds $9.0
million; (b) by an additional $4 for each $1 of additional 1998 EBITDA
between $9.0 million and $10.0 million; and (c) by an additional $6 for each
$1 of additional 1998 EBITDA between $10.0 million and $11.0 million. This
contingent consideration of up to $14.0 million is payable in shares of Class
A Common Stock or, in certain circumstances, in cash by no later than March
20, 1999.

RELATED TO THE PENDING ACQUISITIONS

Certain of the agreements relating to the Pending Acquistions provide for
future contingent payments under certain circumstances. The Company is
obligated to pay to the FAME sellers additional amounts up to $15.0 million
in equal annual installments over 5 years contingent on the achievement by
FAME of certain EBITDA targets. The FAME agreement also provides for
additional payments by the Company to the FAME sellers if FAME's EBITDA
performance exceeds the targets by certain amounts. Furthermore, if the
Company disposes of all or substantially all of the assets or 50% or more of
the voting or equity interests of FAME during the five years following the
closing of the FAME acquisition, certain payments may become due to the FAME
sellers out of the proceeds of such sale. See "Agreements Related to the
Pending Acquisitions." In addition, pursuant to the agreement relating to the
acquisition of certain assets of Oakdale, if the combined EBITDA (as defined
in the acquisition agreement) for 1999 of Oakdale Theater and Meadows exceeds
$5.5 million, the Company will be obligated to pay the sellers of Oakdale
between 5.0 and 5.8 times the amount of such excess. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Pending Acquisitions" and
"Agreements Related to the Pending Acquisitions."

RELATED TO WORKING CAPITAL ADJUSTMENTS

Pursuant to the Distribution Agreement, the Company must pay SFX
Broadcasting any net negative Working Capital at the time of consummation of
the SFX Merger. Alternatively, SFX Broadcasting must pay to the Company any
net positive Working Capital. As of March 31, 1998, the Company estimates
that Working Capital to be paid by SFX Broadcasting to the Company would have
been approximately $3.3 million. The actual amount of Working Capital will be
a function of, among other things, the operating results of SFX Broadcasting
through the date of the SFX Merger, the actual date of the closing of the SFX
Merger and the actual cost of consummating the SFX Merger and the related
transactions. See "--Substantial Leverage" and "--Restrictions Imposed by the
Company's Indebtedness," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Certain Relationships and Related Transactions--Indemnification of Mr.
Sillerman" and "Description of Indebtedness."

RELATED TO THE TAX INDEMNITY PAYMENT

Pursuant to the Tax Sharing Agreement, the Company is required to
indemnify SFX Broadcasting for certain tax obligations including a tax
obligation of approximately $120.0 million in connection with the Spin-Off.
Management's estimate of the amount of the indemnity payment is based on
certain assumptions which management believes are reasonable. However, the
actual amount could vary significantly. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources--Spin-Off."

RELATED TO OTHER INDEMNIFICATION OBLIGATIONS

Pursuant to the Distribution Agreement, the Company has also agreed to
indemnify, defend and hold SFX Broadcasting and its subsidiaries harmless
from and against certain liabilities to which SFX

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<PAGE>

Broadcasting or any of its subsidiaries may be or become subject. These
liabilities relate to the assets, business, operations, employees (including
under any employment agreement assumed by the Company in the Spin-Off), debts
or liabilities of the Company and its subsidiaries. Although the Company does
not anticipate that any material liabilities for which it has agreed to
indemnify SFX Broadcasting and its subsidiaries will arise, it is possible
that the Company will become subject to these liabilities. Any of these
liabilities may have a material adverse effect on the Company's business,
financial condition or results of operations.

Concurrently with the execution of the SFX Merger Agreement, Mr. Sillerman
waived his right to receive indemnification from SFX Broadcasting, its
subsidiaries, SFX Buyer Sub and SFX Buyer, after the effective time of the
SFX Merger with respect to claims or damages relating to the SFX Merger
Agreement and the transactions contemplated thereby, except to the extent
that SFX Broadcasting can be reimbursed under the terms of its directors' and
officers' liability insurance. It is anticipated that the Company will
indemnify (to the extent permitted by law) Mr. Sillerman for any such claims
or damages. In addition, pursuant to Messrs. Sillerman's and Ferrel's
existing employment agreements with SFX Broadcasting (which will be assumed
by the Company pursuant to the Distribution Agreement), the Company will be
obligated to indemnify them (to the extent permitted by law) for one-half of
the cost of any excise tax that may be assessed against them for any
change-of-control payments made to them by SFX Broadcasting in connection
with the SFX Merger. See "Certain Relationships and Related
Transactions--Assumption of Employment Agreements; Certain Change of Control
Payments" and "--Indemnification of Mr. Sillerman."

In addition, the agreements relating to the Tax Sharing Agreement and the
Employee Benefits Agreement provide for certain other indemnities, including
the $120.0 million tax indemnity liability to SFX Broadcasting which the
Company intends to fund with a portion of the proceeds of the Financing.

RISKS RELATED TO THE PENDING ACQUISITIONS

The aggregate consideration to be paid in the Pending Acquisitions is
expected to consist of approximately $216.1 million in cash, including the
repayment of $10.0 million in debt, and the issuance of 1,531,782 shares of
Class A Common Stock. The Company intends to finance the cash portion of the
purchase price with the proceeds of the Financing. The availability of funds
under the Credit Facility is subject to certain financial covenants and there
can be no assurance that the funds required to complete the Pending
Acquisitions will be available to the Company when needed. See "Description
of Indebtedness." In addition, certain of the agreements relating to the
Pending Acquisitions provide for future contingent payments under certain
circumstances. See "--Future Contingent Payments" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Agreements Related to the
Pending Acquisitions."

In addition, the approximately 1.5 million shares to be issued in
connection with acquisitions of FAME and Don Law were not registered under
the Securities Act or state securities laws, as may have been required. The
Company has filed a registration statement in order to make a rescission
offer (the "Rescission Offer") with respect to such transactions which could
result in the unwinding of all or a portion of the FAME and/or Don Law
acquisitions. The Company does not expect the sellers of FAME or Don Law to
accept such Rescission Offer.

There can be no assurance as to when or which of the Pending Acquisitions
will be consummated or that they will be consummated on the terms described
herein or at all. Furthermore, the consummation of the Pending Acquisitions
may fail to conform to the assumptions used in the preparation of the
Unaudited Pro Forma Condensed Combined Financial Statements included herein.
Therefore, in analyzing the Unaudited Pro Forma Condensed Combined Financial
Statements and other information, prospective purchasers of the Class A
Common Stock should consider that the Pending Acquisitions may not be
consummated at all or on the terms described herein. In addition, although
the Company has conducted a due diligence investigation of the Pending
Acquisitions, the scope of its investigation has been limited. Although the
agreements governing the Pending Acquisitions generally provide for
indemnification from the seller for a limited period of time with respect to
certain matters, such indemnification is subject to thresholds and
limitations and it is possible that other material matters not

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<PAGE>

identified in due diligence will subsequently be identified or that the
matters heretofore identified will prove to be more significant than
currently expected.

While none of the Pending Acquisitions is conditioned on the consummation
of any other Pending Acquisition, consummation of each of the Pending
Acquisitions is subject to the satisfaction or waiver of a number of closing
conditions, certain of which are beyond the Company's control, including in
certain cases approvals under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"). The failure to satisfy these
conditions would permit each of the parties to the acquisition agreements to
refuse to consummate the respective Pending Acquisitions. See "Agreements
Related to the Pending Acquisitions."

SUBSTANTIAL LEVERAGE

The Company is a highly leveraged company. As of March 31, 1998, on a pro
forma basis giving effect to the Transactions, the Pending Acquisitions and the
Financing, the Company's consolidated indebtedness would have been
approximately $628.0 million (of which $350.0 million would have consisted of
the Notes, and the balance would have consisted of $235.0 million in debt under
the Credit Facility, and $43.0 million in other debt), its temporary
equity--stock subject to redemption would have been approximately $16.5
million, and its stockholders' equity would have been approximately $280.9
million. See "Unaudited Pro Forma Condensed Combined Financial Statements." On
a pro forma basis for the Transactions, the Pending Acquisitions and the
Financing, the Company's ratio of total debt to total capitalization as of
March 31, 1998 would have been approximately 0.7 to 1.0. The Company's earnings
were insufficient to cover fixed charges by $26.4 million for the three months
ended March 31, 1998, and would have been insufficient by $22.1 million on a
pro forma basis for the Transactions, the Pending Acquisitions and the
Financing for the twelve months ended March 31, 1998.

In addition, certain of the agreements relating to the Recent Acquisitions
and the Pending Acquisitions provide for other purchase price adjustments and
future contingent payments in certain circumstances. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Recent Acquisitions" and "--Pending Acquisitions." In addition,
the Company may incur substantial additional indebtedness from time to time
to finance future acquisitions, for capital expenditures or for other
purposes. See "--Future Contingent Payments," "Capitalization" and "Unaudited
Pro Forma Condensed Combined Financial Statements."

The Company's ability to make scheduled payments of principal, to pay
interest on or to refinance its indebtedness, or to fund planned capital
expenditures, will depend on its future financial performance, which, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors beyond its control, as well as the
success of the Acquired Businesses and the businesses to be acquired in the
Pending Acquisitions and their integration into the Company's operations.
There can be no assurance that the Company will be able to make planned
borrowings (including under the Credit Facility), that the Company's business
will generate sufficient cash flow from operations, or that future borrowings
will be available in an amount to enable the Company to service its debt and
to make necessary capital or other expenditures. The Company may be required
to refinance a portion of the principal amount of its indebtedness prior to
their respective maturities. There can be no assurance that the Company will
be able to raise additional capital through the sale of securities, the
disposition of assets or otherwise for any refinancing. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

The degree to which the Company is and will be leveraged could have
material consequences to the holders of shares of Class A Common Stock,
including, but not limited to, (a) increasing the Company's vulnerability to
general adverse economic and industry conditions, (b) limiting the Company's
ability to obtain additional financing to fund future acquisitions, working
capital, capital expenditures and other general corporate requirements, (c)
requiring the dedication of a substantial portion of the Company's cash flow
from operations to the payment of principal of, and interest on, its
indebtedness, thereby reducing the availability of the cash flow to fund
working capital, capital expenditures or other general corporate purposes,
(d) limiting the Company's flexibility in planning for, or reacting to,
changes in its business and the industry and (e) placing the Company at a
competitive disadvantage to less leveraged

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<PAGE>
competitors. In addition, the indenture relating to the Notes (the
"Indenture") and the Credit Facility contain, financial and other restrictive
covenants that limit the ability of the Company to, among other things,
borrow additional funds. Failure by the Company to comply with these
covenants could result in an event of default that, if not cured or waived,
could have a material adverse effect on the Company's business, financial
condition and results of operations. The indebtedness incurred under the
Credit Facility is secured by a pledge of the stock of its subsidiaries and
by liens on substantially all of its and its subsidiaries' tangible assets.
In addition, the Notes and borrowings under the Credit Facility are
guaranteed by the Company's subsidiaries. See "--Restrictions Imposed by the
Company's Indebtedness" and "Description of Indebtedness."

DISCRETIONARY USE OF FUNDS

While the Company expects to use the proceeds of the Offering as set forth
in "Use of Proceeds," the expectation is based on its ability to consummate
the Pending Acquisitions on the terms contemplated or at all, and on certain
other factors beyond its control, including the ability to borrow sufficient
funds under the Credit Facility. If the Company does not utilize the funds as
set forth herein or utilizes different amounts than presently contemplated,
the Company could use any remaining cash, subject to the terms of the
Indenture, the Credit Agreement, to fund other development projects or
acquisitions, and for general corporate purposes including working capital.
See "Use of Proceeds."

EXPANSION STRATEGY; NEED FOR ADDITIONAL FUNDS

The Company is currently negotiating additional acquisitions and expects
to pursue additional acquisitions of live entertainment businesses in the
future. However, it may be unable to identify and acquire additional suitable
businesses or obtain the financing necessary to acquire the businesses.
Future acquisitions by the Company could result in (a) potentially dilutive
issuance of equity securities, (b) the incurrence of substantial additional
indebtedness and/or (c) the amortization of expenses related to goodwill and
other intangible assets, any or all of which could materially adversely
affect the Company's business, financial condition and results of operations.
Acquisitions involve numerous risks, including difficulties in the
assimilation of the operations, technologies, services and products of the
acquired companies and the diversion of management's attention from other
business concerns. If any acquisition occurs, the Company's business,
financial condition and results of operations may be materially adversely
affected. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources--Recent Developments" and "Future Acquisitions."

Each acquisition is subject to the prior approval of the Company's lenders
under the Credit Facility and financing for such acquisitions may be
unavailable or restricted by the terms of the Credit Facility and the
Indenture.

RESTRICTIONS IMPOSED BY THE COMPANY'S INDEBTEDNESS

Pursuant to the terms of the Credit Facility, a "Change of Control" will
be deemed to occur if, among other things, Mr. Sillerman beneficially owns
less than 35% of the combined voting power of the outstanding Common Stock.
Upon consummation of the Offering and the Pending Acquisitions, Mr. Sillerman
will beneficially own approximately 38.1% of the combined voting power of the
Company. In addition, pursuant to the terms of the Indenture, a change of
control will be deemed to occur if any party, other than Mr. Sillerman,
becomes the beneficial owner of more than 35% of the combined voting power of
the outstanding Common Stock. In the event of a "Change of Control" under the
Credit Facility the Company will be required to repay all amounts outstanding
under the Credit Facility and, in the event of a "Change of Control" under
the Indenture, the Company will be required to offer to repurchase the
outstanding Notes.

The Indenture and the Credit Facility also contain a number of significant
covenants that, among other things, restrict the ability of the Company and
its subsidiaries to dispose of assets, incur additional indebtedness, repay
other indebtedness, pay dividends, make certain investments or acquisitions,

20
<PAGE>

repurchase or redeem capital stock, engage in mergers or consolidations, or
engage in certain transactions with subsidiaries and affiliates and otherwise
restrict corporate activities. These restrictions may adversely affect the
Company's ability to finance its future operations or capital needs or to
engage in other business activities that may be in the interest of the
Company. In addition, the Indenture and the Credit Facility require the
Company to maintain compliance with certain financial ratios, such as a
maximum total leverage ratio, a maximum senior leverage ratio, a minimum
fixed charges ratio, a minimum pro forma interest expense ratio and a minimum
debt service ratio. The Company's ability to comply with these ratios and
limits may be affected by events beyond its control. A breach of any of these
covenants or the inability of the Company to comply with the required
financial ratios or limits could result in an event of default under the
Credit Facility. Such an event of default could permit the lenders to declare
all borrowings outstanding to be due and payable, to require the Company to
apply all of its available cash to repay its borrowings or to prevent the
Company from making debt service payments on certain portions of its
outstanding indebtedness. If the Company were unable to repay any borrowings
when due, the lenders could proceed against their collateral. The Credit
Facility requires the Company and its subsidiaries to grant the lenders
thereunder a continuing security interest in all of their tangible assets and
in the capital stock of the guaranteeing subsidiaries. If the Company's
indebtedness were to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay its indebtedness in full.
See "Description of Indebtedness."

There can be no assurance that the Company will be able to obtain a waiver
of these provisions or that sufficient funds will be available at the time of
any Change of Control to refinance its indebtedness. The failure to either
obtain waivers or refinance its indebtedness will result in a material
adverse effect to the Company's business, results of operations and financial
condition. See "--Substantial Leverage," "Principal Stockholders" and
"Description of Indebtedness."

CONTROL BY MANAGEMENT

Upon the consummation of the Offering and the Pending Acquisitions, Mr.
Sillerman will beneficially own approximately 38.1% of the total voting power
of the Common Stock, and all directors and executive officers together will
beneficially own approximately 44.9% of the total voting power of the Common
Stock. Accordingly, these persons will have substantial influence over the
affairs of the Company, including the ability to control the election of a
majority of the Company's Board of Directors (the "Board"), the decision
whether to effect or prevent a merger or sale of assets (except in certain
"going private transactions") and other matters requiring stockholder
approval. Moreover, control by management may have the effect of discouraging
certain types of "change of control" transactions, including transactions in
which the holders of Class A Common Stock might otherwise receive a premium
for their shares. See "--Anti-Takeover Effects," "Management," "Principal
Stockholders" and "Description of Capital Stock."

Mr. Sillerman beneficially owns 1,524,168 shares of Class B Common Stock
representing approximately 34.6% of the total voting power of the Common
Stock, which will allow him to exert substantial control in the election of
directors. Each share of Class B Common Stock automatically converts into a
share of Class A Common Stock upon (a) its sale, gift, or other transfer,
voluntary or involuntary, to a party that is not an Affiliate (as defined in
the Certificate of Incorporation) of Mr. Sillerman or of the Company or (b)
upon the death of Mr. Sillerman, in the case of any shares of Class B Common
Stock held by Mr. Sillerman or any Affiliate of Mr. Sillerman. The terms of
the Certificate of Incorporation contemplate that, absent an event of
automatic conversion, the shares of Class B Common Stock held by Mr.
Sillerman could be transferred to a third-party without losing their special
voting rights.

DEPENDENCE ON KEY PERSONNEL

The success of the Company depends substantially on the abilities and
continued service of certain of its (and its subsidiaries') executive
officers and directors. In particular, the Company will depend on the
continued services of Robert F.X. Sillerman, Michael G. Ferrel, Brian Becker,
Howard J. Tytel, Thomas P. Benson and, upon the consummation of the
acquisition of FAME, David Falk. Although many of these individuals generally
have greater experience in the radio broadcasting business than the live

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<PAGE>

entertainment industry, they do have significant expertise in selecting,
negotiating and financing acquisitions and in operating and managing public
companies. In addition, most of the Company's directors and executive
officers are also currently acting as directors and executive officers of SFX
Broadcasting. Until the consummation of the SFX Merger, most of these
directors and executive officers can be anticipated to expend substantial
time and effort in managing the business of SFX Broadcasting (which may
detract from their performance with respect to the Company). If the SFX
Merger is not consummated, there can be no assurance that the Company will be
able to retain the services of these directors and executive officers. The
Company has entered into an employment agreement with Mr. Becker and has
reached agreements in principle with Messrs. Sillerman, Ferrel, Tytel and
Benson to enter into employment agreements, which agreements will be
effective upon consummation of the SFX Merger. In addition, the Company has
entered into an employment agreement with Mr. Falk that becomes effective
upon the consummation of the acquisition of FAME. See "--Potential Conflicts
of Interest" and "Management."

Furthermore, the operations of each of the Acquired Businesses and the
businesses to be acquired in the Pending Acquisitions are local in nature and
depend to a significant degree on the continued services of certain
individuals at each business. See "Management" and "Certain Relationships and
Related Transactions." The loss of any of these individuals' services could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "--Absence of Combined Operating History;
Potential Inability to Integrate Acquired Businesses."

POTENTIAL CONFLICTS OF INTEREST

Marquee is a publicly-traded company that, among other things, provides
talent representation services to professional athletes and acts as booking
agent for tours and appearances for musicians and other entertainers. The
Company has indicated to Marquee its potential interest in acquiring Marquee.
Mr. Sillerman has an aggregate equity interest of approximately 9.1% in
Marquee and Mr. Sillerman is the chairman of its board of directors, and Mr.
Tytel is one of its directors. Upon the consummation of the acquisition of
FAME, the Company may directly compete with Marquee in obtaining
representation agreements with particular athletes and endorsement
opportunities for its clients. In addition, the Company anticipates that,
from time to time, it will enter into transactions and arrangements
(particularly booking arrangements) with Marquee and Marquee's clients. In
any transaction or arrangement with Marquee, Messrs. Sillerman and Tytel are
likely to have conflicts of interest as officers and directors of the
Company. These transactions or arrangements will be subject to the approval
of a committee of independent members of the boards of directors of each of
the Company and Marquee, except that booking arrangements in the ordinary
course of business will be subject to periodic review but not the approval of
each particular arrangement. Marquee also acts as a promoter of various
sporting events and sports personalities and the Company produces ice skating
and gymnastics events that may compete with events in which Marquee is
involved. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Recent Developments" and "Certain Relationships
and Related Transactions--Potential Conflicts of Interest."

The Sillerman Companies, Inc. ("TSC"), an entity controlled by Mr.
Sillerman and in which Mr. Tytel also has an equity interest, provides
financial consulting services to Marquee. TSC's services are provided by
certain directors, officers and employees of the Company who are not
separately compensated for their services by TSC. In any transaction,
arrangement or competition with Marquee, Messrs. Sillerman and Tytel are
likely to have conflicts of interest between their duties as officers and
directors of the Company, on the one hand, and their duties as directors of
Marquee and their interests in TSC and Marquee, on the other hand. See
"Certain Relationships and Related Transactions--Triathlon Fees."

In addition, prior to the consummation of the SFX Merger, Mr. Sillerman
and other members of the Company's management team will have management
obligations to both SFX Broadcasting and the Company that may cause them to
have conflicts of interest. See "Management" and "Certain Relationships and
Related Transactions--Potential Conflicts of Interest."

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<PAGE>
RIGHTS TO PURCHASE CERTAIN SUBSIDIARIES

Pursuant to the employment agreement entered into between Brian Becker and
the Company in connection with the PACE acquisition, Mr. Becker has the
option, exercisable within 15 days after February 25, 2000 to acquire the
Company's then existing motor sports line of business (or, if that line of
business has previously been sold, the Company's then existing theatrical
line of business) at its then fair market value. Mr. Becker's exercise of
this option could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, during the period
between February 25, 1999 and February 25, 2000, Mr. Becker also has a right
of first refusal under certain circumstances to acquire the theatrical or
motor sports line of business at a price equal to 95% of the proposed
purchase price. On a pro forma basis, specialized motor sports would have
comprised approximately 6%, and theater would have comprised approximately
13%, of the Company's total net revenues for the year ended March 31, 1998.
The Don Law seller and the Company have also agreed to enter into an
agreement pursuant to which the assets to be acquired in the Don Law
Acquisition, with certain exceptions, will be subject to a right of first
refusal of the Don Law seller if the Company elects to sell such assets
within two years after the closing of the Don Law Acquisition. These rights
of first refusal may have the effect of discouraging potential bidders for
such lines of business from negotiating with the Company. See
"Management--Employment Agreements and Arrangements with Certain Officers and
Directors" and "Agreements Related to the Pending Acquisitions."

In addition, after the consummation of the Spin-Off or the SFX Merger, the
senior management of Concerts may have the right pursuant to their employment
agreements (a) to purchase the outstanding capital stock of Concerts (a
subsidiary of the Company holding a significant amount of the assets of the
Company) for Fair Market Value (as defined in their employment agreements) or
(b) to receive a cash payment equal to 15% of the amount by which the Fair
Market Value of Concerts exceeds the fixed payment portion of the cash
purchase price of the acquisition of Concerts, plus 20% interest thereon. The
senior management of Concerts and SFX Broadcasting have reached an agreement
in principle to waive the above rights in connection with the Spin-Off, the
SFX Merger and related transactions; however, there can be no assurance that
the rights will be waived on terms acceptable to SFX Broadcasting and the
Company or at all. In addition, although the Company is in the process of
negotiating amendments to these agreements, these and certain other rights
described in the agreements may continue to apply to transactions after, or
unrelated to, the Spin-Off or the SFX Merger. See "Certain Relationships and
Related Transactions--Delsener/Slater Employment Agreements."

The Company has also agreed that it will not sell all, or substantially
all, of BGP's assets prior to February 24, 2001 without offering the BGP
sellers the opportunity to purchase the assets on the same terms as those
included in any bona fide offer received by the Company from any third party.
BGP's right of first refusal may have the effect of discouraging potential
bidders for BGP's assets from negotiating with the Company.

ECONOMIC CONDITIONS AND CONSUMER TASTES; AVAILABILITY OF ARTISTS AND EVENTS

The Company's operations are affected by general economic conditions and
consumer tastes. The demand for live entertainment tends to be highly
sensitive to consumers' disposable incomes, and thus a decline in general
economic conditions that generally reduces consumers' disposable incomes can,
in turn, materially adversely affect the Company's revenues. In addition, the
profitability of events promoted or produced by the Company is directly
related to the ancillary revenues generated by those events, and the
ancillary revenues decrease with lower attendance levels. The success of a
music concert, theatrical show or motor sports event depends on public
tastes, which are unpredictable and susceptible to change, and may also be
significantly affected by the number and popularity of competitive
productions, concerts or events as well as other forms of entertainment. It
is impossible for the Company to predict the success of any music concert,
theatrical show or motor sports event. In addition, decreased attendance, a
change in public tastes or an increase in competition could have a material
adverse effect on the Company's business, financial condition and results of
operations.

The Company's success and ability to sell tickets (including
subscriptions) is also highly dependent on the availability of popular
musical artists, Touring Broadway Shows and specialized motor sports

23
<PAGE>
talent, among other performers of live entertainment. The Company's and the
Acquired Businesses' results of operations have been adversely affected in
periods where fewer popular musical artists and/or popular theatrical
productions were available for presentation. There can be no assurance that
popular musical artists, theatrical shows or specialized motor sports talent
will be available to the Company in the future. The lack of availability of
these artists and productions could have a material adverse effect on the
Company's business, financial condition and results of operations.

RISKS RELATED TO THE REPRESENTATION OF ATHLETES

Upon the consummation of the acquisition of FAME, the Company will become
a leading full-service marketing and management company specializing in the
representation of team sports athletes primarily in professional basketball.
A significant portion of FAME's revenues to date has been derived from a
small number of clients. On a pro forma basis, giving effect to the
Transactions and the Pending Acquisitions, the Company estimates that five of
FAME's clients would have accounted for approximately 78% of FAME's revenues
for the twelve months ended March 31, 1998 and, on such pro forma basis,
FAME's EBITDA would have comprised approximately 7% of the Company's EBITDA
for the same period. The amount of endorsement and other revenues which these
clients generate is a function of, among other things, such clients'
professional performance and public appeal. Factors beyond the Company's
control, such as a client's injury, declining skill, declining public appeal
or conduct in violation of team or league policy, as well as labor unrest in
the sports industry, could have a material adverse affect on the Company's
operations. In the event of a labor interruption, for example, FAME's
revenues related to the negotiation of a client's contract (absent a
retroactive payment for games missed as part of any settlement) would
generally cease for the duration of the stoppage. Endorsement revenues, which
generally require that a player be on an active roster, might also be
affected in the event of a labor interruption. FAME's representation
agreements with its clients are generally for a term equal to the term of the
player's professional sports contract, but are terminable on 15 days' notice
(although FAME would continue to be entitled to the revenue streams generated
during the remaining term of any contracts which it negotiated). The
termination or expiration of FAME's contracts with certain clients could also
have a material adverse effect on the Company's operations.

FUTURE CHARGES TO EARNINGS

Consummation of the Recent Acquisitions and the Pending Acquisitions will
result in substantial charges to earnings relating to interest expense and
the recognition and amortization of goodwill and other intangible assets;
these charges will increase the Company's losses or reduce or eliminate its
earnings, if any. As of March 31, 1998 the Company had goodwill and other
intangible assets of approximately $470.7 million. This balance will
substantially increase due to the Pending Acquisitions. Goodwill and other
intangible assets are being amortized using the straight line method over 15
years. See "Unaudited Pro Forma Condensed Combined Financial Statements" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Future Charges to Earnings."

The Company anticipates entering into or amending employment agreements
with certain of its executive officers. In connection with these agreements,
the Company has sold to the executive officers an aggregate of 650,000 shares
of Class B Common Stock and 190,000 shares of Class A Common Stock at a
purchase price of $2.00 per share. The Company will record a non-cash
compensation charge in the second quarter of 1998 of approximately $24
million associated with this sale. In addition, the Company will recognize a
non-cash charge to earnings in the second quarter of 1998 of approximately
$7.5 million resulting from the issuance of 247,177 shares of Class A Common
Stock to Mr. Sillerman in connection with the Meadows Repurchase (as defined
herein). The amount of such charge is equal to the fair value of Class A
Common Stock received by Mr. Sillerman at the time of the Meadows Repurchase.
Further, the Board, on the recommendation of its Compensation Committee, also
has approved the issuance of certain "below market" stock options exercisable
for an aggregate of 252,500 shares of Class A Common Stock. These options will
vest over three years and will have an exercise price of $5.50 per share. The
Company will record non-cash compensation charges over the three-year exercise
period of

24
<PAGE>

approximately $2 million annually. These substantial non-cash charges to
earnings will increase the Company's losses or reduce or eliminate its
earnings, if any. See "--Future Contingent Payments," "Certain Relationships
and Related Transactions" and "Management--Employment Agreements and
Arrangements with Certain Officers and Directors."

COMPETITION

Competition in the live entertainment industry is intense, and is
fragmented among a wide variety of entities. The Company competes on a local,
regional and national basis with a number of large venue owners and
entertainment promoters for the hosting, booking, promoting and producing of
music concerts, theatrical shows, motor sports events and other live
entertainment events. Moreover, the Company's marketing and consulting
operations compete with advertising agencies and other marketing
organizations. The Company and the businesses to be acquired in the Pending
Acquisitions, compete not only with other live entertainment events,
including sporting events and theatrical presentations, but also with
non-live forms of entertainment, such as television, radio and motion
pictures. The talent representation industry is also highly competitive. The
Company competes with both larger and smaller entities. A number of the
Company's competitors have substantially greater resources than the Company.
Certain of the Company's competitors may also operate on a less leveraged
basis, and have greater operating and financial flexibility, than the
Company. In addition, many of these competitors also have long standing
relationships with performers, producers, and promoters and may offer other
services that are not provided by the Company. There can be no assurance that
the Company will be able to compete successfully in this market or against
these competitors.

CONTROL OF VENUES

The Company operates a number of its live entertainment venues under
leasing or booking agreements, and accordingly the Company's long-term
success will depend in part on its ability to renew these agreements when
they expire or terminate. There can be no assurance that the Company will be
able to renew these agreements on acceptable terms or at all, or that it will
be able to obtain attractive agreements with substitute venues. See
"Business--The Company's Live Entertainment Activities--Venue Operations."

REGULATORY MATTERS

The business of the Company is not generally subject to material
governmental regulation. However, if the Company seeks to acquire or
construct new venue operations, its ability to do so will be subject to
extensive local, state and federal governmental licensing, approval and
permit requirements, including, among other things, approvals of state and
local land-use and environmental authorities, building permits, zoning
permits and liquor licenses. Significant acquisitions may also be subject to
the requirements of the HSR Act. Other types of licenses, approvals and
permits from governmental or quasi-governmental agencies might also be
required for other opportunities that the Company may pursue in the future.
There can be no assurance that the Company will be able to obtain the
licenses, approvals and permits it may require from time to time in order to
operate its business.

The Company has real property relating to its business, consisting of fee
interests, leasehold interests and other contractual interests. The Company's
properties are subject to foreign, federal, state and local environmental
laws and regulations regarding the use, storage, disposal, emission, release
and remediation of hazardous and non-hazardous substances, materials or
wastes, including laws relating to noise emissions (which may affect, among
other things, the hours of operation of the Company's venues). Further, under
certain of these laws and regulations, the Company could be held strictly,
jointly and severally liable for the remediation of hazardous substance
contamination at its facilities or at third-party waste disposal sites, and
could also be held liable for any personal or property damage related to any
contamination. The Company believes that it is in substantial compliance with
all of these laws and regulations, and has performed preliminary
environmental assessments of all of the properties that are wholly-owned,
without identifying material environmental hazards. Although the level

25
<PAGE>
of future expenditures cannot be determined with certainty, the Company does
not anticipate, based on currently known facts, that its environmental costs
are likely to have a material adverse effect on the Company's business,
financial condition and results of operations.

POTENTIAL VOLATILITY OF STOCK PRICE

As a result of the Spin-Off, stockholders of SFX Broadcasting received
14,626,061 shares of Common Stock that are freely tradeable at the time of
the Offering without restrictions or further registration under the
Securities Act, except that any shares held by "affiliates" of the Company
within the meaning of the Securities Act will be subject to the resale
limitations of Rule 144 promulgated under the Securities Act. Because the
Spin-Off was made to stockholders of SFX Broadcasting, who did not make an
affirmative decision to invest in the Class A Common Stock, there can be no
assurance that some or all of these shareholders will not sell the shares of
Class A Common Stock into the market shortly after the Spin-Off. Such trading
could increase the volatility of, and adversely affect the market price of,
the Class A Common Stock. See "Price Range of Class A Common Stock" and
"Shares Eligible for Future Sale."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Class A Common Stock in the public market,
or the possibility that these sales may occur, could adversely affect market
prices for Class A Common Stock or the future ability of the Company to raise
capital through an offering of equity securities. Upon consummation of the
Offering and the Pending Acquisitions, the Company will have 27,118,971
shares of Class A Common Stock and 1,697,037 shares of Class B Common Stock
outstanding (not including shares issuable upon the exercise of outstanding
options). Of those shares, a total of 13,579,024 shares will be freely
tradeable in the public market without restriction under the Securities Act,
unless the shares are held by "affiliates" of the Company (as that term is
defined in Rule 144 under the Securities Act). Under the Underwriting
Agreement and certain agreements entered into between the representatives of
the Underwriters and each of the Company's officers and directors (the
"Lock-Up Agreements") who beneficially hold, in the aggregate 2,162,479
shares of Class A Common Stock and 1,697,037 shares of Class B Common Stock,
such officers and directors will not, without the prior written consent of
Goldman, Sachs & Co., during the period commencing on the date hereof and
ending 180 days after the date of this Prospectus, (i) offer, pledge, sell or
otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or any right to acquire Common Stock, or (ii)
enter into any swap or similar agreement that transfers, in whole or in part,
the economic risk of ownership of the Common Stock. The foregoing provisions
will not apply to (i) exercise of options or warrants, or (ii) transfers,
without consideration to family members or to one or more trusts established
for the benefit of one or more family members, provided that the transferee
executes and delivers to Goldman, Sachs & Co., an agreement whereby the
transferee agrees to be bound by all of the foregoing terms and provisions.
Goldman, Sachs & Co. in its sole discretion and at any time without notice,
may release all or any portion of the securities subject to the Lock-Up
Agreements or may waive the covenants contained in the Underwriting
Agreement. Any such decision to release securities would likely be based upon
individual stockholder circumstances, prevailing market conditions and other
relevant factors. Any such release could have a material adverse effect upon
the price of the Class A Common Stock. Upon the expiration or termination of
the Lock-Up Agreements, the shares held by affiliates will be eligible for
sale subject to compliance with the provisions of Rule 144 or pursuant to an
effective registration statement filed with the Securities and Exchange
Commission. See "Underwriting."

The 4,216,680 shares of Class A Common Stock issued in connection with the
Recent Acquisitions are "restricted securities" under Rule 144; however, the
Company has obligations to register all or a portion of these shares.

26
<PAGE>

Company to be issued to the Don Law seller, which agreement will provide for,
among other things: (a) a twelve month lock-up period (provided that the Don
Law seller and its members may continue to engage in hedging other derivative
transactions and other transactions with Affiliates (as defined in such
agreement), (b) a single demand registration right, (c) unlimited piggyback
registration rights (unless sales under Rule 144 and 145 of the Securities
Act are available to the members) and (d) usual and customary underwriting
restrictions with respect to the foregoing. Pursuant to the Underwriting
Agreement, the Company has agreed not to waive these provisions without the
consent of Goldman, Sachs & Co.

Pursuant to the Rescission Offer, the approximately 1.5 million shares of
Class A Common Stock to be issued to the Don Law and FAME sellers will become
(to the extent such sellers do not exercise their rescission rights) freely
tradeable in the public market, subject to applicable limitations on
affiliates.

In addition, the Company has adopted a stock option plan providing for the
issuance of options to purchase up to 2,000,000 shares of Class A Common
Stock. The Company has granted options to purchase an aggregate of 1,002,500
shares of Class A Common Stock under such plan. All shares acquired upon
exercise of such options will be subject to the Lock-Up Agreements. The Company
anticipates that in the future it will file a registration statement with the
SEC to register the shares issuable upon exercise of options granted under the
plan. See "Management--Employment Agreements and Arrangements with Certain
Officers and Directors" and "Shares Eligible for Future Sales."

DIVIDEND POLICY

The Company has no present plans to declare any dividends on Class A
Common Stock. The terms of the Indenture and Credit Facility restrict the
Company's ability to pay dividends on Class A Common Stock in the future. The
decision to declare a dividend and the amount thereof, if any, will be in the
sole discretion of the Board.

ANTI-TAKEOVER EFFECTS

The Amended and Restated Certificate of Incorporation of the Company (the
"Company Certificate"), the By-laws of the Company and the Delaware General
Corporation Law (the "DGCL") contain several provisions that could have the
effect of delaying, deferring or preventing a change of control of the
Company in a transaction not approved by the Board. The Company Certificate
provides for the issuance of shares of Class B Common Stock (with 10 votes
per share in most matters), and the holders of these shares will generally be
able to prevent a change of control of the Company if they so desire. In
addition, the Company Certificate authorizes the Board to issue up to
25,000,000 shares of preferred stock in one or more series and to fix the
number of shares and the relative designations and powers, preferences, and
rights, and qualifications, limitations, and restrictions thereof, without
further vote or action by the stockholders. Issuances of preferred stock
could, under certain circumstances, have the effect of delaying or preventing
a change in control of the Company and may adversely affect the rights of
holders of the Common Stock. Furthermore, the Company is subject to the
anti-takeover provisions of Section 203 of the DGCL, which prohibit the
Company from engaging in a "business combination" with an "interested
stockholder" for three years after the date of the transaction in which the
person became an interested stockholder (unless the business combination is
approved in a prescribed manner). The application of Section 203 could also
have the effect of delaying or preventing a change in control of the Company.
The Board has also adopted certain other programs, plans and agreements with
the Company's management and/or employees that may make a change of control
more expensive. See "Management," "Principal Stockholders" and "Description
of Capital Stock."

DILUTION

Purchasers of Class A Common Stock in the Offering will be subject to a
substantial and immediate dilution of $53.32 per share (determined by
subtracting the Company's pro forma net tangible book value per share as of
March 31, 1998, adjusted to give effect to the Financing and the Pending
Acquisitions, from the assumed public offering price of $40.00 per share). On
a pro forma basis, as of March 31, 1998, the Company's net tangible book
deficit was $383.9 million as a result of the substantial goodwill and other
intangibles which the Company has acquired or will acquire in the Recent
Acquisitions and expects to acquire in and the Pending Acquisitions.

27
<PAGE>

FRAUDULENT CONVEYANCE

The Board of Directors of SFX Broadcasting determined that at the time of
the Spin-Off and after giving effect thereto, SFX Broadcasting was solvent.
There can be no assurance, however that a court would find the facts relied
on and the judgments made by the Board of Directors of SFX Broadcasting in
determining that SFX Broadcasting was solvent at the time of, and after
giving effect to, the Spin-Off would be binding on creditors of SFX
Broadcasting or that a court would reach the same conclusions as the Board of
Directors of SFX Broadcasting. If a court in a lawsuit filed by an unpaid
creditor or representative of unpaid creditors, such as a trustee in
bankruptcy, were to find that, at the time the Spin-Off was consummated or
after giving effect thereto, SFX Broadcasting (a) was insolvent, (b) was
rendered insolvent by reason of the Spin-Off, (c) was engaged in a business
or transaction for which the remaining assets of SFX Broadcasting constituted
unreasonably small capital or (d) intended to incur, or believed it would
incur, debts beyond its ability to pay as the debts matured, then the court
might require the Company to fund certain liabilities of SFX Broadcasting for
the benefit of SFX Broadcasting's creditors. If the assets of the Company
were recovered as fraudulent transfers by a creditor or trustee of SFX
Broadcasting, the relative priority of right to payment between any financing
and any fraudulent transfer claimant would be unclear, and the Company could
be rendered insolvent. In addition, a corporation generally makes
distributions to its stockholders only out of its surplus (net assets minus
capital) and not out of capital. The foregoing consequences would also apply
were a court to find that the Spin-Off was not made out of SFX Broadcasting's
surplus. The Company incurred indebtedness to finance the Recent
Acquisitions, to refinance certain indebtedness of the Company and the Recent
Acquisitions, to pay related fees and expenses, and for general corporate
purposes. Management believes that the indebtedness of the Company incurred
in financing the Recent Acquisitions and the Pending Acquisitions was for
proper purposes and in good faith, and that, based on present forecasts and
other financial information, the Company is solvent, has sufficient capital
for carrying on its business and will be able to pay its debts as they
mature.

The Company believes that, (a) SFX Broadcasting and the Company were
solvent at the time of the Spin-Off, (b) the Company was solvent at the time
of the financing for the Recent Acquisitions and (c) the Spin-Off was made
entirely out of SFX Broadcasting surplus in accordance with applicable law.
However, the Company cannot predict what standard a court might apply in
evaluating these matters, and it is possible that the court would disagree
with the Company's conclusions.

<PAGE>

USE OF PROCEEDS

USES OF FUNDS:
Tax Indemnity Payment(2)............................. $120,000
Cash Portion of the Pending Acquisitions:
FAME Acquisition(3)............................... 82,900
Don Law Acquisition(4)............................ 74,000
Avalon Acquisition(5) ............................ 27,400
Oakdale Acquisition(6)............................ 23,250
EMI Acquisition................................... 8,500
Fees and Expenses Related to the Financing(7) ...... 17,900
Fees and Expenses Related to the Pending
Acquisitions ....................................... 6,000
Other Payment Obligations(8)......................... 5,000
-------------
Total Uses of Funds............................... $364,950
=============
</TABLE>

- ------------
(1) On a pro forma basis for the twelve months ended March 31, 1998,
amounts available for borrowing under the Credit Facility, plus the net
proceeds from the Offering, would be sufficient for the uses of funds
described herein. However, there can be no assurance that the Company
will have sufficient cash flows at the time of borrowing to permit such
borrowings under the terms of its debt agreements. See "Description of
Indebtedness--Credit Facility."
(2) Pursuant to the Tax Sharing Agreement, the Company is required to
indemnify SFX Broadcasting for certain tax obligations, including a tax
obligation of approximately $120.0 million in connection with the
Spin-Off. The tax liability relates to certain deferred intercompany
transactions which management believes will give rise to significant
additional tax basis which will be available to offset future taxable
income. Management's estimates with respect to the amount of the
indemnity payment and the additional basis are based on certain
assumptions which management believes are reasonable. However, the
actual amounts of such obligations could vary materially. See
"Management, Discussion and Analysis of Financial Condition and Results
of Operations."
(3) Includes approximately $7.9 million which the Company anticipates
paying in connection with certain taxes which FAME and the FAME sellers
will be subject to. See "Agreements Related to the Pending
Acquisitions."
(4) Includes the repayment of $10.0 million in debt. Assumes that the
Company pays $16.0 million of the purchase price for Don Law in shares
of Class A Common Stock. See "Agreements Related to the Pending
Acquisitions."
(5) Includes approximately $400,000 which the Company expects to pay to the
Avalon seller to reimburse their third party out of pocket expenses
incurred in the development of the Camarillo Creek Amphitheater.
(6) Includes a loan to the Oakdale sellers in the amount of $11.4 million,
a portion of which will be used to repay Oakdale's senior mortgage
indebtedness. See "Agreements Related to the Pending Acquisitions."
(7) Consists of approximately $15.4 million underwriting discount and $2.5
million of other fees and expenses related to the Financing. The fees
and expenses are based on management's estimates, and may not be
indicative of, and are likely to vary from, the actual amount of fees
and expenses incurred by the Company. See "Agreements Related to the
Pending Acquisitions."
(8) Consists of change of control payments under the employment agreements
of Messrs. Sillerman, Ferrel and Benson assumed by the Company pursuant
to the Distribution Agreement, aggregating approximately $3.3 million,
$1.5 million and $0.2 million, respectively. See "Certain Relationships
and Related Transactions--Assumption of Employment Agreements; Certain
Change of Control Payments."

29
<PAGE>

Certain of the Company's agreements provide for future contingent payments
in certain circumstances. There can be no assurance that the Company will
have sufficient sources of funds to make such payments should they come due.
In addition, the Company is currently negotiating additional acquisitions
which, if consummated, will require additional financing. See "Risk
Factors--Future Contingent Payments" and "--Risks Related to the Pending
Acquisitions," "Expansion Strategy; Need for Additional Funds" "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Certain Relationships and Related Transactions--Indemnification of Mr.
Sillerman."

PRICE RANGE OF CLASS A COMMON STOCK

Since April 21, 1998, the Class A Common Stock has been quoted on Nasdaq
National Market under the symbol "SFXE" (between April 21, 1998 and April 27,
1998 the Class A Common Stock traded on a when-issued basis (in which shares
can be traded before certificates are actually available or issued)). Between
February 18, 1998 and April 20, 1998, the Class A Common Stock traded on a
when-issued basis on the over-the-counter market under the symbol "SFXAV."
See "Risk Factors--Potential Volatility of Stock Price." The Class B Common
Stock is not expected to be publicly traded.

The following table sets forth the high and the low closing bid
information for the shares of Class A Common Stock as reported on the
over-the-counter market through April 20, 1998 and as reported by the Nasdaq
National Market subsequent to such date. Bid quotations reflect interdealer
prices, without retail mark-up, mark-down or commissions, and may not
represent actual transactions.

<TABLE>
<CAPTION>
CLASS A COMMON
STOCK
------------------
YEAR ENDING DECEMBER 31, 1998 HIGH LOW
- ---------------------------------------- -------- --------
<S> <C> <C>
First Quarter (since February 18, 1998) $25.75 $18.50
Second Quarter (through May 4, 1998) ... 40.25 24.36
</TABLE>

On May 4, 1998, the last reported sales price of the Class A Common Stock
on the Nasdaq National Market was $40.25 per share. As of May 4, 1998, the
Company had approximately 113 holders of record of the Class A Common Stock
and two holders of record of the Class B Common Stock.

DIVIDEND POLICY

The Company has no present plans to declare any dividends on Common Stock.
The terms of the Indenture and Credit Facility restrict the Company's ability
to pay dividends on Common Stock in the future. The decision to declare a
dividend and the amount thereof, if any, will be in the sole discretion of
the Board.

30
<PAGE>
CAPITALIZATION

The following table sets forth, as of March 31, 1998, (a) the historical
capitalization of the Company (giving effect to the recapitalization of the
Company in connection with the Spin-Off) and (b) the pro forma capitalization
of the Company to reflect the Pending Acquisitions, the Financing and the
application of the proceeds therefrom, the Spin-Off and the SFX Merger. This
information should be read in conjunction with the financial statements and
the related notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------
(IN THOUSANDS)
PRO FORMA FOR
THE PENDING
ACQUISITIONS,
FINANCING,
SPIN-OFF AND
ACTUAL THE SFX MERGER
(UNAUDITED) (UNAUDITED)
---------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS.................................................... $ 93,992 $105,694
=========== ===============
DEBT:
Credit Facility ............................................................. $150,000 $234,950
Notes ....................................................................... 350,000 350,000
Other long-term debt......................................................... 30,701 30,701
Capital lease obligations ................................................... 12,302 12,302
----------- ---------------
Total debt ................................................................. $543,003 $627,953
----------- ---------------
TEMPORARY EQUITY--STOCK SUBJECT TO REDEMPTION(1)............................. 16,500 16,500
STOCKHOLDERS' EQUITY(2):
Net capital transferred from SFX Broadcasting................................ (21,410) --
Preferred Stock, $.01 par value, 25,000,000 shares authorized, 10 shares
issued and outstanding as of March 31, 1998 actual, and none outstanding
pro forma(3) ............................................................... -- --
Class A Common Stock, $.01 par value, 100,000,000 shares authorized,
13,579,024 shares issued and outstanding as of March 31, 1998 actual, and
27,118,971 shares issued and outstanding pro forma(4) ...................... 136 271
Class B Common Stock, $.01 par value, 10,000,000 shares authorized,
1,047,037 shares issued and outstanding as of March 31, 1998 actual, and
1,697,037 shares issued and outstanding pro forma(4) ....................... 10 17
Paid-in capital ............................................................. 39,975 334,784
Accumulated deficit(5) ...................................................... (23,757) (23,757)
----------- ---------------
Total stockholders' (deficit) equity ....................................... $ (5,046) $311,315
----------- ---------------
Total capitalization........................................................ $554,457 $955,768
=========== ===============

</TABLE>

- ------------
(1) The PACE agreement provides that each PACE seller shall have a Fifth
Year Put Option, exercisable during a period beginning on February 25,
2003 and ending 90 days thereafter, to require the Company to purchase
up to one-third of the Class A Common Stock received by such PACE
seller (representing 500,000 shares in the aggregate) for a cash
purchase price of $33.00 per share. With certain limited exceptions,
the Fifth Year Put Option rights are not assignable by the PACE
sellers. The maximum amount payable under the Fifth Year Put Option
($16.5 million) has been presented as temporary equity on the pro forma
balance sheet.
(2) In connection with the Spin-Off, the Company amended and restated its
certificate of incorporation to, among other things, (a) increase the
authorized number of shares of Class A Common Stock and Class B Common
Stock to 100,000,000 shares and 10,000,000, respectively and (b)
recapitalize the outstanding shares of Common Stock in order to permit
the distribution of shares in the Spin-Off. See "Description of Capital
Stock."
(3) In February 1998, the Company issued 10 shares of preferred stock in
connection with the Contemporary acquisition, which were converted into
1,047,037 shares of Class A Common Stock at the time of the Spin-Off.
(4) Gives effect on a pro forma basis to the issuance of (a) an aggregate
of 13,579,024 shares of Class A Common Stock and 1,047,037 shares of
Class B Common Stock issued in the Spin-Off, (b) an aggregate of
4,216,680 shares of Class A Common Stock issued pursuant to the Recent
Acquisitions, (c) an aggregate of 526,566 shares of Class A Common
Stock issued to the holders of stock options and SARs issued by SFX
Broadcasting, (d) 75,019 shares of Class A Common Stock which the
Company agreed to issue in connection with its acquisition of Westbury
Music Fair, (e) 7,000,000 shares issued pusuant to the Offering, (f)
190,000 shares of Class A Common Stock and 650,000 shares of Class B
Common Stock issued pursuant to certain employment agreements and (g)
1,531,782 shares issued pursuant to the Pending Acquisitions. Does not
include (a) shares issuable, subject to certain conditions, upon
conversion of the Class B Common Stock, (b) shares issuable upon
exercise of outstanding options and (c) 1,050,000 shares of Class A
Common Stock issuable upon exercise of the Underwriters' over-allotment
option. See "Management--Employment Agreements and Arrangements with
Certain Officers and Directors" and "Certain Relationships and Related
Transactions--Issuance of Stock to Holders of SFX Broadcasting's
Options and SARs."
(5) Retained earnings on a pro forma basis have not been adjusted for
future charges to earnings which will result from the issuance of stock
and options granted to certain executive officers and other employees
of the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital
Resources--Future Charges to Earnings."

31
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share amounts)

The Selected Consolidated Financial Data of the Company includes the
historical financial statements of Delsener/ Slater and affiliated companies,
the predecessor of the Company, for each of the four years ended December 31,
1996 and the three months ended March 31, 1998 and the historical financial
statements of the Company for the year ended December 31, 1997 and the three
months ended March 31, 1998. The statement of operations data with respect to
Delsener/Slater for the year ended December 31, 1993 and the balance sheet
data as of December 31, 1993 and 1994 is unaudited. The financial information
presented below should be read in conjunction with the information set forth
in "Unaudited Pro Forma Condensed Combined Financial Statements" and the
notes thereto and the historical financial statements and the notes thereto
of the Company, the 1997 Acquisitions, the Recent Acquisitions and the
Pending Acquisitions included herein. The financial information has been
derived from the audited and unaudited financial statements of the Company,
the 1997 Acquisitions, the Recent Acquisitions and the Pending Acquisitions.
The pro forma summary data for the year ended December 31, 1997 and the three
months ended March 31, 1998 are derived from the unaudited pro forma
condensed combined financial statements, which, in the opinion of management,
reflect all adjustments necessary for a fair presentation of the transactions
for which such pro forma financial information is given.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
PREDECESSOR
----------------------------------
1997
PRO FORMA
FOR THE
TRANSACTIONS,
1997 THE PENDING
PRO FORMA ACQUISITIONS
FOR THE AND THE
TRANSACTIONS FINANCING
1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
------- ------- ------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenue................ $46,526 $92,785 $47,566 $50,362 $ 96,144 $646,719 $779,014
Operating expenses .... 45,635 90,598 47,178 50,686 83,417 576,913 688,430
Depreciation &
amortization.......... 762 755 750 747 5,431 39,639 56,392
Corporate expenses
(1)................... -- -- -- -- 2,206 4,206 5,206
------- ------- ------- -------- -------- ------------ -------------
Operating income
(loss)................ $ 129 $ 1,432 $ (362) $(1,071) $ 5,090 $ 25,961 $ 28,986
Interest expense....... (148) (144) (144) (60) (1,590) (47,296) (54,198)
Other income
(expense)............. 85 138 178 198 295 633 1,226
Equity income (loss)
from investments ..... -- (9) 488 524 509 5,417 5,347
------- ------- ------- -------- -------- ------------ -------------
Income (loss) before
income taxes.......... $ 66 $ 1,417 $ 160 $ (409) $ 4,304 $(15,285) $(18,639)
Income tax provision . (57) (5) (13) (106) (490) (3,500) (4,200)
------- ------- ------- -------- -------- ------------ -------------
Net income (loss)...... $ 9 $ 1,412 $ 147 $ (515) $ 3,814 $(18,785) $(22,839)
======= ======= ======= ======== ========
Accretion on temporary
equity--stock subject
to redemption (2)..... (3,300) (3,300)
------------ -------------
Net loss applicable to
common shares ........ $(22,085) $(26,139)
============ =============
Net loss per common
share (3)............. $ (1.12) $ (0.92)
============ =============
Weighted average
common shares
outstanding (3)(4) ... 20,209 28,816
============ =============
OTHER OPERATING DATA:
EBITDA (5)............. $ 891 $ 2,187 $ 388 $ (324) $ 10,521 $ 65,600 $ 85,378
======= ======= ======= ======== ======== ============ =============
Cash flow from:
Operating activities . $ 2,959 $ (453) $ 4,214 $ 1,005
Investing activities . -- -- (435) (73,296)
Financing activities . (477) (216) (1,431) 78,270
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDED
THREE MONTHS ENDED MARCH 31, MARCH 31,
------------------------------------------------

1998 1998
PRO FORMA PRO FORMA
FOR THE FOR THE
TRANSACTIONS, TRANSACTIONS,
THE PENDING THE PENDING
ACQUISITIONS ACQUISITIONS
AND THE AND THE
1997 1998 FINANCING FINANCING
(UNAUDITED)(UNAUDITED) (UNAUDITED) (UNAUDITED)
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenue................ $ 7,789 $ 60,994 $187,345 $827,916
Operating expenses .... 7,738 58,175 171,422 729,485
Depreciation &
amortization.......... 660 4,428 14,098 56,392
Corporate expenses
(1)................... 858 1,314 1,617 5,565
--------- --------- ------------- -------------
Operating income
(loss)................ $(1,467) $ (2,923) $ (792)(9) $ 36,474
Interest expense....... (103) (6,748) (13,549) (54,198)
Other income
(expense)............. 26 (17,570) (17,250) (17,136)
Equity income (loss)
from investments ..... -- 445 77 6,362
--------- --------- ------------- -------------
Income (loss) before
income taxes.......... $(1,544) $(26,796) $(31,514) $(28,498)
Income tax provision . -- (500) (650) (3,000)
--------- --------- ------------- -------------
Net income (loss)...... $ (1,544) $ (27,296) $(32,164) $(31,498)
========= =========
Accretion on temporary
equity--stock subject
to redemption (2)..... (275) (825) (3,300)
--------- --------- ------------- -------------
Net loss applicable to
common shares ........ $ (27,571) $(32,989) $(34,798)
========= ========= ============= =============
Net loss per common
share (3)............. $ (1.17) $ (1.23)
========= ========= ============= =============
Weighted average
common shares
outstanding (3)(4) ... 28,816 28,816
========= ========= ============= =============
OTHER OPERATING DATA:
EBITDA (5)............. $ (807) $ 1,505 $ 13,306 $ 92,866
========= ========= ============= =============
Cash flow from:
Operating activities . $ 307 $ 9,140
Investing activities . (22,612) (379,782)
Financing activities . 24,927 458,654
</TABLE>

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
PREDECESSOR
-------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.................... $1,823 $4,453 $3,022 $6,191 $ 11,220
Property and equipment, net ...... 4,484 3,728 2,978 2,231 59,685
Intangible assets, net............ -- -- -- -- 60,306
Total assets...................... 6,420 8,222 6,037 8,879 146,942
Current liabilities............... 4,356 3,423 3,138 7,973 21,514
Long-term debt, including current
portion.......................... -- 1,830 -- -- 16,178
Temporary equity--stock subject
to redemption(2)................. -- -- -- -- --
Shareholders' equity (deficit) ... 6,420 2,969 2,900 907 102,144
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------
PRO FORMA
FOR THE
SPIN-OFF, THE
SFX MERGER, THE
PENDING
ACQUISITIONS
AND THE
ACTUAL FINANCING
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Current assets.................... $149,375 $ 167,021
Property and equipment, net ...... 196,732 243,824
Intangible assets, net............ 470,721 695,238
Total assets...................... 858,426 1,158,007
Current liabilities............... 260,165 139,216
Long-term debt, including current
portion.......................... 543,003 615,651
Temporary equity--stock subject
to redemption(2)................. 16,500 16,500
Shareholders' equity (deficit) ... (5,046) 311,315(6)
</TABLE>

- ------------
(1) Corporate expenses are reduced by $1,794,000 and $1,286,000 for fees
earned from Triathlon Broadcasting Company ("Triathlon") for the year
ended December 31, 1997 and for the twelve months ended March 31, 1998,
respectively. The right to receive fees payable under this agreement
was assigned to the Company by SFX Broadcasting in connection with the
Spin-Off. Future fees may vary, above the minimum fee of $500,000,
depending upon the level of acquisition and financing activities of
Triathlon. Triathlon has previously announced that it is exploring ways
of maximizing stockholder value, including possible sale to a third
party. In the event that Triathlon were acquired by a third party,
there can be no assurance that the agreement would continue for the
remainder of its term. See "Certain Relationships and Related
Transactions--Triathlon Fees."
(2) The PACE acquisition agreement provides that each PACE seller shall
have an option (a "Fifth Year Put Option"), exercisable during a period
beginning on the fifth anniversary of the closing of the PACE
Acquisition and ending 90 days thereafter, to require the Company to
purchase up to one-third of the Class A Common Stock received by that
PACE seller (representing 500,000 shares in the aggregate) for a cash
purchase price of $33.00 per share. With certain limited exceptions,
the Fifth Year Put Option rights are not assignable by the sellers. The
maximum amount payable under all Fifth Year Put Options ($16,500,000)
has been presented as temporary equity on the pro forma balance sheet.
See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations--Liquidity and Capital Resources."
(3) Includes 500,000 shares of the Class A Common Stock issued to the PACE
sellers in connection with the Fifth Year Put Option; these shares are
not included in calculating the net loss per common share.
(4) Reflects the assumed issuance of 7,000,000 shares of Class A Common
Stock in connection with the Offering and the approximately 1.5 million
shares of Class A Common Stock to be issued in connection with the
Pending Acquisitions.
(5) "EBITDA" is defined as earnings before interest, taxes, other income,
net, equity income (loss) from investments and depreciation and
amortization. Although EBITDA is not a measure of performance
calculated in accordance with generally accepted accounting principals
("GAAP"), the Company believes that EBITDA is accepted by the
entertainment industry as a generally recognized measure of performance
and is used by analysts who report publicly on the performance of
entertainment companies. Nevertheless, this measure should not be
considered in isolation or as a substitute for operating income, net
income, net cash provided by operating activities or any other measure
for determining the Company's operating performance or liquidity which
is calculated in accordance with GAAP.
There are other adjustments that could affect EBITDA but have not been
reflected herein. Had such adjustments been made, Adjusted EBITDA on a
pro forma basis would have been approximately $96,465,000 for the year
ended December 31, 1997 and $104,883,000 for the twelve months ended
March 31, 1998, an increase of $8,418,000. The adjustments include the
expected cost savings in connection with the Recent Acquisitions
associated with the elimination of duplicative staffing and general and
administrative expenses of $5,740,000 and $5,655,000, and include
equity income from investments of $5,347,000 and $6,362,000, for the
year ended December 31, 1997 and the twelve months ended March 31, 1998,
respectively. While management believes that such cost savings are
achievable, the Company's ability to fully achieve such cost savings is
subject to numerous factors, certain of which may be beyond the
Company's control.
(6) Stockholders' equity on a pro forma basis have not been adjusted for
future charges to earnings which will result from the issuance of stock
and options granted to certain executive officers and other employees
of the Company or certain other costs. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity
and Capital Resources--Future Charges to Earnings."

33
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following financial statements (the "Unaudited Pro Forma Condensed
Combined Financial Statements") and notes thereto contain forward-looking
statements that involve risks and uncertainties. The actual results of the
Company may differ materially from those discussed herein for the reasons
identified herein. The Company undertakes no obligation to publicly release
the result of any revisions to these forward-looking statements that may be
made to reflect any future events or circumstances.

In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. The Unaudited Pro Forma Condensed
Combined Financial Statements are based upon, and should be read in
conjunction with, the historical financial statements of the Company and the
1997 Acquisitions, Recent Acquisitions and the Pending Acquisitions and the
respective notes to such financial statements included herein. The pro forma
information is based upon tentative allocations of purchase price for the
Recent Acquisitions and the Pending Acquisitions, and does not purport to be
indicative of the results that would have been reported had such events
actually occurred on the date specified, nor is it indicative of the
Company's future results. Purchase accounting is based upon preliminary asset
valuations, which are subject to change.

The Unaudited Pro Forma Condensed Combined Balance Sheet at March 31, 1998
is presented as if the Company had completed the Pending Acquisitions,
Financing, the Spin-Off and the SFX Merger as of March 31, 1998.

The Unaudited Pro Forma Condensed Combined Statements of Operations for
the year ended December 31, 1997, the three months ended March 31, 1998 and
the twelve months ended March 31, 1998 are presented as if the Company had
completed the Transactions, the Pending Acquisitions and the Financing as of
January 1, 1997.

In addition, the Unaudited Pro Forma Condensed Combined Financial
Statements do not reflect certain purchase price adjustments and future
contingent payments contained in the agreements relating to the Recent and
Pending Acquisitions. See "Risk Factors--Risks Related to Pending
Acquisitions" and "--Future Contingent Payments" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

The pro forma financial statements do not include the effect of certain
immaterial acquisitions. No adjustments have been made to the Pro Forma
Condensed Combined Statement of Operations relating to charges to earnings
that are non-recurring and related to the transactions presented. See "Risk
Factors--Future Charges to Earnings."

34
<PAGE>
SFX ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1998
(in thousands)

<TABLE>
<CAPTION>
PRO FORMA FOR PENDING ACQUISITIONS
-----------------------------------------------
PRO FORMA
ADJUSTMENTS
SFX OTHER FOR PENDING
ENTERTAINMENT FAME DON LAW ACQUISITIONS ACQUISITIONS
(ACTUAL) I II III IV
------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets....... $149,375 $(81,157) $(66,855) $(53,653) $(6,000)
Property and
equipment, net...... 196,732 60 32,000 15,032
Intangible assets,
net................. 470,721 123,943 56,649 35,525 6,000
2,400
Other assets......... 41,598 348 11,357 (1,379)
------------- --------- --------- ------------ ------------
TOTAL ASSETS......... $858,426 $ 43,194 $ 21,794 $ 8,261 $ 1,021
============= ========= ========= ============ ============
LIABILITIES &
STOCKHOLDERS'
EQUITY:
Current liabilities . 245,982 2,405 5,744 5,085
Deferred taxes....... 50,559 2,400
Senior Subordinated
Notes .............. 350,000
Credit Facility...... 150,000
Other long-term
debt................ 30,701
Capital lease
obligations ........ 12,302
Other liabilities ... 5,858 789 50 97
Minority interest ... 1,570 3,079 (1,379)
Temporary equity--
stock subject to
redemption ......... 16,500
Stockholders'
Equity.............. (5,046) 40,000 16,000

------------- --------- --------- ------------ ------------
TOTAL LIABILITIES &
STOCKHOLDERS'
EQUITY.............. $858,426 $ 43,194 $ 21,794 $ 8,261 $ 1,021
============= ========= ========= ============ ============
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
PRO FORMA FOR PRO FORMA FOR
THE SPIN-OFF PRO FORMA THE SPIN-OFF, THE SFX
AND THE SFX ADJUSTMENTS FOR MERGER,
MERGER THE FINANCING THE PENDING ACQUISITIONS
V VI AND THE FINANCING
----------------- --------------- ---------------------------
<S> <C> <C> <C>
ASSETS:
Current assets....... $(121,739) $262,100 $ 167,021
84,950
Property and
equipment, net...... 243,824
Intangible assets,
net................. 695,238

Other assets......... 51,924
----------------- --------------- ---------------------------
TOTAL ASSETS......... $(121,739) $347,050 $1,158,007
================= =============== ===========================
LIABILITIES &
STOCKHOLDERS'
EQUITY:
Current liabilities . (120,000) 139,216
Deferred taxes....... 52,959
Senior Subordinated
Notes .............. 350,000
Credit Facility...... 84,950 234,950
Other long-term
debt................ 30,701
Capital lease
obligations ........ 12,302
Other liabilities ... 6,794
Minority interest ... 3,270
Temporary equity--
stock subject to
redemption ......... 16,500
Stockholders'
Equity.............. (5,000) 262,100 311,315
3,261
----------------- --------------- ---------------------------
TOTAL LIABILITIES &
STOCKHOLDERS'
EQUITY.............. $(121,739) $347,050 $1,158,007
================= =============== ===========================
</TABLE>

<PAGE>

I. FAME ACQUISITION

<TABLE>
<CAPTION>
AS OF MARCH 31, 1998 (IN THOUSANDS)
--------------------------------------------
PRO FORMA FAME
AS REPORTED ADJUSTMENTS ACQUISITION
------------- -------------- -------------
<S> <C> <C> <C>
ASSETS:
Current assets.......................... $ 1,743 $(82,900)(a) $(81,157)
Property and equipment, net............. 60 -- 60
Intangible assets, net.................. -- 123,943 (b) 123,943
Other assets............................ 348 -- 348
------------- -------------- -------------
TOTAL ASSETS............................ $ 2,151 $ 41,043 $ 43,194
============= ============== =============
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities..................... 2,405 -- 2,405
Other long-term debt.................... 344 (344)(c) --
Other liabilities....................... 1,411 (622)(d) 789
Stockholders' Equity.................... (2,009) 2,009 (e) 40,000
40,000 (a)
------------- -------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY................................. $ 2,151 $ 41,043 $ 43,194
============= ============== =============
</TABLE>

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

PRO FORMA ADJUSTMENTS:
(a) To reflect the FAME Acquisition for $82,900,000 in cash (including
$7,900,000 which the Company anticipates paying in connection with
certain taxes that FAME and the FAME sellers will be subject to) and
the issuance of 1.0 million shares of Class A Common Stock valued at
$40,000,000.
(b) To reflect the excess of the purchase price over the net tangible
assets acquired.
(c) To reflect the repayment by the Company of FAME's long-term debt at
closing.
(d) To reflect the repayment of certain other liabilities.
(e) To reflect the elimination of FAME's stockholder's equity.

36
<PAGE>

II. DON LAW ACQUISITION

<TABLE>
<CAPTION>
AS OF MARCH 31, 1998 (IN THOUSANDS)
--------------------------------------------
PRO FORMA DON LAW
AS REPORTED ADJUSTMENTS ACQUISITION
------------- -------------- -------------
<S> <C> <C> <C>
ASSETS:
Current assets .......................... $ 7,145 $(74,000)(a) $(66,855)
Property and equipment, net ............. 12,515 19,485 (b) 32,000
Intangible assets, net .................. 157 56,492 (c) 56,649
------------- -------------- -------------
TOTAL ASSETS ............................ $19,817 $ 1,977 $ 21,794
============= ============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities ..................... $ 5,744 5,744
Long-term debt .......................... 11,014 (10,000)(a) --
(1,014)(d)
Other liabilities ....................... 50 -- 50
Stockholders' Equity..................... 3,009 (3,009)(e) 16,000
16,000 (a)
------------- -------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $19,817 $ 1,977 $ 21,794
============= ============== =============
</TABLE>

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

PRO FORMA ADJUSTMENTS
(a) To reflect the Don Law acquisition for $74,000,000 in cash (including
the repayment of up to $10,000,000 of the seller's debt) and the
issuance of shares of Class A Common Stock valued at $16,000,000
(531,782 shares based on a negotiated share price of $30.0875). The
Company may, at its option, elect to pay the full purchase price in
cash in lieu of capital stock.
(b) To reflect the increase in fair value allocated to fixed assets.
(c) To reflect the excess of the purchase price paid over the fair value
of net tangible assets acquired.
(d) To reflect the repayment by the seller of the remaining long-term
debt at closing.
(e) To reflect the elimination of Don Law's stockholders' equity.

37
<PAGE>

III. OTHER ACQUISITIONS

<TABLE>
<CAPTION>
AS OF MARCH 31, 1998 (IN THOUSANDS)
--------------------------------------------------------------------------
TOTAL
AVALON OAKDALE EMI PRO FORMA OTHER
ACQUISITION ACQUISITION ACQUISITION ADJUSTMENTS ACQUISITIONS
------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets .......................... $2,871 $4,997 $1,300 $(27,400)(a) $(53,653)
(23,250)(a)
(8,500)(a)
(2,871)(c)
(800)(f)
Property and equipment, net ............. 3,505 364 11,163 (b) 15,032
Intangible assets, net .................. 257 10,251 (b) 35,525
25,017 (b)
Other assets ............................ 2,337 7 11,350 (a) 11,357
(2,337)(c)
------------- ------------- ------------- -------------- --------------
TOTAL ASSETS ............................ $8,970 $5,361 $1,307 $ (7,377) $ 8,261
============= ============= ============= ============== ==============
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities ..................... $2,493 $4,624 $ 461 $ (2,493)(c) $ 5,085
Long term debt .......................... 1,124 800 (1,124)(c) --
(800)(f)
Other liabilities ....................... -- 97 -- 97
Minority interest ....................... 1,379 1,700 (g) 3,079
Stockholders' Equity .................... 3,974 737 (51) (737)(d) --
51 (e)
(3,974)(c)
------------- ------------- ------------- -------------- --------------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY.................................. $8,970 $5,361 $1,307 $ (7,377) $ 8,261
============= ============= ============= ============== ==============
</TABLE>

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

PRO FORMA ADJUSTMENTS:
(a) To reflect the Avalon acquisition for $27,400,000 in cash (including
reimbursement of all out-of-pocket costs and expenses incurred in
connection with the development of the Camarillo Creek Amphitheatre
which are expected to be approximately $400,000), the Oakdale
acquisition for $23,250,000 in cash (including a non-recourse loan to
the sellers of Oakdale in the amount of $11,350,000 a portion of
which will be used to repay outstanding indebtedness), and the EMI
acquisition for $8,500,000 in cash.
(b) To reflect the excess of the purchase price paid over the fair value
of net tangible assets of $25,017,000 and $10,251,000 for the Avalon
and EMI acquisitions, respectively. Also to reflect the increase in
fair value allocated to fixed assets of $11,163,000 associated with
the Oakdale acquisition.
(c) To reflect the elimination of the historical balances of current
assets, current liabilities, other assets, long term debt, and
stockholders equity of the Avalon acquisition.
(d) To reflect the elimination of Oakdale stockholders' equity.
(e) To reflect the elimination of EMI's stockholders' deficiency.
(f) To reflect the repayment by the Company of EMI's long-term debt at
closing.
(g) To record minority interest for the 20% of EMI not purchased by the
Company.

38
<PAGE>

IV. PRO FORMA ADJUSTMENTS FOR THE PENDING ACQUISITIONS

Reflects $6,000,000 in estimated fees and expenses associated with the
Pending Acquisitions.

Reflects deferred taxes of $2,400,000 associated with the differences between
the book and tax bases of assets and liabilities acquired in the Avalon
acquisition.

Reflects the elimination of $1,379,000 of minority interest recorded by
Avalon related to its investment in a partnership which operates the Irvine
and Glen Helen Amphitheatres. The Company currently owns the remaining 50% of
the partnership.

V. PRO FORMA ADJUSTMENTS FOR THE SPIN-OFF AND THE SFX MERGER

To reflect the assumption of the obligation to pay $120.0 million of certain
taxes resulting from the Spin-Off and the payment of the Working Capital by
SFX Broadcasting to the Company upon consummation of the SFX Merger. On a pro
forma basis, as of March 31, 1998, the amount of Working Capital to be paid
by SFX Broadcasting to the Company would be $3,261,000. Also reflects $5.0
million of change of control payments under the employment agreements of
Messrs. Sillerman, Ferrel and Benson assumed by the Company pursuant to the
Distribution Agreement.

VI. PRO FORMA ADJUSTMENTS FOR THE FINANCING

Represents amounts used to finance the Pending Acquisitions including the
estimated net proceeds from the Offering of $262,100,000 and additional
borrowings under the Credit Facility of $84,950,000.

39
<PAGE>

SFX ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA FOR THE PENDING ACQUISITIONS
------------------------------------------
PRO FORMA
SFX PRO FORMA ADJUSTMENTS
ENTERTAINMENT FOR THE FOR THE PENDING
(ACTUAL) TRANSACTIONS FAME DON LAW OTHER ACQUISITIONS
I II III IV V VI
------------- ---------------- ------- ------- ----- ----------------
<S> <C> <C> <C> <C> <C> <C>
Revenue ..................... $96,144 $646,719 $10,881 $50,588 $70,826
Operating expenses .......... 83,417 576,913 3,457 43,741 64,319
Depreciation & amortization 5,431 39,639 115 2,033 461 $ 14,144
Corporate expenses........... 2,206 4,206 -- -- -- 1,000
------------- ---------------- ------- ------- ------- ---------------
Operating income (loss) .... 5,090 25,961 7,309 4,814 6,046 (15,144)
Interest expense ............ 1,590 47,296 79 1,072 1,643 (2,794)
Other (income) expenses .... (295) (595) (143) (329) (121)
Equity (income) loss from
investments ................ (509) (5,417) -- -- 70
Other expenses............... (38)
------------- ---------------- ------- ------- ------- ---------------
Income/(loss) before income
tax expense ................ 4,304 (15,285) 7,373 4,071 4,454 (12,350)
Income tax expense
(benefit)................... 490 3,500 700 -- 949 (949)
------------- ---------------- ------- ------- ------- ---------------
Net income (loss) ........... $ 3,814 $(18,785) $ 6,673 $ 4,071 $ 3,505 $(11,401)
============= ================ ======= ======= ======= ===============
Accretion on temporary equity (3,300)
Net loss applicable to
common shares .............. $(22,085)
================
Net loss per common share ...
Weighted average common
shares outstanding (1)......
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
PRO FORMA FOR PRO FORMA FOR
ADJUSTMENTS FOR THE TRANSACTIONS, THE
THE FINANCING PENDING ACQUISITIONS
VII AND THE FINANCING
--------------- ---------------------
<S> <C> <C>
Revenue ..................... $-- $779,014
Operating expenses .......... -- 688,430
Depreciation & amortization -- 56,392
Corporate expenses........... -- 5,206
--------------- ---------------------
Operating income (loss) .... -- 28,986
Interest expense ............ 6,902 54,198
Other (income) expenses .... -- (1,188)
Equity (income) loss from
investments ................ -- (5,347)
Other expenses............... (38)
--------------- ---------------------
Income/(loss) before income
tax expense ................ (6,902) (18,639)
Income tax expense
(benefit)................... -- 4,200
--------------- ---------------------
Net income (loss) ........... $(6,902) $(22,839)
=============== =====================
Accretion on temporary equity (3,300)
Net loss applicable to
common shares .............. $(26,139)
=====================
Net loss per common share ... $ (0.92)
=====================
Weighted average common
shares outstanding (1)...... 28,816
=====================
</TABLE>

- ------------
(1) Includes 500,000 shares of Class A Common Stock to be issued to the
PACE sellers in connection with the Fifth Year Put Option (such shares
are not included in calculating the net loss per common share) and
the assumed issuance of 7.0 million and approximately 1.5 million shares
of Class A Common Stock in the Offering and the Pending Acquisitions,
respectively.

40
<PAGE>

NOTES TO PRO FORMA INCOME STATEMENT:

I. Represents the Company's actual operating results for the year ended
December 31, 1997.
EBITDA for the year ended December 31, 1997 was $10,521,000 and
$85,378,000 for the Company on an actual basis and a pro forma basis,
respectively. EBITDA is defined as earnings before interest, taxes,
other income, net, equity income (loss) from investments and
depreciation and amortization. Although EBITDA is not a measure of
performance calculated in accordance with GAAP, the Company believes
that EBITDA is accepted by the entertainment industry as a generally
recognized measure of performance and is used by analysts who report
publicly on the performance of entertainment companies. Nevertheless,
this measure should not be considered in isolation or as a substitute
for operating income, net income, net cash provided by operating
activities or any other measure for determining the Company's
operating performance or liquidity which is calculated in accordance
with GAAP. Cash flows from operating, investing and financing
activities for the Company for the year ended December 31, 1997 were
$1,005,000, ($73,296,000) and $78,270,000, respectively.
There are other adjustments that could affect EBITDA but have not
been reflected herein. Had such adjustments been made, Adjusted
EBITDA on a pro forma basis would have been approximately $96,465,000
for the year ended December 31, 1997. The adjustments include the
expected cost savings in connection with the Recent Acquisitions
associated with the elimination of duplicative staffing and general
and administrative expenses of $5,740,000, and include equity income
from investments of $5,347,000. While management believes that such
cost savings are achievable, the Company's ability to fully achieve
such cost savings is subject to numerous factors, certain of which
may be beyond the Company's control.
Corporate expenses are net of fees from Triathlon of $1,794,000.
These fees will vary, above the minimum level of $500,000, based on
the level of acquisition and financing activities of Triathlon.
Sillerman Communications Management Corporation ("SCMC") previously
assigned its rights to receive fees payable under this agreement to
SFX Broadcasting. Pursuant to the terms of the Distribution
Agreement, SFX Broadcasting assigned its rights to receive such fees
to the Company. Triathlon has previously announced that it is
exploring ways of maximizing stockholder value, including possible
sale to a third party. In the event that Triathlon were acquired by a
third party, there can be no assurance that the agreement would
continue for the remainder of its term.

II. PRO FORMA FOR THE TRANSACTIONS

The Transactions consist of the 1997 Acquisitions, the Recent
Acquisitions, the Offering, the Spin-Off and the SFX Merger. It is assumed that
7,000,000 shares of the Company's Class A Common Stock will be issued in
connection with the Offering.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
-------------------------------------------------------------------------------
PRO FORMA PACE
SFX FOR 1997 AND PAVILION CONTEMPORARY BGP NETWORK
ENTERTAINMENT ACQUISITIONS ACQUISITIONS ACQUISITION ACQUISITION ACQUISITION
(ACTUAL) A B C D E
------------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue......................... $96,144 $14,243 $284,360 $103,300 $105,553 $28,322
Operating expenses.............. 83,417 13,293 260,256 91,220 96,630 19,577
Depreciation & amortization .... 5,431 1,402 6,053 1,320 1,027 351
Corporate expenses.............. 2,206 -- -- -- --
Other expenses.................. -- -- -- -- --
------------- ------------ ------------ ------------ ----------- -----------
Operating income (loss)......... 5,090 (452) 18,051 10,760 7,896 8,394
Interest expense................ 1,590 171 6,772 266 917 195

Other (income) expenses......... (295) (1) 1,328 (357) (270) (78)
Equity (income) loss from
investments.................... (509) -- (7,399) -- -- --

Other expenses.................. -- -- (38) -- -- --
------------- ------------ ------------ ------------ ----------- -----------
Income (loss) before income tax
expense........................ 4,304 (622) 17,388 10,851 7,249 8,277
Income tax expense (benefit) ... 490 -- 3,569 -- 1,687 127
------------- ------------ ------------ ------------ ----------- -----------
Net income (loss)............... $ 3,814 $ (622) $ 13,819 $ 10,851 $ 5,562 $ 8,150
============= ============ ============ ============ =========== ===========
Accretion on temporary equity ..
Net income (loss) applicable to
common share...................
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
----------------------------------------------------
PRO FORMA
PRO FORMA ADJUSTMENTS
ADJUSTMENTS FOR THE
CONCERTS FOR THE FINANCING OF
SOUTHERN RECENT THE RECENT PRO FORMA
ACQUISITION ACQUISITIONS ACQUISITIONS FOR THE
F G H TRANSACTIONS
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenue......................... $14,797 $ -- $646,719
Operating expenses.............. 12,520 -- 576,913
Depreciation & amortization .... 79 23,976 (a) 39,639
Corporate expenses.............. -- 2,000 (b) 4,206
Other expenses.................. -- -- --
----------- ------------ ------------ ------------
Operating income (loss)......... 2,198 (25,976) 25,961
Interest expense................ -- (8,150)(c) 45,535 47,296
--
Other (income) expenses......... (60) (862)(d) (595)
Equity (income) loss from
investments.................... 48 862 (d) (5,417)
1,581 (g)
Other expenses.................. -- (38)
----------- ------------ ------------ ------------
Income (loss) before income tax
expense........................ 2,210 (19,407) (45,535) (15,285)
Income tax expense (benefit) ... -- (2,373)(e) 3,500
----------- ------------ ------------ ------------
Net income (loss)............... $ 2,210 $(17,034) $(45,535) $(18,785)
=========== ============ ============ ============
Accretion on temporary equity .. (3,300)(f) (3,300)
------------ ------------
Net income (loss) applicable to
common share................... $(20,334) $(22,085)
=========== ============
</TABLE>

41
<PAGE>

A. The Company acquired Delsener/Slater, the Meadows Music Theater and
Sunshine Promotions on January 2, 1997, March 20, 1997 and June 24,
1997, respectively. These adjustments represent the operating results
of the Meadows Music Theater and Sunshine Promotions prior to their
acquisitions by the Company.

B. PACE AND PAVILION ACQUISITIONS

Reflects the PACE acquisition and the separate acquisition of two
partners' interest in a partnership that owns certain amphitheaters operated
by PACE and the acquisition of USA Motor Sports by PACE in March 1998.

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, 1997 (IN THOUSANDS)
----------------------------------------------------------------------
PACE PAVILION USA MOTOR PRO FORMA PACE
AS REPORTED AS REPORTED SPORTS ADJUSTMENTS ACQUISITION
------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue ........................ $176,168 $98,632 $8,560 $ 1,000 (a) $284,360
Operating expenses.............. 170,169 83,258 8,306 (1,477)(b) 260,256
Depreciation & amortization .... 1,985 4,045 23 -- 6,053
Other expenses.................. 1,139 -- -- (1,139)(c) --
------------- ------------- ----------- ------------- -------------
Operating income (loss) ........ $ 2,875 $11,329 $ 231 $ 3,616 $ 18,051
Interest expense................ 2,384 4,388 -- -- 6,772
Other (income) expenses......... 53 1,304 (29) -- 1,328
Equity (income) loss from
investments.................... (8,134) (1,831) -- 2,566 (d) (7,399)
Other expenses ................. -- -- (38) -- (38)
------------- ------------- ----------- ------------- -------------
Income/(loss) before income tax
expense........................ $ 8,572 $ 7,468 298 $ 1,050 $ 17,388
Income tax expense (benefit) .. 3,569 -- -- -- 3,569
------------- ------------- ----------- ------------- -------------
Net income (loss) .............. $ 5,003 $ 7,468 $ 298 $ 1,050 $ 13,819
============= ============= =========== ============= =============
</TABLE>

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

PRO FORMA ADJUSTMENTS:
(a) To reflect non-cash revenue resulting from the Company granting
Blockbuster naming rights to three venues for two years for no future
consideration as part of its agreement to acquire Blockbuster's
indirect 33 1/3% interest in Pavilion.
(b) Reflects the elimination of $570,000 of certain officers' salaries and
bonuses which will not be paid under the Company's new employment
contracts and of $907,000 of non-recurring costs incurred in connection
with PACE's previously planned initial public offering, which was
canceled. The amount of the pro forma adjustment to eliminate salaries
and bonuses is based on the Company's agreements with the affected
employees that a bonus will not be paid unless there is a significant
improvement in the results of the PACE acquisition. Accordingly, no
such bonus is reflected in the pro forma statement of operations as
should PACE's results be at a similar level to that in these pro forma
statements of operations no bonus would be paid, and the Company would
not be contractually obligated to pay a bonus.
(c) Reflects the elimination of non-recurring restricted stock compensation
to PACE executives.
(d) To eliminate PACE's income from its 33 1/3% equity investment in
Pavilion Partners.

42
<PAGE>

C. CONTEMPORARY ACQUISITION

Reflects the Contemporary acquisition and the separate acquisition of the
remaining 50% interest in Riverport Amphitheater Partners, a partnership that
owns an amphitheater in St. Louis, Missouri that is operated by Contemporary.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
-----------------------------------------------------------
CONTEMPORARY RIVERPORT PRO FORMA CONTEMPORARY
AS REPORTED AS REPORTED ADJUSTMENTS ACQUISITION
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue ................................ $89,053 $14,247 $ -- $103,300
Operating expenses...................... 90,820 11,630 (11,230)(a) 91,220
Depreciation & amortization............. 541 779 -- 1,320
-------------- ------------- ------------- --------------
Operating income (loss)................. $(2,308) $ 1,838 $ 11,230 $ 10,760
Interest expense........................ 192 74 -- 266
Other (income) expenses................. (117) (240) -- (357)
Equity (income) from investments ....... (1,002) -- 1,002 (b) --
-------------- ------------- ------------- --------------
Income/(loss) before income tax
expense................................ $(1,381) $ 2,004 $ 10,228 $ 10,851
Income tax expense (benefit)............ -- -- -- --
-------------- ------------- ------------- --------------
Net income (loss)....................... $(1,381) $ 2,004 $ 10,228 $ 10,851
============== ============= ============= ==============
</TABLE>

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

PRO FORMA ADJUSTMENTS:

(a) Reflects the elimination of certain officers' salaries and bonuses and
other consulting expenses which will not be paid under the Company's
new employment and other contracts. The amount of the pro forma
adjustment to eliminate salaries and bonuses is based on the Company's
agreements with the affected employees that a bonus will not be paid
unless there is a significant improvement in the results of
Contemporary. Accordingly, no such bonus is reflected in the pro forma
statement of operations as should Contemporary's results be at a
similar level to that in these pro forma statements of operations no
bonus would be paid, and the Company would not be contractually
obligated to pay a bonus.
(b) Reflects the elimination of Contemporary's equity income in Riverport
Amphitheater Partners. Contemporary has acquired its partners' 50%
interest in this venture.

D. BGP ACQUISITION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
---------------------------------------------
PRO FORMA BGP
AS REPORTED (A) ADJUSTMENTS ACQUISITION
--------------- ------------- -------------
<S> <C> <C> <C>
Revenue ................................ $105,553 $ -- $105,553
Operating expenses...................... 99,958 (3,328)(b) 96,630
Depreciation & amortization............. 1,027 -- 1,027
--------------- ------------- -------------
Operating income ....................... $ 4,568 $ 3,328 $ 7,896
Interest expense........................ 917 -- 917
Other (income) expenses................. (270) -- (270)
--------------- ------------- -------------
Income/(loss) before income tax
expense................................ $ 3,921 $ 3,328 $ 7,249
Income tax expense (benefit)............ 1,687 -- 1,687
--------------- ------------- -------------
Net income.............................. $ 2,234 $ 3,328 $ 5,562
=============== ============= =============
</TABLE>

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

PRO FORMA ADJUSTMENTS:

(a) Reflects BGP's operating results for the twelve months ended January
31, 1998.

(b) Reflects the elimination of certain officers' salaries and bonuses and
other consulting expenses which will not be paid under the Company's
new employment and other contracts. The amount of the pro forma
adjustment to eliminate salaries and bonuses is based on the Company's
agreements with the affected employees that a bonus will not be paid
unless there is a significant improvement in the

<PAGE>

results of BGP. Accordingly, no such bonus is reflected in the pro
forma statement of operations as should BGP's results, once acquired by
the Company, be at a similar level to that in these pro forma
statements of operations no bonus would be paid, and the Company would
not be contractually obligated to pay a bonus.

E. NETWORK ACQUISITION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
----------------------------------------------------------
THE NETWORK
MAGAZINE SJS PRO FORMA NETWORK
AS REPORTED AS REPORTED ADJUSTMENTS ACQUISITIONS
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue ................................ $16,274 $14,218 $(2,170)(b) $28,322
Operating expenses...................... 14,651 14,422 (2,170)(b) 19,577
(7,326)(a)
Depreciation & amortization............. 224 127 351
------------- ------------- ------------- --------------
Operating income (loss)................. $ 1,399 $ (331) $ 7,326 $ 8,394
Interest expense, net................... 159 36 -- 195
Other (income) expenses................. -- (78) -- (78)
------------- ------------- ------------- --------------
Income/(loss) before income tax
expense................................ $ 1,240 $ (289) $ 7,326 $ 8,277
Income tax expense (benefit) ........... -- (127) -- (127)
------------- ------------- ------------- --------------
Net income (loss) ...................... $ 1,240 $ (416) $ 7,326 $ 8,150
============= ============= ============= ==============
</TABLE>

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

PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officers' salaries and bonuses
which will not be paid under the Company's new employment contracts.
The amount of the pro forma adjustment to eliminate salaries and
bonuses is based on the Company's agreements with the affected
employees that a bonus will not be paid unless there is a significant
improvement in the results of the Network acquisitions. Accordingly, no
such bonus is reflected in the pro forma statement of operations as
should Network's results be at a similar level to that in these pro
forma statements of operations no bonus would be paid, and the Company
would not be contractually obligated to pay a bonus.
(b) Reflects the elimination of transactions between Network Magazine and
SJS.

F. CONCERT/SOUTHERN ACQUISITION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
-------------------------------------------
CONCERT/
PRO FORMA SOUTHERN
AS REPORTED ADJUSTMENTS ACQUISITION
------------- ------------- -------------
<S> <C> <C> <C>
Revenue .............................. $14,797 $ -- $14,797
Operating expenses.................... 12,949 (429)(a) 12,520
Depreciation & amortization........... 79 -- 79
------------- ------------- -------------
Operating income...................... $ 1,769 $ 429 $ 2,198
Other (income) expenses............... (60) -- (60)
Equity (income) loss from
investments.......................... 80 (32)(b) 48
------------- ------------- -------------
Income before income tax expense ..... $ 1,749 $ 461 $ 2,210
Income tax expense (benefit).......... -- -- --
------------- ------------- -------------
Net income............................ $ 1,749 $ 461 $ 2,210
============= ============= =============
</TABLE>

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

PRO FORMA ADJUSTMENTS:

(a) Reflects the elimination of certain officers' salaries and bonuses
which will not be paid under the Company's new employment contracts.
The amount of the pro forma adjustment to eliminate salaries and
bonuses is based on the Company's agreements with the affected
employees that a bonus will not be paid unless there is a significant
improvement in the results of Concert/Southern. Accordingly, no such
bonus is reflected in the pro forma statement of operations as should
Concert/Southern's results be at a similar level to that in these pro
forma statements of operations no bonus would be paid, and the Company
would not be contractually obligated to pay a bonus.

44
<PAGE>

(b) Reflects the elimination of equity loss of a non-entertainment
affiliated entity which was not acquired by the Company.

G. PRO FORMA ADJUSTMENTS
(a) Reflects the increase in depreciation and amortization resulting from
the preliminary purchase accounting treatment of the Recent
Acquisitions. The Company amortizes goodwill over 15 years.
(b) To record incremental corporate overhead charges associated with
headquarters personnel and general and administrative expenses that
management estimates will be necessary as a result of the Recent
Acquisitions.
(c) Reflects the elimination of $8,150,000 of historical interest expense.
(d) To reclassify Delsener/Slater's equity income in the PNC Bank Arts
Center venue following the acquisition of Pavilion Partners which owns
the other 50% equity interest in the venue.
(e) Represents an adjustment to the provision for their state and local
income taxes to reflect an approximate pro forma tax provision of
$3,500,000. The calculation treats all companies acquired pursuant to
the Recent Acquisitions as "C" Corporations. The tax provision reflects
the non-deductibility of approximately $17,000,000 of goodwill
amortization, and tax savings related to the pro forma adjustments for
the Financing.
(f) Represents the accretion on the Fifth Year Put Option issued to the
PACE sellers in connection with the PACE acquisition.
(g) To reclassify PACE's equity income in Avalon following the Avalon
acquisition.

H. PRO FORMA ADJUSTMENTS FOR THE FINANCING OF THE RECENT ACQUISITIONS
Reflects interest expense associated with the Notes, the initial
borrowings under the Credit Facility, and other debt and deferred
compensation costs related to the 1997 and the Recent Acquisitions.

III. FAME ACQUISITION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
--------------------------------------------
PRO FORMA FAME
AS REPORTED ADJUSTMENTS ACQUISITION
------------- -------------- -------------
<S> <C> <C> <C>
Revenue................................. $10,881 $10,881
Operating expenses...................... 13,002 $(10,595)(a) 3,457
1,050 (b)
Depreciation & amortization............. 115 115
--------- -------------- -------------
Operating income (loss)................. (2,236) 9,545 7,309
Interest expense........................ 79 79
Other (income) expenses................. (143) (143)
--------- -------------- -------------
Income/(loss) before income tax
expense................................ (2,172) 9,545 7,373
Income tax expense (benefit)............ 700 (c) 700
--------- -------------- -------------
Net income (loss)....................... $(2,172) $ 8,845 $ 6,673
========= ============== =============
</TABLE>

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

PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officer's distributions of
earnings which will not be paid under the Company's new employment
contracts. The FAME Agreement provides for payments by the Company to
the FAME sellers of additional amounts up to $15.0 million in equal
annual installments over 5 years contingent on the achievement of
certain EBITDA targets. If FAME's EBITDA (as defined in the FAME
Agreement) exceeds 105% of specified targets in each of the years
1998 through 2002, the Company is required to pay the FAME sellers
$3.0 million within 120 days after the end of the year to which the
payment relates.
(b) Reflects salaries and officers' life insurance premiums to be paid by
the Company.
(c) Reflects an adjustment to the provision for state and local income
taxes.

45
<PAGE>

IV. DON LAW ACQUISITION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
-------------------------------------------
PRO FORMA DON LAW
AS REPORTED ADJUSTMENTS ACQUISITION
------------- ------------- -------------
<S> <C> <C> <C>
Revenue................................. $50,588 $50,588
Operating expenses...................... 44,401 (610)(a) 43,741
(50)(b)
Depreciation & amortization............. 2,033 2,033
------------- ------------- -------------
Operating income (loss)................. $ 4,154 660 $ 4,814
Interest expense........................ 1,072 1,072
Other (income) expenses................. (329) (329)
------------- ------------- -------------
Income/(loss) before income tax
expense................................ $ 3,411 660 $ 4,071
Income tax expense (benefit)............ --
------------- ------------- -------------
Net income (loss)....................... $ 3,411 $ 660 $ 4,071
============= ============= =============
</TABLE>

- ------------
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of payments made to employees by the
principal owner of Don Law in connection with the sale of membership
interests to a third party in 1997.
(b) Reflects the elimination of certain officer's bonuses and wages not
expected to be paid under the Company's new employment contracts. The
amount of the pro forma adjustment to eliminate salaries and bonuses
is based on the Company's agreements with the affected employees that
a bonus will not be paid unless there is a significant improvement in
the results of Don Law. Accordingly, no such bonus is reflected in
the pro forma statement of operations as should Don Law's results be
at a similar level to that in these pro forma statements of
operations no bonus would be paid, and the Company would not be
contractually obligated to pay a bonus.
(c) The pro forma adjustments for Don Law do not reflect the impact of
certain new business opportunities in 1998 including an agreement to
provide ticketing services for the Boston Red Sox, a new long-term
concessions contract at Great Woods and an opportunity to sell the
naming rights at Harborlights Pavilion. These opportunities are
expected to have a significant positive impact on Don Law's 1998
operating results.

V. OTHER ACQUISITIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
------------------------------------------------------------------------
AVALON OAKDALE EMI PRO FORMA OTHER
ACQUISITION ACQUISITION ACQUISITION ADJUSTMENTS ACQUISITION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue.............................. $27,265 $16,435 $27,126 $70,826
Operating expenses................... 24,404 14,720 27,035 (1,840)(a) 64,319

Depreciation & amortization.......... 410 51 461
Corporate expenses................... --
Other expenses....................... --
------------- ------------- ------------- ------------- -------------
Operating income (loss).............. 2,451 $ 1,664 $ 91 1,840 6,046
Interest expense..................... 94 1,508 41 1,643
Other (income) expenses.............. -- (79) (42) (121)
Equity (income) loss from
investments......................... 70 70
Other expenses ...................... 1,581 (1,581)(b) --
------------- ------------- ------------- ------------- -------------
Income/(loss) before income tax
expense............................. $ 776 $ 235 22 3,421 4,454
Income tax expense (benefit)......... 249 700 (c) 949
------------- ------------- ------------- ------------- -------------
Net income (loss).................... $ 527 $ 235 $ 22 $ 2,721 $ 3,505
============= ============= ============= ============= =============
</TABLE>

- ------------
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officer's bonuses and wages not
expected to be paid under the Company's new employment contracts with
Avalon. The amount of the pro forma adjustment to eliminate salaries
and bonuses is based on the Company's agreements with the affected
employees that a bonus will not be paid unless there is a significant
improvement in the results of Avalon. Accordingly,

46
<PAGE>

no such bonus is reflected in the pro forma statement of operations
as should Avalon's results be at a similar level to that in these pro
forma statements of operations no bonus would be paid, and the
Company would not be contractually obligated to pay a bonus.
(b) To reclassify PACE's equity income in Avalon following the Avalon
acquisition.
(c) Reflects an adjustment to the provision for state and local income
taxes.

VI. PRO FORMA ADJUSTMENTS FOR THE PENDING ACQUISITIONS
Reflects the $14,144,000 increase in depreciation and amortization
resulting from the preliminary purchase accounting treatment of the
Pending Acquisitions. The Company amortizes goodwill over 15 years.
To record incremental corporate overhead charges of $1,000,000
associated with incremental headquarters personnel and general and
administrative expenses that management estimates will be necessary
as a result of the Pending Acquisitions.
Reflects the elimination of $2,794,000 of historical interest
expense.
Represents an adjustment to the provision for their state and local
income taxes to reflect an approximate pro forma tax provision of
$4,200,000. The calculation treats all companies to be acquired
pursuant to the Pending Acquisitions as "C" Corporations.

VII. PRO FORMA ADJUSTMENTS FOR THE FINANCING

Reflects interest expense of $6,902,000 to finance the Pending
Acquisitions associated with the additional borrowings under the Credit
Facility.

47
<PAGE>

SFX ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA FOR THE PENDING ACQUISITIONS
--------------------------------------
PRO FORMA
SFX ADJUSTMENTS
ENTERTAINMENT PRO FORMA FOR DON FOR THE PENDING
(ACTUAL) THE TRANSACTIONS FAME LAW OTHER ACQUISITIONS
I II III IV V VI
------------- ---------------- ------ ------ ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenue.................................... $ 60,994 $173,828 $1,813 $4,549 $7,155
Operating expenses......................... 58,175 159,565 716 4,718 7,423
Depreciation & amortization................ 4,428 9,910 14 425 124 $ 3,625
Corporate expenses......................... 1,314 1,314 -- -- -- 303
Other expenses............................. -- -- -- -- --
--------- ---------------- ------ ------ ------ ---------------
Operating income (loss).................... $ (2,923) $ 3,039 $1,083 $ (594)$ (392) $(3,928)
Interest expense........................... 6,748 11,824 21 201 55 (277)
Other (income) expenses.................... (897) (1,274) (24) (30) (21)
Equity (income) loss from investments ..... (445) (77) -- -- --
Other expenses (principally relating to
the Spin-off) ............................ 18,467 18,599 -- -- --
--------- ---------------- ------ ------ ------ ---------------
Income/(loss) before income tax expense ... $(26,796) $(26,033) $1,086 $ (765)$ (426) $(3,651)
Income tax expense (benefit)............... 500 600 100 -- -- (50)
--------- ---------------- ------ ------ ------ ---------------
Net income (loss).......................... (27,296) $(26,633) $ 986 $ (765)$ (426) $(3,601)
========= ================ ====== ====== ====== ===============
Accretion on temporary equity.............. (275) (825)
Net income (loss) applicable to common
shares.................................... $(27,571) $(27,458)
========= ================
Net income (loss) per common share ........
Weighted Average common shares outstanding
(1).......................................
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
PRO FORMA
FOR THE
PRO FORMA TRANSACTIONS,
FOR THE THE PENDING
FINANCING ACQUISITIONS,
VII AND THE FINANCING
---------------- -----------------
<S> <C> <C>
Revenue.................................... $ -- $187,345
Operating expenses......................... -- 172,422
Depreciation & amortization................ -- 14,098
Corporate expenses......................... -- 1,617
Other expenses............................. -- --
---------------- -----------------
Operating income (loss).................... -- (792)
Interest expense........................... $ 1,725 13,549
Other (income) expenses.................... -- (1,349)
Equity (income) loss from investments ..... -- (77)
Other expenses (principally relating to
the Spin-off) ............................ -- 18,599
---------------- -----------------
Income/(loss) before income tax expense ... $(1,725) $(31,514)
Income tax expense (benefit)............... -- 650
---------------- -----------------
Net income (loss).......................... $(1,725) $(32,164)
================ =================
Accretion on temporary equity.............. (825)
Net income (loss) applicable to common
shares.................................... $(32,989)
=================
Net income (loss) per common share ........ $ (1.17)
=================
Weighted Average common shares outstanding
(1)....................................... 28,816
=================
</TABLE>

<PAGE>

- ------------
(1) Includes 500,000 shares of Class A Common Stock to be issued to the
PACE sellers in connection with the Fifth Year Put Option (such shares
are not included in calculating the net loss per common share) and the
assumed issuance of 7.0 million and approximately 1.5 million shares of
Class A Common Stock in the Offering and the Pending Acquisitions,
respectively.

48
<PAGE>

NOTE TO PRO FORMA INCOME STATEMENT:

I. Represents the Company's actual operating results for the three months
ended March 31, 1998.

EBITDA for the three months ended March 31, 1998 was $1,505,000 and
$14,006,000 for the Company on an actual basis and a pro forma basis,
respectively. EBITDA is defined as earnings before interest, taxes, other
income, net, equity income (loss) from investments and depreciation and
amortization. Although EBITDA is not a measure of performance calculated
in accordance with GAAP, the Company believes that EBITDA is accepted by
the entertainment industry as a generally recognized measure of
performance and is used by analysts who report publicly on the performance
of entertainment companies. Nevertheless, this measure should not be
considered in isolation or as a substitute for operating income, net
income, net cash provided by operating activities or any other measure for
determining the Company's operating performance or liquidity which is
calculated in accordance with GAAP. Cash flows from operating, investing
and financing activities for the Company for the three months ended March
31, 1998 were $9,140,000, $379,782,000 and $458,654,000, respectively.

There are other adjustments that could affect EBITDA but have not been
reflected herein. Had such adjustment been made, Adjusted EBITDA on a pro
forma basis would have been approximately $15,466,000 for the three months
ended March 31, 1998. The adjustments include the expected cost savings in
connection with the Recent Acquisitions associated with the elimination of
duplicative staffing and general and administrative expenses of
$1,383,000, and include equity income from investments of $77,000. While
management believes that such cost savings are achievable, the Company's
ability to fully achieve such cost savings is subject to numerous factors,
certain of which may be beyond the Company's control.

Corporate expenses are net of fees from Triathlon of $133,000. These fees
will vary, above the minimum annual level of $500,000, based on the level
of acquisition and financing activities of Triathlon. Sillerman
Communications Management Corporation ("SCMC") previously assigned its
rights to receive fees payable under this agreement to SFX Broadcasting.
Pursuant to the terms of the Distribution Agreement, SFX Broadcasting
assigned its rights to receive such fees to the Company. Triathlon has
previously announced that it is exploring ways of maximizing stockholder
value, including possible sale to a third party. In the event that
Triathlon were acquired by a third party, there can be no assurance that
the agreement would continue for the remainder of its term.

II. PRO FORMA FOR THE TRANSACTIONS

The Company acquired PACE (including USA Motor Sports) & Pavilion,
Contemporary, BGP, Network, and Concert/Southern on February 25, 1998,
February 27, 1998, February 24, 1998, February 27, 1998, and March 4,
1998, respectively. The following represent the operating results of these
companies prior to their acquisition by the Company.

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
------------------------------------------------------------------------------
SFX PACE & CONCERT/
ENTERTAINMENT PAVILION CONTEMPORARY BGP NETWORK SOUTHERN
(ACTUAL) ACQUISITIONS ACQUISITION ACQUISITION ACQUISITION ACQUISITION
------------- ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue ........................ $ 60,994 $84,199 $7,882 $16,075 $4,154 $ 524
Operating expenses ............. 58,175 83,643 8,255 16,801 3,949 638

Depreciation & amortization ... 4,428 1,049 254 213 51 9
Corporate expenses ............. 1,314
Other expenses ................. --
--------- ------------ ------------ ----------- ----------- -----------
Operating income (loss) ........ $ (2,923) (493) (627) (939) 154 (123)
Interest expense ............... 6,748 1,148 -- 165 37
Other (income) expenses ........ (897) (195) (122) (46) (14)
Equity (income) loss from
investments ................... (445) 549 20
Other expenses ................. 18,467 19 113
--------- ------------ ------------ ----------- ----------- -----------
Income/(loss) before income tax
expense ....................... $(26,796) (2,014) (505) (1,171) 131 (143)
Income tax expense (benefit) .. 500 (475) 3
--------- ------------ ------------ ----------- ----------- -----------
Net income (loss) .............. $(27,296) $(1,539) $ (505) $(1,171) $ 128 $(143)
============ ============ =========== =========== ===========
Accretion on temporary equity .. (275)
Net income (loss) applicable to
common share .................. $(27,571)
=========
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
---------------------------------------------
PRO FORMA
ADJUSTMENTS
PRO FORMA FOR THE
ADJUSTMENTS FINANCING
FOR THE RECENT OF THE RECENT PRO FORMA
ACQUISITIONS ACQUISITIONS FOR THE
A B TRANSACTIONS
-------------- ---------------- ------------
<S> <C> <C> <C>
Revenue ........................ $173,828
Operating expenses ............. $(10,723) 159,565
(1,173)
Depreciation & amortization ... 3,906 9,910
Corporate expenses ............. 1,314
Other expenses ................. --
-------------- ---------------- ------------
Operating income (loss) ........ 7,990 -- 3,039
Interest expense ............... (8,098) 11,824 11,824
Other (income) expenses ........ (1,274)
Equity (income) loss from
investments ................... (201) (77)
Other expenses ................. 18,599
-------------- ---------------- ------------
Income/(loss) before income tax
expense ....................... 16,289 (11,824) (26,033)
Income tax expense (benefit) .. 572 600
-------------- ---------------- ------------
Net income (loss) .............. $ 15,717 $(11,824) $(26,633)
============== ================ ============
Accretion on temporary equity .. (550) (825)
Net income (loss) applicable to
common share .................. $ 15,167 $(27,458)
============== ============
</TABLE>

49
<PAGE>

A. PRO FORMA ADJUSTMENTS FOR THE RECENT ACQUISITIONS:
To reflect the elimination of $10,723,000 of PACE's non-cash stock
compensation and $1,173,000 of Network's excess compensation.
Reflects the increase of $3,906,000 in depreciation and amortization
resulting from the preliminary purchase accounting treatment of the
Recent Acquisitions. The Company amortizes goodwill over 15 years.
Reflects the elimination of $8,098,000 of historical interest
expense.
To reclassify $201,000 of PACE's equity income in Avalon following
the Avalon acquisition.
Represents an adjustment to the provision for their state and local
income taxes to reflect an approximate pro forma tax provision of
$600,000. The calculation treats all companies to be acquired
pursuant to the Recent Acquisitions as "C" Corporations.
Represents the accretion of $550,000 on the Fifth Year Put Option
issued to the PACE sellers in connection with the PACE acquisition.

B. PRO FORMA ADJUSTMENTS FOR THE FINANCING OF THE RECENT ACQUISITIONS:

Reflects interest expense of $11,824,000 associated with the Notes, the
Credit Facility and other debt related to the Recent Acquisitions.

III. FAME ACQUISITION

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998 (IN
THOUSANDS)
-------------------------------------------
PRO FORMA FAME
AS REPORTED ADJUSTMENTS ACQUISITION
------------- ------------- -------------
<S> <C> <C> <C>
Revenue......................... $1,813 $1,813
Operating expenses.............. 1,742 $(1,289)(a) 716
263 (b)
Depreciation & amortization .... 14 14
------------- ------------- -------------
Operating income................ 57 1,026 1,083
Interest expense................ 21 21
Other (income) expenses......... (24) (24)
------------- ------------- -------------
Income before income tax
expense........................ 60 1,026 1,086
Income tax expense (benefit) ... 100(c) 100
------------- ------------- -------------
Net income...................... $ 60 $ 926 $ 986
============= ============= =============
</TABLE>

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

PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officer's distributions of
earnings which will not be paid under the Company's new employment
contracts. The FAME Agreement provides for payments by the Company to
the FAME sellers of additional amounts up to $15.0 million in equal
annual installments over 5 years contingent on the achievement of
certain EBITDA targets. If FAME's EBITDA (as defined in the FAME
Agreement) exceeds 105% of specified targets in each of the years
1998 through 2002, the Company is required to pay the FAME sellers
$3.0 million within 120 days after the end of the year to which the
payment relates.
(b) Reflects salaries and officer's life insurance premiums to be paid by
the Company.
(c) Reflects an adjustment to the provision for state and local income
taxes.

50
<PAGE>

IV. DON LAW ACQUISITION

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998 (IN
THOUSANDS)
-------------------------------------------
PRO FORMA DON LAW
AS REPORTED ADJUSTMENTS ACQUISITION
------------- ------------- -------------
<S> <C> <C> <C>
Revenue................................. $4,549 $4,549
Operating expenses...................... 4,718 4,718
Depreciation & amortization............. 425 425
------------- ------------- -------------
Operating income (loss)................. $ (594) -- $ (594)
Interest expense........................ 201 201
Other (income) expenses................. (30) (30)
------------- ------------- -------------
Income/(loss) before income tax
expense................................ $ (765) -- $ (765)
Income tax expense (benefit)............ -- --
------------- ------------- -------------
Net income (loss)....................... $ (765) -- $ (765)
============= ============= =============
- ------------
(a) The pro forma adjustments for Don Law do not reflect the impact of
certain new business opportunities in 1998 including an agreement to
provide ticketing services for the Boston Red Sox, a new long-term
concessions contract at Great Woods and an opportunity to sell the
naming rights at Harborlights Pavilion. These opportunities are
expected to have a significant positive impact on Don Law's 1998
operating results.

</TABLE>

V. OTHER ACQUISITIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998 (IN THOUSANDS)
-------------------------------------------------------------------------
AVALON OAKDALE EMI PRO FORMA OTHER
ACQUISITION ACQUISITION ACQUISITION ADJUSTMENTS ACQUISITIONS
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue................................. $ 1,071 $4,610 $1,474 $7,155
Operating expenses...................... 2,043 3,838 1,542 7,423
Depreciation & amortization............. 110 14 124
------------- ------------- ------------- ------------- --------------
Operating income (loss)................. (1,082) $ 758 $ (68) -- $ (392)
Interest expense........................ 20 31 4 55
Other (income) expenses................. (21) (21)
Other expenses ......................... (201) $ 201 --
------------- ------------- ------------- ------------- --------------
Income/(loss) before income tax
expense................................ $ (901) $ 748 $ (72) $(201) $ (426)
Income tax expense (benefit)............ --
------------- ------------- ------------- ------------- --------------
Net income (loss)....................... $ (901) $ 748 $ (72) $(201) $ (426)
============= ============= ============= ============= ==============
</TABLE>

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

PRO FORMA ADJUSTMENTS:
(a) To reclassify PACE's equity income in Avalon following the Avalon
acquisition.

51
<PAGE>

VI. PRO FORMA ADJUSTMENTS FOR THE PENDING ACQUISITIONS
Reflects the increase of $3,542,000 in depreciation and amortization
resulting from the preliminary purchase accounting treatment of the
Pending Acquisitions. The Company amortizes goodwill over 15 years.
To record incremental corporate overhead charges of $303,000
associated with incremental headquarters personnel and general and
administrative expenses that management estimates will be necessary
as a result of the Pending Acquisitions.
Reflects the elimination of $277,000 of historical interest expense.
Represents an adjustment to the provision for their state and local
income taxes to reflect an approximate pro forma tax benefit of
$650,000. The calculation treats all companies to be acquired
pursuant to the Pending Acquisitions as "C" Corporations.

VII. PRO FORMA ADJUSTMENTS FOR THE FINANCING

Reflects interest expense of $2,281,000 associated with the additional
borrowings under the Credit Facility to finance the Pending Acquisitions.

<PAGE>

SFX ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA FOR THE PENDING ACQUISITIONS
-------------------------------------------
PRO FORMA
ADJUSTMENTS
SFX PRO FORMA FOR FOR THE
ENTERTAINMENT THE OTHER PENDING
(ACTUAL) TRANSACTIONS FAME DON LAW ACQUISITIONS ACQUISITIONS
I II III IV V VI
------------- ---------------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue........................ $149,349 $693,101 $11,475 $49,494 $73,846
Operating expenses............. 133,854 615,343 2,814 42,894 68,434
Depreciation & amortization ... 9,199 39,639 99 1,956 481 $ 14,217
Corporate expenses............. 2,662 4,662 -- -- -- 903
Other expenses................. -- -- -- -- --
-------- ---------------- ------- ------- ------------ ------------
Operating income (loss)........ 3,634 33,457 8,562 4,644 4,931 (15,120)
Interest expense............... 8,235 47,296 -- 1,055 304 (1,359)
Other (income) expenses........ (1,166) (1,854) (54) (351) (137)
Equity (income) loss from
investments................... (954) (6,432) -- -- 70
Other expenses (primarily
related to the Spin-off) .... 18,467 19,532 -- -- --
-------- ---------------- ------- ------- ------------ ------------
Income/(loss) before income
tax expense................... (20,948) (25,085) 8,616 3,940 4,694 (13,761)
Income tax expense (benefit) .. 870 2,500 900 -- 948 (1,348)
-------- ---------------- ------- ------- ------------ ------------
Net income (loss).............. $(21,818) $(27,585) $ 7,716 $ 3,940 $ 3,746 $(12,413)
======= ======= ============ ============
Accretion on temporary equity.. (275) (3,300)
Net income (loss) applicable
to common shares.............. $(22,093) $(30,885)
======== ================
Net income (loss) per common
share.........................
Weighted average common shares
outstanding (1)...............
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA FOR THE
ADJUSTMENTS TRANSACTIONS,
FOR THE THE PENDING
FINANCING ACQUISITIONS
VII AND THE FINANCING
---------------- --------------------
<S> <C> <C>
Revenue........................ $ -- $827,916
Operating expenses............. -- 729,485
Depreciation & amortization ... -- 56,392
Corporate expenses............. -- 5,565
Other expenses................. -- --
---------------- --------------------
Operating income (loss)........ -- 36,474
Interest expense............... 6,902 54,198
Other (income) expenses........ -- (2,396)
Equity (income) loss from
investments................... -- (6,362)
Other expenses (primarily
related to the Spin-off) .... -- 19,532
---------------- --------------------
Income/(loss) before income
tax expense................... (6,902) (28,498)
Income tax expense (benefit) .. -- 3,000
---------------- --------------------
Net income (loss).............. $(6,902) $(31,498)
================ ====================
Accretion on temporary equity.. (3,300)
Net income (loss) applicable
to common shares.............. $(34,798)
====================
Net income (loss) per common
share......................... $ (1.23)
====================
Weighted average common shares
outstanding (1)............... 28,816
====================
</TABLE>

- ------------
(1) Includes 500,000 shares of Class A Common Stock to be issued to the
PACE sellers in connection with the Fifth Year Put Option (such shares
are not included in calculating the net loss per common share) and the
assumed issuance of 7.0 million and approximately 1.5 million shares of
Class A Common Stock in the Offering and the Pending Acquisitions,
respectively.

53
<PAGE>
NOTES TO PRO FORMA INCOME STATEMENT:

I. Represents the Company's actual operating results for the twelve months
ended March 31, 1998.
EBITDA for the twelve months ended March 31, 1998 was $12,833,000 and
$92,866,000 for the Company on an actual basis and a pro forma basis,
respectively. EBITDA is defined as earnings before interest, taxes,
other income, net, equity income (loss) from investments and
depreciation and amortization. Although EBITDA is not a measure of
performance calculated in accordance with GAAP, the Company believes
that EBITDA is accepted by the entertainment industry as a generally
recognized measure of performance and is used by analysts who report
publicly on the performance of entertainment companies. Nevertheless,
this measure should not be considered in isolation or as a substitute
for operating income, net income, net cash provided by operating
activities or any other measure for determining the Company's operating
performance or liquidity which is calculated in accordance with GAAP.
Cash flows from operating, investing and financing activities for the
Company for the twelve months ended March 31, 1998 were $9,838,000,
$430,466,000 and $511,997,000, respectively.
There are other adjustments that could affect EBITDA but have not been
reflected herein. Had such adjustments been made, Adjusted EBITDA on a
pro forma basis would have been approximately $104,883,000 for the
twelve months ended March 31, 1998. The adjustments include the
expected cost savings in connection with the Recent Acquisitions
associated with the elimination of duplicative staffing and general and
administrative expenses of $5,655,000, and include equity income from
investments of $6,362,000. While management believes that such cost
savings are achievable, the Company's ability to fully achieve such
cost savings is subject to numerous factors, certain of which may be
beyond the Company's control.
Corporate expenses are net of fees from Triathlon of $1,286,000. These
fees will vary, above the minimum annual level of $500,000, based on
the level of acquisition and financing activities of Triathlon.
Sillerman Communications Management Corporation ("SCMC") previously
assigned its rights to receive fees payable under this agreement to SFX
Broadcasting. Pursuant to the terms of the Distribution Agreement, SFX
Broadcasting assigned its rights to receive such fees to the Company.
Triathlon has announced that it is exploring ways of maximizing
stockholder value, including possible sale to a third party. In the
event that Triathlon were acquired by a third party, there can be no
assurance that the agreement would continue for the remainder of its
term.

54
<PAGE>

II. PRO FORMA FOR THE TRANSACTIONS

The Company acquired Sunshine Promotions, PACE & Pavilion, Contemporary,
BGP, Network, and Concert/Southern, on June 24, 1997, February 25, 1998,
February 27, 1998, February 24, 1998, February 27, 1998, March 4, 1998,
respectively. The following adjustments represents the operating results of
these companies prior to their acquisition by the Company.

<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
-----------------------------------------------------------------
SFX SUNSHINE PACE &
ENTERTAINMENT PROMOTIONS PAVILION CONTEMPORARY BGP
(ACTUAL) ACQUISITION ACQUISITIONS ACQUISITION ACQUISITION
------------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenue................... $149,349 $6,057 $295,607 $90,225 $110,745

Operating expenses........ 133,854 5,553 279,891 90,162 102,918

Depreciation &
amortization............. 9,199 299 5,649 1,225 857
Corporate expenses........ 2,662 --
Other expenses............ -- -- 1,139
--------- ----------- ------------ ------------ -----------
Operating income (loss) .. 3,634 205 8,928 (1,162) 6,970
Interest expense.......... 8,235 447 6,325 (10) 989
Other (income) expenses .. (1,166) (34) (7) (368) (257)
Equity (income) loss from
investments.............. (954) -- (9,457) (1,002)

Other expenses (primarily
related to the Spin-off) 18,467 -- 1,415 -- 156
--------- ----------- ------------ ------------ -----------
Income/(loss) before
income tax expenses...... (20,948) (208) 10,652 218 6,082
Income tax expense
(benefit)................ 870 -- 683
--------- ----------- ------------ ------------ -----------
Net income (loss)......... $(21,818) $ (208) $ 9,969 $ 218 $ 6,082
=========== ============ ============ ===========
Accretion on temporary
equity .................. (275)
---------
Net income (loss)
applicable to common
shares................... $(22,093)
=========
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
-----------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS
FOR THE
FINANCING
CONCERT/ PRO FORMA OF THE RECENT PRO FORMA
NETWORK SOUTHERN ADJUSTMENTS ACQUISITIONS FOR THE
ACQUISITION ACQUISITION A B TRANSACTIONS
----------- ----------- ----------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Revenue................... $28,364 $13,924 $ 1,000 $693,101
(2,170)
Operating expenses........ 28,321 12,027 (2,170) 615,343
(11,423)
(23,790)
Depreciation &
amortization............. 378 72 21,960 39,639
Corporate expenses........ 2,000 4,662
Other expenses............ -- (1,139) --
----------- ----------- ----------- ------------- -------------------
Operating income (loss) .. (335) 1,825 13,392 -- 33,457
Interest expense.......... 151 (16,137) 47,296 47,296
Other (income) expenses .. 28 (50) (1,854)
Equity (income) loss from
investments.............. 65 2,566 (6,432)
1,380
1,002
(32)
Other expenses (primarily
related to the Spin-off) (506) 19,532
----------- ----------- ----------- ------------- -------------------
Income/(loss) before
income tax expenses...... (8) 1,810 24,613 (47,296) (25,085)
Income tax expense
(benefit)................ (503) 1,450 2,500
----------- ----------- ----------- ------------- -------------------
Net income (loss)......... $ 495 $ 1,810 $ 23,163 $(47,296) $(27,585)
=========== =========== =========== ============= ===================
Accretion on temporary
equity .................. (3,025) (3,300)
----------- -------------------
Net income (loss)
applicable to common
shares................... $ 20,138 $(30,885)
=========== ===================
</TABLE>

<PAGE>

A. PRO FORMA ADJUSTMENTS FOR RECENT ACQUISITIONS:
To reflect $1,000,000 of non-cash revenue resulting from the Company
granting naming rights to three venues for two years for no future
consideration as part of its agreement to acquire Blockbuster's indirect
33 1/3% interest in Pavilion.
Reflects the elimination of transactions of $2,170,000 between network
Magazine and SJS.
To eliminate PACE's non-cash stock and other non-recurring compensation
of $11,423,000.
To record the elimination of certain officer's bonuses and wages not
expected to be paid under the Company's new employment contracts of
$1,477,000, $11,230,000, $3,328,000, $7,326,000, and $429,000 for the
PACE, Contemporary, BGP, Network, and Concert Southern Acquisitions,
respectively.
Reflects the elimination of $1,139,000 of non-recurring restricted stock
compensation to PACE executives.
To eliminate $2,566,000 of PACE's income from its 33 1/3% equity
investment in Pavilion Partners, $1,380,000 of PACE's equity income in
Avalon, $1,002,000 of Contemporary's equity income in Riverport
Amphitheatre Partners, and $32,000 of equity loss of a non-entertainment
affiliated entity of Concert/Southern which was not acquired by the
Company.
Reflects the increase of $21,960,000 in depreciation and amortization
resulting from the preliminary purchase accounting treatment of the
Recent Acquisitions. The Company amortizes goodwill over 15 years.
To record incremental corporate overhead charges of $2,000,000 associated
with incremental headquarters personnel and general and administrative
expenses that management estimates will be necessary as a result of the
Recent Acquisitions.
To reflect the elimination of $16,137,000 of historical interest expense.
Represents an adjustment to the provision for their state and local
income taxes to reflect an approximate pro forma tax provision of
$2,500,000. The calculation treats all companies to be acquired pursuant
to the Recent Acquisitions as "C" Corporations.
To reflect the accretion of $3,025,000 on the Fifth Year Put Option
issued to the PACE sellers in connection with the PACE acquisition.

B. PRO FORMA FOR FINANCING OF THE RECENT ACQUISITIONS:

Reflects interest expense associated with the Notes, the Credit Facility
and other debt and deferred compensation costs related to the Recent
Acquisitions.

56
<PAGE>

III. FAME ACQUISITION

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED MARCH 31, 1998 (IN
THOUSANDS)
--------------------------------------------
PRO FORMA FAME
AS REPORTED ADJUSTMENTS ACQUISITION
------------- -------------- -------------
<S> <C> <C> <C>
Revenue................................. $11,475 $11,475
Operating expenses...................... 13,185 $(10,711)(a) 2,814
340 (b)
Depreciation & amortization............. 99 99
Corporate expenses...................... --
Other expenses.......................... --
------------- -------------- -------------
Operating income (loss)................. (1,809) 10,371 8,562
Interest expense........................ --
Other (income) expenses................. (54) (54)
Equity (income) loss from investments .. --
Other expenses ......................... --
------------- -------------- -------------
Income/(loss) before income tax
expense................................ (1,755) 10,371 8,616
Income tax expense (benefit)............ 900 (c) 900
------------- -------------- -------------
Net income (loss)....................... $(1,755) $ 9,471 $ 7,716
============= ============== =============
</TABLE>

PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officer's distributions of earnings
which will not be paid under the Company's new employment contracts. The
FAME Agreement provides for payments by the Company to the FAME sellers
of additional amounts up to $15.0 million in equal annual installments
over 5 years contingent on the achievement of certain EBITDA targets. If
FAME's EBITDA (as defined in the FAME Agreement) exceeds 105% of
specified targets in each of the years 1998 through 2002, the Company is
required to pay the FAME sellers $3.0 million within 120 days after the
end of the year to which the payment relates.
(b) Reflects salaries and officer's life insurance premiums to be paid by the
Company.
(c) Reflects an adjustment to the provision for state and local income taxes.

IV. DON LAW ACQUISITION

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED MARCH 31, 1998 (IN
THOUSANDS)
-------------------------------------------
PRO FORMA DON LAW
AS REPORTED ADJUSTMENTS(c) ACQUISITION
------------- ------------- -------------
<S> <C> <C> <C>
Revenue................................ $49,494 $49,494
Operating expenses..................... 43,554 $(610)(a) 42,894
(50)(b)
Depreciation & amortization............ 1,956 1,956
------------- ------------- -------------
Operating income (loss)................ 3,984 660 4,644
Interest expense....................... 1,055 1,055
Other (income) expenses................ (351) (351)
------------- ------------- -------------
Income/(loss) before income tax
expense............................... 3,280 660 3,940
Income tax expense (benefit)........... -- --
------------- ------------- -------------
Net income (loss)...................... $ 3,280 $ 660 $ 3,940
============= ============= =============
</TABLE>

PRO FORMA ADJUSTMENTS:
(a) Reflects elimination of payments made to employees by the principal owner
of Don Law in connection with the sale of membership interests to a third
party in 1997.
(b) Reflects the elimination of certain officer's bonuses and wages not
expected to be paid under the Company's new employment contracts. The
amount of the pro forma adjustment to eliminate salaries and bonuses is
based on the Company's agreements with the affected employees that a
(c) The pro forma adjustments for Don Law do not reflect the impact of certain
new business opportunities in 1998 including an agreement to provide

<PAGE>

ticketing services for the Boston Red Sox, a new long-term concessions
contract at Great Woods and an opportunity to sell the naming rights at
Harborlights Pavilion. These opportunities are expected to have a
significant positive impact on Don Law's 1998 operating results.

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<PAGE>

bonus will not be paid unless there is a significant improvement in the
results of FAME. Accordingly, no such bonus is reflected in the pro forma
statement of operations as should FAME's results be at a similar level to
that in these pro forma statements of operations no bonus would be paid,
and the Company would not be contractually obligated to pay a bonus.

V. OTHER ACQUISITIONS

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED MARCH 31, 1998 (IN THOUSANDS)
--------------------------------------------------------------------------
TOTAL
AVALON OAKDALE EMI PRO FORMA OTHER
ACQUISITION ACQUISITIONS ACQUISITIONS ADJUSTMENTS ACQUISITIONS
------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue................................ $27,795 $17,756 $28,295 $73,846
Operating expenses..................... 25,310 16,806 28,158 (1,840)(a) 68,434
Depreciation & amortization............ 426 55 -- 481
Corporate expenses..................... -- --
Other expenses......................... -- --
------------- -------------- -------------- ------------- -------------
Operating income (loss)................ 2,059 895 137 1,840 4,931
Interest expense....................... 99 160 45 304
Other (income) expenses................ (95) (42) (137)
Equity (income) loss from investments . 70 70
Other expenses......................... 1,380 -- (1,380)(b) --
------------- -------------- -------------- ------------- -------------
Income/(loss) before income tax
expense............................... 580 830 64 3,220 4,694
Income tax expense (benefit)........... 248 -- -- 700 (c) 948
------------- -------------- -------------- ------------- -------------
Net income (loss)...................... $ 332 $ 830 $ 64 $ 2,520 $ 3,746
============= ============== ============== ============= =============
</TABLE>

PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officer's bonuses and wages not
expected to be paid under the Company's new employment contracts. The
amount of the pro forma adjustment to eliminate salaries and bonuses is
based on the Company's agreements with the affected employees that a
bonus will not be paid unless there is a significant improvement in the
results of EMI. Accordingly, no such bonus is reflected in the pro forma
statement of operations as should EMI's results be at a similar level to
that in these pro forma statements of operations no bonus would be paid,
and the Company would not be contractually obligated to pay a bonus.
(b) To reclassify PACE's equity income in Avalon following the Avalon
acquisition.
(c) Reflects an adjustment to the provision for state and local income taxes.

VI. PRO FORMA ADJUSTMENTS FOR PENDING ACQUISITIONS:
Reflects the increase of $13,886,000 in depreciation and amortization
resulting from the preliminary purchase accounting treatment of the
Pending Acquisitions. The Company amortizes goodwill over 15 years.
To record incremental corporate overhead charges of $903,000 associated
with incremental headquarters personnel and general and administrative
expenses that management estimates will be necessary as a result of the
Pending Acquisitions.
To reflect the elimination of $1,359,000 of historical interest expense.
Represents an adjustment to the provision for their state and local
income taxes to reflect an approximate pro forma tax provision of
$2,500,000. The calculation treats all companies to be acquired pursuant
to the Pending Acquisitions as "C" Corporations.

VII. PRO FORMA ADJUSTMENTS FOR THE FINANCING:

Reflects interest expense associated with the additional borrowings under
the Credit Facility and other debt to finance the Pending Acquisitions.

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes thereto. The following discussion
contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from
those discussed herein. Factors that could cause or contribute to the
differences are discussed in "Risk Factors" and elsewhere in this Prospectus.
The Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.

The performance of entertainment companies, such as the Company, is
measured, in part, by their ability to generate EBITDA. "EBITDA" is defined
as earnings before interest, taxes, other income, net equity income (loss)
from investments and depreciation and amortization. Although EBITDA is not a
measure of performance calculated in accordance with GAAP, the Company
believes that EBITDA is accepted by the industry as a generally recognized
measure of performance and is used by analysts who report publicly on the
performance of entertainment companies. Nevertheless, this measure should not
be considered in isolation or as a substitute for operating income, net
income, net cash provided by operating activities or any other measure for
determining the Company's operating performance or liquidity that is
calculated in accordance with GAAP.

The Company's core business is the promotion and production of live
entertainment events, most significantly for concert and other music
performances in venues owned and/or operated by the Company and in
third-party venues. In connection with all of its live entertainment events,
the Company seeks to maximize related revenue streams, including the sale of
corporate sponsorships, the sale of concessions and the merchandising of a
broad range of products. On a pro forma basis, the Company's music businesses
comprised approximately 67%, theater comprised approximately 13%, specialized
motor sports comprised approximately 6% and other operations comprised
approximately 14% of the Company's total revenues for the twelve months
ended March 31, 1998.

Promotion of events involves booking talent, renting or providing the
event venue, marketing the event to attract ticket buyers and providing for
local services required in the production of the event such as security and
stage hands. Promoters generally receive revenues from the sale of tickets
and sponsorships. When an event is promoted at a venue owned or managed by
the promoter, the promoter also generally receives a percentage of revenues
from concessions, merchandising, parking and premium box seats. The Company
earns promotion revenues principally by promoting (a) music concerts, (b)
Touring Broadway Shows and (c) specialized motor sports events.

Production of events involves developing the event content, hiring
artistic talent and managing the actual production of the event (with the
assistance of the local promoter). Producers generally receive revenues from
guarantees and from profit sharing agreements with promoters, a percentage of
the promoters' ticket sales, merchandising, sponsorships, licensing and the
exploitation of other rights (including intellectual property rights) related
to the production. The Company earns revenues by producing (a) Touring
Broadway Shows, (b) specialized motor events and (c) other proprietary and
non-proprietary entertainment events.

1997 ACQUISITIONS

The Company entered the live entertainment business with SFX
Broadcasting's acquisition of Delsener/Slater, a New York-based concert
promotion company, in January 1997 for aggregate consideration of $27.6
million. Delsener/Slater has long-term leases or is the exclusive promoter
for many of the major concert venues in the New York City metropolitan area,
including the Jones Beach Amphitheater, a 14,000-seat complex located in
Wantagh, New York, and the PNC Bank Arts Center (formerly known as the Garden
State Arts Center), a 17,500-seat complex located in Holmdel, New Jersey. In
March 1997, Delsener/Slater acquired, for aggregate consideration of $23.8
million, companies which hold a 37-year lease to operate the Meadows Music
Theater, a 25,000-seat indoor/outdoor complex located in Hartford,
Connecticut. In June 1997, SFX Broadcasting acquired

59
<PAGE>

Sunshine Promotions, a concert promoter in the Midwest, and certain other
related companies for an aggregate consideration of $57.5 million. As a
result of the acquisition of Sunshine Promotions, the Company owns the Deer
Creek Music Theater, a 21,000-seat complex located in Indianapolis, Indiana,
the Polaris Amphitheater, a 20,000-seat complex located in Columbus, Ohio,
and has a long-term lease to operate the Murat Centre, a 2,700-seat theater
and 2,200-seat ballroom located in Indianapolis, Indiana. See "Certain
Relationships and Related Transactions--Delsener/Slater Employment
Agreements."

The cash portion of the 1997 Acquisitions was financed through capital
contributions from SFX Broadcasting.

RECENT ACQUISITIONS

In January 1998, the Company acquired Westbury Music Theater. In February
1998, the Company acquired PACE, Pavilion Partners, Contemporary, BGP and
Network and in March 1998, the Company acquired Concert/Southern and USA
Motorsports. See "Business--Recent Acquisitions."

ACQUISITION OF PACE

On February 25, 1998, the Company acquired all of the outstanding capital
stock of PACE (the "PACE Acquisition"). In connection with the PACE
Acquisition, the Company acquired 100% of Pavilion Partners, a partnership
that owns interests in 10 venues ("Pavilion"), one-third through the
acquisition of PACE and two-thirds through separate agreements between PACE
and Blockbuster and between PACE and Sony (the acquisition of such two-thirds
interest, the "Pavilion Acquisition"). The total consideration for the PACE
Acquisition was approximately $109.5 million in cash, the repayment of
approximately $20.6 million of debt and the issuance of 1.5 million shares of
Class A Common Stock. The total consideration for the Pavilion Acquisition
was approximately $90.6 million, comprised of $41.4 million in cash and the
repayment of $43.1 million of debt and the assumption of approximately $6.1
million of debt related to a capital lease. The purchase price was financed
from the proceeds of the Note Offering.

In addition, on March 25, 1998, PACE acquired a 67% interest in certain
assets and liabilities of USA Motorsports for an aggregate cash consideration
of approximately $4.0 million. The remaining 33% interest is held by the
Contemporary Group.

In connection with its acquisition of partnership interests in Lakewood
Amphitheater in Atlanta, Georgia and Starplex Amphitheater in Dallas, Texas,
PACE entered into a co-promotion agreement with its partner that contains a
provision that purports, under certain circumstances, to require PACE to
co-promote (and share one-half of the profits and losses) with such
partnership certain concerts which are presented by PACE or any of its
affiliates in another venue located in either Atlanta, Georgia or Dallas,
Texas. However, the Company acquired an interest in Chastain Park
Amphitheater, also in Atlanta, in the Concert Southern acquisition described
below. The Company is currently negotiating with the third party to waive
this restrictive provision; however, it is possible that the Company will be
unable to obtain the waiver. In management's view, this provision will not
materially affect the business or prospects of the Company.

ACQUISITION OF CONTEMPORARY

On February 27, 1998, the Company acquired Contemporary Group (the
"Contemporary Acquisition"). The Contemporary Acquisition involved the merger
of Contemporary International Productions Corporation with and into the
Company, the acquisition by a wholly-owned subsidiary of the Company of
substantially all of the assets, excluding certain cash and receivables, of
the remaining members of Contemporary and the acquisition of the 50% interest
in the Riverport Amphitheatre Joint Venture not owned by Contemporary. The
total consideration of the Contemporary Acquisition was approximately $72.8
million in cash, a payment for working capital of $9.9 million, and the
issuance of 1,402,850 shares of Class A Common Stock. The purchase price was
financed by the borrowings under the Credit Facility and with the proceeds of
the Note Offering.

60
<PAGE>
ACQUISITION OF BGP

On February 24, 1998, the Company, through the Company's wholly-owned
subsidiary, BGP Acquisition, LLC acquired all of the outstanding capital
stock of BGP, for a total consideration of $60.8 million in cash, $12.0
million in repayment of debt, which amount was at least equal to BGP's
working capital (as defined in the acquisition agreement), and 562,640 shares
of Class A Common Stock (the "BGP Acquisition"). The purchase price was
financed from the proceeds of the Note Offering.

ACQUISITION OF NETWORK

On February 27, 1998, the Company acquired Network (the "Network
Acquisition"). In the Network Acquisition, the Company acquired all of the
outstanding capital stock of each of The Album Network, Inc. and SJS and
purchased substantially all of the assets and properties and assumed
substantially all of the liabilities and obligations of The Network 40, Inc.
The total purchase price was approximately $52.0 million cash, a payment for
working capital of $1.8 million, reimbursed seller's costs of $500,000, the
purchase of an office building and related property for approximately $2.5
million and the issuance of approximately 750,000 shares of Class A Common
Stock. The purchase price is subject to increase based on Network's actual
1998 EBITDA (as defined in the acquisition agreement) by $4.0 million if such
EBITDA equals or exceeds $9.0 million to $14 million if EBITDA is greater
than $11 million, and is payable in stock, or in certain circumstances in
cash, by no later than March 20, 1999. The $2.5 million purchase of the
office building and related property used in connection with Network's
business was comprised of cash of $700,000 and the assumption of debt of $1.8
million. The purchase price was financed by the borrowings under the Credit
Facility. In connection with the Network Acquisition, the selling
stockholders were reimbursed working capital (as defined in the acquisition
agreement) in excess of $500,000.

ACQUISITION OF CONCERT/SOUTHERN

On March 4, 1998, the Company acquired Concert/Southern Promotions, a
promoter of live music entertainment in the Atlanta metropolitan area, for a
total consideration of $16.9 million (including the payments of the $1.6
million representing the present value of a deferred purchase obligation and
$300,000 for the working capital adjustment.) The purchase price was financed
by the borrowings under the Credit Facility.

ACQUISITION OF WESTBURY

On January 8, 1998, the Company acquired a long-term lease for Westbury
Music Fair, located in Westbury, New York, for an aggregate consideration of
approximately $3.0 million and an agreement to issue 75,019 shares of Class A
Common Stock. During the period between the closing and January 8, 2000, the
Company has the right to repurchase all of such shares for an aggregate
consideration of $2.0 million and the seller has the right to require the
Company to purchase all of such shares for an aggregate consideration of
$750,000. The purchase price was financed from the Company's cash on hand.

The foregoing descriptions do not purport to be complete descriptions of
the terms of the acquisition agreements and are qualified by reference to the
acquisition agreements, copies of which are attached hereto as exhibits and
incorporated herein by reference. Pursuant to the acquisition agreements and
the agreements related thereto, the Company, (a) under certain circumstances,
may be required to repurchase shares of its Class A Common Stock or make
additional payments in connection therewith, (b) has granted certain rights
of first refusal certain of which are exercisable at 95% of the proposed
purchase price and (c) in connection with the PACE Acquisition, has granted
Brian Becker, the Executive Vice President, a Member of the Office of the
Chairman, and a director of the Company, the option to acquire, after the
second anniversary of the consummation of the PACE Acquisition, the Company's
then existing motor sports line of business (or, if that business has
previously been sold, the Company's then existing theatrical line of
business) at its then fair market value. See "Risk Factors--Future Contingent
Payments" and "--Rights to Purchase Certain Subsidiaries."

61
<PAGE>

The Recent Acquisitions were accounted for using the purchase method of
accounting, and the intangible assets created in the purchase transactions
will generally be amortized against future earnings over a 15-year period.
The amount of amortization will be substantial and will continue to affect
the Company's operating results in the future. These expenses, however, do
not result in an outflow of cash by the Company and do not impact EBITDA.

PENDING ACQUISITIONS

In April and May of 1998, the Company entered into agreements or letters
of intent to acquire all of the capital stock of FAME, certain assets of Don
Law, certain assets of Oakdale and 80% of the outstanding capital stock of
EMI for an aggregate consideration consisting of approximately $216.1 million
in cash, including the repayment of approximately $10.0 million in debt, and
the issuance of 1,531,782 million shares of Class A Common Stock. See
"Agreements Related to the Pending Acquisitions."

ACQUISITION OF FAME

On April 29, 1998 the Company entered into an agreement to acquire all of
the outstanding capital stock of FAME (the "FAME Acquisition"). The aggregate
purchase price for FAME is approximately $82.9 million in cash (including
approximately $7.9 million which the Company anticipates paying in connection
with certain taxes which FAME and the FAME sellers will be subject to) and
1.0 million shares of Class A Common Stock. The agreement also provides for
payments by the Company to the FAME sellers of additional amounts up to $15.0
million in equal annual installments over 5 years contingent on the
achievement of certain EBITDA targets. The agreement also provides for
additional payments by the Company if FAME's EBITDA performance exceeds the
targets by certain amounts. The additional payments are to be within 120 days
after the end of the year to which they relate.

ACQUISITION OF DON LAW

On April 29, 1998 the Company entered into an agreement to acquire certain
assets of Blackstone Entertainment, LLC (the "Don Law Acquisition"). The
aggregate purchase price for the Don Law Acquisition is approximately $90.0
million, including the repayment of $10.0 million in debt. The Company may,
at its option, pay up to $16.0 million of the purchase price in 531,782
shares of Class A Common Stock. The purchase price will be increased or
decreased, as applicable, to the extent that Don Law's Net Working Capital
(as defined in the acquisition agreement) is positive or negative at the
closing. The Company has made a $100,000 non-refundable deposit in connection
with the Don Law Acquisition.

ACQUISITION OF AVALON

On March 6 and 9, 1998, the Company entered into two binding letters of
intent to acquire all the outstanding equity interests in Avalon for a total
cash purchase price of $27.4 million, including approximately $400,000 that
the Company is obligated to pay to reimburse the Avalon sellers' third party
out of pocket costs and expenses incurred with the development of the
Camarillo Creek Amphitheater (the "Avalon Acquisition''). The Company may also
be obligated to pay an additional $1.0 million to the Avalon sellers if the
Camarillo Creek Amphitheater has been completed pursuant to certain budget
projections and the production of entertainment events at the site have
commenced.

ACQUISITION OF OAKDALE

On April 22, 1998, the Company entered into an agreement to acquire
certain assets of Oakdale for a purchase price of $11.9 million in cash (the
"Oakdale Acquisition"). At the closing the Company will also make a
non-recourse loan to the Oakdale sellers in the amount of $11.3 million, a
portion of which will be used to repay outstanding indebtedness. In addition,
if the combined EBITDA (as defined in the acquisition agreement) for the
Oakdale Theater and Meadows exceeds $5.5 million in 1999, the Company will be
obligated to pay the amount of such excess multiplied by a factor of between
5.0 to 5.8.

ACQUISITION OF EMI

On May 1, 1998, the Company entered into an agreement to acquire an 80%
equity interest in EMI for $8.5 million in cash (the "EMI Acquisition"). In
addition, the Company is required to make a loan to

62
<PAGE>

the EMI sellers in an amount equal to twenty percent of certain taxes
incurred by the EMI sellers in connection with the transaction. The Company
expects that the amount of the loan will be approximately $750,000.

The Pending Acquisitions will be accounted for using the purchase method
of accounting and intangible assets created in the purchase transaction will
generally be amortized against future earnings over a fifteen-year period.
The amount of such amortization will be substantial and will continue to
affect the Company's operating results in the future. These expenses,
however, do not result in an outflow of cash by the Company and do not impact
EBITDA.

The Company expects to complete all of the Pending Acquisitions as soon as
practicable after the consummation of the Offering. The Company anticipates
that it will consummate all of the Pending Acquisitions in the second quarter
of 1998. However, the timing and completion of the Pending Acquisitions are
subject to a number of conditions, certain of which are beyond the Company's
control, and there can be no assurance that any of the Pending Acquisitions
will be consummated during such periods, on the terms described herein, or at
all. See "Risk Factors--Risks Related to the Pending Acquisitions" and
"Agreements Related to the Pending Acquisitions."

THE SPIN-OFF AND THE SFX MERGER

SFX Broadcasting was formed in 1992 principally to acquire and operate
radio broadcasting stations. In August 1997, SFX Broadcasting agreed to merge
with a subsidiary of SFX Buyer, and to Spin-Off the Company to certain
stockholders of SFX Broadcasting on a pro rata basis. The Spin-Off was
consummated on April 27, 1998. The Spin-Off separated the entertainment
business from SFX Broadcasting's radio broadcasting business and will enable
SFX Buyer to acquire only SFX Broadcasting's radio broadcasting business in
the SFX Merger. SFX Broadcasting has indicated that it expects the SFX Merger
to be completed in the second quarter of 1998.

Prior to the Spin-Off, pursuant to the Distribution Agreement, SFX
Broadcasting contributed to the Company all of its assets relating to the
entertainment business. In addition, the Company, SFX Broadcasting and SFX
Buyer also entered into the Tax Sharing Agreement and the Employee Benefits
Agreement. Each of the agreements provides for certain indemnification
obligations by the Company and SFX Broadcasting. Pursuant to the Distribution
Agreement, at the time of the SFX Merger, if Working Capital is negative, the
Company must pay the amount of the shortfall to SFX Broadcasting, and if
positive SFX Broadcasting must pay such Working Capital to the Company.
Copies of the Distribution Agreement (containing a description of the working
capital calculation), Tax Sharing Agreement and Employee Benefits Agreement
have been filed as exhibits to the Company's Registration Statement on Form
S-1 (File No. 333-50079). See "Risk Factors--Future Contingent Payments," and
"--Risks Related to the Pending Acquisitions," "--Liquidity and Capital
Resources" and "Additional Information."

In the Spin-Off, shares of Common Stock were distributed pro rata to
holders on the Spin-Off record date of SFX Broadcasting's Class A common
stock, Class B common stock, Series D preferred stock and interests in SFX
Broadcasting's director deferred stock ownership plan, and the remaining
shares were placed in escrow to be issued upon the exercise of certain
warrants of SFX Broadcasting. See "Certain Relationships and Related
Transactions--Employment Agreements."

RECENT DEVELOPMENTS

The Company has indicated to Marquee, a publicly-traded company, its
potential interest in acquiring Marquee. Marquee provides integrated event
management, television production, marketing and consulting services in the
sports, news and entertainment industries. In addition, Marquee represents
various entertainers, including athletes in team sports, and books tours
and appearances for a variety of entertainers. Mr. Sillerman, the Executive
Chairman of the Company, has an aggregate equity interest of approximately
9.1% in Marquee and is the chairman of its board of directors, and Mr. Tytel,
a Director and Executive Vice President of the Company, is one of its
directors. The Company has been informed that Marquee has formed a committee
of independent directors to consider the proposal, as well as other strategic
alternatives. However, the Company has not entered into any agreement,
arrangement or understanding with Marquee, and there can be no assurance that
the Company will enter into a definitive agreement with Marquee. See "Risk
Factors--Potential Conflicts of Interest" and "--Expansion Strategy; Need for
Additional Funds."

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<PAGE>
RESULTS OF OPERATIONS

GENERAL

The Company's operations consist primarily of (a) concert promotion and
venue operation, (b) the promotion and production of theatrical events,
particularly Touring Broadway Shows, and (c) the promotion and production of
motor sports events. The Company and the Acquired Businesses also engage in
various other activities ancillary to their live entertainment businesses.

On a pro forma basis, after giving effect to the Transactions, the Pending
Acquisitions and the Financing, the Company's revenues for the year ended
December 31, 1997 and the three months ended March 31, 1998, would have been
$779.0 million and $187.3 million, respectively.

On a pro forma basis, after giving effect to the Transactions, the Pending
Acquisitions and the Financing, operating expenses for the year ended
December 31, 1997 and the three months ended March 31, 1998, would have been
$688.4 million and $172.4 million, respectively. Pro forma operating expenses
do not reflect the Company's expectation that it will be able to achieve
substantial economies of scale upon completion of the Recent Acquisitions and
reductions in operating expenses as a result of the elimination of
duplicative staffing and general and administrative expenses.

On a pro forma basis, after giving effect to the Transactions, the Pending
Acquisitions and the Financing, the Company's net loss for the year ended
December 31, 1997 and the three months ended March 31, 1998, would have been
$22.8 million and $32.2 million, respectively. Net loss per share, after
accretion of the Fifth Year Put Option issued in connection with the PACE
Acquisition, would have been $0.92 and $1.17 million for the year ended
December 31, 1997 and three months ended March 31, 1998, respectively. The
pro forma operating results include the impact of significant non-cash
amortization expense arising from the Recent Acquisitions and interest
expense relating to the Financing.

As of March 31, 1998, on a pro forma basis after giving effect to the
Financing, Spin-Off and SFX Merger, the Company had net current assets of
$167.0 million (included in net current assets is cash and cash equivalents
of $105.7 million), net property and equipment (principally concert venues)
of $243.8 million, net intangible assets of $695.2 million and long-term debt
of $628.0 million. The long-term debt is comprised of $350.0 million of
Notes, borrowings of $235.0 million under the Credit Facility and other debt
obligations of $40.3 million.

CONCERT PROMOTION/VENUE OPERATION

The Company's concert promotion and venue operation business consist
primarily of the promotion of concerts and operation of venues primarily for
use in the presentation of musical events. The Company's primary source of
revenues from its concert promotion activities is from ticket sales at events
promoted by the Company. As a venue operator, the Company's primary sources
of revenue are sponsorships, concessions, parking and other ancillary
services, derived principally from events promoted by the Company.

Revenue from ticket sales is affected primarily by the number of events
the Company promotes, the average ticket price and the number of tickets
sold. The average ticket price depends on the popularity of the artist whom
the Company is promoting, the size and type of venue and the general economic
conditions and consumer tastes in the market where the event is being held.
Revenue and margins are also affected significantly by the type of contract
entered into with the artist or the artist's representative. Generally, the
promoter or venue operator will agree to pay the artist the greater of a
minimum guarantee or a profit sharing payment based on ticket revenue, less
certain show expenses. The promoter or venue operator assumes the financial
risk of ticket sales and is responsible for local production and advertising
of the event. However, in certain instances, the promoter agrees to accept a
fixed fee from the artist for its services, and the artist assumes all
financial risk. When the promoter or venue operator assumes the financial
risk, all revenue and expenses associated with the event are recorded. When
the artist assumes the risk, only the fee is recorded. As a result, operating
margins would be significantly greater for fee-based events as opposed to
events for which the Company assumes the risk of ticket sales, although
profits per event would tend to be lower. Operating margins can vary from
period to period.

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The Company's most significant operating expenses are talent fees,
production costs, venue operating expenses (including rent), advertising
costs and insurance expense. The booking of talent in the concert promotion
business generally involves contracts for limited engagements, often
involving a small number of performances. Talent fees depend primarily on the
popularity of the artist, the ticket price that the artist can command at a
particular venue and the expected level of ticket sales. Production costs and
venue operating expenses have substantial fixed cost components and lesser
variable costs primarily related to expected attendance.

THEATRICAL

The Company's theatrical operations are directed mainly towards the
promotion and production of Touring Broadway Shows, which generate revenues
primarily from ticket sales and sponsorships. The Company may also
participate in ancillary revenues, such as concessions and merchandise sales,
depending on its agreement with a particular local promoter/venue operator.
Revenue from ticket sales is primarily affected by the popularity of the
production and the general economic conditions and consumer tastes in the
particular market and venue where the production is presented. In order to
reduce its dependency on the success of any single touring production, the
Company sells advance annual subscriptions that provide the purchaser with
tickets for all of the shows that the Company intends to tour in the
particular market during the touring season. For the year ended December 31,
1997, on a pro forma basis approximately 34% of ticket sales for Touring
Broadway Shows presented by the Company were sold through advance annual
subscriptions. Subscription related revenues received prior to the event date
are initially recorded on the balance sheet as deferred revenue; after the
event occurs, they are recorded on the statement of operations as gross
revenue. Expenses are capitalized on the balance sheet as prepaid expenses
until the event occurs. Subscriptions for Touring Broadway Shows typically
cover approximately two-thirds of the Company's break-even cost point for
those shows.

Principal operating expenses related to touring shows include talent,
rent, advertising and royalties. Talent costs are generally fixed once a
production is cast. Rent and advertising expense may be either fixed or
variable based on the arrangement with the particular local promoter/venue
operator. Royalties are generally paid as a percentage of gross ticket sales.

The Company also makes minority equity investments in original Broadway
productions, principally as a means to obtain rights for touring shows, and
in certain Touring Broadway Shows. These investments are accounted for using
either the equity method or the cost method of accounting, based on the
relative size of the investment. The Company monitors the recoverability of
these investments on a regular basis, and the Company may be required to take
write-offs if the original production closes or if the Company determines
that the production will not recoup the investment. The timing of any
write-off could adversely affect operating results in a particular quarter.

MOTOR SPORTS

The Company's motor sports activities consist principally of the promotion
and production of specialized motor sports, which generate revenues primarily
from ticket sales and sponsorships, as well as merchandising and video rights
associated with producing motor sports events. Ticket prices for these events
are generally lower than for theatrical or music concert events, generally
ranging from $5 to $30 in 1996. Revenue from these sources is primarily
affected by the type of event and the general economic conditions and
consumer tastes in the particular markets and venues where the events are
presented. Event-related revenues received prior to the event date are
initially recorded on the balance sheet as deferred revenue; after the event
occurs, they are recorded on the statement of operations as gross revenue.
Expenses are capitalized on the balance sheet as prepaid expenses until the
event occurs.

Operating expenses associated with motor sports activities include talent,
rent, track preparation costs, security and advertising. These operating
expenses are generally fixed costs that vary based on the type of event and
venue where the event is held.

Under certain circumstances, the Company may be required to sell either
its motor sports or theatrical lines of business. See "Risk Factors--Rights
to Purchase Certain Subsidiaries."

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REPRESENTATION OF PROFESSIONAL ATHLETES

FAME's talent representation activities consist principally of the
representation of team sports athletes, primarily in the National Basketball
Association, in player contract and endorsement negotiations. FAME also
provides certain investment advisory services to its clients through an
affiliate. FAME typically receives a percentage of monies earned by a player,
generally approximately 4% of a player's sports contract and typically from
20% to 25% of endorsement deals. Revenue from these sources is recognized as
the player receives his salary or endorsement payments based on the terms of
the negotiated agreement. Revenue from these sources is dependent upon a
number of variables, many of which are outside the Company's control,
including a player's skill, health, public appeal and the appeal of the sport
in which the player participates. Principal operating expenses include
salaries, wages and travel and entertainment expenses. See "Risk
Factors--Risks Related to the Representation of Athletes."

OTHER BUSINESSES

The Company's other principal businesses include (a) the production and
distribution of radio industry trade magazines, (b) the production of radio
programming content and show-prep material and (c) the provision of radio air
play and music retail research services. The primary sources of revenues from
these activities include (a) the sale of advertising space in its
publications and the sale of advertising time on radio stations that carry
its syndicated shows, (b) subscription fees for its trade publications and
(c) subscription fees for access to its database of radio play list and
audience data. Revenues generally vary based on the overall advertising
environment and competition.

The Company also provides marketing and consulting services pursuant to
contracts with individual clients for specific projects. Revenues from and
costs related to these services vary based on the type of service being
provided and the incremental associated costs.

SEASONALITY

The Company's operations and revenues have been largely seasonal in
nature, with generally higher revenue generated in the second and third
quarters of the year. For example, on a pro forma basis for the 1997
Acquisitions, the Company generated approximately 68% of its revenues in the
second and third quarters for the twelve months ended December 31, 1997. The
Company's outdoor venues are primarily utilized in the summer months and do
not generate substantial revenue in the late fall, winter and early spring.
Similarly, the musical concerts that the Company promotes largely occur in
the second and third quarters. To the extent that the Company's entertainment
marketing and consulting relate to musical concerts, they also predominantly
generate revenues in the second and third quarters. Therefore, the
seasonality of the Company's business causes (and, upon consummation of the
Pending Acquisitions, will probably continue to cause) a significant
variation in the Company's quarterly operating results. These variations in
demand could have a material adverse effect on the timing of the Company's
cash flows and, therefore, on its ability to service its obligations with
respect to its indebtedness. However, the Company believes that this
variation may be somewhat offset with the acquisition of typically non-summer
seasonal businesses in the Recent Acquisitions, such as motor sports (which
is winter-seasonal) and Touring Broadway Shows (which typically tour between
September and May).

THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1997

The Company's revenue increased by $53.2 million to $61.0 million for the
three months ended March 1998, compared to $7.8 million for three months
ended March 31, 1997, as a result of the acquisitions of Sunshine and Meadows
in 1997 and the Recent Acquisitions. On a pro forma basis after giving effect
to the Transactions, the pending Acquisitions and the Financing, revenue for
the three months ended March 31, 1998 would have been $187.3 million.

Operating expenses increased by $50.5 million to $58.2 million for the
three month period ended March 31, 1998, compared to $7.7 million for three
months ended March 31, 1997, primarily as a result

<PAGE>

of the acquisition of Sunshine and Meadows in 1997 and the Recent
Acquisitions. On a pro forma basis, after giving effect to the Transactions,
the Pending Acquisitions and the Financing, operating expenses would have
been $172.4 million for the three month period ended March 31, 1998.

Depreciation and amortization expense increased to $4.4 million for the
three month period ended March 31, 1998 compared to $660,000 for the three
month period ended March 31, 1997, due to the inclusion of depreciation and
amortization expense related to the acquisitions of Sunshine and Meadows in
1997 and the Recent Acquisitions. The Company recorded the fixed assets the
these acquisitions at fair value and recorded intangible asset equal to the
excess of purchase price over the fair value of the net tangible assets,
which are being amortized over a 15 year period.

Corporate expenses were $1.3 million for the three month period ended
March 31, 1998, net of $133,000 fees received from Triathlon, compared to
$858,000 million for the three months ended March 31, 1997, net of Triathlon
fees of $651,000. The fees receivable from Triathlon are based on consulting
services provided by or on behalf of Sillerman Communications Management
Corporation, a private investment company in which Messrs. Sillerman and
Tytel have economic interests, that makes investments in and provides
financial consulting services to companies engaged in the music business
("SCMC"). The fees will fluctuate (above the minimum annual fee of $500,000)
based on the level of acquisition financing activities of Triathlon. SCMC
previously assigned its rights to receive fees payable from Triathlon to SFX
Broadcasting, and SFX Broadcasting will assign its rights to receive the fees
to the Company, pursuant to the Distribution Agreement. Triathlon has
announced that it is exploring ways of maximizing stockholder value,
including possible sale to a third party. If Triathlon is acquired by a third
party, it is possible that the consulting fees would not continue for the
remainder of the agreement's term.

Non-recurring and unusual charges relating to the Spin-Off included
$16.6 million of consent fees and $1.8 million of legal, accounting and other
costs.

The operating loss was $2.9 million for the three month period ended March
31, 1998, compared to a loss of $1.5 million for the three months March 31,
1997, due to the results discussed above.

Interest expense, net of investment income, was $5.9 million in the three
months ended March 31, 1998, compared to $77,000 for the three months ended
March 31, 1997, primarily as a result of assumption of additional debt
related to the Recent Acquisitions and the debt assumed in connection with
Meadows and Sunshine acquisitions.

Equity income in unconsolidated subsidiaries were $445,000 for the three
months March 31, 1998 as a result of Recent Acquisitions.

Income tax expense was $500,000 for the three month period ended March 31,
1998.

The Company's net loss increased to $27.3 million for the three month
period ended March 31, 1998, as compared to a net loss of $1.5 million for
the three months ended March 31, 1997, due to the factors discussed above.

EBITDA increased to $1.5 million for the three month period ended March
31, 1998, compared to negative $807,000 for the three months ended March 31,
1997, primarily as a result of the 1997 and Recent Acquisitions.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996

The Company's concert promotion revenue increased by 91% to $96.1 million
for the year ended December 31, 1997, compared to $50.4 million for the year
ended December 31, 1996, as a result of the acquisitions of Sunshine
Promotions and Meadows, which increased concert promotion revenue by $45.5
million. On a pro forma basis, assuming the acquisitions had been completed
as of January 1, 1997, revenue for the year ended December 31, 1997 would
have been $110.4 million.

Concert promotion operating expenses increased by 65% to $83.4 million for
the year ended December 31, 1997, compared to $50.7 million for year ended
December 31, 1996, primarily as a result of the acquisitions of Sunshine
Promotions and the Meadows, which increased concert operating expenses
revenue by $37.1 million, which was offset in part by decreased officer
salary expense paid to

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the former owners of Delsener/Slater. On a pro forma basis, assuming that
those acquisitions had been completed as of January 1, 1997, operating
expenses would have been $96.7 million for the year ended December 31, 1997.

Depreciation and amortization expense increased to $5.4 million for the
year ended December 31, 1997, compared to $747,000 for the year ended
December 31, 1996, due to the inclusion of $2.6 million of depreciation and
amortization expense related to the acquisitions of Sunshine Promotions and
Meadows and the additional depreciation and amortization recorded in 1997
related to the purchase of Delsener/Slater on January 2, 1997. In 1997, the
Company recorded the fixed assets of Delsener/Slater at fair value and
recorded an intangible asset equal to the excess of purchase price over the
fair value of net tangible assets of Delsener/Slater, which was amortized
over a 15 year period.

Corporate expenses were $2.2 million for the year ended December 31, 1997,
net of $1.8 million in fees received from Triathlon, compared to zero for the
year ended December 31, 1996. These expenses represent the incremental costs
of operating the Company's corporate offices, and therefore did not exist in
1996. The fees receivable from Triathlon are based on consulting services
provided by or on behalf of SCMC, a private investment company in which
Messrs. Sillerman and Tytel have economic interests, that makes investments
in and provides financial consulting services to companies engaged in the
media business. The fees will fluctuate (above the minimum annual fee of
$500,000) based on the level of acquisition and financing activities of
Triathlon. SCMC previously assigned its rights to receive fees payable from
Triathlon to SFX Broadcasting, and SFX Broadcasting will assign its rights to
receive the fees to the Company, pursuant to the Distribution Agreement.
Triathlon has previously announced that it is exploring ways of maximizing
stockholder value, including a possible sale to a third party. If Triathlon
is acquired by a third party, it is possible that the consulting fees would
not continue for the remainder of the agreement's term. See "Certain
Relationships and Related Transactions--Triathlon Fees."

Operating income was $5.1 million for the year ended December 31, 1997,
compared to a loss of $1.1 million for the year ended December 31, 1996, due
to the results discussed above.

Interest expense, net of investment income, was $1.3 million in the year
ended December 31, 1997, compared to net interest income of $138,000 for the
year ended December 31, 1996, primarily as a result of assumption of
additional debt related to the acquisitions of the Meadows Music Theater and
Sunshine Promotions.

Equity income in unconsolidated subsidiaries decreased 3% to $509,000 from
$524,000.

Income tax expense increased to $490,000 for the year ended December 31,
1997, compared to $106,000 for the year ended December 31, 1996, primarily as
a result of higher operating income.

The Company's net income increased to $3.8 million for the year ended
December 31, 1997, as compared to a net loss of $515,000 for the year ended
December 31, 1996, due to the factors discussed above.

EBITDA increased to $10.5 million for the year ended December 31, 1997,
compared to a negative $324,000 for the year ended December 31, 1996, as a
result of the 1997 Acquisitions, the reduction in officers' salary expense
and improved operating results.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995

The Company's concert promotion revenue increased by 5.9% to $50.4 million
for the year ended December 31, 1996, compared to $47.6 million for the year
ended December 31, 1995, primarily as a result of an increase in concerts
promoted and an increase in ticket prices.

Concert promotion operating expenses increased by 7.2% to $50.6 million
for the year ended December 31, 1996, compared to $47.2 million for the year
ended December 31, 1995, primarily as a result of an increase in concert
activity.

Depreciation and amortization expense decreased slightly to $747,000 for
the year ended December 31, 1996, compared to $750,000 for the year ended
December 31, 1995.

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The Company's operating loss was $1.1 million for the year ended December
31, 1996, compared to an operating loss of $362,000 for the year ended
December 31, 1995, due to the results discussed above.

Interest income, net of interest expense, increased by 306% to $138,000
for the year ended December 31, 1996, compared to $34,000 for the year ended
December 31, 1995.

Equity income in unconsolidated subsidiaries increased 8% to $524,000 from
$488,000, primarily as result of the investment in the PNC Bank Arts Center,
offset by lower income from the Company's other equity investments.

The Company's state and local income tax expense increased to $106,000 for
the year ended December 31, 1996, compared to $13,000 for the year ended
December 31, 1995. This increase was primarily the result of the higher
operating income.

The Company's net loss was $515,000 for the year ended December 31, 1996,
compared to net income of $147,000 for the year ended December 31, 1995, due
to the factors discussed above.

EBITDA was a negative $324,000 for the year ended December 31, 1996,
compared to $388,000 for the year ended December 31, 1995, primarily as a
result of higher officers' salary expense partially offset by lower general
and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal need for funds has been for acquisitions, interest
expense, working capital needs, to make certain payments in connection with
the Spin-Off and, to a lesser extent, capital expenditures. The Company
anticipates that its principal sources of funds will be the proceeds from the
Financing, remaining proceeds from the Note Offering, borrowings under the
Credit Facility and cash flows from operations.

HISTORICAL CASH FLOWS

Net cash provided by operations was $9.1 million for the three months
ended March 31, 1998 as compared to $307,000 for the three months ended March
31, 1997. The increase was primarily attributable to changes in working
capital.

Net cash used in investing activities for the three months ended March 31,
1998 was $379.8 million as compared to $22.6 million for the three months
ended March 31, 1997. The increase was primarily the result of the Recent
Acquisitions. During the three months ended March 31, 1997, the Company
completed the acquisition of Delsener/Slater.

Net cash provided by financing activities for the three months ended March
31, 1998 was $458.7 million as compared to $24.9 million for the three months
ended March 31, 1997. During 1998, the Company completed the issuance of the
Notes for $350.0 million and borrowed $150.0 under the Credit Facility,
offset by Spin-Off related payments of $17.1 million and the payment of debt
issuance costs of $16.9 million.

PENDING ACQUISITIONS

The aggregate consideration in the Pending Acquisitions is expected to
consist of approximately $216.1 million (including the repayment of
approximately $10 million in debt) and 1,531,782 shares of Class A Common
Stock. In addition, the Company expects to incur approximately $6.0 million
in fees and expenses related to the Pending Acquisitions. In addition, the
agreements relating to the Pending Acquisitions provide for future contingent
payments under certain circumstances. The Company has also placed a deposit in
connection with the Pending Acquisitions of $100,000, which will be applied
against the applicable purchase price at closing. In addition, the agreements
relating to the Pending Acquisitions provide for certain future contingent
payments. See "--Future Contingent Payments" and "--Pending Acquisitions."

The 1,531,782 shares to be issued in connection with acquisitions of FAME
and Don Law were not registered under the Securities Act or state securities
laws, as may have been required. The Company has filed a registration
statement in order to make a rescission offer with respect to such
transactions which could result in the unwinding of all or a portion of the
FAME and/or Don Law acquisitions. The Company does not expect the sellers to
accept such rescission offer.

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The timing and completion of the Pending Acquisitions is subject to a
number of closing conditions certain of which are beyond the control of the
Company. No assurance can be given that the Company will be able to complete
any of the Pending Acquisitions on the terms described or at all, or that the
Company will have sufficient funds available to make any of the contingent
payments described above should they come due. See "Agreements Related to the
Pending Acquisitions."

FUTURE CONTINGENT PAYMENTS

Certain of the agreements relating to the Recent Acquisitions provide for
purchase price adjustments and other future contingent payments under certain
circumstances. The PACE acquisition agreement provides that each PACE seller
will have an option, exercisable for 90 days after the fifth anniversary of
the closing of the PACE acquisition, to require the Company to repurchase up
to 500,000 shares of the Class A Common Stock received by that seller for
$33.00 in cash per share (an aggregate of up to $1.5 million). Pursuant to
the terms of the Becker Employment Agreement (as defined herein), during the
period between December 12, 1999 and December 27, 1999, Mr. Becker, an
Executive Vice President, Director and a Member of the Office of the Chairman
of the Company, will have the option to, among other things, require the
Company to purchase any stock or portion thereof (including vested and
unvested options) granted to him by the Company and/or pay him an amount
equal to the present value of the compensation payable during the remaining
term of his employment agreement. See "Management--Employment Agreements and
Arrangements with Certain Officers and Directors." Moreover, pursuant to the
Contemporary acquisition agreement, if the average trading price of the
1,402,850 shares of Class A Common Stock issued in the Contemporary
acquisition is less than $13.33 during the twenty days prior to the second
anniversary of the Contemporary acquisition, the Company will be required to
pay one-half of such difference for each share held by the sellers of
Contemporary on such date. Pursuant to the Network acquisition agreement, the
Company has agreed to increase the purchase price for Network based on
Network's actual 1998 EBITDA (as defined in the acquisition agreement) as
follows: (a) by $4.0 million if the 1998 EBITDA equals or exceeds $9.0
million; (b) by an additional $4 for each $1 of additional 1998 EBITDA
between $9.0 million and $10.0 million; and (c) by an additional $6 for each
$1 of additional 1998 EBITDA between $10.0 million and $11.0 million. This
contingent consideration of up to $14.0 million is payable in shares of Class
A Common Stock or, in certain circumstances, in cash by no later than March
20, 1999. No assurance can be given that the Company will have sufficient
cash or other available sources of capital to make any or all of the future
or contingent payments described above.

In addition, certain of the agreements relating to the Pending
Acquisitions provide for future contingent payments under certain
circumstances. Pursuant to the agreement relating to the acquisition of FAME,
the Company is obligated to pay to the FAME sellers additional amounts up to
$15.0 million in equal annual installments over five years contingent on the
achievement by FAME of certain EBITDA targets. The FAME agreement also
provides for additional payments by the Company to the FAME sellers if FAME's
EBITDA performance exceed the targets by certain amounts. Futhermore, if the
Company disposes of all or substantially all of the assets or voting
interests of FAME during the five years following the closing of the FAME
acquisition, certain payments may become due to the FAME sellers out of the
proceeds of such sale. See "Agreements Related to the Pending Acquisitions."
In addition, pursuant to the agreement relating to the acquisition certain
assets of Oakdale, if the combined EBITDA (as defined in the Oakdale
acquisition agreement) of the Oakdale Music Theater and Meadows exceeds $5.5
million in 1999, the Company will be obligated to pay the Oakdale sellers
between 5.0 to 5.8 times the amount of such excess. See "Risk Factors--Future
Contingent Payments."

FUTURE ACQUISITIONS

The Company is in the process of negotiating certain additional
acquisitions in the live entertainment business and related businesses,
however, it has not yet entered into any definitive agreements with respect
to such acquisitions and there can be no assurance that it will do so or have
the necessary resources to consummate any of such acquisitions. See "--Recent
Developments" and "Risk Factors--Expansion Strategy; Need for Additional
Funds."

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SPIN-OFF

Pursuant to the Tax Sharing Agreement, the Company is responsible for
certain taxes of SFX Broadcasting, including taxes imposed with respect to
income generated by the Company for the periods prior to the Spin-Off and
taxes resulting from gain recognized in the Spin-Off. The Company will be
allowed to offset any gain or income by the net operating losses of SFX
Broadcasting (including net operating losses generated in the current year
prior to the Spin-Off) which are available to offset such gain or income. The
Company believes that the amount of taxes that it will be required to pay in
connection with the Spin-Off will be determined by reference to the average
of the high and low sales price of the Class A Common Stock on April 27, 1998
(the date of the distribution of Common Stock pursuant to the Spin-Off).
Increases or decreases in the value of the Common Stock subsequent to such
date will not affect the tax liability. The average of the high and low sales
price of the Class A Common Stock on April 27, 1998 was $30.50 per share, and
Management estimates that the Company will be required to pay approximately
$120 million pursuant to such indemnification obligation. Most of the tax
liability relates to certain deferred intercompany transactions creating
taxable income for the Company. Management believes that these deferred
intercompany transactions will give rise to additional tax basis which will
be available to offset future taxable income of the Company. Management's
estimates of the amount of the indemnity payment and additional taxable basis
are based on certain assumptions which management believes are reasonable.
However, upon completion of the relevant tax forms, including any potential
audits, such assumptions could be modified in a manner which would result in
a significant variance in the actual amount of the tax indemnity. The Company
intends to use a substantial portion of the net proceeds from the Offering to
make such payment and expects that such payment will be due on or about
June 15, 1998. Such payment will not result in any corresponding increase in
the Company's assets or cash flows and, therefore, the purchasers of Class A
Common Stock in the Offering will experience substantial dilution. For a more
complete description of the tax indemnification obligations, see the Tax
Sharing Agreement filed as an exhibit hereto. See "Risk Factors--Future
Contingent Payments" and "--Dilution," "Use of Proceeds" and "Additional
Information."

The Company also incurred approximately $18.0 million in fees and expenses
in connection with the Spin-Off which the Company will fund from its cash on
hand. In addition, pursuant to the SFX Merger Agreement, the Company has
agreed to assume SFX Broadcasting's obligations under the employment
agreements of certain employees and senior management, including the
obligation to make change of control payments to Messrs. Sillerman, Ferrel
and Benson aggregating approximately $3.3 million, $1.5 million and $0.2
million, respectively. The assumed obligations will also include the duty to
indemnify Messrs. Sillerman and Ferrel for one-half of any excise taxes that
may be assessed against them in connection with the change of control
payments. It is also anticipated that Mr. Sillerman's employment agreement
with the Company will provide for certain indemnities relating to the SFX
Merger. See "Certain Relationships and Related Transactions--Assumption of
Employment Agreements; Certain Change of Control Payments" and
"--Indemnification of Mr. Sillerman." In addition, pursuant to the
Distribution Agreement, the Company will be required to indemnify SFX
Broadcasting and each of its directors, officers and employees for any losses
relating to the Company's assets and liabilities.

In addition, pursuant to the Distribution Agreement, the Company will
assume certain obligations of SFX Broadcasting, including two real estate
leases on its executive offices. Such leases provide for annual rent of
approximately $1.4 million.

WORKING CAPITAL

As required by the Distribution Agreement, SFX Broadcasting contributed to
the Company all of its concert and other live entertainment assets. At that
time, the Company assumed all of SFX Broadcasting's liabilities relating to
the live entertainment businesses, along with certain other liabilities. At
the time of the SFX Merger, if Working Capital is negative, then the Company
must pay the amount of the shortfall to SFX Broadcasting. If positive, SFX
Broadcasting must pay such Working Capital to the Company. As of March 31,
1998, the Company estimates that Working Capital to be paid by SFX
Broadcasting to the

<PAGE>

Company would have been approximately $3.3 million. The actual amount of
Working Capital as of the SFX Merger will be a function of, among other
things, the operating results of SFX Broadcasting through the date of the SFX
Merger, the actual date of the closing of the SFX Merger and the actual cost
of consummating the SFX Merger and related transactions. For a more complete
description of the calculation of the Working Capital, see the Distribution
Agreement filed as an exhibit hereto. See "Additional Information." In
February 1998, the Company reimbursed SFX Broadcasting approximately $25.3
million for consent fees, capital expenditures and other acquisition related
fees previously funded by SFX Broadcasting. See "Risk Factors--Future
Contingent Payments."

INTEREST ON NOTES AND BORROWINGS UNDER THE CREDIT FACILITY

On February 11, 1998, the Company completed the private placement of
$350.0 million of 9 1/8% Senior Subordinated Notes. Interest is payable on
the Notes on February 1 and August 1 of each year. In addition, the Company
borrowed $150.0 million under the Credit Facility at an interest rate of
approximately 8.07%. The Company expects to borrow approximately $85.0 million
under the Credit Facility pursuant to the Financing. See "Use of Proceeds,"
"--Sources of Liquidity" and "Description of Indebtedness."

The degree to which the Company is leveraged will have material
consequences to the Company. The Company's ability to obtain additional
financing in the future for acquisitions, working capital, capital
expenditures, general corporate or other purposes are subject to the
covenants contained in the instruments governing its indebtedness. A
substantial portion of the Company's cash flow from operations will be
required to be used to pay principal and interest on its debt and will not be
available for other purposes. The Indenture and the credit agreement with
respect to the Credit Facility (the "Credit Agreement") contain restrictive
financial and operating covenants, and the failure by the Company to comply
with those covenants would result in an event of default under the applicable
instruments, which in turn would permit acceleration of the debt under the
instruments (and in some cases acceleration of debt under other instruments
that contain cross-default or cross-acceleration provisions). The Company
will be more vulnerable to economic downturns and could also be limited in
its ability to withstand competitive pressures and in its flexibility in
reacting to changes in its industry and general economic conditions. These
consequences are not exhaustive; the Company's indebtedness could also have
other adverse consequences. See "Risk Factors--Substantial Leverage."

The Company's ability to make scheduled payments of principal of, to pay
interest on or to refinance its debt depends on its future financial
performance, which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond its
control, as well as the success of the businesses to be acquired and the
integration of these businesses into the Company's operations. There can be
no assurance that the Company will be able to make planned borrowings
(including under the Credit Facility), that the Company's business will
generate sufficient cash flow from operations, or that future borrowings will
be available in an amount to enable the Company to service its debt and to
make necessary capital or other expenditures. The Company may be required to
refinance a portion of the principal amount of its indebtedness prior to
their respective maturities. There can be no assurance that the Company will
be able to raise additional capital through the sale of securities, the
disposition of assets or otherwise for any refinancing. See "Risk Factors."

CAPITAL EXPENDITURES

Capital expenditures totaled $11.8 million for the three months ended
March 31, 1998 and $2.1 million in the year ended December 31, 1997 and $11.8
million for the three months ended March 31, 1998. Capital expenditures in 1997
included cash paid for expansion and renovations at the Jones Beach
Amphitheater, improvements at other venues and computer and other operating
equipment. The Company expects that capital expenditures in fiscal year 1998
will be substantially higher than current levels, due to the planned capital
expenditures of approximately $29.0 million for 1998 at existing venues
(including $17.0 million for the expansion and renovation of the Jones Beach
Amphitheater and $12.0 million for the expansion and renovation of the PNC Bank
Arts Center) and capital expenditures requirements of the Acquired Businesses,
including $12.0 million for the construction of a new amphitheater serving the
Seattle,

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Washington market. As of March 31, 1998, the Company had paid approximately
$9.0 million of the $41.0 million which it expects to pay in 1998. The
Company estimates that, of the remaining capital expenditures of approximately
$32.0 million, approximately $25.0 million will consist of major projects
and approximately $7.0 million will consist of other capital expenditures.
The Company expects to fund such capital expenditures from its cash on hand.

FUTURE CHARGES TO EARNINGS

The Company anticipates entering into or amending employment agreements
with certain of its executive officers before the Spin-Off. In connection
with these agreements, the Company sold to the executive officers an
aggregate of 650,000 shares of Class B Common Stock and 190,000 shares of
Class A Common Stock at a purchase price of $2.00 per share. The Company will
record a non-cash compensation charge in the second quarter of approximately
$24.0 million in connection with this sale. In addition, the Company will
recognize a charge to earnings of approximately $7.5 million in the second
quarter associated with the Meadows Repurchase resulting from 247,177 shares
of Class A Common Stock issued to Mr. Sillerman in connection with the
Meadows Repurchase. The amount of such charge would be equal to the fair
value of Class A Common Stock to be received by Mr. Sillerman at the time of
the Meadows Repurchase. See "Certain Relationships and Related Transactions--
Meadows Repurchase."

Further, the Board, on the recommendation of its Compensation Committee,
also has approved the issuance of certain "below market" stock options
exercisable for an aggregate of 252,500 shares of Class A Common Stock. These
options will vest over three years and will have an exercise price of $5.50 per
share. The Company will record non-cash compensation charges of approximately
$2.0 million annually over the three-year exercise period. See "Management--
Employment Agreements and Arrangements with Certain Officers and Directors" and
"Certain Relationship and Related Transactions."

The consummation of the Recent Acquisitions and other future acquisitions
will also result in substantial charges to earnings relating to interest
expense and the recognition and amortization of goodwill and other intangible
assets. As of March 31, 1998, the Company's goodwill was approximately $470.7
million. This balance will substantially increase due to the Pending
Acquisitions. Goodwill and other intangible assets are being amortized using
the straight line method over 15 years.

YEAR 2000 COMPLIANCE

The Company has addressed the risks associated with Year 2000 compliance
with respect to its accounting and financial reporting systems and is in the
process of installing new accounting and reporting systems. These systems are
expected to provide better reporting, to allow for more detailed analysis, to
handle both the 1997, Recent and the Pending Acquisitions and to be Year 2000
compliant. The Company anticipates that the cost of implementing these
systems will be approximately $3.0 million. The Company is in the process of
examining Year 2000 compliance issues with respect to its vendors and does
not anticipate that it will be subject to a material impact in this area.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of An
Enterprise and Related Information" ("FAS 131"), which is effective for years
beginning after December 15, 1997. FAS 131 establishes standards for the way
that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers. FAS 131 is effective for
financial statements for fiscal years beginning after December 15, 1997, and
therefore the Company will adopt the new requirements in 1998. Management has
not yet completed its review of FAS 131 but does not expect that its adoption
will have a material effect on the Company's statement of position or
revenues, only on the composition of its reportable segments.

SOURCES OF LIQUIDITY

As of March 31, 1998, the Company's cash and cash equivalents totaled
$94.0 million and its working capital deficit totaled $110.8 million. In
February of 1998, the Company received proceeds of

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$350.0 million from the Note Offering and borrowed $150.0 million under the
Credit Facility in order to consummate the Recent Acquisitions (approximately
$446.1 million) and pay certain fees and expenses related to the Recent
Acquisitions (approximately $6.0 million). On a pro forma basis, after giving
effect to the Transactions, the Pending Acquisitions and the Financing as if
they had occurred on March 31, 1998, the Company's working capital would have
been approximately $27.8 million at March 31, 1998.

The Company has incurred and will continue to incur substantial amounts
of indebtedness. As of March 31, 1998, the Company's consolidated
indebtedness would have been approximately $628.0 million on a pro forma
basis giving effect to the Transactions, the Pending Acquisitions and the
Financing (assuming that the SFX Merger occurs on the terms
currently contemplated). The Company may incur indebtedness from time to time
to finance acquisitions, for capital expenditures or for other purposes. See
"Risk Factors--Substantial Leverage" and "--Expansion Strategy; Need for
Additional Funds."

The Credit Facility consists of a $150.0 million seven year reducing
revolving facility (the "Revolver") and a $150.0 million eight year term loan
(the "Term Loan"). Upon consummation of the Financing, the Company estimates
that it will have $65.1 million in remaining borrowing availability under the
Credit Facility (subject to the ability of the Company to increase borrowing
availability by up to an additional $50.0 million). Loans outstanding under
the Credit Facility will bear interest, at the Company's option, at 1.875 to
2.375 percentage points over LIBOR or the greater of the Federal Funds rate
plus 0.50% or BNY's prime rate. The interest rate spreads on the Term Loan
and the Revolver will be adjusted based on the Company's Total Leverage Ratio
(as defined in the Credit Agreement). The Company will pay a per annum
commitment fee on unused availability under the Revolver of 0.50% to the
extent that the Company's Leverage Ratio is greater than or equal to 4.0 to
1.0, and 0.375% if such ratio is less than 4.0 to 1.0 and a per annum letter
of credit fee equal to the Applicable LIBOR Margin (as defined in the Credit
Agreement) for the Revolver then in effect. The Revolver and Term Loan
contain provisions providing that, at its option and subject to certain
conditions, the Company may increase the amount of either the Revolver or
Term Loan by $50.0 million. The Revolver and Term Loan contain usual and
customary covenants, including limitations on (a) line of business, (b)
additional indebtedness, (c) liens, (d) acquisitions, (e) asset sales, (f)
dividends, repurchases of stock and other cash distributions, (g) total
leverage, (h) senior leverage and (i) ratios of Operating Cash Flow (as
defined in the Credit Agreement) to pro forma interest expense, debt service
and fixed charges. The Company's obligations under the Revolver and Term Loan
are secured by substantially all of its assets, including property, stock of
subsidiaries and accounts receivable and guaranteed by the Company's
subsidiaries. See "Description of Indebtedness--Credit Facility."

The net proceeds of the Offering, together with anticipated borrowings
under the Credit Facility, are expected to be approximately $347.0 million,
which the Company intends to use to pay the anticipated tax indemnification
obligation to SFX Broadcasting (approximately $120.0 million), to pay the
cash portion of the purchase price of the Pending Acquisitions (approximately
$216.1 million), to pay certain fees and expenses related to the Financing
(approximately $17.9 million), to pay certain fees and expenses related to
the Pending Acquisitions (approximately $6.0 million) and to make certain
change of control payments to executive officers ($5.0 million). The
foregoing represents the Company's best estimate of the allocation of the net
proceeds of the Offering based on the current status of its business and, as
noted elsewhere herein, could be subject to significant change. On a pro
forma basis for the twelve months ended March 31, 1998, amounts available for
borrowing under the Credit Facility plus the net proceeds from the Offering,
would be sufficient for the uses of funds described herein. However, there
can be no assurance that the Company will have sufficient cash flows at the
time of borrowing to permit it to make borrowings under the Credit Facility
in the amounts required. See "Description of Indebtedness."

Future events, including the actual amount of the tax indemnity payment,
the ability of the Company to identify appropriate acquisition candidates,
the availability of other financing and funds generated from operations and
the status of the Company's business from time to time, may make changes in
the allocation of the net proceeds of the Offering necessary or desirable.
See "Use of Proceeds."

Furthermore, certain agreements of the Company, including the Distribution
Agreement, the Tax Sharing Agreement, the Employee Benefits Agreement, certain
employment agreements and the agreements relating to the Recent

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Acquisitions and the Pending Acquisitions provide for tax and other
indemnities, purchase price adjustments and future contingent payments in
certain circumstances. There can be no assurance that the Company will have
sufficient sources of funds to make such payments should they come due. In
addition, consistent with its operating strategy, the Company is currently
negotiating additional acquisitions and expects to pursue additional
acquisitions in the live entertainment business in the future. See "Risk
Factors--Risks Related to Pending Acquisitions," "--Substantial Leverage,"
"--Future Contingent Payments" and "--Restrictions Imposed by the Company's
Indebtedness," "Certain Relationships and Related Transactions--Indemnification
of Mr. Sillerman" and "Description of Indebtedness."

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OVERVIEW OF THE LIVE ENTERTAINMENT INDUSTRY

CONCERT PROMOTION INDUSTRY

The concert promotion industry consists primarily of regional promoters
focused generally in one or two major metropolitan markets. According to
Amusement Business, industry gross box office receipts for North American
concert tours totaled $1.1 billion in 1997, compared to $321.7 million in
1985, representing a compounded annual growth rate of approximately 10.9%.
The Company believes that overall increases in ticket sales during the last
several years are in part due to the increasing popularity of amphitheaters
as live entertainment venues, as well as an increasing number of tours that
attract older audiences who did not previously attend musical concerts.

Typically, in order to initiate a music concert or other live
entertainment event or tour, a booking agent contracts with a performer to
arrange a venue and date, or series of venues and dates, for the performer's
event. The booking agent in turn contacts a promoter or promoters in the
locality or region of the relevant venue or venues. The promoter markets the
event, sells tickets, rents or otherwise provides the event venue or venues,
and arranges for local production services (such as stage, set, sound and
lighting). In certain instances, particularly in connection with music
festivals, a promoter may also provide limited production services.
Individual industry participants, such as the Company, often perform more
than one of the booking, promotion and venue operation functions.

The booking agent generally receives a fixed fee for its services, or in
some cases, a fee based on the success of the event or events, in each case
from the artist. The promoter typically agrees to pay the performer the
greater of a guaranteed amount and a profit-sharing payment based on gross
ticket revenues, therefore assuming the risk of an unsuccessful event. The
promoter sets ticket prices and advertises the event in order to cover
expenses and generate profits. In the case of an unprofitable event, a
promoter will sometimes renegotiate a lower guarantee in order to mitigate
the promoter's losses (in a process known as "settlement"). In some
instances, the promoter agrees to accept a fee from the booking agent for the
promoter's services, and the booking agent bears the financial risk of the
event.

A venue operator typically contracts with a promoter to rent its venue for
a specific event on a specific date or dates. The venue operator provides
services such as concessions, parking, security, ushers and ticket-takers,
and receives revenues from concessions, merchandise, sponsorships, parking
and premium box seats. A venue operator will typically receive (for each
event it hosts) a fixed fee or percentage of ticket sales for use of the
venue, as well as a fee representing between 40-50% of total concession sales
from the vendors and 10-25% of total merchandise sales from the performer.

Concert venues are generally comprised of stadiums (typically 32,000 seats
or more), amphitheaters or arenas (typically 5,000 to 32,000 seats), clubs
(typically less than 2,000 seats) and theaters (typically 100 to 5,000
seats). Amphitheaters are generally outdoor venues that are used primarily in
the summer season. They have become increasingly popular venues for concerts
because the seating configuration is designed specifically for concert
events, often resulting in more available seats, fewer obstructed seats,
better lines of sight to the stage and superior acoustics. In addition,
because they typically cost less to construct, maintain and operate than
traditional multi-purpose stadiums and arenas, amphitheaters often are able
to host concerts and other events that would not be profitable in a stadium
or arena.

THEATRICAL INDUSTRY

The audience for live professional theater has increased significantly in
the last two decades. According to Variety Magazine, gross ticket sales for
the entire industry of Touring Broadway Shows and Broadway shows have
increased from $431.5 million during the 1986-7 season to $1.3 billion during
the 1996-7 season, a compounded annual growth rate of 11.7%. During this
time, the number of touring weeks and markets where Touring Broadway Shows
could profitably be presented have expanded. Sales for Touring Broadway Shows
have grown as a percentage of total industry gross ticket sales, from
approximately 52% in the 1986-7 season to approximately 60% in the 1996-7
season. The growth of the

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national theatrical industry had resulted, in part, from the development of
local subscription series for Touring Broadway Shows, the construction of new
performing arts centers with seating capacities of 2,500 or more in many
municipalities, and an increase in the quality of Touring Broadway Shows and
in the number of multiple-week engagements produced for presentation outside
of New York City. Touring Broadway Shows are typically revivals of previous
commercial successes or reproductions of theatrical shows currently playing
on Broadway in New York City ("Broadway Shows").

Live professional theater consists mainly of the production of existing
musical and dramatic works and the development of new works. In general,
musicals require more investment of time and capital than dramatic
productions. For an existing musical work (which is more likely to be
presented as a Touring Broadway Show), a period of 12 to 24 months typically
elapses between the time a producer acquires the theatrical stage rights and
the date when the musical is first performed before the public. During this
time, a touring company is assembled, and the show is readied for the road.
By comparison, dramatic productions typically have smaller production
budgets, shorter pre-production periods and lower operating costs, and tend
to occupy smaller theaters for shorter runs.

A producer of a Broadway Show or a Touring Broadway Show first acquires
the rights to the work from its owners, who typically receive royalty
payments in return. The producer then assembles the cast of the play, hires a
director and arranges for the design and construction of sets and costumes.
The producer of a Touring Broadway Show also must arrange transportation and
schedule the show with local promoters. The local promoter of a Touring
Broadway Show, who generally operates or has relationships with venues in
individual markets, provides all local services such as selling tickets,
hiring local personnel, buying advertising and paying a fixed guarantee
(typically between $100,000 and $400,000) to the producer of the show for
each week that the show is presented. The promoter is then entitled to
recover the amount of the guarantee plus its local costs from ticket
revenues. Any remaining ticket revenues are shared by the promoter and the
producer, with the producer typically receiving approximately 60% of the
profits. Although Touring Broadway Shows are generally substantially less
expensive to produce than Broadway Shows, they may be financed through a
limited partnership with third-party investors who receive a profit interest
in the production. Often, investors in Touring Broadway Shows will also
invest in the underlying Broadway Show, in part to help secure touring
rights. After investors have received the complete return of their
investment, net profits are split between the limited partners and the show's
producer. The amount of net profits allocated to the show's producer,
including fees and royalties, varies somewhat, but is normally in the range
of 50% after certain profit participations are deducted. After certain net
profits, a producer may also receive a production fee and royalties. A
typical Touring Broadway Show requires 45 playing weeks with a weekly
guarantee from the local promoter of approximately $250,000 to recoup
production and touring costs; more elaborate touring productions with larger
casts or sets, such as The Phantom of the Opera or Miss Saigon, generally
require significantly higher weekly revenues and additional playing weeks in
order to recoup production and touring costs.

Tickets for Touring Broadway Shows often are sold through "subscription
series," which are pre-sold season tickets for a defined package of shows to
be presented in a given venue.

MOTOR SPORTS INDUSTRY

Specialized motor sports events make up a growing segment of the live
entertainment industry. This growth has resulted from additional demand in
existing markets and new demand in markets where new arenas and stadiums have
been built. The increasing popularity of specialized motor sports over the
last several years has coincided with (and, in part, been due to) the
increased popularity of other professional motor sports events, such as
professional auto racing (including NASCAR, CART and Indy Car Racing). A
number of specialized motor sports events are televised on several of the
major television networks and are also shown on television in markets outside
of the United States.

In general, one to four motor sports events will be produced and presented
each year in a market, with larger markets hosting more performances.
Stadiums and arenas typically work with producers and promoters to manage the
scheduling of events to maximize each event's results and each season's
revenues. The cost of producing and promoting a typical single stadium event
ranges from $300,000 to

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$600,000, and the cost of producing and presenting a typical single arena
event ranges from $50,000 to $150,000. Monster trucks, demolition derbies,
thrill acts, air shows and other motor sports concepts and events are
typically created and financed by third parties and hired to perform in an
individual event or season of events. As in other motor sports, corporate
sponsorships and television exposure are important financial components that
contribute to the success of a single event or season of events.

TALENT REPRESENTATION INDUSTRY

The talent representation industry generally encompasses the negotiation
of employment agreements and the creation and evaluation of endorsement,
promotional and other business opportunities for the client. A participant in
this industry may also provide ancillary services, such as financial advisory
or management services to its clients in the course of the representation.

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BUSINESS

GENERAL

SFX Entertainment is a leading integrated promoter, producer and venue
operator in the live entertainment industry. In addition, upon consummation
of the acquisition of FAME, the Company will be a leading full-service
marketing and management company specializing in the representation of team
sports athletes, primarily in professional basketball. The Company believes
that it currently controls the largest network of venues used principally for
music concerts and other live entertainment events in the United States, with
45 venues either directly owned or operated under lease or exclusive booking
arrangements in 22 of the top 50 markets, including 11 amphitheaters in 7 of
the top 10 markets. Through its large number of venues, its strong, branded
presence in each market served and its long operating history, the Company is
able to provide an integrated offering of promotion and production services
across a broad variety of live entertainment events locally, regionally and
nationally. During 1997, approximately 27 million people attended 9,600
events promoted and/or produced by the Company, the Acquired Businesses and
the businesses to be acquired in the Pending Acquisitions, including
approximately 4,200 music concerts, 4,900 theatrical shows and over 200
specialized motor sports events. These events included: (a) music concerts
featuring artists such as The Rolling Stones, Phish, Fleetwood Mac, Ozzy
Osbourne and Alanis Morissette, (b) music festivals such as the George Strait
Country Music Festival, (c) touring theatrical productions such as The
Phantom of the Opera, Jekyll & Hyde, Rent and The Magic of David Copperfield
and (d) specialized motor sports events, such as Truck Fest and American
Motorcycle Association Supercross racing events. In addition, the Company's
event marketing programs interfaced with over 15 million people in 1997. The
Company believes that its ability to provide integrated live entertainment
services will, among other things, encourage wider use of its venues by
performers and allow the Company to capture a greater percentage of revenues
from national tours and ancillary revenue sources. On a pro forma basis, the
Company would have had revenues and Adjusted EBITDA of $827.9 million and
$104.9 million, respectively, for the twelve months ended March 31, 1998. For a
description of Adjusted EBITDA, see footnote 5 to "Summary Consolidated
Financial Statements."

The Company's core business is the promotion and production of live
entertainment events, most significantly for concert and other music
performances in venues owned and/or operated by the Company and in
third-party venues. As promoter, the Company typically markets events and
tours, sells tickets, rents or otherwise provides event venues and arranges
for local production services (such as stage, set, sound and lighting). As
producer, the Company (a) creates tours for music concert, theatrical,
specialized motor sports and other events, (b) develops and manages Touring
Broadway Shows and (c) develops specialized motor sports and other live
entertainment events. As venue owner/operator, the Company books and promotes
events in the venues which it controls. The Company also derives ancillary
revenues from operations related to its live entertainment events, including
the sale of corporate sponsorships and advertising, the sale of concessions
and the merchandising of a broad range of products. In addition, upon
consummation of the acquisition of FAME, the Company will represent
approximately 75 professional athletes, primarily in basketball. On a pro
forma basis, the Company's music businesses, theater operations, specialized
motor sports operations and other operations would have comprised
approximately 67%, 13%, 6% and 14%, respectively, of the Company's total
revenues for the twelve months ended March 31, 1998.

SFX MERGER AND THE SPIN-OFF

SFX Broadcasting was formed in 1992 principally to acquire and operate
radio broadcasting stations. In August 1997, SFX Broadcasting agreed to merge
with an affiliate of SFX Buyer, and to Spin-Off the Company to certain
stockholders of SFX Broadcasting on a pro rata basis. The Spin-Off was
consummated on April 27, 1998. The Spin-Off separated the entertainment
business from SFX Broadcasting's radio broadcasting business and will enable
SFX Buyer to acquire only SFX Broadcasting's radio broadcasting business in
the SFX Merger. SFX Broadcasting has indicated that it expects the SFX Merger
to be completed in the second quarter of 1998.

Prior to the Spin-Off, pursuant to the Distribution Agreement, SFX
Broadcasting contributed to the Company all of its assets relating to the
entertainment business. In addition, the Company, SFX

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Broadcasting and SFX Buyer also entered into a Tax Sharing Agreement and the
Employee Benefits Agreement. Each of the agreements provides for certain
indemnification obligations by the Company and SFX Broadcasting. Pursuant to
the Distribution Agreement, at the time of the SFX Merger, SFX Broadcasting
will contribute any positive Working Capital to the Company. If Working
Capital is negative, the Company must pay the amount of the shortfall to SFX
Broadcasting. As of March 31, 1998, the Company estimates that Working
Capital to be paid by SFX Broadcasting to the Company would have been
approximately $3.0 million. The Company does not expect that the amount of
Working Capital will be materially different at the time of the SFX Merger
(assuming a closing date for the SFX Merger of May 31, 1998). Pursuant to the
Tax Sharing Agreement, the Company is required to indemnify SFX Broadcasting
for certain tax obligations, including a tax obligation of approximately
$120.0 million in connection with the Spin-Off. The Company intends to use a
portion of the net proceeds of the Financing to make such payments. See "Risk
Factors--Future Contingent Payments," and "--Liquidity and Capital
Resources."

In the Spin-Off, (a) 13,579,024 shares of Class A Common Stock were
distributed to holders on the Spin-Off record date of SFX Broadcasting's
Class A common stock, Series D preferred stock and interests in SFX
Broadcasting's director deferred stock ownership plan, (b) 1,047,037 shares
of Class B Common Stock were distributed to holders on the Spin-Off record
date of SFX Broadcasting's Class B Common Stock, and (c) 609,856 shares were
placed in escrow to be issued upon the exercise of certain warrants of SFX
Broadcasting. See "Certain Relationships and Related Transactions--Employment
Agreements."

1997 ACQUISITIONS

The Company was formed as a wholly-owned subsidiary of SFX Broadcasting in
December 1997 as the parent company of Concerts. Concerts was formed by SFX
Broadcasting in January of 1997 to acquire and hold SFX Broadcasting's live
entertainment operations.

DELSENER/SLATER

In January 1997, Concerts acquired Delsener/Slater, a leading concert
promotion company, for an aggregate consideration of approximately $27.6
million, including $2.9 million for working capital and the present value of
deferred payments of $3.0 million to be paid without interest over five years
and $1.0 million to be paid without interest over ten years. Delsener/Slater
has long-term leases or is the exclusive promoter for several of the major
concert venues in the New York City metropolitan area, including the Jones
Beach Amphitheater, a 14,000-seat complex located in Wantagh, New York, and
the PNC Bank Arts Center (formerly known as the Garden State Arts Center), a
17,500-seat complex located in Holmdel, New Jersey.

MEADOWS

In March 1997, Concerts acquired the stock of certain companies which own
and operate the Meadows, a 25,000-seat indoor/outdoor complex located in
Hartford, Connecticut for $900,000 in cash, 250,838 shares of SFX
Broadcasting Class A common stock with a value of approximately $7.5 million
and the assumption of approximately $15.4 million in debt. See "Certain
Relationships and Related Transactions--Meadows Repurchase."

SUNSHINE PROMOTIONS

In June 1997, Concerts acquired the stock of Sunshine Promotions, one of
the largest concert promoters in the Midwest for $53.9 million in cash, $2.0
million payable over five years, shares of SFX Broadcasting Class A common
stock issued and issuable over a two year period with a value of
approximately $4.0 million and the assumption of approximately $1.6 million
of debt. Sunshine Promotions owns the Deer Creek Music Theater, a 21,000-seat
complex located in Indianapolis, Indiana, and the Polaris Amphitheater
("Polaris"), a 20,000-seat complex located in Columbus, Ohio, and has a
long-term lease to operate the Murat Centre, a 2,700-seat theater and
2,200-seat ballroom located in Indianapolis, Indiana.

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RECENT ACQUISITIONS

In February and March of 1998, the Company completed its acquisitions of
PACE, Contemporary, BGP, Network, Concert/Southern and certain related
entities. The aggregate purchase price of these Recent Acquisitions was
approximately $442.1 million in cash including repaid debt and payments for
working capital, $7.8 million in assumed debt and the issuance of an
aggregate of approximately 4.2 million shares of Class A Common Stock.
Following is a brief description of the Acquired Businesses. The following
descriptions are not intended to be complete descriptions of the terms of the
acquisition agreements and are qualified by reference to the acquisition
agreements, copies of which are filed as exhibits hereto and are incorporated
herein by reference. See "Additional Information."

PACE

On February 25, 1998, the Company acquired all of the outstanding capital
stock of PACE for a total purchase price of $109.5 million in cash, the
repayment of $20.6 million of debt and the issuance of 1.5 million shares of
Class A Common Stock. PACE is one of the largest diversified promoters and
producers of live entertainment in the United States, having what the Company
believes to be the largest distribution network in each of its music
concerts, theatrical shows and motor sports events business segments. In
connection with the acquisition of PACE, the Company has obtained 100% of
Pavilion Partners, a partnership that owns interests in 10 of the 41 venues
owned by the Company, by acquiring one-third of Pavilion Partners through the
acquisition of PACE and the remaining two-thirds of Pavilion Partners from
Sony and Blockbuster, for a combined consideration of $90.6 million
(comprised of cash of $41.4 million, the repayment of $43.1 million of debt
related to the two-thirds interest and the assumption of $6.1 million of debt
related to a capital lease). Under certain circumstances, the Company may be
required to sell either its motor sports or theatrical lines of business. See
"Management--Employment Agreements and Arrangements with Certain Officers and
Directors."

CONTEMPORARY

On February 27, 1998, the Company acquired by merger and asset
acquisition, the music concert, live entertainment, event marketing,
computerized ticketing and related businesses of Contemporary and the 50%
interest in the Riverport Amphitheater Joint Venture not owned by
Contemporary for approximately $72.8 million in cash, a payment for working
capital of $9.9 million, and the issuance of the 1,402,850 shares of Class A
Common Stock. Contemporary is a vertically-integrated live entertainment and
special event promoter and producer, venue operator and consumer marketer.

Contemporary is also one of the top special event sales promotion and
marketing companies in the country. Contemporary develops programs for
national consumer product companies and for demonstrating, sampling and
selling products to consumers. Contemporary's clients have included AT&T, CBS
TV, Radio Shack, Coca Cola USA, Reebok, Nabisco and the National Basketball
Association.

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BGP

On February 24, 1998, the Company acquired BGP for total consideration of
$60.8 million in cash, $12.0 million in repayment of debt, which amount was
at least equal to BGP's working capital (as defined in the acquisition
agreement) and the issuance of 562,640 shares of Class A Common Stock. BGP is
one of the oldest promoters and producers of live entertainment in the United
States and is the principal promoter of live entertainment in the San
Francisco Bay area.

NETWORK

On February 27, 1998, the Company acquired Album Network, Inc., SJS and
The Network 40 for a purchase price of $52.0 million in cash, a payment for
working capital of $1.8 million, reimbursed seller's costs of $500,000, the
purchase of an office building and related property for $2.5 million and the
issuance of 750,188 shares of Class A Common Stock upon consummation of the
Spin-Off. The $2.5 million purchase of the office building and related
property consisted of cash of $700,000 and the assumption of debt of $1.8
million. Network is engaged in music marketing, research and artist
development activities and is a publisher of trade magazines for radio
broadcasters, music retailers, performers and record industry executives.

CONCERT/SOUTHERN

On March 4, 1998, the Company acquired Concert/Southern for a total cash
purchase price of $16.9 million (including a working capital payment of
$300,000). Concert/Southern is a promoter of live entertainment in the
Atlanta metropolitan area.

WESTBURY

PENDING ACQUISITIONS

In April and May of 1998, the Company entered into agreements or letters
of intent to acquire the following live entertainment and talent
representation businesses (for a more complete description of the material
terms of the agreements relating to these acquisitions, see "Agreements
Related to the Pending Acquisitions"):

FAME

On April 29, 1998, the Company entered into an agreement (the "FAME
Agreement") to acquire all of the outstanding capital stock of FAME, a
leading full-service marketing and management company which specializes in
the representation of team sports athletes, primarily in professional
basketball. The aggregate purchase price for FAME will be approximately $82.9
million in cash (including approximately $7.9 million which the Company
anticipates paying in connection with certain taxes which FAME and the FAME
sellers will be subject to) and 1.0 million shares of Class A Common Stock.
The agreement provides for payments by the Company to the FAME sellers of
additional amounts up to $15.0 million in equal annual installments over five
years contingent on the achievement of certain EBITDA targets. The agreement
also provides for additional payments by the Company if FAME's EBITDA
performance exceeds the targets by certain amounts. FAME was founded in 1992
by David Falk and Curtis Polk and currently represents some of the premier
athletes in professional team sports, including, among others, Michael
Jordan, Patrick Ewing, Alonzo Mourning, Juwan Howard and Allen Iverson. In
addition, FAME provides specialized financial advisory services to its
clients. Upon the consummation of the FAME acquisition, Mr. Falk will
continue to serve as the Chairman of FAME and will be appointed as a Member

<PAGE>

of the Office of the Chairman and a Director of the Company. The Company
believes that, through its acquisition of FAME, it will be able to capitalize
on the cross-marketing opportunities that may arise by virtue of representing
prominent team athletes while selling corporate sponsorships and other
marketing rights at its existing venues.

DON LAW

On April 29, 1998, the Company entered into an agreement (the "Don Law
Agreement") to acquire certain assets of Don Law. The Company proposes to
acquire such assets of Don Law for an aggregate consideration of
approximately $90.0 million, including the repayment of approximately $10.0
million in indebtedness. The Company may, at its option, pay up to $16.0
million of the purchase price in shares of Class A Common Stock. Don Law is a
leading concert and theater promoter in the New England area. In addition,
Don Law acts as the sole ticket operator for all of its own venues as well as
several third party venues. The definitive agreement is expected to provide
for an employment contract for Mr. Donald F. Law, Jr., the founder and
president and chief executive officer of Don Law.

AVALON

On March 6 and 9, 1998, the Company entered into two binding letters of
intent to acquire Avalon for a total cash purchase price of $27.4 million,
including approximately $400,000 which the Company expects to pay to the
Avalon sellers to reimburse them for their third party out of pocket costs
and expenses incurred in connection with the development of the Camarillo
Creek Amphitheater. The Avalon sellers will receive an additional $1.0 million
if the Camarillo Creek Amphitheater has been completed pursuant to a certain
budget projections and the production of entertainment events at the site
have commenced. Avalon is a leading music concert producer and promoter in
the Los Angeles area.

OAKDALE

On April 22, 1998, the Company entered into an agreement (the "Oakdale
Agreement") to acquire certain assets of Oakdale for a purchase price of
$11.9 million in cash. At the closing the Company will also make a
non-recourse loan to the Oakdale sellers in the amount of $11.4 million.
Oakdale is a promoter and producer of concerts in Connecticut and the owner
of the Oakdale Theater, a new 4,800 seat facility located in Wallingford,
Connecticut. In addition, pursuant to the Oakdale Agreement, if the combined
EBITDA (as defined in the Oakdale Agreement) of the Oakdale Theater and
Meadows exceeds $5.5 million in 1999, the Company will be obligated to pay
between 5.0 to 5.8 times the amount of such excess.

EMI

On May 1, 1998, the Company entered into an agreement (the "EMI
Agreement") to acquire an 80% equity interest in EMI for $8.5 million in
cash. In addition, if the EMI sellers are required to pay any federal income
taxes in connection with the transaction, the Company has agreed to make a
loan to them in such amount (which the Company currently anticipates will be
approximately $750,000. The loan will bear interest at a rate of 10% and will
be repaid when the EMI sellers sell their remaining equity interests in EMI.
EMI has long term concession contracts with 26 amphitheaters, including 13
venues owned and/or operated by the Company.

SERVICES PROVIDED BY THE COMPANY

The Company is engaged in (a) the booking, promotion and production of
live entertainment events and tours, (b) the ownership and/or operation of
concert and other entertainment venues, (c) the representation of
professional athletes and (d) the sale of corporate sponsorships and
advertising and provision of marketing and consulting services to
third-parties.

BOOKING AND PROMOTION

The Company books and promotes music concert, theatrical, specialized
motor sports and other live entertainment events and tours such as music
festivals, comedy tours, figure skating shows, gymnastics

83
<PAGE>
tours, motivational speaking tours and other special events. The Company
books and promotes events in a number of types of venues (including
amphitheaters, theaters, clubs, arenas and stadiums) that are owned and/or
operated by the Company or by third parties. See "--Venue Operations." The
Company primarily promotes concerts performed by newer groups having
widespread popularity (e.g., Phish, Dave Matthews and Hootie & the Blowfish)
and by more established groups having relatively long-standing and more
stable bases of popularity (e.g., James Taylor and Jimmy Buffett). The
Company believes that its large distribution network will enable it to set an
aggregate guarantee for a series of shows, mitigating the risk of loss
associated with a single show. The Company also believes that the market
research and audience demographics database that it acquired in the Recent
Acquisitions, when combined with its existing audience data collection
efforts, will permit highly-effective, targeted marketing, such as
direct-mail and subscription series campaigns, which the Company believes
will increase ticket pre-sales and overall sales in a cost-efficient manner.
In addition, the Company's Capital Tickets retail distribution outlets and
Dialtix interactive, voice-response automated phone ticket order system are
currently operating in three markets. The Company believes that expanding the
markets where it can utilize its own ticketing sources will permit the
Company to promote its live entertainment events more effectively.

The following table identifies artists whose events were recently promoted
by the Company:

<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------
Aerosmith Elton John Phil Collins
Alabama Fleetwood Mac* Pink Floyd
Alanis Morissette James Taylor Phish
Bette Midler Jerry Seinfeld* R.E.M.
Billy Joel Jimmy Buffett Rod Stewart
Brooks & Dunn John Secada The Rolling Stones
Chris Rock* Live Seal
Clint Black Melissa Etheridge Sheryl Crow
Crosby, Stills & Nash Metallica Smashing Pumpkins
Dave Matthews Michael Bolton Stone Temple Pilots
Depeche Mode Ozzy Osbourne* Tim Allen*
The Eagles Pearl Jam Tina Turner
Earth, Wind & Fire Peter Gabriel U2
- -------------------------------------------------------------------------------
</TABLE>

* National tour produced by the Company.

PRODUCTION

The Company is currently involved in the creation of tours for music
concert and other live entertainment events. The Company's production
activities include (a) the creation of tours for music concert, theatrical,
specialized motor sports and other live entertainment events, (b) the
development and management of Touring Broadway Shows and (c) the development
of specialized motor sports shows, proprietary characters and television
programming. The Acquired Businesses produce tours on a national or regional
basis and, in 1997, structured national tours for Fleetwood Mac and Ozzy
Osbourne, among others. The Company plans to increase its production of
national music tours. PACE (one of the Acquired Businesses) also produces
Touring Broadway Shows, acquiring the stage and touring rights from a show's
owner, assembling the touring cast, hiring a director and arranging for the
construction and design of sets and costumes. Touring Broadway Shows are
typically revivals of previous commercial successes or reproductions of
theatrical shows currently playing on Broadway in New York City. PACE also
produces and makes small investments (i.e., from approximately $150,000 to
$600,000) as a limited partner in the creation of a small number of original
Broadway Shows in exchange for obtaining touring rights and favorable
scheduling for those shows.

The Touring Broadway Show production and promotion industry is highly
fragmented. The Company believes it is the largest of six multiple-market
promoters of Touring Broadway Shows in the United States, and that the
remainder of the industry is made up of single-market promoters. The Company
competes with other producers and promoters to obtain presentation
arrangements with venues and

84
<PAGE>

performing arts organizations in various markets, including in markets that
have more than one venue suitable for presenting a Touring Broadway Show. The
Company's competitors, some of whom have also been partners of PACE in
certain theater investments from time to time, include a number of New
York-based production companies that also promote Touring Broadway Shows and
a number of regional promoters. On a pro forma basis, the Company would have
had a producing interest or investment in the following shows for 1997 and/or
1998:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SHOW TITLE TYPE THE COMPANY'S INVOLVEMENT
---------- ---- -------------------------
<S> <C> <C>
Big Touring Production
Damn Yankees Touring Production
David Copperfield Touring Production
Death Trap Touring Production
Funny Girl Touring Production
Harmony Development Production
Jekyll & Hyde Broadway Production
Kiss of the Spiderwoman Touring Production
Man of La Mancha Touring Production
Smokey Joe's Cafe Touring Production
The Sound of Music Touring Production
West Side Story Touring Production
A Chorus Line Touring (US & UK) Investment
Annie Broadway Investment
Carousel Touring Investment
Cirque Ingenieux Touring Investment
Grease Broadway & Touring Investment
Chicago Broadway & Touring Investment
How to Succeed in Business Broadway & Touring Investment
Martin Guerre West End (UK) Investment
Rent Broadway & Touring Investment
Steel Pier Broadway Investment
Triumph of Love Broadway Investment
West Side Story Touring (UK) Investment
- -------------------------------------------------------------------------------
</TABLE>

The Company believes that there are approximately 50 domestic markets that
can provide the potential audience and gross ticket revenues for a full scale
Touring Broadway Show to be profitable, and an additional 50 markets where
smaller scale productions with shorter runs can be presented profitably. In
most of these cities, there are a limited number of venues that can
accommodate a Touring Broadway Show.

The Company currently sells subscription series for its Touring Broadway
Shows in the following 31 of the approximately 60 markets that maintain
active touring schedules:

<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------
Atlanta, GA Long Beach, CA Palm Beach, FL
Austin, TX Louisville, KY Phoenix, AZ
Baltimore, MD Miami, FL Pittsburgh, PA
Chicago, IL Milwaukee, WI Portland, OR
Cincinnati, OH Minneapolis, MN San Antonio, TX
Columbus, OH Myrtle Beach, SC Seattle, WA
Dallas, TX Nashville, TN Tampa, FL
Ft. Lauderdale, FL New Orleans, LA Ottawa, Canada
Green Bay, WI Omaha, NE Edmonton, Canada
Houston, TX Orange County, CA
Indianapolis, IN Orlando, FL
- -------------------------------------------------------------------------------
</TABLE>

Subscriptions historically have covered two-thirds of PACE's break-even
point for Touring Broadway Shows. In 1997, PACE had approximately 220,000
subscribers for its Touring Broadway Shows.

The Company also produces motor sports events such as monster truck
events, tractor pulls, mud races, demolition derbies and motorcross races,
and designs tracks and other elements for those events.

85
<PAGE>

Competition among producers in the specialized motor sports industry is
between three large companies and a number of smaller regional companies. The
Company believes that it is the largest participant in the industry, on a pro
forma basis having produced over 200 events in 1997. The Company also
competes with several regional specialized motor sports companies, which each
present only a small number of events, as well as a number of local promoters
that present only one or two events per year. See "Risk Factors--Rights to
Purchase Certain Subsidiaries."

In addition, the Company produces a variety of other forms of live
entertainment, including music festivals, radio programs, air shows, figure
skating shows, gymnastics tours, comedy tours, motivational speaking tours
and television programming based on certain of their events and other events.

VENUE OPERATIONS

The Company's revenues from its venue operations are derived primarily
from corporate sponsorships and advertising, concessions, merchandise,
parking and other related items. A venue operator will typically receive for
each event it hosts a fixed fee or percentage of ticket sales for use of the
venue, as well as a fee representing between 40-50% of total concession sales
from the vendors and 10-25% of total merchandise sales from the performer. As
a venue owner, the Company typically receives 100% of sponsorship and
advertising revenues. Since few artists will play in every available market
during a tour, the Company competes with venues in other markets for dates of
popular national tours. The favorable cost structure of amphitheaters and
their ability to draw fans is often an important factor in the decision of a
performer to choose to perform in an amphitheater market. In certain cities,
the Company also competes with other venues to promote an artist in that
city. The Company believes that it controls the largest network of venues
used principally for music concerts and other live entertainment events in
the United States. Upon consummation of the Pending Acquisitions the Company
will own and/or operate 45 venues in 22 of the top 50 markets, including 11
amphitheaters in 7 of the top 10 markets. The following chart sets forth
certain information with respect to the venues that are owned and/or operated
by the Company:

<TABLE>
<CAPTION>
TOTAL
MARKET TYPE OF THE COMPANY'S SEATING
MARKET AND VENUE RANK (1) VENUE INTEREST CAPACITY
- ---------------------------- ---------- ---------------- ------------------------ -------------
<S> <C> <C> <C> <C>
New York--Northern New 1
Jersey--Long Island:
PNC Bank ArtsCenter
(formerly Garden State
Arts Center)
(Holmdel, NJ).............. amphitheater 22-year lease (expires 17,500(2)
October 31, 2017)
Jones Beach Marine
Amphitheater (Wantagh,
NY)......................... amphitheater 10-year license 14,400(2)
agreement (expires
December 31, 1999)
Roseland Theater ........... theater exclusive booking agent 3,200
Westbury Music Fair 2,870
(Westbury, NY)............. theater 43-year lease (expires
December 31, 2034)

</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
TOTAL
AVG. NO. OF SEATS
ATTENDANCE EVENTS SOLD IN
MARKET AND VENUE IN 1997 IN 1997 1997
- ---------------------------- -------------- ----------- -----------
<S> <C> <C> <C>
New York--Northern New
Jersey--Long Island:
PNC Bank ArtsCenter
(formerly Garden State
Arts Center)
(Holmdel, NJ).............. 6,456 57 368,004
Jones Beach Marine
Amphitheater (Wantagh,
NY)......................... 7,992 45 359,653
Roseland Theater ........... 2,614 41 107,174
Westbury Music Fair
(Westbury, NY)............. 2,198 148 325,348
</TABLE>

86
<PAGE>

Los Angeles--Riverside-- 2
Orange County:
Glen Helen Blockbuster
Pavilion
(San Bernardino, CA) ...... amphitheater 25-year lease (expires 25,000(3)
July 1, 2018)
Irvine Meadows
Amphitheater
(Irvine, CA)............... amphitheater 20-year lease (expires 15,500
February 28, 2017)
Thousand Oaks Civic Arts Plaza
(Thousand Oaks, CA).......... theater 5-year exclusive booking 1,800
agent for contemporary music
events (expires May 2003)

San Francisco--Oakland-- 5
San Jose:
Shoreline Amphitheater...... amphitheater facility owned; land 22,000
leased for 35 years
(expires November 30,
2021)
Concord Pavilion............ amphitheater 10-year exclusive 12,500
outside booking agent
(expires December 31,
2005)
Greek Theater............... theater 4-year lease (expires 8,500
October 31, 1998)
Warfield Theatre............ theater 10-year lease (expires 2,250
May 31, 2008)
Filmore Auditorium.......... theater 10-year lease (expires 1,249
August 31, 2007)
Punchline Comedy Club .....
club 5-year lease (expires 175
September 15, 2001)
Philadelphia--Wilmington-- 6
Atlantic City:
Blockbuster/SONY Music
Entertainment
Centre on the Waterfront .
amphitheater 31-year lease (expires 25,000
February 9, 2025)
Boston--Mansfield: 7
Great Woods Center for the
Performing Arts............
amphitheater owned 19,900
Harborlights Pavilion....... amphitheater leased 4,800
Orpheum Theatre............. theater long-term management 2,700
contract
Dallas--Ft. Worth: 9
Starplex Amphitheater....... amphitheater 32.5% partnership 20,500
interest in 31 year
lease (expires December
31, 2028)

</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
TOTAL
AVG. NO. OF SEATS
ATTENDANCE EVENTS SOLD IN
MARKET AND VENUE IN 1997 IN 1997 1997
- ---------------------------- -------------- ----------- -----------
<S> <C> <C> <C>
Los Angeles--Riverside--
Orange County:
Glen Helen Blockbuster
Pavilion
(San Bernardino, CA) ...... 10,162 15 152,432
Irvine Meadows
Amphitheater
(Irvine, CA)............... 11,537 19 219,211
Thousand Oaks Civic Arts Plaza
(Thousand Oaks, CA).......... 1,164 24 27,929
San Francisco--Oakland--
San Jose:
Shoreline Amphitheater...... 12,600 40 504,013
Concord Pavilion............ 6,226 42 261,479
Greek Theater............... 6,191 9 55,718
Warfield Theatre............ 1,677 77 129,129
Filmore Auditorium.......... 1,051 180 189,103
Punchline Comedy Club ..... 97 422 41,138
Philadelphia--Wilmington--
Atlantic City:
Blockbuster/SONY Music
Entertainment
Centre on the Waterfront .
8,973 54 484,528
Boston--Mansfield:
Great Woods Center for the
Performing Arts............ 11,943 54 644,875
Harborlights Pavilion....... 3,180 45 143,100
Orpheum Theatre............. 2,475 184 622,586
Dallas--Ft. Worth:
Starplex Amphitheater....... 8,799 35 307,981
</TABLE>

<PAGE>

Houston--Galveston-- 10
Brazoria:
Cynthia Woods Mitchell
Pavilion................... amphitheater 15-year management 13,000
contract (expires
December 31, 2009)
Bayou Place
Performance Hall........... theater 50% partnership interest 2,800
in 10-year lease
(expires December 31,
2007)
Atlanta: 12
Lakewood Amphitheater .....
amphitheater 32.5% partnership 19,000
interest in 35-year
lease (expires January
1, 2019)
Chastain Park
Amphitheater............... amphitheater 10-year lease (expires 7,000
December 31, 2000)
Roxy Theater................ theater 7-year lease (expires 1,600
March 31, 2004)
Cotton Club................. theater 5-year lease (expires 650
June 12, 2000)
St. Louis: 17
Riverport Amphitheater...... amphitheater owned 21,000
American Theater............ theater 10-year lease (expires 2,000
July 31, 2004)
Westport Playhouse.......... theater 1 year lease (expires 1,100
May 31, 1998)
Phoenix--Mesa: 18
Desert Sky Blockbuster
Pavilion .................. amphitheater 60-year lease (expires 19,900(2)
June 30, 2049)
Pittsburgh: 19
Star Lake Amphitheater ....
amphitheater 45-year lease (expires 22,500
December 31, 2034)
Kansas City: 24
Sandstone Amphitheater
(Kansas City, KS)..........
amphitheater 10-year lease (expires 18,000
December 31, 2002)
Starlight Theater........... theater annual exclusive booking 9,000
agent contract for 1998
(renewal under
negotiation)
Memorial Hall............... theater 1998 contract (renewal 3,000
under negotiation)

</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
TOTAL
AVG. NO. OF SEATS
ATTENDANCE EVENTS SOLD IN
MARKET AND VENUE IN 1997 IN 1997 1997
- ---------------------------- -------------- ----------- -----------
<S> <C> <C> <C>
Houston--Galveston--
Brazoria:
Cynthia Woods Mitchell
Pavilion................... 8,381 35 293,350
Bayou Place
Performance Hall........... 3,223 18 58,019
Atlanta:
Lakewood Amphitheater .....
9,257 32 296,225
Chastain Park
Amphitheater............... 5,777 28 161,755
Roxy Theater................ 848 102 86,498
Cotton Club................. 403 151 60,829
St. Louis:
Riverport Amphitheater...... 10,531 42 442,302
American Theater............ 1,510 24 36,236
Westport Playhouse.......... 880 15 13,196
Phoenix--Mesa:
Desert Sky Blockbuster
Pavilion .................. 9,179 23 211,114
Pittsburgh:
Star Lake Amphitheater ....
12,361 42 519,182
Kansas City:
Sandstone Amphitheater
(Kansas City, KS)..........
8,109 32 259,488
Starlight Theater........... 3,772 9 33,948
Memorial Hall............... 1,910 11 21,014
</TABLE>

<PAGE>

Sacramento--Yolo: 26
Punchline Comedy Club......
club 9-year lease (expires 245
December 17, 1999)
Indianapolis: 28
Deer Creek Music Center ...
amphitheater owned 21,000
Murat Centre................ theater and 50-year lease (expires 2,700
ballroom August 31, 2045)
Columbus: 30
Polaris Amphitheater....... amphitheater owned 20,000
Charlotte--Gastonia--
Rock Hill: 32
Charlotte Blockbuster
Pavilion................... amphitheater owned 18,000
Hartford--Wallingford: 36
Meadows Music Theater......
amphitheater facility owned; land 25,000
leased for 37 years
(expires September 13,
2034)

Oakdale Theater ............ theater facility owned; land
leased for 15 years and
the Company will
purchase land upon
expiration 4,800
Rochester: 39
Finger Lakes Amphitheater .
amphitheater co-promotion agreement 12,700
Nashville: 41 amphitheater
Starwood Amphitheater....... 50% ownership 17,000
Oklahoma City: 43
Zoo Amphitheater............ amphitheater year-to-year exclusive 9,000
booking agent
Raleigh--Durham--
Chapel Hill: 50
Walnut Creek Amphitheater .
amphitheater 66 2/3% partnership
interest in 40-year
lease (expires October
31, 2030) 20,000
West Palm Beach--
Boca Raton: 50
SONY Music/Blockbuster
Coral Sky Amphitheater ...
amphitheater 75% partnership interest 20,000
in 10-year lease
(expires January 4,
2005)
Reno: 119
Reno Hilton Amphitheater ..
amphitheater operating agreement
(renewal under
negotiation) 8,500
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
TOTAL
AVG. NO. OF SEATS
ATTENDANCE EVENTS SOLD IN
MARKET AND VENUE IN 1997 IN 1997 1997
- ---------------------------- -------------- ----------- -----------
<S> <C> <C> <C>
Sacramento--Yolo:
Punchline Comedy Club......
355 90 31,834
Indianapolis:
Deer Creek Music Center ... 11,348 42 476,617
Murat Centre................ 1,412 144 211,920
Columbus:
Polaris Amphitheater....... 7,732 39 301,555
Charlotte--Gastonia--
Rock Hill:
Charlotte Blockbuster
Pavilion................... 8,592 34 292,135
Hartford--Wallingford:
Meadows Music Theater......
9,807 26 254,982
Oakdale Theater ............ 2,944 142 418,000
Rochester:
Finger Lakes Amphitheater .
6,123 15 91,845
Nashville:
Starwood Amphitheater....... 8,208 25 205,204
Oklahoma City:
Zoo Amphitheater............ 6,412 4 25,648
Raleigh--Durham--
Chapel Hill:
Walnut Creek Amphitheater .
10,498 40 419,919
West Palm Beach--
Boca Raton:
SONY Music/Blockbuster
Coral Sky Amphitheater ...
11,244 26 292,340
Reno:
Reno Hilton Amphitheater ..
3,420 19 64,983
</TABLE>

- ------------
(1) Based on the July 1994 population of metropolitan statistical areas as
set forth in the 1997 Statistical Abstracts of the United States. Does
not include venues where the Company sells subscriptions for Touring
Broadway Shows.
(2) Assumes completion of current expansion projects, which are anticipated
to be completed by Summer 1998.
(3) Additional seating of approximately 40,000 is available for certain
events.

Because the Company operates a number of its venues under leasing or
booking agreements, the Company's long-term success will depend on its
ability to renew these agreements when they expire or terminate. There can be
no assurance that the Company will be able to renew these agreements on
acceptable terms or at all, or that it will be able to obtain attractive
agreements with substitute venues.

REPRESENTATION OF PROFESSIONAL ATHLETES

Upon consummation of the FAME Acquisition, the Company will be a leading
full-service provider of marketing and management services, specializing in
the representation of team sports athletes (primarily in professional
basketball). The Company will generate revenues through the negotiation of
professional sports contracts (primarily basketball) and endorsement
contracts for its clients. FAME's clients have endorsed products for
companies such as Nike, McDonald's, Coca-Cola and Chevrolet. In addition,
FAME generates a small portion of its revenues by providing certain financial
management and planning services to its clients, through its investment
affiliate (which will also be acquired in the FAME Acquisition), which is a
registered investment advisor. The Company believes that it will be able to
capitalize on the synergies which exist between the representation of
athletes in corporate marketing opportunities and the sale of corporate
sponsorships and other marketing rights at its existing venues.

A significant portion of FAME's revenues to date has been derived from a
small number of clients. On a pro forma basis, giving effect to the
Transactions and the Pending Acquisitions, the Company estimates that five of
FAME's clients would have accounted for approximately 78% of FAME's revenue
for the twelve months ended March 31, 1998 and, on such pro forma basis,
FAME's EBITDA would have comprised approximately 7% of the Company's EBITDA
for the same period. The amount of endorsement and other revenues which these
clients generate is a function of, among other things, such clients'
professional performance and public appeal. Factors beyond the Company's
control, such as injuries to these clients, declining skill, or labor unrest
among others, could have a material adverse affect on the Company's
operations. FAME's representation agreements with its clients are generally
for a term equal to the term of the player's professional sports contract but
are terminable on 15 days' notice (although FAME would continue to be
entitled to the revenue streams generated during the remaining term of any
contracts which it negotiated). The termination or expiration of FAME's
contracts with certain clients could have a material adverse affect on the
Company's operations. See "Risk Factors--Risks Related to the Representation
of Athletes."

SPONSORSHIPS AND ADVERTISING; MARKETING AND OTHER SERVICES

In order to maximize revenues, the Company actively pursues the sale of
local, regional and national corporate sponsorships, including the naming of
venues (e.g., the PNC Bank Arts Center) and the designation of "official"
event or tour sponsors, concessions providers (e.g., beer and soda), credit
card companies, phone companies, film manufacturers and radio stations, among
others. Sponsorship arrangements can provide significant additional revenues
at negligible incremental cost, and many of the Company's venues currently
have no sponsorship arrangements in many of the available categories
(including naming rights). The Company believes that the national venue
network assembled through the Recent Acquisitions will likely (a) attract a
larger number of major corporate sponsors and (b) enable the Company to sell
national sponsorship rights at a premium over local or regional sponsorship
rights. The

89
<PAGE>

Company also pursues the sale of corporate advertising at its venues, and
believes that it has substantial advertising space available (e.g., billboard
space) that it has not yet begun to utilize. The Company also believes that (a)
its relationships with advertisers will enable it to better utilize available
advertising space and (b) the aggregation of its audiences nationwide will
create the opportunity for advertisers to access a nationwide market.

The Company provides a variety of marketing and consulting services
derived from or complementary to their live entertainment operations,
including (a) local, regional and national live marketing programs and (b)
subscription or fee based radio and music industry data compilation and
distribution. Live marketing programs are generally specialized advertising
campaigns designed to promote a client's product or service by providing
samples or demonstrations in a live format, typically at malls and college
campuses. For example, Contemporary (one of the Acquired Businesses) presents
live marketing events on behalf of AT&T for the purposes of demonstrating the
advantages of AT&T's long distance service over that of its competitors. This
program is in its third year, and Contemporary is now the primary vendor for
this service. Additionally, the Company believes that Contemporary is one of
the leading producers of national mall touring events, producing over 65 events
every year in the country's top-rated shopping malls. These events, either in
stores or mall congregation areas, are designed to promote brand awareness and
drive follow-up sales. Contemporary recently had mall tour campaigns for
Newsweek magazine (the Newsweek Technology Tour) and for Radio Shack (The Rock
and Roll Hall of Fame/Radio Shack Tour). The Company believes that, along with
mall events, Contemporary is one of the industry leaders in events produced on
college campuses. Currently in its seventh year, the CBS College Tour will
appear at 40 colleges in the U.S. In addition to promoting the image of the CBS
Television Network, these tours also create value-added tie-in promotions and
marketing programs for the network's top advertisers. During each year,
Contemporary uses over 100 vehicles (including semi-trailer trucks, vans and
other vehicles) traveling nationwide in support of these programs, and draws on
over 1,000 independent marketing associates across the country with respect to
its marketing campaigns.

The Company is engaged in music marketing, research and artist development
activities, and is a publisher of trade magazines for radio broadcasters,
music retailers, performers and record industry executives. Each of the
Company's magazines focuses on research and insight common to a specific
contemporary radio format. The Company also provides radio airplay and music
retail research services to record labels, artist managers, retailers and
radio broadcasters. The Company gathers its information directly from nearly
1,100 radio programmers and product buyers and in 1996 had more than 300
clients for these services. Annual fees from these services during this
period have ranged from $2,500 to $250,000 per corporate client.

The Company, through Network (one of the Acquired Businesses), creates and
distributes network radio special events and live concert programming for
over 400 music radio stations in the top 200 United States radio markets.
Additionally, the Company produces eight daily radio "show prep" services
that stations use to supplement in-house content production. In 1996, Network
delivered these services to approximately 1,100 radio stations in exchange
for commercial inventory or airtime, which in turn was sold to national
network advertisers. Network also provides consulting and entertainment
marketing services to corporate clients with music business interests.

OPERATING STRATEGY

OWN AND/OR OPERATE LEADING LIVE ENTERTAINMENT VENUES IN NATION'S TOP 50
MARKETS

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products and maximize numerous other related revenue sources, (c) position
itself to produce national tours by leading music performers in order to
capture a greater percentage of revenues from those tours and (d) encourage
wider use by performers of the Company's venues by providing centralized access
to a nationwide network of venues. The Company believes that it controls the
largest network of venues used principally for music concerts and other live
entertainment events in the United States, with 45 venues either directly owned
or operated under lease or exclusive booking arrangements in 22 of the top 50
markets, including 11 amphitheaters in 7 of the top 10 markets.

MAXIMIZE ANCILLARY REVENUE OPPORTUNITIES

The Company intends to enhance revenues and cash flows by maximizing
revenue sources arising from and related to its leadership position in the
live entertainment business. On a pro forma basis for the 1997 and Recent
Acquisitions, these ancillary revenues comprised approximately 19% of the
Company's music businesses' total revenues for the year ended December 31,
1997. Management believes that these related revenue sources generally have
higher margins than promotion and production revenues and include, among
others, (a) the sale of corporate sponsorship, naming and other rights,
concessions, merchandise, parking and other products and services and (b) the
sale of rights to advertise to the Company's large aggregate national audience.
Categories available for sponsorship arrangements include the naming of the
venue itself (e.g., the PNC Bank Arts Center) and the designation of "official"
event or tour sponsors, concessions providers (e.g., beer and soda), credit
card companies, phone companies, film manufacturers and radio stations, among
others. Sponsorship arrangements can provide significant additional revenues at
negligible incremental cost, and many of the Company's venues currently have no
sponsorship arrangements in many of the available categories (including naming
rights). The Company also intends to maximize related revenues by developing
and exploiting intellectual property rights associated with (a) its production
of musical concert tours and themed events (such as regional music festivals)
and (b) branded characters created as an integral part of the content,
marketing and merchandising of certain motor sports events.

EXPLOIT SYNERGIES OF THE ACQUIRED BUSINESSES

The Company plans to maximize revenues by exploiting synergies among its
various existing businesses and the Acquired Businesses. The Company believes
that it can utilize the best business practices of the respective businesses
acquired in the 1997 Acquisitions, the Recent Acquisitions and the Pending
Acquisitions on a national scale. For example, the Atlanta-based regional
Music Midtown Festival, created and promoted by Concert/Southern (one of the
Acquired Businesses), is a highly successful music festival concept that drew
approximately 200,000 attendees in 1997; the Company believes that it can use
the event as a model for other markets. In addition, the Company believes that
the radio industry trade publications of Network (another of the Acquired
Businesses) will enable the Company to introduce new acts and new musical
releases to radio programming directors nationwide. This exposure can enhance
recorded music sales and, in turn, music concert attendance, particularly for
artists having relationships with the Company. In addition, upon consummation
of the FAME acquisition, the Company believes that it will be able to
capitalize on the cross-marketing opportunities that may arise by virtue of
representing team athletes while selling corporate marketing opportunities and
the sale of corporate sponsorships and other marketing rights at its existing
venues.

INCREASE USE OF VENUES; DIVERSIFICATION OF ACTS AND VENUES

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INNOVATIVE EVENT MARKETING

The Company plans to use innovative event marketing to increase
admissions, sponsorship and advertising revenues, and, to a limited extent,
average ticket prices at its venues. In particular, the Company believes that
it can increase the profitability of its venues by offering premium ticket
packages, including (a) season ticket packages that include amenities such as
preferred seating, VIP parking, waiter service, private club and/or "upscale"
concession menus, (b) subscription series packages allowing customers to
purchase tickets for a set of performances and (c) preferred seating, such as
box seating and VIP seating areas, which typically generate higher revenues
per seat. Moreover, the market research and audience demographics databases
that the Company acquired through certain of the Recent Acquisitions, when
combined with the Company's existing audience data collection efforts, will
permit highly-effective targeted marketing, such as direct-mail and
subscription series campaigns, which the Company believes will increase
ticket pre-sales and overall sales in a cost-efficient manner.

STRICT COST CONTROLS; NATIONALLY COORDINATED BOOKING, MARKETING & ACCOUNTING

The Company's senior management imposes strict financial reporting
requirements and expense budget limitations on all of its businesses,
enabling senior management to monitor the performance and operations of all
of its businesses, to eliminate duplicative administrative costs and to
realize expense savings. Moreover, the Company believes that its size will
enable it to achieve substantial economies of scale by (a) implementing a
nationally coordinated booking system (for contracting for and scheduling
acts), while continuing to utilize the substantial local expertise of the
Acquired Businesses, (b) establishing a centralized marketing team to exploit
ancillary revenue streams on local, regional and national levels, including
from sponsorship, advertising and merchandising opportunities, and (c)
implementing a centralized accounting system.

PURSUE COMPLEMENTARY ACQUISITION OPPORTUNITIES

The live entertainment business is characterized by numerous participants,
including booking agents, promoters, producers, venue owners and venue
operators, many of which are entrepreneurial, capital-constrained local or
regional businesses that do not achieve significant economies of scale from
their operations. The Company believes that the fragmented nature of the
industry presents attractive acquisition opportunities, and that its larger
size will provide it with improved access to the capital markets that will
give it a competitive advantage in implementing its acquisition strategy.
Through consolidation, the Company believes that it will be better able to
coordinate negotiations with performers and talent agents, addressing what
the Company believes is a growing desire among performers and talent agents
to deal with fewer, more sophisticated promoters. The Company intends to
pursue additional strategic acquisitions of (a) amphitheater and other live
entertainment venues, (b) local and regional promoters and producers of music
concert, theatrical, specialized motor sports and other live entertainment
events and (c) companies in the talent representation industry. The Company
is currently in the process of negotiating certain additional acquisitions of
live entertainment and related businesses; however, it has not yet entered
into any definitive agreements and there can be no assurance that it will do
so.

PROPERTIES

The Company's executive offices are located at 650 Madison Avenue, 16th
Floor, New York, New York 10022. Upon consummation of the Pending
Acquisitions, in addition to the properties described in "--The Company's
Live Entertainment Activities--Venue Operations," the Company leases office
space in New York, New York; Austin and Houston, Texas; Atlanta, Georgia;
Chicago, Illinois; Indianapolis, Indiana; Washington, DC; Miami, Florida;
Gaithersburg, Maryland; Cambridge, Mansfield and Boston Massachusetts; Santa
Monica and Encino, California; Seattle, Washington; London, England; and St.
Louis, Missouri and owns office buildings in Burbank and San Francisco,
California; and Mansfield, Massachusetts. These properties are generally
leased for terms of 1 to 10 years.

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EMPLOYEES

As of March 31, 1998, the Company had approximately 950 full-time
employees. Upon consummation of the Pending Acquisitions, the Company expects
to have approximately 1,100 full-time employees. The Company will also, from
time to time, hire or contract for part-time or seasonal employees or
independent contractors, although its staffing needs will vary. Management
believes that its relations with its employees are good. A number of the
employees to be retained by the Company are covered by collective bargaining
agreements. See "Management."

LITIGATION

Although the Company is involved in several suits and claims in the
ordinary course of business, it is not currently a party to any legal
proceeding that it believes would have a material adverse effect on its
business, financial condition or results of operations.

POTENTIAL CONFLICTS OF INTEREST

Marquee is a publicly-traded company that, among other things, provides
talent representation services to professional athletes and acts as booking
agent for tours and appearances for musicians and other entertainers. The
Company has indicated to Marquee its potential interest in acquiring Marquee.
Mr. Sillerman has an aggregate equity interest of approximately 9.1% in
Marquee and Mr. Sillerman is the chairman of its board of directors, and Mr.
Tytel is one of its directors. Upon the consummation of the acquisition of
FAME, the Company may directly compete with Marquee in obtaining
representation agreements with particular athletes and endorsement
opportunities for its clients. The Company anticipates that, from time to
time, it will enter into transactions and arrangements (particularly, booking
arrangements) with Marquee and Marquee's clients. In any transaction or
arrangement with Marquee, Messrs. Sillerman and Tytel are likely to have
conflicts of interest as officers and directors of the Company. These
transactions or arrangements will be subject to the approval of a committee
of independent members of the boards of directors of each of the Company and
Marquee, except that booking arrangements in the ordinary course of business
will be subject to periodic review but not the approval of each particular
arrangement. Marquee also acts as a promoter of various sporting events and
sports personalities and the Company produces ice skating and gymnastics
events that may compete with events in which Marquee is involved. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Recent Developments" and "Certain Relationships and Related
Transactions--Potential Conflicts of Interest."

TSC, an entity controlled by Mr. Sillerman and in which Mr. Tytel also has
an equity interest, provides financial consulting services to Marquee. TSC's
services are provided by certain directors, officers and employees of the
Company who are not separately compensated for their services by TSC. In any
transaction, arrangement or competition with Marquee, Messrs. Sillerman and
Tytel are likely to have conflicts of interest between their duties as
officers and directors of the Company, on the one hand, and their duties as
directors of Marquee and their interests in TSC and Marquee, on the other
hand. See "Certain Relationships and Related Transactions--Triathlon Fees."

Pursuant to the employment agreement entered into between Brian Becker and
the Company in connection with the acquisition of PACE, Mr. Becker has the
option, exercisable within 15 days after the second anniversary of the
consummation of the PACE Acquisition, to purchase the Company's then existing
motor sports line of business (or, if that line of business has been sold,
the Company's then existing theatrical line of business) at its then fair
market value. Mr. Becker's option may present a conflict of interest in his
role as a director of the Company. See "Management--Employment Agreements and
Arrangements with Certain Officers and Directors."

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SEASONALITY

The Company's operations and revenues are largely seasonal in nature, with
generally higher revenue generated in the second and third quarters of the
year. For example, on a pro forma basis for the 1997 Acquisitions, the
Company generated approximately 68% of its revenues in the second and third
quarters for the twelve months ended December 31, 1997. The Company's outdoor
venues are primarily utilized in the summer months and do not generate
substantial revenue in the late fall, winter and early spring. Similarly, the
musical concerts that the Company promotes largely occur in the second and
third quarters. To the extent that the Company's entertainment marketing and
consulting relate to musical concerts, they also predominantly generate
revenues in the second and third quarters. Therefore, the seasonality of the
Company's business causes (and, upon consummation of the Pending
Acquisitions, will probably continue to cause) a significant variation in the
Company's quarterly operating results. These variations in demand could have
a material adverse effect on the timing of the Company's cash flows and,
therefore, on its ability to service its obligations with respect to its
indebtedness. However, the Company believes that this variation may be
somewhat offset with the acquisition of typically non-summer seasonal
businesses in the Recent Acquisitions, such as motor sports (which is
winter-seasonal) and Touring Broadway Shows (which typically tour between
September and May). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

COMPETITION

Competition in the live entertainment industry is intense, and competition
is fragmented among a wide variety of entities. The Company competes on a
local, regional and national basis with a number of large venue owners and
entertainment promoters for the hosting, booking, promoting and producing of
music concerts, theatrical shows, motor sports events and other live
entertainment events. Moreover, the Company's marketing and consulting
operations compete with advertising agencies and other marketing
organizations. The Company and the businesses to be acquired in the Pending
Acquisitions compete not only with other live entertainment events, including
sporting events and theatrical presentations, but also with non-live forms of
entertainment, such as television, radio and motion pictures. The talent
representation industry is also highly competitive. The Company competes with
both larger and smaller entities. A number of the Company's competitors have
substantially greater resources than the Company. Certain of the Company's
competitors may also operate on a less leveraged basis, and have greater
operating and financial flexibility, than the Company. In addition, many of
these competitors also have long standing relationships with performers,
producers, and promoters and may offer other services that are not provided
by the Company. There can be no assurance that the Company will be able to
compete successfully in this market or against these competitors.

REGULATORY MATTERS

FORWARD-LOOKING STATEMENTS

Many of the statements, estimates, predictions and projections contained
in this "Business" section of the Prospectus, in addition to certain
statements contained elsewhere in this Prospectus, are "forward-looking
statements"within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. These forward-looking statements are
prospective, involving risks and uncertainties. While these forward-looking
statements, and any assumptions on which they are based, are made in

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good faith and reflect the Company's current judgment regarding the direction
of its business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein. Some important factors (but not necessarily all
factors) that could affect the Company's revenues, growth strategies, future
profitability and operating results, or that otherwise could cause actual
results to differ materially from those expressed in or implied by any
forward-looking statement, are discussed under "Risk Factors" and elsewhere in
this Prospectus. Stockholders are urged to carefully consider these factors in
connection with the forward-looking statements. The Company does not undertake
to release publicly any revisions to forward-looking statements that may be
made to reflect events or circumstances after the date of this Prospectus or to
reflect the occurrence of unanticipated events.

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AGREEMENTS RELATED TO THE PENDING ACQUISITIONS

The following is a summary of the material terms of the agreements related
to the Pending Acquisitions. This summary is not intended to be complete and
is subject to, and qualified in its entirety by reference to, the agreements,
copies of which have been filed as exhibits to the Company's Registration
Statement on Form S-1 (File No. 333-50079) filed with the Commission and are
incorporated herein by reference. The Company will provide without charge to
each person to whom this Prospectus is delivered, upon written or oral
request of any such person, a copy of any or all documents incorporated
herein by reference (other than exhibits to such documents which are not
specifically incorporated by reference into such documents). Requests for
such documents should be directed to SFX Entertainment, Inc., 650 Madison
Avenue, 16th Floor, New York, New York 10022, Attention: Investor Relations,
telephone (212) 838-3100.

FAME ACQUISITION

The Company has entered into an agreement to acquire FAME (the "FAME
Agreement") pursuant to which the Company will acquire all of the outstanding
capital stock of FAME for a total purchase price of approximately $82.9
million (including $7.9 million which the Company anticipates paying in order
to reimburse the FAME sellers for certain taxes which they will be subject
to) and the issuance of 1.0 million shares of Class A Common Stock (which,
based upon the last reported sales price of the Class A Common Stock on May 4,
1998, would have a value of approximately $40.3 million).

The FAME Agreement provides for payments by the Company to the FAME
sellers of additional amounts up to $15.0 million in equal annual
installments over 5 years contingent on the achievement of certain EBITDA
targets. If FAME's EBITDA (as defined in the FAME Agreement) exceeds 105% of
specified targets in each of the years 1998 through 2002, the Company is
required to pay the FAME sellers $3.0 million (an "Earn-out Payment") within
120 days after the end of the year to which the payment relates. If EBITDA
exceeds 75% but is less than 105% of the target EBITDA, a portion of the
Earn-out Payment will be paid to one of the FAME sellers for such year. In
any year that FAME's EBITDA is less than 105% of the target EBITDA for that
year, Mr. Falk may direct that FAME's EBITDA in excess of 105% of the target
EBITDA for one or more prior years be added to the current year's EBITDA (a
"Carry Forward Amount") for purposes of paying the Earn-out Payment for the
current year (reducing such Earn-out Payment by any payment made in a prior
year with respect to the Carry Forward Amount). In any year FAME's EBITDA is
greater than 105% of the target EBITDA for that year, Mr. Falk may direct
that any portion of any excess of EBITDA for any year over 105% of the target
for that year (a "Carry Back Amount") be added to the EBITDA for any prior
year for purposes of paying the Earn-out Payment for such prior year (which
amount will be paid as if it were due with respect to the current year). Any
EBITDA in excess of 105% of the target EBITDA for any year may be used as the
basis for a Carry Forward Amount or a Carry Back Amount, but no portion may
be used as both. Mr. Falk is entitled to 50% of the Earn-out Payments.

The FAME Agreement also provides for additional payments by the Company if
FAME's EBITDA performance exceed the targets by certain amounts from 1998 to
2002. During 1998 to 2000, the Earn-out Payment will be increased if FAME's
EBITDA exceeds 110%, 125% or 150% of the target and the increase will be
equal to 10%, 15% or 20%, respectively, of the excess of EBITDA for that year
over the corresponding target EBITDA. During 2001 and 2002, the Earn-out
Payment will be increased if FAME's EBITDA exceeds 125% or 150% of the target
and the increase will be equal to 15% or 20%, respectively, of the excess of
EBITDA for that year over the corresponding target EBITDA. Mr. Falk is
entitled to one-third of such increases to any Earn-out Payment as described
in the foregoing paragraph.

The FAME Agreement also provides that, if in a transaction or series of
related transactions, all or substantially all of the assets of FAME or 50%
or more of the voting power or equity interests of FAME is transferred to any
person that is not a wholly owned subsidiary of the Company (a "Business
Disposition"), the Company will be obligated to pay in lieu of an Earn-out
Payment, certain amounts on the date of consummation of such Business
Disposition. If a Business Disposition is consummated on or prior to the
first anniversary of the closing of the FAME Acquisition, the Company will be
obligated to pay one-third of the first $45.0 million of disposition profit
(as defined in the FAME Agreement) and 10%

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of any disposition profit in excess of that amount. If a Business Disposition
is consummated thereafter and prior to the end of 2002, the Company will be
obligated to pay any Earn-out Payments earned but unpaid and the greater of
(a) the average Earn-out Payment made or to be made for any completed fiscal
years since the closing of the FAME Acquisition, multiplied by the number of
years remaining until the end of 2002 and (b) 10% of any disposition profit.
Mr. Falk will be entitled to 50% of any payments made by the Company upon the
occurrence of a Business Disposition.

REGISTRATION RIGHTS

Beginning on the first anniversary of the closing of the FAME Acquisition,
the FAME sellers have certain demand and "piggy-back" registration rights
with respect to the shares of Class A Common Stock issuable pursuant to the
FAME Agreement. However, pursuant to the Rescission Offer, the Class A Common
Stock to be issued to the FAME sellers will become (to the extent such
sellers do not exercise their rescission rights) freely tradeable in the
public market, subject to applicable limitations on affiliates.

INDEMNIFICATION

Pursuant to the FAME Agreement, the FAME sellers agree to indemnify,
defend and hold harmless the Company and its respective officers, directors,
stockholders, employees and agents after the closing of the FAME Acquisition
from and against, among other things, any liability or expense arising or
resulting from any inaccuracy in or breach of certain representations and
warranties. The Company will not be entitled to any such indemnity unless the
aggregate of all losses incurred by the Company exceeds $100,000 (other than
for breach of certain representations and warranties relating to the capital
stock of FAME for which there is no such threshold), in which event the FAME
sellers will be responsible for all such losses, provided however, that the
aggregate liability of the FAME sellers shall not exceed $12.5 million. The
Company agrees to indemnify, defend and hold harmless the FAME sellers after
the closing of the FAME Acquisition from and against, among other things, any
liability or expense arising or resulting from any inaccuracy in or breach of
any representation or warranty contained in the FAME Agreement.

CLOSING CONDITIONS; TERMINATION

The closing of the FAME Acquisition is subject to certain closing
conditions, including a requirement that the employment agreements entered
into by the Company with certain executive officers of FAME continue to be in
effect and that certain stock appreciation rights with respect to the capital
stock of FAME and a certain shareholders agreement among the FAME sellers be
cancelled. The FAME Agreement may be terminated by mutual consent or by the
Company or Mr. Falk if any closing condition for the benefit of the Company
or the FAME sellers, respectively, has not been timely met or has become
incapable of fulfilment (unless such condition is waived), or if the FAME
Acquisition has not closed by July 15, 1998, unless the sole reason that the
closing has not occurred by that time is related to certain matters under the
HSR Act (including the failure of the waiting period under the HSR Act to
have expired or been terminated), in which case the FAME Agreement may not be
terminated by the Company or Mr. Falk unless the closing has not occurred on
or before September 15, 1998.

RESCISSION OFFER

The shares issued in connection with the FAME acquisition were not
registered under the Securities Act or state securities laws, as may have
been required. The Company has made a Rescission Offer with respect to this
transaction which could result in the unwinding of the FAME Acquisition. The
acceptance or rejection of the Rescission Offer is not a closing condition of
the FAME Agreement.

FALK EMPLOYMENT AGREEMENT

On April 29, 1998, the Company entered into an employment agreement with
Mr. Falk (the "Falk Employment Agreement"). The Falk Employment Agreement has
a term of five years commencing as of the closing of the FAME Acquisition.
The Company will employ Mr. Falk as the Chairman of FAME and the Company's
Sports Group and as a Member of the Office of Chairman of the Company and
will appoint him a Director of the Company. Pursuant to the Falk Employment
Agreement, Mr. Falk will direct the day to day operations of FAME and the
Company's Sports Group and any other sports businesses

<PAGE>

acquired by the Company. The Falk Employment Agreement provides for an annual
base salary of $315,000, reviewed annually and increased (but in no event
decreased) by a minimum of 4.0% per year. In addition, Mr. Falk will be
considered for an annual bonus consistent with the bonuses given to other
senior executives of the Company. Mr. Falk will receive an option to purchase
100,000 shares of Class A Common Stock at an exercise price equal to the
closing price of the Class A Common Stock on the closing date of the FAME
Acquisition (subject to adjustment under certain circumstances). Such option
will fully vest on the first anniversary of the closing. In addition, the
Company has agreed to make annual stock option grants to Mr. Falk of at least
30,000 shares of Class A Common Stock in the first four years of the Falk
Employment Agreement.

The Company may terminate Mr. Falk's employment at any time with or
without cause (as defined in the Falk Employment Agreement). In the event
that the Falk Employment Agreement is terminated for any reason other than a
voluntary termination or termination for cause, all stock options granted
pursuant to the Falk Employment Agreement will immediately vest and become
exercisable and any remaining stock options to be granted pursuant to the
Falk Employment Agreement will immediately be granted and will vest and
become exercisable upon grant. In such case, the Company will also be
obligated to pay Mr. Falk his (a) base salary and (b) annual bonuses at a
rate equal to 50% of his base salary through the original term of the Falk
Employment Agreement, as well as certain additional benefits. In addition, in
the event of a change in control (as defined in the Falk Employment
Agreement), the Company may be required to pay a portion of certain taxes
incurred by Mr. Falk as a result of the change of control.

For one year following the termination of the Falk Employment Agreement
for cause (as defined in the Falk Employment Agreement) or by Mr. Falk,
except in the event of a constructive termination event (as defined in the
Falk Employment Agreement), Mr. Falk has agreed that (i) he will not become
employed in any capacity by, or become an officer, director, shareholder or
general partner of any entity that competes with any material business of
FAME as conducted as of the closing date of the FAME Acquisition and (ii) he
will not solicit any employee of the Company or any entities that are
directly or indirectly controlled by the Company to leave such employment.

DON LAW ACQUISITION

The Company has also entered into the Don Law Agreement pursuant to which
the Company will acquire certain assets of Don Law for an aggregate purchase
price of $90.0 million (subject to adjustment based on the working capital of
Don Law as described more fully below), including the repayment of $10.0
million in debt. The Company may at its option pay up to $16.0 million of the
purchase price in shares of Class A Common Stock at a negotiated per share
price of approximately $30.09. At the closing, the Company will have the
option to either include or exclude the lease on the Harborlights Pavilion
(the ''Harborlights") and related assets (collectively, the "Harborlights
Assets") from the Don Law Acquisition. If the Harborlights Assets are so
excluded, the purchase price will be reduced by $8.0 million.

EXCLUDED ASSETS

Certain assets of Don Law are to be excluded from the Don Law Acquisition,
including (a) Don Law's ownership interests in certain nightclubs in Boston,
Massachusetts (as long as such nightclubs do not materially compete with the
Company's efforts to attract performing artists), (b) the name "Blackstone",
(c) the name "Don Law", which the Company will have the right to use during
the term of the employment agreement to be executed between the Company and
Donald F. Law, Jr. at the closing, (d) the land and improvements located in
Mansfield, Massachusetts that have been designated for a waterpark facility
and (e) a lease for certain office space in Cambridge, Massachusetts.

RIGHT OF FIRST REFUSAL; NON-COMPETE

As a condition to closing, the Don Law seller and the Company will enter
into an agreement pursuant to which the assets to be acquired in the Don Law
Acquisition, with certain exceptions, will be subject to a right of first
offer and refusal by the members of Don Law if the Company elects to sell
such assets within two years after the closing of the Don Law Acquisition. In
addition, the Company and Mr. Law have

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agreed to enter into a non-competition agreement at the closing to restrict
employees of the Company and its affiliates that are responsible for the day
to day operation or management of the concert promotion business in the New
York metropolitan area from participating in the management of the assets
acquired in the Don Law Acquisition. The agreement also imposes certain
restrictions on transfers of the Company's assets (including the assets to
acquired in the Don Law Acquisition) in Maine, Massachusetts and Rhode Island
to such employees.

TERMINATION

Both parties will have the right to terminate the Don Law Agreement if the
closing has not occurred by July 1, 1998 or such other date as mutually
agreed; provided however, if Don Law seller has not entered into a new lease
with respect to the Harborlights on terms and conditions acceptable to the
Company, the Company may extend the termination date to August 1, 1998.

REGISTRATION RIGHTS

If the Company issues any Class A Common Stock as part of the purchase
price, then the Don Law Agreement provides that the parties will enter into a
registration rights agreement providing for certain demand and piggy-back
registration rights and a twelve month lock-up period.

INDEMNITY

The Don Law seller, including its members (pro rata according to their
respective ownership interests in Don Law), and the Company will indemnify
each other from all costs and expenses with respect to any breach of any
representation, warranty, covenant or obligation pursuant to the Don Law
Agreement. In most cases, each party will be obligated to indemnify the other
to the extent that the other party has indemnifiable expenses in excess of
$100,000. Each party's indemnity obligations generally terminate after one
year. The Don Law seller's indemnity obligation is generally limited to 5% of
the purchase price (as adjusted), but in no event in excess of the purchase
price (as adjusted) with respect to claims relating to title to assets and
excluded assets. Indemnity obligations of the Don Law seller and its members
are payable in cash and shares of Class A Common Stock (issued at fair market
value) in specified proportions.

RESCISSION OFFER

The shares to be issued in connection with the Don Law acquisition were
not registered under the Securities Act or state securities laws, as may have
been required. The Company has made a Rescission Offer with respect to this
transaction which may result in the unwinding of the Don Law Acquisition. The
acceptance or rejection of the Rescission Offer is not a closing condition of
the Don Law Acquisition.

DON LAW EMPLOYMENT AGREEMENT

The closing is also conditioned upon the execution by the Company and Mr.
Law of a five-year employment agreement providing for an initial annual
salary of $300,000 and a grant (on the closing date and the first through
fifth anniversaries of the closing date) of stock options to purchase an
aggregate of 100,000 shares of Class A Common Stock.

AVALON ACQUISITION

The Company has entered into two binding letters of intent to acquire all
of the outstanding equity interests in Avalon for a purchase price of $27.0
million in cash (subject to adjustment under certain circumstances). In
addition, the Company will be obligated to make additional payments to
reimburse the Avalon seller's third party out of pocket expenses incurred in
the development of the Camarillo Creek Amphitheater (expected to be
approximately $400,000). The Company may also be obligated to pay an

<PAGE>

additional $1.0 million to the Avalon sellers if the Camarillo Creek
Amphitheater has been completed pursuant to certain budget projections and
the production of entertainment events at the site has commenced by May 15,
1998. The definitive agreement will provide for customary indemnification
arrangements.

OAKDALE ACQUISITION

The Company has entered into the Oakdale Agreement pursuant to which the
Company will acquire certain assets of Oakdale, including the Oakdale
Theater, a new 4,800 seat facility located in Wallingford, Connecticut, for a
purchase price of $11.9 million in cash. In addition, the Company will be
obligated to pay Oakdale an additional payment on March 30, 2000 if the
combined EBITDA for the Oakdale Theater and Meadows for 1999 exceeds $5.5
million (subject to adjustment for the Operating Deficit (as defined in the
Oakdale Agreement) of the Oakdale Theater). In such case the Company will be
obligated to pay Oakdale between 5.0 and 5.8 times the amount of such excess.

SUBJECT RIGHTS; CLOSING CONDITIONS

The Oakdale Acquisition is subject to the rights and restrictions of the
Financial Assistance Agreement, dated December 21, 1995 (the "FAA"), between
the Connecticut Development Authority (the "CDA") and Oakdale Ventures, Inc.
and the Use Agreement, dated December 21, 1995 (the "Use Agreement"), among
the CDA, Oakdale, and Oakdale Ventures. The closing of the Oakdale
Acquisition is conditioned upon obtaining the CDA Consent (as defined in the
Oakdale Agreement) in a form reasonably acceptable to the Company and
containing certain agreed upon terms, including the following: (a) a
certification with respect to the FAA and the performance of certain
obligations thereunder; (b) a consent with regard to the transactions
contemplated pursuant to the Oakdale Agreement; and (c) certain amendments to
the FAA.

INDEMNIFICATION

The Oakdale Agreement provides that each party will indemnify the other
for damages arising from breaches of any of their respective representations,
warranties and covenants contained in the Oakdale Agreement. Oakdale's
indemnity obligation will be limited to the amount received by Oakdale
pursuant to the Oakdale Agreement for a period of two years from closing. In
addition, the Company and Oakdale have also agreed to enter into an
environmental agreement in which Oakdale will make representations and
warranties to the Company concerning the operation of the premises upon which
the Oakdale Theater is located in material compliance with all applicable
environmental laws and in which Oakdale will agree to unconditionally
indemnify the Company from and against all costs and expenses relating to any
action required to be taken with respect to any such environmental laws for a
period of six years.

TERMINATION

The Oakdale Agreement may be terminated if the closing of the Oakdale
Acquisition does not occur by May 11, 1998 (provided that the Company may
elect prior to such date to extend the closing date to June 11, 1998). In
addition, if the closing does not occur but for the Company's breach of any
material representation, warranty, covenant or condition contained in the
Oakdale Agreement, then the Company will be obligated to pay the Oakdale
sellers liquidated damages in the amount of $1.6 million.

LEASE AND OWNERSHIP OF REAL ESTATE

At the closing, the Company and the sellers of Oakdale will enter into a
non-recourse secured loan agreement (the "Mortgage Loan"), pursuant to which
the Company will loan the Oakdale sellers approximately $11.4 million, a
portion of the proceeds of which will be used to repay all outstanding senior
mortgage indebtedness on all real estate owned by Oakdale. The loan will bear
interest at an annual interest rate of approximately 5.7% and will have a
term of fifteen years. The loan will be secured by a first priority
non-recourse mortgage on certain parcels of real estate used in the
operations of the Oakdale Theater. In addition, the Company and Oakdale will
enter into a master lease with respect to such real estate which will provide
for an annual rent of $900,000 and a purchase agreement which will

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<PAGE>

provide that the Company will purchase such real estate on the fifteenth
anniversary of the closing of the transaction for approximately $15.4
million. Amounts outstanding under the Mortgage Loan will be credited against
such purchase price. The real estate purchase is conditioned on the
assumption by the Company of the FAA and the Use Agreement.

EMI ACQUISITION

On May 1, 1998, the Company entered into the EMI Agreement to acquire
approximately an 80% equity interest in EMI for an aggregate purchase price
of $8.5 million in cash. In addition, the Company has agreed to make a
loan to the EMI sellers in an amount equal to 20% of certain taxes which the
EMI sellers will be subject to as a result of the transaction. The Company
currently anticipates the amount of such loan will be approximately $750,000.
The loan will bear interest at a rate of 10% and, subject to certain
conditions, will be repaid when the EMI sellers sell their equity interests
in EMI.

CLOSING CONDITIONS; TERMINATION

The parties have the right to terminate the EMI Agreement if the closing
has not occurred by June 30, 1998. The EMI Agreement provides that the
Company and the EMI sellers will enter into a shareholders agreement
reasonably satisfactory to the parties and a management services agreement.
The Company expects that the management services agreement will provide that
the EMI sellers will be entitled to compensation for providing services
pursuant to such agreement in an amount equal to 20% of EMI's adjusted EBDA
(which will be defined in the management services agreement).

INDEMNITY

The Company and the EMI sellers have agreed to indemnify each other for,
among other things, any costs or expenses with respect to any breach of a
representation, warranty, covenant or other obligation under the EMI
Agreement. The indemnity obligations of the EMI sellers is subject to certain
limitations, including a limitation of approximately $4.3 million on the
amount of the sellers liability with respect to a breach of any
representation or warranty and to approximately $8.5 million in all other
cases.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Pursuant to the Company's Certificate of Incorporation and By-laws, the
business of the Company is managed by the Board. The Board conducts its
business through meetings of the board and its committees. The standing
committees of the Board are described below.

The By-laws of the Company authorize the Board to fix the number of
directors from time to time. The number of directors of the Company is
currently ten; however, it is anticipated that upon consummation of the FAME
Acquisition, the number of directors will be increased to eleven. All
directors hold office until the next annual meeting of stockholders following
their election or until their successors are elected and qualified. Officers
of the Company are to be elected annually by the Board and serve at the
Board's discretion. In the election of directors, the holders of the Class A
Common Stock will be entitled by class vote, exclusive of all other
stockholders, to elect two-sevenths (rounded up) of the directors to serve on
the Board, with each share of the Class A Common Stock entitled to one vote.

Currently, the Board consists of the individuals who are currently serving
as directors of SFX Broadcasting and Brian Becker who was appointed to the
Board upon the consummation of the PACE Acquisition. In addition, it is
anticipated that upon the consummation of the FAME Acquisition, Mr. Falk, the
Chairman and a founder of FAME, will be appointed as a Director and a Member
of the Office of the Chairman of the Company. All of the individuals who
currently serve as directors of SFX Broadcasting will cease to be directors
of SFX Broadcasting at the time of the consummation of the SFX Merger. If the
SFX Merger Agreement is terminated, Messrs. Dugan, Kramer and O'Grady have
indicated that they will promptly resign from their positions as directors of
the Company, and the Board will appoint three new independent directors, to
serve until the next annual meeting of the stockholders of the Company.

All of the executive officers of the Company other than Mr. Becker (the
"Executive Officers") are currently responsible for the management of SFX
Broadcasting. It is anticipated that such Executive Officers will enter into
five year employment agreements with the Company that will be similar to
their existing employment agreements with SFX Broadcasting (except Mr.
Armstrong who will no longer serve as an executive officer of the Company,
effective as of September 1, 1998, in order to continue to pursue a career in
radio broadcasting). See "--Employment Agreements and Arrangements with
Certain Officers and Directors." These employment agreements will become
effective immediately at the time of consummation of the SFX Merger. Prior to
the consummation of the SFX Merger, the Executive Officers who currently
serve as officers of SFX Broadcasting will continue to devote as much time as
they deem necessary to conduct the operations of the Company consistent with
their obligations to SFX Broadcasting. If the SFX Merger Agreement is
terminated for any reason, such Executive Officers will continue to perform
services for both SFX Broadcasting and the Company until SFX Broadcasting is
able to hire suitable replacements for these Executive Officers. If the SFX
Merger Agreement is terminated, SFX Broadcasting intends to seek another
buyer for its radio broadcasting business.

The Company and Messrs. Sillerman, Ferrel, Tytel and Benson have reached
agreements in principle that they will continue to serve as officers and
directors of the Company. See "Risk Factors--Dependence on Key Personnel."
The following table sets forth information as to the directors and the
executive officers of the Company:

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<TABLE>
<CAPTION>
AGE AS OF
POSITION(S) HELD WITH SFX DECEMBER 31,
NAME ENTERTAINMENT 1997
- ------------------------ ----------------------------------- --------------
<S> <C> <C>
Robert F.X. Sillerman ... Director, Executive Chairman and 49
Member of the Office of the
Chairman
Michael G. Ferrel........ Director, President, Chief 48
Executive Office and Member of the
Office of the Chairman
Brian Becker............. Director, Executive Vice President 41
and Member of the Office of the
Chairman
Howard J. Tytel.......... Director, Executive Vice President, 50
General Counsel and Secretary
Thomas P. Benson......... Director, Vice President and Chief 35
Financial Officer
Richard A. Liese......... Director, Vice President and 47
Assistant General Counsel
D. Geoffrey Director and Executive Vice 40
Armstrong(1)............ President
James F. O'Grady, Jr. ... Director 69
Paul Kramer.............. Director 65
Edward F. Dugan.......... Director 63
David Falk(2)............ Director and Member of the Office 47
of the Chairman
</TABLE>

- ------------
(1) While Mr. Armstrong will remain as a director of the Company, it is
anticipated that, effective as of September 1, 1998, he will no longer
serve as an executive officer of the Company in order to continue to
pursue a career in radio broadcasting.
(2) Effective upon consummation of the FAME Acquisition.

ROBERT F.X. SILLERMAN has served as the Executive Chairman, a Member of
the Office of the Chairman and a Director of the Company since its formation
in December 1997. Mr. Sillerman also presently serves as the Executive
Chairman of SFX Broadcasting, having served in such capacity since July 1,
1995. From 1992 through June 30, 1995, Mr. Sillerman served as Chairman of
the Board of Directors and Chief Executive Officer of SFX Broadcasting. Mr.
Sillerman is Chairman of the Board of Directors and Chief Executive Officer
of SCMC, a private company that makes investments in and provides financial
consulting services to companies engaged in the media business, and of TSC, a
private company that makes investments in and provides financial advisory
services to media-related companies. Through privately held entities, Mr.
Sillerman controls the general partner of Sillerman Communications Partners,
L.P., an investment partnership. Mr. Sillerman is also the Chairman of the
Board and a founding stockholder of Marquee, a publicly-traded company
organized in 1995, which is engaged in various aspects of the sports, news
and other entertainment industries. Mr. Sillerman is also a founder and a
significant stockholder of Triathlon, a publicly-traded company that owns and
operates radio stations in medium and small-sized markets in the mid-western
and western United States. For the last twenty years, Mr. Sillerman has been
a senior executive of and principal investor in numerous entities operating
in the broadcasting business. In 1993, Mr. Sillerman became the Chancellor of
the Southampton campus of Long Island University.

MICHAEL G. FERREL has served as the President, Chief Executive Officer, a
Member of the Office of the Chairman and a Director of the Company since its
formation in December 1997. Mr. Ferrel also presently serves as the
President, Chief Executive Officer and a director of SFX Broadcasting, having
served in such capacity since November 22, 1996. Mr. Ferrel served as
President and Chief Operating Officer of MMR, a wholly-owned subsidiary of
SFX Broadcasting , and a member of MMR's board of directors since MMR's
inception in August 1992 and as Co-Chief Executive Officer of MMR from
January 1994 to January 1996, when he became the Chief Executive Officer.
From 1990 to 1993, Mr. Ferrel served as Vice President of Goldenberg
Broadcasting, Inc., the former owner of radio station WPKX-FM, Springfield,
Massachusetts, which was acquired by MMR in July 1993.

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BRIAN E. BECKER has served as an Executive Vice President, a Member of the
Office of the Chairman and a Director of the Company since the consummation
of the PACE acquisition in February 1998. Mr. Becker has served as Chief
Executive Officer of PACE since 1994 and was appointed as President of PACE
in 1996. He first joined PACE as the Vice President and General Manager of
PACE's theatrical division at the time of that division's formation in 1982,
and subsequently directed PACE's amphitheater development efforts. He served
as Vice Chairman of PACE from 1992 until he was named its Chief Executive
Officer in 1994.

HOWARD J. TYTEL has served as an Executive Vice President, General
Counsel, Secretary and a Director of the Company since its formation in
December 1997. Mr. Tytel also presently serves as a Director, General
Counsel, Executive Vice President and Secretary of SFX Broadcasting, having
served in such capacity since 1992. Mr. Tytel is Executive Vice President,
General Counsel and a Director of SCMC and TSC and holds an economic interest
in those companies. Mr. Tytel is a Director and a founder of Marquee and a
founder of Triathlon. Mr. Tytel was a Director of Country Music Television
from 1988 to 1991. From March 1995 until March 1997, Mr. Tytel was a Director
of Interactive Flight Technologies, Inc., a publicly-traded company providing
computer-based in-flight entertainment. For the last twenty years, Mr. Tytel
has been associated with Mr. Sillerman in various capacities with entities
operating in the broadcasting business. Since 1993, Mr. Tytel has been Of
Counsel to the law firm of Baker & McKenzie, which currently represents SFX
Broadcasting, the Company and other entities with which Messrs. Sillerman and
Tytel are affiliated, on various matters.

THOMAS P. BENSON has served as the Vice President, Chief Financial Officer
and a Director of the Company since its formation in December 1997. Mr.
Benson also presently serves as the Chief Financial Officer and a Director of
SFX Broadcasting, having served in such capacity since November 22, 1996. Mr.
Benson became the Vice President of Financial Affairs of SFX Broadcasting in
June 1996. He was the Vice President--External and International Reporting
for American Express Travel Related Services Company from September 1995 to
June 1996. From 1984 through September 1995, Mr. Benson worked at Ernst &
Young LLP as a staff accountant, senior accountant, manager and senior
manager.

RICHARD A. LIESE has served as a Vice President, Associate General Counsel
and a Director of the Company since its formation in December 1997. Mr. Liese
also presently serves as a Director, Vice President and Associate General
Counsel of SFX Broadcasting, having served in such capacity since 1995. Mr.
Liese has also been the Assistant General Counsel and Assistant Secretary of
SCMC since 1988. In addition, from 1993 until April 1995, he served as
Secretary of MMR.

D. GEOFFREY ARMSTRONG has served as an Executive Vice President and a
Director of the Company since its formation in December 1997. It is
anticipated that, effective as of September 1, 1998, Mr. Armstrong will no
longer serve as an executive officer of the Company but will remain as a
Director. Mr. Armstrong also presently serves as the Chief Operating Officer
and an Executive Vice President of SFX Broadcasting, having served in such
capacity since November 22, 1996. Mr. Armstrong has served as a Director of
SFX Broadcasting since 1993. Mr. Armstrong became the Chief Operating Officer
of SFX Broadcasting in June 1996 and the Chief Financial Officer, Executive
Vice President and Treasurer of SFX Broadcasting in April 1995. Mr. Armstrong
was Vice President, Chief Financial Officer and Treasurer of SFX Broadcasting
from 1992 until March 1995. He had been Executive Vice President and Chief
Financial Officer of Capstar, a predecessor of SFX Broadcasting, since 1989.
From 1988 to 1989, Mr. Armstrong was the Chief Executive Officer of Sterling
Communications Corporation.

JAMES F. O'GRADY, JR. has served as a Director of the Company since its
formation in December 1997. Mr. O'Grady also serves as a Director of SFX
Broadcasting. Mr. O'Grady has been President of O'Grady and Associates, a
media brokerage and consulting company, since 1979. Mr. O'Grady has been a
Director of Orange and Rockland Utilities, Inc. and of Video for Broadcast,
Inc. since 1980 and 1991, respectively. Mr. O'Grady has been the co-owner of
Allcom Marketing Corp., a corporation that provides marketing and public
relations services for a variety of clients, since 1985, and has been Of
Counsel to Cahill and Cahill, Brooklyn, New York, since 1986. He also served
on the Board of Trustees of St. John's University from 1984 to 1996, and has
served as a Director of The Insurance Broadcast System, Inc. since 1994.

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<PAGE>

PAUL KRAMER has served as a Director of the Company since its formation in
December 1997. Mr. Kramer also serves as a Director of SFX Broadcasting and
Nations Flooring, Inc. Mr. Kramer has been a partner in Kramer & Love,
financial consultants specializing in acquisitions, reorganizations and
dispute resolution, since 1994. From 1992 to 1994, Mr. Kramer was an
independent financial consultant. Mr. Kramer was a partner in the New York
office of Ernst & Young LLP from 1968 to 1992.

EDWARD F. DUGAN has served as a Director of the Company since its
formation in December 1997. Mr. Dugan also serves as a Director of SFX
Broadcasting. Mr. Dugan is President of Dugan Associates Inc., a financial
advisory firm to media and entertainment companies, which he founded in 1991.
Mr. Dugan was an investment banker with Paine Webber Inc., as a Managing
Director, from 1978 to 1990, with Warburg Paribas Becker Inc., as President,
from 1975 to 1978 and with Smith Barney Harris Upham & Co., as a Managing
Director, from 1961 to 1975.

DAVID FALK will serve as a Member of the Office of the Chairman and a
Director of the Company upon consummation of the FAME Acquisition. Mr. Falk
will also serve as a Director and as Chairman of both FAME and the Company's
Sports Group and each subsidiary of the Company's Sports Group (which
includes FAME). Mr. Falk, who has represented professional athletes for over
twenty years, is presently a director, Chairman and Chief Executive Officer
of FAME, positions he has held since he founded FAME in 1992. Mr. Falk also
serves as Chairman of the HTS Sports-a-Thon to benefit the Leukemia Society
of America, is a member of the Executive Committee of the College Fund and is
on the Board of Directors of the Juvenile Diabetes Foundation and Share the
Care for Children.

AUDIT COMMITTEE

The Audit Committee will review (and report to the Board) on various
auditing and accounting matters, including the selection, quality and
performance of the Company's internal and external accountants and auditors,
the adequacy of its financial controls, and the reliability of financial
information reported to the public. The Audit Committee will also review
certain related-party transactions and potential conflict-of-interest
situations involving officers, directors or stockholders of the Company. The
members of the Audit Committee are Messrs. Kramer, O'Grady and Dugan.

COMPENSATION COMMITTEE

The Compensation Committee will review and make recommendations with
respect to certain of the Company's compensation programs and compensation
arrangements with respect to certain officers, including Messrs. Sillerman,
Ferrel, Tytel, Benson and Liese. The members of the Compensation Committee
are Messrs. Kramer, O'Grady and Dugan, none of whom is a current or former
employee or officer of SFX Broadcasting or the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee is comprised of Messrs. Kramer, O'Grady and
Dugan. The Board approved the issuance of shares of Class A Common Stock to
holders as of the Spin-Off record date of stock options or SARs of SFX
Broadcasting , whether or not vested. The issuance was approved to allow the
holders of these options and SARs to participate in the Spin-Off in a similar
manner to holders of SFX Broadcasting's Class A common stock. In connection
with this issuance, Messrs. Kramer, O'Grady and Dugan received 13,000, 13,000
and 3,000 shares of Class A Common Stock, respectively.

STOCK OPTION COMMITTEE

The Stock Option Committee will grant options, determine which employees
and other individuals performing substantial services to the Company may be
granted options and determine the rights and limitations of options granted
under the Company's plans. The members of the Stock Option Committee are
Messrs. Kramer, O'Grady and Dugan.

STOCK OPTION AND RESTRICTED STOCK PLAN

The Company's 1998 Stock Option and Restricted Stock Plan, provides for
the issuance of up to 2,000,000 shares of Class A Common Stock. The purpose
of the plan is to provide additional incentive to officers and employees of
the Company. Each option granted under the plan will be designated at the

105
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time of grant as either an "incentive stock option" or a "non-qualified stock
option." The plan will be administered by the Stock Option Committee. The
Board has approved the issuance of stock options exercisable for an aggregate
of 1,002,500 shares under the plan. See "--Employment Agreements and
Arrangements with Certain Officers and Directors."

COMPENSATION OF DIRECTORS

Directors employed by the Company will receive no compensation for
meetings they attend. Each director not employed by the Company will receive
a fee of $1,500 for each Board meeting he attends, in addition to
reimbursement of travel expenses. Each non-employee director who is a member
of a committee will also receive $1,500 for each committee meeting he attends
that is not held in conjunction with a Board meeting. If the committee
meeting occurs in conjunction with a Board meeting, each committee member
will receive an additional $500 for each committee meeting he attends. In
addition, the Company will pay each director an annual retainer of $30,000,
of which not less than one-half will be paid in cash and one-half will be
paid in shares of the Class A Common Stock.

EXECUTIVE COMPENSATION

The Company did not pay any compensation to the current Executive Officers
in 1997. The Company anticipates that during 1998 its most highly compensated
executive officers will be Messrs. Sillerman, Ferrel, Becker and Tytel. See
"--Employment Agreements and Arrangements with Certain Officers and
Directors."

It is anticipated that compensation for the Executive Officers and for
other executives will consist principally of base salary, an annual incentive
bonus opportunity and long-term stock-based incentive awards. All direct and
indirect remuneration of all Executive Officers and certain other executives
will be approved by the Compensation and Stock Option Committees.

The Company has granted shares of Class A Common Stock to holders as of
the Spin-Off record date of stock options or SARs of SFX Broadcasting,
whether or not vested. See "Certain Relationships and Related
Transactions--Issuance of Stock to Holders of SFX Broadcasting's Options and
SARs."

EMPLOYMENT AGREEMENTS AND ARRANGEMENTS WITH CERTAIN OFFICERS AND DIRECTORS

The Company anticipates that it will enter into employment agreements with
all of the Executive Officers prior to the consummation of the SFX Merger
(except for Mr. Armstrong), and that the employment agreements (except for
Mr. Becker's employment agreement which is described below) will become
effective immediately after the consummation of the SFX Merger. It is
anticipated that the employment agreements will provide for annual base
salaries of $500,000 for Mr. Sillerman, $350,000 for Mr. Ferrel, $300,000 for
Mr. Tytel and $235,000 for Mr. Benson. Each executive officer is expected to
receive a bonus to be determined annually in the discretion of the Board, on
the recommendation of the Compensation Committee. Each employment agreement
will be for a term of five years, and unless terminated or not renewed by the
Company or the employee, the term will continue thereafter on a year-to-year
basis on the same terms existing at the time of renewal. It is anticipated
that each of the agreements will provide for payments and other benefits to
be mutually agreed upon, if the employee's employment terminates following a
change of control.

In connection with entering into the employment agreements, the Company
sold the following restricted stock: 500,000 shares of Class B Common Stock
to Mr. Sillerman, 150,000 shares of Class B Common Stock to Mr. Ferrel,
80,000 shares of Class A Common Stock to Mr. Tytel and 10,000 shares of Class
A Common Stock to Mr. Benson. The shares of restricted stock were sold to the
officers at a purchase price of $2.00 per share. In addition, the Board (on
the review and recommendation of the Compensation Committee) also approved
the issuance, effective upon consummation of the Spin-Off, of the following
stock options exercisable for shares of Class A Common Stock: options to
purchase 120,000 shares to Mr. Sillerman, options to purchase 50,000 shares
to Mr. Ferrel, options to purchase 40,000 shares to Mr. Armstrong, options to
purchase 25,000 shares to Mr. Tytel, options to purchase 10,000 shares to Mr.
Benson and options to purchase 2,500 shares to each of Messrs. Kramer,
O'Grady, and Dugan. The options will vest over three years and will have an
exercise price of $5.50 per share. See "Risk Factors--Future Charges to
Earnings."

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Until the closing date of the SFX Merger, the Executive Officers (other
than Mr. Becker) will continue to be employed by SFX Broadcasting (at SFX
Broadcasting's expense), but will devote as much time as they deem reasonably
necessary, consistent with their obligations to SFX Broadcasting, in support
of the Company on a basis consistent with the time and scope of services that
they devoted to the live entertainment business prior to the Spin-Off.
Effective immediately prior to the consummation of the SFX Merger, the
Company will assume all obligations arising under any employment agreement or
arrangement (written or oral) between SFX Broadcasting or any of its
subsidiaries and the Executive Officers, other than the rights, if any, of
the Executive Officers to receive options at the time of their termination
following a change of control of SFX Broadcasting (as defined in their
respective employment agreements) and all existing rights to indemnification.
The Company will assume the obligation to make change of control payments
under Messrs. Sillerman's, Ferrel's and Benson's existing employment
agreements with SFX Broadcasting of approximately $3.3 million, $1.5 million
and $0.2 million, respectively. The Company will also indemnify SFX
Broadcasting and its subsidiaries from all obligations arising under the
assumed employment agreements or arrangements (except in respect of the
termination options and all existing rights to indemnification).

BECKER EMPLOYMENT AGREEMENT

As a condition to the execution of the PACE Agreement, the Company entered
into an employment agreement with the Chief Executive Officer and President
of PACE, Mr. Brian Becker (the "Becker Employment Agreement"). The Becker
Employment Agreement has a term of five years commencing on February 25,
1998. Mr. Becker will continue as President and Chief Executive Officer of
PACE. In addition, for the term of his employment, Mr. Becker will serve as
(a) a member of the Company's Office of the Chairman, (b) an Executive Vice
President of the Company and (c) a director of each of PACE and the Company
(subject to shareholder approval). During the term of his employment, Mr.
Becker will receive (a) a base salary of $294,000 for the first year,
$313,760 for each of the second and third years and $334,310 for each of the
fourth and fifth years and (b) an annual bonus in the discretion of the
Board.

The Company has agreed that it will not sell either the theatrical or
motor sports line of business of PACE prior February 25, 1999. If the Company
sells either line of business after the first anniversary, it has agreed not
to sell the other line of business prior to 15 days past the second
anniversary of the PACE Acquisition. The Becker Employment Agreement provides
that Mr. Becker will have a right of first refusal (the "Becker Right of
First Refusal") if, between the first and second anniversary of the PACE
Acquisition, the Company receives a bona fide offer from a third party to
purchase all or substantially all of either the theatrical or motor sports
lines of business at a price equal to 95% of the proposed purchase price. The
Fifth Year Put Option (as defined in the PACE acquisition agreement) will
also be immediately exercisable as of such closing. If that Mr. Becker does
not exercise his right of first refusal and either of the theatrical or motor
sports line of business is sold, then he will have an identical right of
first refusal for the sale of the remaining line of business beginning on the
second anniversary of the PACE Acquisition and ending six months thereafter.
Mr. Becker will be paid an administrative fee of $100,000 if he does not
exercise his right of first refusal and the Company does not consummate the
proposed sale. Mr. Becker would thereafter retain all rights to the Becker
Right of First Refusal.

Beginning on the second anniversary of the date of the Becker Employment
Agreement (December 12, 1999), Mr. Becker will have the option (the "Becker
Second Year Option"), exercisable within 15 days thereafter, to elect one or
more of the following: to (a) put any stock or portion thereof (including any
vested and unvested options to purchase stock) and/or any compensation to be
paid to Mr. Becker by the Company; (b) become a consultant to the Company for
no more than an average of 20 hours per week for the remainder of the term
and with the same level of compensation set forth in the Becker Employment
Agreement; or (c) acquire PACE's motor sports line of business (or, if that
line of business was previously sold, PACE's theatrical line of business) at
its fair market value as determined in the Becker Employment Agreement.

The Becker Employment Agreement may be terminated (a) by the Company for
Cause (as defined in the Becker Employment Agreement), (b) by the Company for
Mr. Becker's death or permanent disability or (c) by Mr. Becker at any time
for any reason or upon exercise of the Becker Second Year Option.

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<PAGE>
In addition, Mr. Becker's employment may be terminated by the Company any
time in the Company's sole discretion or by Mr. Becker at any time following,
among other things, (a) failure to elect or re-elect Mr. Becker as a director
of the Company, (b) a reduction in Mr. Becker's base salary or in the formula
to calculate his bonus, (c) discontinuation of Mr. Becker's participation in
any stock option, bonus or other employee benefit plan, (d) prior to two
years and fifteen days after consummation of the PACE Acquisition, the sale
of either the motor sports or theatrical line of business to any person other
than Mr. Becker (unless Mr. Becker elected not to exercise the Becker Right
of First Refusal (as defined below)), (e) the sale of all or substantially
all of the assets of PACE, (f) a change of control of the Company or (g) the
failure by the Company to contribute any acquired business (which derives a
majority of its revenues from either a theatrical or motor sports line of
business) to PACE. If Mr. Becker's employment is terminated, then, among
other things, (a) for the period from the date of termination until the fifth
anniversary of the closing of the PACE Acquisition, the Company must pay Mr.
Becker the base salary and any bonus to which he would otherwise be entitled
and Mr. Becker will be entitled to participate in any and all of the
profit-sharing, retirement income, stock purchase, savings and executive
compensation plans to the same extent he would otherwise have been entitled
to participate, (b) for a period of one year after the date of termination,
the Company will maintain Mr. Becker's life, accident, medical, health care
and disability programs or arrangements and provide Mr. Becker with use of
the same office and related facilities and (c) if the termination occurs
prior to two years and 15 days after consummation of the PACE Acquisition,
Mr. Becker will retain the Becker Second Year Option and the Becker Right of
First Refusal.

Throughout the term of his employment and for a period of 18 months
thereafter, Mr. Becker has agreed not to, directly or indirectly, engage in
any activity or business that is directly competitive with the Company (or
its affiliates) or solicit any of its employees to leave the Company (or its
affiliates). However, these restrictions will not apply if Mr. Becker
exercises his rights, or the Company breaches its obligations, with respect
to the Becker Right of First Refusal or the Becker Second Year Option

The Company has agreed to indemnify, defend and hold Mr. Becker harmless
to the maximum extent permitted by law against expenses, including attorney's
fees, incurred in connection with the fact that Mr. Becker is or was an
officer, employee or director of the Company or any of its affiliates.

In addition, the Company has entered into an employment agreement with
David Falk which will be effective upon the consummation of the FAME
Acquisition. See "Agreements Related to the Pending Acquisitions."

POSSIBLE AMENDMENTS TO DELSENER/SLATER EMPLOYMENT AGREEMENTS

Messrs. Delsener and Slater and the Company are in the process of
negotiating amendments to their employment agreements to reflect, among other
things, the changes to the Company's business as a result of the Recent
Acquisitions and the Spin-Off. Messrs. Delsener and Slater have agreed in
principle to waive any rights to repurchase (or to offer to repurchase)
Concerts, and any rights to receive a portion of the proceeds of a Return
Event (as defined in their employment agreements) that they might otherwise
have in connection with the SFX Merger or the Spin-Off. However, there can be
no assurance that Messrs. Delsener and Slater will waive these rights on
terms acceptable to the Company or that, if not so waived, neither Mr.
Delsener nor Mr. Slater will exercise these rights. These rights may continue
to apply in certain circumstances to transactions after, or unrelated to, the
Spin-Off and the SFX Merger. The Company also expects, in connection with the
foregoing, to negotiate mutually satisfactory amendments to certain of
Messrs. Delsener's and Slater's compensation arrangements, including bonus
and profit-sharing provisions. See "Risk Factors--Rights to Purchase Certain
Subsidiaries" and "Certain Relationships and Related
Transactions--Delsener/Slater Employment Agreements."

The Company and SFX Broadcasting have also entered into certain agreements
and arrangements with their officers and directors from time to time in the
past. See "Certain Relationships and Related Transactions."

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PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of shares of Common Stock as of May 1, 1998, as adjusted to give
effect to the Offering (assuming no exercise of the Underwriters
over-allotment option) and the Pending Acquisitions, with respect to (a) each
director of the Company, (b) each executive officers of the Company, (c) the
directors and executive officers of the Company as a group and (d) each
person known by the Company to own beneficially more than five percent of the
outstanding shares of any class of Common Stock.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING AND
THE PENDING ACQUISITIONS(1)
-----------------------------------------------------------
CLASS A CLASS B
COMMON STOCK COMMON STOCK
------------------------- ---------------------- ---------
PERCENT
NAME AND ADDRESS OF
OF NUMBER PERCENT NUMBER PERCENT TOTAL
BENEFICIAL OF OF OF OF VOTING
OWNER(2) SHARES CLASS SHARES CLASS POWER
- ------------------ -------------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Directors and
Executive
Officers:
Robert F.X.
Sillerman ....... 1,577,034(3) 8.5% 1,524,168 89.8% 47.3%
Michael G. Ferrel 191,236(4) * 172,869 10.2% 5.4
Brian Becker ..... 29,402 * -- -- *
Howard J. Tytel . 137,891 (5) * -- -- *
Thomas P. Benson 19,000 * -- -- *
Richard A. Liese 9,500 * -- -- *
D. Geoffrey
Armstrong ....... 161,800 * -- -- *
James F. O'Grady,
Jr. ............. 14,772 * -- -- *
Paul Kramer ...... 15,922 * -- -- *
Edward F. Dugan . 5,922 * -- -- *
David Falk........ -- * -- -- *
All directors and
executive officers
as a group
(10 persons -11
including David
Falk) ............ 2,162,479 11.6% 1,697,037 100.0% 53.8%
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AFTER THE OFFERING AND
THE PENDING ACQUISITIONS(1)
--------------------------------------------------------------
CLASS A CLASS B
COMMON STOCK COMMON STOCK
------------------------- -------------------------
PERCENT
NAME AND ADDRESS OF
OF NUMBER PERCENT NUMBER PERCENT TOTAL
BENEFICIAL OF OF OF OF VOTING
OWNER(2) SHARES CLASS SHARES CLASS POWER
- ------------------ -------------- --------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Directors and
Executive
Officers:
Robert F.X.
Sillerman ....... 1,577,034(3) 5.8% 1,524,168(3) 89.8% 38.1%
Michael G. Ferrel 191,236 * 172,869(4) 10.2% 4.3
Brian Becker ..... 29,402 * -- -- *
Howard J. Tytel . 137,891 (5) * -- -- *
Thomas P. Benson 19,000 * -- -- *
Richard A. Liese 9,500 * -- -- *
D. Geoffrey
Armstrong ....... 161,800 * -- -- *
James F. O'Grady,
Jr. ............. 14,772 * -- -- *
Paul Kramer ...... 15,922 * -- -- *
Edward F. Dugan . 5,922 * -- -- *
David Falk........ 850,000 2.4 -- -- 1.5
All directors and
executive officers
as a group
(10 persons -11
including David
Falk) ............ 2,812,479 10.4% 1,697,037 100.0% 44.9%
</TABLE>

- ------------
* Less than 1%
(1) Does not include 2,000,000 shares reserved for issuance pursuant to
the Company's 1998 Stock Option and Restricted Stock Plan. In January
1998, the Board approved the issuance of stock options for an
aggregate of 1,002,500 shares of Class A Common Stock.
(2) Unless otherwise set forth above, the address of each stockholder is
the address of the Company, which is 650 Madison Avenue, 16th Floor,
New York, New York 10022. Pursuant to Rule 13d-3 of the Exchange Act,
as used in this table, (a) "beneficial ownership" means the sole or
shared power to vote, or to direct the disposition of, a security,
and (b) a person is deemed to have "beneficial ownership" of any
security that the person has the right to acquire within 60 days of
May 1, 1998. Unless noted otherwise, (a) information as to beneficial
ownership is based on statements furnished to the Company by the
beneficial owners, and (b) stockholders possess sole voting and
dispositive power with respect to shares listed on this table. As of
May 1, 1998, there were issued and outstanding 18,512,170 shares of
Class A Common Stock and 1,697,037 shares of Class B Common Stock.
(3) Includes (a) 8,949 shares of Class A Common Stock held by TSC; (b)
warrants held by SCMC to purchase an aggregate of 600,000 shares of
Class A Common Stock and (c) an option to acquire an aggregate of
537,185 shares of Class A Common Stock from a third party. If the
1,524,168 shares of Class B Common Stock held by Mr. Sillerman were
included in calculating his ownership of the Class A Common Stock,
then Mr. Sillerman would beneficially own 3,101,202 shares of Class A
Common Stock, representing approximately 10.8% of the class upon
consummation of the Offering and the Pending Acquisitions. Does not
include options to purchase an aggregate of 120,000 shares of Class A
Common Stock that are expected to be issued to Mr. Sillerman pursuant
to his anticipated employment agreement. See "Management--Employment
Agreements and Arrangements with Certain Officers and Directors."

109
<PAGE>

(4) If the 172,869 shares of Class B Common Stock held by Mr. Ferrel were
included in calculating his ownership of the Class A Common Stock,
then Mr. Ferrel would beneficially own 364,105 shares of Class A
Common Stock, representing approximately 1.3% of the class upon
consummation of the Offering. Does not include options to purchase an
aggregate of 50,000 shares of Class A Common Stock that are expected
to be issued to Mr. Ferrel pursuant to his anticipated employment
agreement. See "Management--Employment Agreements and Arrangements
with Certain Officers and Directors."
(5) In addition to the shares that Mr. Tytel beneficially owns, he has
economic interests in a limited number of shares beneficially owned
by Mr. Sillerman. These interests do not impair Mr. Sillerman's
ability to vote and dispose of those shares. Mr. Tytel also has an
economic interest in SCMC and TSC, which together will beneficially
own an aggregate of 608,949 shares of Class A Common Stock, although
he does not have voting or dispositive power with respect to the
shares beneficially held by SCMC and TSC. See "Certain Relationships
and Related Transactions--Arrangement Between Robert F.X. Sillerman
and Howard J. Tytel." Does not include options to purchase an
aggregate of 25,000 shares of Class A Common Stock that are expected
to be issued to Mr. Tytel pursuant to his employment agreement. See
"Management--Employment Agreements and Arrangements with Certain
Officers and Directors" and "Certain Relationships and Related
Transactions--Issuance of Stock to Holders of SFX Broadcasting's
Options and SARs."

POSSIBLE CHANGE IN CONTROL

Mr. Sillerman has pledged an aggregate of 793,401 of his shares of Class B
Common Stock as collateral for a line of credit, under which Mr. Sillerman
currently has no outstanding borrowings. Mr. Sillerman continues to be
entitled to exercise voting and consent rights with respect to the pledged
shares, with certain restrictions. However, if Mr. Sillerman defaults in the
payment of any future loans extended to him under the line of credit, the
bank will be entitled to sell the pledged shares. Although the Class B Common
Stock has 10 votes per share in most matters, the pledged shares will
automatically convert into shares of Class A Common Stock upon such a sale.
Such a sale of the pledged shares would reduce Mr. Sillerman's share of the
voting power of the Common Stock, and would therefore be likely to result in
a change of control of the Company. See "Risk Factors--Restrictions Imposed
by the Company's Indebtedness."

110
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

POTENTIAL CONFLICTS OF INTEREST

Marquee is a publicly-traded company that, among other things, provides
talent representations services to professional athletes and acts as booking
agent for tours and appearances for musicians and other entertainers. The
Company has indicated to Marquee its potential interest in acquiring Marquee.
Mr. Sillerman has an aggregate equity interest of approximately 9.1% in
Marquee and Mr. Sillerman is the chairman of its board of directors, and Mr.
Tytel is one of its directors. Upon the consummation of the acquisition of
FAME, the Company may directly compete with Marquee in obtaining
representation agreements with particular athletes and endorsement
opportunities for its clients. The Company anticipates that, from time to
time, it will enter into transactions and arrangements (particularly, booking
arrangements) with Marquee and Marquee's clients, and it may compete with
Marquee for specific concert promotion engagements. In addition, the Company
could in the future compete with Marquee in the production or promotion of
motor sports or other sporting events. These transactions or arrangements
will be subject to the approval of a committee of independent members of the
boards of directors of each of the Company and Marquee, except that booking
arrangements in the ordinary course of business will be subject to periodic
review, but not approval of each particular arrangement. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Recent Developments" and "Certain Relationships and Related
Transactions--Potential Conflicts of Interest."

EMPLOYMENT AGREEMENTS

In January 1998, in order to retain the services of Messrs. Sillerman,
Ferrel, Tytel and Benson as officers of the Company, the Company reached an
agreement in principle with such individuals pursuant to which the
individuals waived their right to receive shares of the Company in connection
with the Spin-Off in return for the right to receive either a share of Common
Stock or $4.20 in cash for each share of SFX Broadcasting common stock held
by them directly or indirectly in the event that either the Spin-Off or an
Alternate Transaction (as defined in the SFX Merger Agreement) were to occur.
The amount of $4.20 was based on the value attributed to the Common Stock in
the fairness opinion obtained by SFX Broadcasting in connection with the SFX
Merger. The Company's obligation will be deemed satisfied by the receipt of
shares of Common Stock in the Spin-Off.

The Company anticipates that it will enter into employment agreements with
each member of its senior management (except for Mr. Armstrong), and that the
employment agreements (except for Mr. Becker's employment agreement) will
become effective immediately after the consummation of the SFX Merger. The
Company anticipates that the employment agreements will provide for annual
base salaries of $500,000 for Mr. Sillerman, $350,000 for Mr. Ferrel,
$300,000 for Mr. Tytel and $235,000 for Mr. Benson. In connection with
entering into the employment agreements, the Company sold the following
restricted stock: 500,000 shares of Class B Common Stock to Mr. Sillerman,
150,000 shares of Class B Common Stock to Mr. Ferrel, 80,000 shares of Class
A Common Stock to Mr. Tytel and 10,000 shares

111
<PAGE>

of Class A Common Stock to Mr. Benson. The shares of restricted stock were
sold to the officers at a purchase of $2.00 per share. In addition, the
Board, on the recommendation of its Compensation Committee, also has approved
the issuance of stock options exercisable for an aggregate of 252,500 shares
of Class A Common Stock. The options will vest over three years and will have
an exercise price of $5.50 per share. The Company will record non-cash
compensation charges over the three-year exercise period to the extent that
the fair value of the underlying Class A Common Stock of the Company exceeds
the exercise price. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--Future
Charges to Earnings" and "Management--Employment Agreements and Arrangements
with Certain Officers and Directors."

The Company has entered into an employment agreement with Mr. Becker who
serves as a Director, Member of the Office of the Chairman and Executive Vice
President. Mr. Becker's employment agreement provides for (a) an annual
salary of $294,000 for the first year, $313,760 for each of the second and
third years and $334,310 for each of the fourth and fifth years, (b) an
annual bonus in the discretion of the Board and (c) the other terms described
in "Management--Employment Agreements and Arrangements with Certain Officers
and Directors."

ASSUMPTION OF EMPLOYMENT AGREEMENTS; CERTAIN CHANGE OF CONTROL PAYMENTS

Pursuant to the terms of the Distribution Agreement, at the time of the
consummation of the SFX Merger, the Company will assume all obligations under
any employment agreement or arrangement (whether written or oral) between SFX
Broadcasting or any of its subsidiaries and any employee of the Company
(including Messrs. Sillerman and Ferrel), other than obligations relating to
Messrs. Sillerman's and Ferrel's change of control options and existing
rights to indemnification. These assumed obligations include the obligation
to pay to Messrs. Sillerman, Ferrel and Benson, after the termination of
their employment with SFX Broadcasting, cash payments aggregating
approximately $3.3 million, $1.5 million and $0.2 million, respectively.
These payments will become due to Messrs. Sillerman, Ferrel and Benson after
the termination of their employment with SFX Broadcasting following a change
of control of SFX Broadcasting, pursuant to their employment agreements with
SFX Broadcasting. In addition, the Company's assumed obligations will include
the duty to indemnify Messrs. Sillerman and Ferrel (to the extent permitted
by law) for one-half of the cost of any excise tax that may be assessed
against them for any change-of-control payments made to them by SFX
Broadcasting in connection with the SFX Merger.

INDEMNIFICATION OF MR. SILLERMAN

On August 24, 1997, Mr. Sillerman entered into an agreement with SFX
Broadcasting, SFX Buyer and SFX Buyer Sub to waive his right to receive
indemnification (except to the extent covered by directors' and officers'
insurance) from SFX Broadcasting, its subsidiaries, SFX Buyer and SFX Buyer
Sub for claims and damages arising out of the SFX Merger and related
transactions. It is anticipated that, in any employment agreement with Mr.
Sillerman, the Company will agree to indemnify Mr. Sillerman for these claims
and damages to the fullest extent permitted by applicable law.

DELSENER/SLATER EMPLOYMENT AGREEMENTS

In connection with the Delsener/Slater Acquisition, SFX Broadcasting
entered into employment agreements in January 1997 with Ron Delsener and
Mitch Slater (collectively, the "Delsener/Slater Employment Agreements"),
pursuant to which each of Messrs. Delsener and Slater serve as co-Presidents
and co-Chief Executive Officers of Delsener/Slater. The employment agreements
will continue until December 31, 2001 unless terminated earlier by the
Company for Cause (as defined in the employment agreements) or voluntarily by
Messrs. Delsener or Slater.

After the consummation of the Spin-off or the SFX Merger, Messrs. Delsener
and Slater may have the right pursuant to their employment agreements (a) to
purchase the outstanding capital stock of Concerts (a subsidiary of the
Company holding a significant amount of the assets of the Company) for Fair
Market Value (as defined in their employment agreements) or (b) to receive a
cash payment equal to 15% of the amount by which the Fair Market Value of
Concerts exceeds the fixed payment portion of

112
<PAGE>
the cash purchase price of the acquisition of Concerts, plus 20% interest
thereon. The senior management of Concerts and SFX Broadcasting have reached
an agreement in principle to waive the above rights in connection with the
Spin-Off, the SFX Merger and related transactions; however, there can be no
assurance that the rights will be waived on terms acceptable to SFX
Broadcasting and the Company or at all. In addition, although the Company is
in the process of negotiating amendments to these agreements, these and
certain other rights described in the agreements may continue to apply to
transactions after, or unrelated to, the Spin-Off or the SFX Merger.

Additionally, the Messrs. Delsener's and Slater's employment agreements
provide for certain annual bonus arrangements.

Management believes that no bonuses were earned in 1997 pursuant to such
arrangements. However, any bonuses that may accrue to Messrs. Delsener and
Slater in the future will not be available for the Company's use to service
its debt or for other purposes.

RELATIONSHIP BETWEEN HOWARD J. TYTEL AND BAKER & MCKENZIE

Howard J. Tytel, who is the Executive Vice President, General Counsel,
Secretary and a Director of the Company, is "of counsel" to the law firm of
Baker & McKenzie. Mr. Tytel is also an executive vice president, the general
counsel and a director of SFX Broadcasting. Baker & McKenzie serves as
counsel to SFX Broadcasting, the Company and certain other affiliates of Mr.
Sillerman. Baker & McKenzie compensates Mr. Tytel based, in part, on the fees
it receives from providing legal services to SFX Broadcasting, other
affiliates of Mr. Sillerman and other clients introduced to the firm by Mr.
Tytel.

ARRANGEMENT BETWEEN ROBERT F.X. SILLERMAN AND HOWARD J. TYTEL

Since 1978, Messrs. Sillerman and Tytel have been jointly involved in
numerous business ventures, including SCMC, TSC, MMR, Triathlon, Marquee, SFX
Broadcasting and the Company. In consideration for certain services provided
by Mr. Tytel in connection with those ventures, Mr. Tytel has received from
Mr. Sillerman either a minority equity interest in the businesses (with Mr.
Sillerman retaining the right to control the voting and disposition of Mr.
Tytel's interest) or cash fees in an amount mutually agreed upon. Although
Mr. Tytel has not been compensated directly by SFX Broadcasting (except for
ordinary fees paid to him in his capacity as a director), he receives
compensation from TSC and SCMC, companies controlled by Mr. Sillerman, as
well as from Mr. Sillerman personally, with respect to the services he
provides to various entities affiliated with Mr. Sillerman, including SFX
Broadcasting. In 1997, these cash fees aggregated approximately $5.0 million,
a portion of which were paid from the proceeds of payments made by SFX
Broadcasting to Mr. Sillerman or entities controlled by Mr. Sillerman and the
proceeds from Mr. Sillerman's exercise for tax purposes of options granted to
him by SFX Broadcasting and subsequent sale of the underlying shares. It is
anticipated that, in connection with the consummation of the SFX Merger and
certain related transactions, Mr. Tytel will receive shares of the Company
and cash fees from TSC, SCMC and Mr. Sillerman personally in an amount to be
determined in the future. See "--Assumption of Employment Agreements; Certain
Change of Control Payments." It is also anticipated that Mr. Tytel will enter
into an employment agreement directly with the Company that will be effective
at the time of consummation of the SFX Merger. See "--Employment Agreements."

TRIATHLON FEES

SCMC, a corporation controlled by Mr. Sillerman and in which Mr. Tytel has
an equity interest, has an agreement to provide consulting and marketing
services to Triathlon, a publicly-traded company in which Mr. Sillerman is a
significant stockholder. Under the terms of the agreement, SCMC has agreed to
provide consulting and marketing services to Triathlon until June 1, 2005 for
an annual fee of $500,000, together with a refundable advance of $500,000 per
year against fees earned in respect of transactional investment banking
services. Fees paid by Triathlon for the years ended December 31, 1996 and
December 31, 1997 were $3,000,000 and $1,794,000, respectively. These fees
will vary (above the minimum annual fee of $500,000) depending on the level
of acquisition and financing activities of Triathlon. SCMC previously
assigned its rights to receive fees payable under this agreement

113
<PAGE>
to SFX Broadcasting. Pursuant to the terms of the Distribution Agreement, SFX
Broadcasting will assign its rights to receive these fees to the Company.
Triathlon has announced that it is exploring ways of maximizing stockholder
value, including possible sale to a third party. If Triathlon were acquired
by a third party, the agreement might not continue for the remainder of its
term.

AGREEMENTS WITH SFX BROADCASTING

The Company and SFX Broadcasting have entered into various agreements with
respect to the Spin-Off and related matters. For a description of the
material terms of these agreements, see the Distribution Agreement, Tax
Sharing Agreement and the Employment Benefit Agreement, each filed as an
exhibit to this Registration Statement. See "Additional Information."

In addition, SFX Broadcasting has guaranteed certain payments in
connection with the PACE Acquisition, the Contemporary Acquisition and the
Network Acquisition.

COMMON STOCK RECEIVED IN THE SPIN-OFF

In the Spin-Off, the holders of SFX Broadcasting's Class A common stock,
Series D preferred stock and Warrants (upon exercise) received shares of
Class A Common Stock, whereas Messrs. Sillerman and Ferrel, as the holders of
SFX Broadcasting's Class B common stock (which is entitled to ten votes per
share on most matters), received shares of Class B Common Stock. The Class A
Common Stock and Class B Common Stock have similar rights and privileges,
except that the Class B Common Stock differs as to voting rights generally to
the extent that SFX Broadcasting's Class A common stock and Class B common
stock presently differ. The issuance of the Class B Common Stock in the
Spin-Off was intended to preserve Messrs. Sillerman's and Ferrel's relative
voting power after the Spin-Off. Upon consummation of the Offering and the
Pending Acquisitions, Mr. Sillerman will be deemed to beneficially own
approximately 38.1% of the combined voting power of the Company and Messrs.
Sillerman and Ferrel will be deemed to beneficially own approximately 45.3%
of the combined voting power of the Company. Accordingly, Mr. Sillerman,
alone and together with the Company's current directors and executive
officers, will generally be able to control the outcome of the votes of the
stockholders of the Company on most matters. The Company and Messrs.
Sillerman and Ferrel have agreed in principle that Messrs. Sillerman and
Ferrel will continue to serve as officers and directors of the Company. See
"Principal Stockholders."

In addition, in August 1997, the board of directors of SFX Broadcasting
approved amendments to the SCMC Warrants (which represent the right to
purchase an aggregate of 600,000 shares of SFXBroadcasting's Class A common
stock). The SCMC Warrants had previously been issued to SCMC, an entity
controlled by Mr. Sillerman. The amendments memorialize the original intent
of the directors of SFX Broadcasting that SCMC receive the aggregate number
of shares of Class A Common Stock that it would have received if it had
exercised the SCMC Warrants immediately prior to the Spin-Off.

ISSUANCE OF STOCK TO HOLDERS OF SFX BROADCASTING'S OPTIONS AND SARS

On April 21, 1998, the Company issued 526,566 shares of Class A Common
Stock to holders as of the Spin-Off record date of the stock options or SARs
of SFX Broadcasting, whether or not vested. The issuance was made to allow
holders of such options and SARs to participate in the Spin-Off in a manner
similar to holders of SFX Broadcasting's Class A common stock. Additionally,
many of the option and SAR holders have become officers, directors or
employees of the Company. The members of the Company's Board, other than Mr.
Becker, received an aggregate of 455,479 shares pursuant to such issuance.

MEADOWS REPURCHASE

In connection with the acquisition of Meadows Music Theater, SFX
Broadcasting obtained an option to repurchase 250,838 shares of its Class A
common stock (the "Meadows Shares") for an aggregate purchase price of $8.3
million (the "Meadows Repurchase"). Pursuant to the terms of the SFX Merger

114

<PAGE>

Agreement, if the Meadows Shares are outstanding at the effective time of the
SFX Merger. Working Capital would be decreased by approximately $10.5
million. However, SFX Broadcasting was restricted from exercising the Meadows
Repurchase by certain loan covenants and other restrictions.

In January 1998, Mr. Sillerman, the Executive Chairman of the Company,
committed to finance the $8.3 million exercise price of the Meadows
Repurchase in order to avoid the $10.5 million reduction to Working Capital.
In consideration for such commitment, the board of directors of SFX
Broadcasting agreed that Mr. Sillerman would receive approximately the number
of shares of Class A Common Stock to be issued in the Spin-Off with respect
to the Meadows Shares. At the time SFX Broadcasting accepted Mr. Sillerman's
commitment, the board of directors of SFX Broadcasting valued the Class A
Common Stock to be issued in the Spin-Off at $4.20 per share, the value
attributed to such shares in the fairness opinion obtained by SFX
Broadcasting in connection with the SFX Merger. In April 1998, SFX
Broadcasting assigned the option for the Meadows Shares to an unaffiliated
third party and, in connection therewith, paid such party a fee of $75,000.
Mr. Sillerman subsequently advanced such party the $8.3 million exercise
price for the Meadows Repurchase which will become due on the earlier of the
date on which the Meadows Shares are disposed of by the third party of
January 16, 1999. If the SFX Merger is consummated, the Meadows Shares will
be tendered in the SFX Merger without any gain or loss to the third party. In
the event that the SFX Merger is not consummated on or before December 31,
1998, SFX Broadcasting has the option, for a limited time, to repurchase the
Meadows Shares for an aggregate consideration of approximately $10.0 million.
The third party has agreed to transfer to Mr. Sillerman the Class A Common
Stock to be issued in the Spin-Off with respect to the Meadows Shares. The
transaction has been approved by SFX Broadcasting's board of directors,
including the independent directors. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources--Future Charges to Earnings."

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DESCRIPTION OF CAPITAL STOCK

In order to facilitate the Spin-Off, the Company recently revised its
capital structure to increase its authorized capital stock and to effect a
stock split. The authorized capital stock of the Company consists of
110,000,000 shares of Common Stock (comprised of 100,000,000 shares of Class
A Common Stock and 10,000,000 shares of Class B Common Stock), and 25,000,000
shares of preferred stock, par value $.01 per share. The following
descriptions of the Common Stock and the preferred stock are summaries, and
are qualified in their entirety by reference to the detailed provisions of
the Company Certificate and the Company By-laws (each of which are filed as
exhibits to the Registration Statement). See "Additional Information."

COMMON STOCK

SHARES OUTSTANDING

As of the date of this Prospectus, there are issued and outstanding
18,512,170 shares of Class A Common Stock and 1,697,037 shares of Class B
Common Stock. All of these shares are validly issued, fully paid and
nonassessable. Upon the consummation of the Offering and the Pending
Acquisitions, there will be issued and outstanding 27,118,971 shares of Class
A Common Stock and 1,697,037 shares of Class B Common Stock.

DIVIDENDS

Although no dividends are anticipated to be paid on the Common Stock in
the foreseeable future, holders of Common Stock are entitled to receive any
dividends (payable in cash, stock, or otherwise) that are declared thereon by
the Board at any time and from time to time out of funds legally available
for that purpose. No dividend may be declared or paid in cash or property on
either class of common stock, unless the same dividend is simultaneously
declared or paid on the other class of common stock. If dividends are
declared that are payable in shares of Common Stock, then the stock dividends
will be payable at the same rate on each class of Common Stock and will be
payable only in shares of Class A Common Stock to holders of Class A Common
Stock and in shares of Class B Common Stock to holders of Class B Common
Stock. If dividends are declared that are payable in shares of common stock
of another corporation, then the shares paid may differ as to voting rights
to the extent that voting rights differ among the Class A Common Stock and
the Class B Common Stock.

VOTING RIGHTS

Holders of Class A Common Stock and Class B Common Stock vote as a single
class on all matters submitted to a vote of the stockholders, with each share
of Class A Common Stock entitled to one vote and each share of Class B Common
Stock entitled to ten votes, except (a) for the election of directors, (b)
with respect to any "going private" transaction between the Company and
Robert F.X. Sillerman or any of his affiliates and (c) as otherwise provided
by law.

In the election of directors, the holders of shares of Class A Common
Stock, voting as a separate class, are entitled to elect two sevenths of the
Company's directors (each, a "Class A Director"). Any person nominated by the
Board for election by the holders of Class A Common Stock as a director of
the Company must be qualified to be an "Independent Director" (as defined in
the Company Certificate). If a Class A Director dies, is removed or resigns
before his term expires, then that director's vacancy on the Board may be
filled by any person appointed by a majority of the directors then in office,
although less than a quorum. Any person appointed to fill the vacancy must,
however, be qualified to be an Independent Director. The holders of Class A
Common Stock and Class B Common Stock, voting as a single class, with each
share of Class A Common Stock entitled to one vote and each share of Class B
Common Stock entitled to ten votes, are entitled to elect the remaining
directors. The holders of Common Stock are not entitled to cumulative votes
in the election of directors. Mr. Sillerman has agreed to abstain, and has
agreed to cause each of his affiliates to abstain, from voting in any
election of Class A Directors.

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The initial Class A Directors are Messrs. Dugan, Kramer and O'Grady. If
the SFX Merger Agreement is terminated, each of these individuals has
indicated that he will promptly resign from his position as a director of the
Company, and the board of directors of the Company will appoint three
different Class A Directors, to serve until the next annual meeting of the
stockholders of the Company.

The holders of the Class A Common Stock and Class B Common Stock vote as a
single class with respect to any proposed "going private" transaction with
Mr. Sillerman or any of his affiliates, with each share of Class A Common
Stock and Class B Common Stock entitled to one vote.

Under Delaware law, the affirmative vote of the holders of a majority of
the outstanding shares of any class of common stock is required to approve,
among other things, a change in the designations, preferences or limitations
of that class of common stock.

LIQUIDATION RIGHTS

Upon liquidation, dissolution or winding-up of the Company, after
distribution in full of any preferential amounts required to be distributed
to holders of preferred stock, the holders of Class A Common Stock will be
entitled to share ratably with the holders of Class B Common Stock all assets
available for distribution after payment in full of creditors.

CONVERSION

Each share of Class B Common Stock is convertible at any time, at the
holder's option, into one share of Class A Common Stock. Each share of Class
B Common Stock converts automatically into one share of Class A Common Stock
(a) at the time of its sale or transfer to a party not affiliated with the
Company or (b) in the case of shares held by Mr. Sillerman or any of his
affiliates, at the time of Mr. Sillerman's death.

OTHER PROVISIONS

The holders of Common Stock are not entitled to preemptive or subscription
rights. In any merger, consolidation or business combination, the
consideration to be received per share by holders of Class A Common Stock
must be identical to that received by holders of Class B Common Stock, except
that in any such transaction in which shares of Common Stock are to be
distributed, the distributed shares may differ as to voting rights to the
extent that voting rights now differ among the Class A Common Stock and the
Class B Common Stock. The Company may not subdivide (by any stock split,
reclassification, stock dividend, recapitalization, or otherwise) or combine
the outstanding shares of either class of Common Stock unless the outstanding
shares of both classes are proportionately subdivided or combined.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Class A Common Stock and the
Class B Common Stock is Chase Mellon Shareholder Services, L.L.C.

PREFERRED STOCK

As of the date of this Prospectus, there are no shares of the Company's
preferred stock, par value $.01 per share, outstanding and there are
25,000,000 shares of preferred stock authorized.

The Board has the authority to issue this preferred stock in one or more
series and to fix the number of shares and the relative designations and
powers, preferences, and rights, and qualifications, limitations, and
restrictions thereof, without further vote or action by the stockholders. If
shares of preferred stock with voting rights are issued, the voting rights of
the holders of Common Stock could be diluted by increasing the number of
outstanding shares having voting rights, and by creating class or series
voting rights. If the Board authorizes the issuance of shares of preferred
stock with conversion rights, the number of shares of common stock
outstanding could potentially be increased by up to the authorized amount.
Issuances of preferred stock could, under certain circumstances, have the
effect of

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delaying or preventing a change in control of the Company and may adversely
affect the rights of holders of Common Stock. Also, the preferred stock could
have preferences over the common stock (and other series of preferred stock)
with respect to dividend and liquidation rights.

DESCRIPTION OF INDEBTEDNESS

NOTES

The following is a summary of the material terms contained in the
Indenture. This summary is not complete. It is subject to the terms of the
Indenture, which was filed as an exhibit to the Registration Statement. See
"Additional Information."

On February 11, 1998, the Company consummated the private placement of
$350.0 million in aggregate principal amount of 9 1/8% Senior Subordinated
Notes due 2008. The Notes bear interest at an annual interest rate of 9 1/8%,
and interest payments will be due semi-annually, commencing August 1, 1998.
The Notes will mature on February 1, 2008. The Notes do not contain any
sinking fund provision.

RANKING

The Notes are general unsecured obligations of the Company, subordinate in
right to all Senior Debt (as defined in the Indenture), whether outstanding
on the date of the Indenture or thereafter incurred, of the Company and
senior in right of payment to or pari passu with all other indebtedness of
the Company. See "Capitalization."

SUBSIDIARY GUARANTEES

The Company's payment obligations under the Notes are jointly and
severally guaranteed on a senior subordinated basis by all of its current and
future domestic subsidiaries, with certain specified exceptions.

OPTIONAL REDEMPTION

Except as noted below, the Notes are not redeemable at the Company's
option before February 1, 2003. Thereafter, the Notes will be subject to
redemption at any time at the option of the Company, in whole or in part, at
specified redemption prices plus accrued and unpaid interest and Liquidated
Damages (as defined in the Indenture), if any, thereon to the applicable
redemption date. In addition, at any time prior to February 1, 2001, the
Company may on any one or more occasions redeem up to 35.0% of the original
aggregate principal amount of Notes at a redemption price of 109.125% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of redemption, with the net proceeds of
one or more offerings of common equity of the Company. However, at least
65.0% of the original aggregate principal amount of Notes must remain
outstanding immediately after each occurrence of redemption.

CHANGE OF CONTROL

After the occurrence of a Change of Control (as defined in the Indenture),
the Company will be required to make an offer to repurchase the Notes at a
price equal to 101% of their principal amount, together with accrued and
unpaid interest and Liquidated Damages, if any, to the date of purchase.

CERTAIN COVENANTS

The Indenture contains certain covenants that, among other things, limit
the ability of the Company and its subsidiaries to (a) incur additional
Indebtedness (as defined in the Indenture), (b) issue preferred stock, (c)
pay dividends, (d) make certain other restricted payments, (e) create certain
Liens (as defined in the Indenture), (f) enter into certain transactions with
affiliates, (g) sell assets of the Company or its Restricted Subsidiaries (as
defined in the Indenture), (h) issue or sell Equity Interests (as defined in
the Indenture) of the Company's Restricted Subsidiaries or (i) enter into
certain mergers and consolidations.

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In addition, under certain circumstances, the Company will be required to
offer to purchase Notes at a price equal to 100.0% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of purchase, with the proceeds of certain Asset Sales (as defined in
the Indenture).

EXCHANGE OFFER; REGISTRATION RIGHTS

Pursuant to a registration rights agreement among the Company and the
initial purchasers of the Notes, the Company must use its best efforts to
file a registration statement with the SEC with respect to an offer to
exchange the Notes for a new issue of debt securities registered under the
Securities Act, with terms identical in all material respects to those of the
Notes. If (a) this exchange offer is not permitted by applicable law or (b)
any holder of Transfer Restricted Securities (as defined in the Indenture)
notifies the Company that (i) it is prohibited by law or SEC policy from
participating in the exchange offer, (ii) it may not resell the new issue of
debt securities to be acquired by it in the exchange offer to the public
without delivering a prospectus, and the prospectus contained in the
registration statement is not appropriate or available for those resales, or
(iii) it is a broker-dealer and holds Notes acquired directly from the
Company or an affiliate of the Company, then the Company will be required to
provide a shelf registration statement to cover resales of the Notes by their
holders. If the Company fails to satisfy these registration obligations, it
will be required to pay Liquidated Damages to the holders of Notes under
certain circumstances.

TRANSFER RESTRICTIONS

The Notes have not been registered under the Securities Act, and may not
be offered or sold except pursuant to an exemption from (or in a transaction
not subject to) the registration requirements of the Securities Act.

CREDIT FACILITY

The following is a summary of the material terms of the Credit Facility.
This summary is not complete. It is subject to, and qualified in its entirety
by reference to, the Credit and Guarantee Agreement, which has been filed as
an exhibit hereto.

In February of 1998, the Company entered into the Credit Agreement which
established a $300.0 million of senior secured credit facilities. The Credit
Facility is comprised of (a) the $150.0 million eight-year Term Loan and (b)
the $150.0 million seven-year reducing Revolver. Borrowings under the Credit
Facility are secured by substantially all the assets of the Company, including
a pledge of the outstanding stock of substantially all of its subsidiaries,
and are guaranteed by substantially all of the Company's subsidiaries. On
February 27, 1998, the Company borrowed $150.0 million pursuant to the Term
Loan in connection with the Recent Acquisitions. The Company expects to borrow
approximately $85.0 million pursuant to the Revolver in connection with the
Financing. The Revolver and Term Loan contain provisions providing that, at
its option and subject to certain conditions, the Company may increase the
mount of either the Revolver or the Term Loan by $50.0 million.

GENERAL

The Credit Facility provides for borrowings in a principal amount of up to
$300.0 million, subject to certain covenants and conditions. Borrowings under
the Credit Facility may be used by the Company to finance Permitted
Acquisitions (as defined in the Credit Agreement), for working capital and
for general corporate purposes. Up to $20.0 million of the Revolver will be
available for the issuance of standby letters of credit. Each Permitted
Acquisition must be in the same line of business (or other business
incidental or related thereto) as the Company and must have the prior written
consent of the Required Lenders (as defined in the Credit Agreement) if the
cost of the Permitted Acquisition exceeds $50.0 million.

INTEREST RATES; FEES

Loans outstanding under the Credit Facility will bear interest, at the
Company's option, at certain spreads over LIBOR or the greater of the Federal
Funds rate plus 0.50% or BNY's prime rate. The

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interest rate spreads on the Term Loan and the Revolver will be adjusted
based on the Company's Total Leverage Ratio (as defined below). The Company
will pay an annual commitment fee on unused availability under the Revolver
of 0.50% if the Company's Total Leverage Ratio is greater than or equal to
4.0 to 1.0, and 0.375% if that ratio is less than 4.0 to 1.0. The Company
will also pay an annual letter of credit fee equal to the Applicable LIBOR
Margin (as defined in the Credit Agreement) for the Revolver then in effect.

MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS

Commitments to lend under the Revolver will be reduced in equal quarterly
installments commencing March 31, 2000 in annual percentages of the
borrowings under the Revolver as of December 31, 1999 according to the
following schedule: by 10.0% in 2000; by 15.0% in 2001; by 20.0% in 2002; by
25.0% in 2003; by 25.0% in 2004; and by the remaining 5.0% upon final
maturity. The Term Loan will be reduced by $1.0 million per year until final
maturity, at which point the remaining balance will be due and payable.
Amounts outstanding under the Credit Facility will be subject to, among
others, the following mandatory prepayments, which will also permanently
reduce commitments: (a) 100.0% of the net cash proceeds received from
permitted Asset Sales (as defined in the Credit Agreement), subject to
standard reinvestment provisions; (b) 50.0% of Excess Cash Flow (as defined
in the Credit Agreement), calculated for each fiscal year beginning with the
year ending December 31, 2000; and (c) 50.0% of net proceeds of any equity
issuance, to the extent that the Total Leverage Ratio is greater than or
equal to 5.0 to 1.0.

COLLATERAL AND GUARANTEES

Each of the Company's present and future direct and indirect domestic
subsidiaries (the "Senior Guarantors") must provide guarantees under the
Credit Facility. In order to secure its obligations under the Credit
Facility, the Company and each of the Senior Guarantors must also grant to
the lenders a continuing security interest in all of their tangible assets
(subject to certain non-material exceptions), all of the capital stock of
each Senior Guarantor and not less than 66 2/3% of the capital stock of the
Company's present and future direct and indirect foreign subsidiaries.

The Credit Facility contains various covenants that, subject to certain
specified exceptions, restrict the Company's and its subsidiaries' ability
to:

o incur additional indebtedness and other obligations;

o grant liens;

o consummate mergers, acquisitions, investments and asset dispositions;

o declare or pay Restricted Payments (as defined in the Credit
Agreement);

o declare or pay dividends, distributions and other prepayments or
repurchases of other indebtedness;

o amend certain agreements, including the Company's organizational
documents, the Notes and the Indenture;

o make acquisitions and dispositions;

o engage in transactions with affiliates;

o engage in sale and leaseback transactions; and

o change lines of business.

The Credit Facility also includes covenants relating to compliance with
ERISA, environmental and other laws, payment of taxes, maintenance of
corporate existence and rights, maintenance of insurance and financial
reporting. In addition, the Credit Facility requires the Company to maintain
compliance with certain specified financial covenants relating to:

o a maximum ratio (the "Total Leverage Ratio") of (a) all outstanding
amounts under the Credit Facility and any other borrowed money and
similar type indebtedness (including capital lease

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obligations) of the Company and its subsidiaries, on a consolidated
basis ("Total Debt"), less cash and cash equivalents in excess of $5.0
million, to (b) for the most recently completed four fiscal quarters,
(i) revenues less (ii) expenses (excluding depreciation, amortization
other than capitalized pre-production costs, interest expense and
income tax expense), plus (iii) non-recurring expense items or non-cash
expense items mutually agreed upon by the Company and the Required
Lenders, plus (iv) the lesser of (A) the equity income from
Unconsolidated Investments (as defined in the Credit Agreement) and (B)
cash dividends and other cash distributions from Unconsolidated
Investments (however, the total amount determined under this clause
(iv) will not exceed 10.0% of Operating Cash Flow before overhead) (the
amount referred to in this clause (b), "Operating Cash Flow");
Operating Cash Flow is to be adjusted to reflect acquisitions and
dispositions consummated during the calculation period as if those
transactions were consummated at the beginning of the period (with
adjustment, "Adjusted Operating Cash Flow");

o a maximum ratio (the "Senior Leverage Ratio") of (a) Total Debt less
the principal amount outstanding under the Notes to, less cash and cash
equivalents in excess of $5.0 million, to (b) Operating Cash Flow;

o a minimum ratio (the "Pro Forma Interest Expense Ratio") of (a)
Adjusted Operating Cash Flow to (b) the sum of all interest expense and
commitment fees calculated for the four fiscal quarters following the
calculation quarter, giving effect to the Total Debt outstanding and
the interest rates in effect as of the date of the determination and
the commitment reductions and debt amortization scheduled during that
period;

o a minimum ratio (the "Debt Service Ratio") of (a) Adjusted Operating
Cash Flow to (b) the sum of (i) the sum of all interest expense and
commitment fees calculated for the four fiscal quarters following the
calculation quarter, giving effect to the Total Debt outstanding and
the interest rates in effect as of the date of the determination and
the commitment reductions and debt amortization scheduled during that
period and (ii) the scheduled current maturities of Total Debt and
current commitment reductions with respect to the Revolver, each
measured for the four fiscal quarters immediately succeeding the date
of determination; and

o a minimum ratio (the "Fixed Charges Ratio") of (a) the sum of Operating
Cash Flow to (b) the sum of, for the four most recently completed
fiscal quarters, the following paid during that period: (i) Interest
Expense (as defined in the Credit Agreement) plus the scheduled
maturities of Total Debt and current commitment reductions with respect
to the Revolver, (ii) cash income taxes, (iii) capital expenditures
(excluding certain special capital expenditures to be mutually agreed
upon) and (iv) Unconsolidated Investments (as defined in the Credit
Agreement).

The Total Leverage Ratio for the most recently completed 12 month period
may not at any time exceed (a) 6.75x from the Credit Facility Closing Date to
September 29, 1998, (b) 6.50x from September 30, 1998 to December 30, 1998,
(c) 6.25x from December 31, 1998 to June 29, 1999, (d) 5.75x from June 30,
1999 to December 30, 1999, (e) 5.25x from December 31, 1999 to December 30,
2000, (f) 4.50x from December 31, 2000 to December 30, 2001 and (g) 3.75x on
December 31, 2001 and thereafter.

The Senior Leverage Ratio for the most recently completed 12 month period
may not at any time exceed (a) 3.50x from the Credit Facility Closing Date to
September 29, 1998, (b) 3.25x from September 30, 1998 to December 30, 1999,
(c) 3.00x from December 31, 1999 to December 30, 2000 and (d) 2.50x on
December 31, 2000 and thereafter.

The Pro Forma Interest Expense Ratio may not at the end of any fiscal
quarter be less than (a) 1.50x from the Credit Facility Closing Date to
December 31, 1998 and (b) 2.00x on January 1, 1999 and thereafter.

The Pro Forma Debt Service Ratio may not at any fiscal quarter end be less
than (a) 1.25x from the Credit Facility Closing Date to December 31, 1998 and
(b) 1.50x on January 1, 1999 and thereafter.

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The Fixed Charges Ratio may not at any quarter end be less than 1.05x.

The Credit Facility will also prohibit prepayment of any subordinated
notes, including the Notes.

EVENTS OF DEFAULT

The Credit Facility contains customary events of default, including
payment defaults, the occurrence of a Change of Control (as defined in the
Credit Agreement), the invalidity of guarantees or security documents under
the Credit Facility, any Material Adverse Change (as defined in the Credit
Agreement), breach of any representation or warranty under the Credit
Facility and any cross-default to other indebtedness of the Company and its
subsidiaries. The occurrence of any event of default could result in
termination of the commitments to extend credit under the Credit Facility and
foreclosure on the collateral securing those obligations, each of which,
individually, could have a material adverse effect on the Company.

Change of Control

"Change of Control" is defined in the Credit Facility as, inter alia: (i)
the failure of Mr. Sillerman, any Affiliate (as defined therein) of Mr.
Sillerman, or any Affiliate of Mr. Sillerman together with any executor, heir
or successor appointed to take control of Mr. Sillerman's affairs in the
event of his death, disability or incapacity, to own directly or indirectly,
in the aggregate, of record and beneficially, more than 35% of the voting
power of all issued and outstanding capital stock of the Company or (ii) the
occurrence of any Person (as defined in the Credit Facility), other than as
provided in clause (i) above, owning, beneficially, more than 10% of the
voting power of all issued and outstanding capital stock of the Company.

OTHER DEBT

In addition, the Company also has approximately $16.2 million of long-term
debt outstanding, which was incurred primarily in connection with the 1997
Acquisitions. See Note 5 to the Notes to the Consolidated Financial
Statements of the Company. The Company also assumed $18.7 million of debt in
connection with the Recent Acquisitions.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Class A Common Stock in the public market,
or the possibility that these sales may occur, could adversely affect market
prices for Class A Common Stock or the future ability of the Company to raise
capital through an offering of equity securities. Upon consummation of the
Offering and the Pending Acquisitions, the Company will have 27,118,971
shares of Class A Common Stock and 1,697,037 shares of Class B Common Stock
outstanding (not including shares issuable upon the exercise of outstanding
options). Of those shares, a total of 13,579,024 shares will be freely
tradeable in the public market without restriction under the Securities Act,
unless the shares are held by "affiliates" of the Company (as that term is
defined in Rule 144 under the Securities Act). Under the Underwriting
Agreement and certain agreements entered into between the representatives of
the Underwriters and each of the Company's officers and directors (the
"Lock-Up Agreements") who beneficially hold, in the aggregate 2,162,479
shares of Class A Common Stock and 1,697,037 shares of Class B Common Stock,
such officers and directors will not, without the prior written consent of
Goldman, Sachs & Co., during the period commencing on the date hereof and
ending 180 days after the date of this Prospectus, (i) offer, pledge, sell,
or otherwise transfer or dispose of, directly or indirectly, any shares of
the Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or any right to acquire Common Stock, or (ii)
enter into any swap or similar agreement that transfers, in whole or in part,
the economic risk of ownership of the Common Stock. The foregoing provisions
shall not apply to (i) exercise of options or warrants, or (ii) transfers,
without consideration, of the Common Stock or any securities convertible
into, or exercisable or exchangeable for Common Stock to family members or to
one or more trusts established for the benefit of one or more family members,
provided that the transferee executes and delivers to Goldman, Sachs & Co.,
an agreement whereby the transferee agrees to be bound by all of the
foregoing terms and provisions. Goldman, Sachs & Co. in its sole discretion
and at any time without notice, may release all or any portion of the
securities subject to

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the Lock-Up Agreements or many waive the covenants contained in the
Underwriting Agreement. Any such decision to release securities would likely
be based upon individual stockholder circumstances, prevailing market
conditions and other relevant factors. Any such release could have a material
adverse effect upon the price of the Class A Common Stock. Upon the
expiration or termination of the Lock-Up Agreements, the shares held by
affiliates will be eligible for sale subject to compliance with the
provisions of Rule 144 or pursuant to an effective registration statement
filed with the Securities and Exchange Commission. See "Underwriting."

Additionally, pursuant to the acquisition agreement relating to the Don
Law Acquisition, the Company and the Don Law seller have agreed that they
(and the members of the Don Law seller) will enter into a registration rights
agreement regarding the 531,782 shares of Class A Common Stock of the Company
to be issued to the Don Law seller, which agreement will provide for, among
other things: (a) a twelve month lock-up period (provided that the Don Law
seller and its members may continue to engage in hedging other derivative
transactions and other transactions with Affiliates (as defined in such
agreement), (b) a single demand registration right, (c) unlimited piggyback
registration rights (unless sales under Rule 144 and 145 of the Securities
Act are available to the members) and (d) usual and customary underwriting
restrictions with respect to the foregoing. Pursuant to the Underwriting
Agreement, the Company has agreed not to waive these provisions without the
consent of Goldman, Sachs & Co.

In addition, the Company has adopted a stock option plan providing for the
issuance of options to purchase up to 2,000,000 shares of Class A Common
Stock. The Company has granted options to purchase an aggregate of
approximately 1,002,500 shares of Class A Common Stock under such plan. All
shares acquired upon exercise of such options will be subject to the Lock-Up
Agreements. The Company anticipates that in the future it will file a
registration statement with the SEC to register the shares issuable upon
exercise of options granted under the plan. See "Management--Employment
Agreements and Arrangements with Certain Officers and Directors" and "Shares
Eligible for Future Sales."

LEGAL MATTERS

The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Baker & McKenzie, New York, New York. Howard
J. Tytel, who is an executive officer and director of and has an equity
interest in the Company, and who has an equity interest in SFX Broadcasting,
TSC and SCMC and is an executive officer and director of those entities, is
Of Counsel to Baker & McKenzie. Certain legal matters relating to the
Offering will be passed upon for the Underwriters by Latham & Watkins, New
York, New York. See "Management," "Principal Stockholders" and "Certain
Relationships and Related Transactions."

EXPERTS

The consolidated financial statements of the Company as of December 31,
1997, and for the year ended December 31, 1997; the consolidated financial
statements of Delsener/Slater Enterprises, Ltd. and Affiliated Companies
(Predecessor) as of December 31, 1996, and for the years ended December 31,
1995 and 1996; the consolidated financial statements of PACE Entertainment
Corporation and Subsidiaries as of September 30, 1996, and for the years
ended September 30, 1996 and 1995; the combined financial statements of
Contemporary Group as of December 31, 1996 and 1997, and for the years ended
December 31, 1996 and 1997; the combined financial statements of SJS
Entertainment Corporation as of December 31, 1996 and 1997, and for the years
ended December 31, 1996 and 1997; the combined financial statements of The
Album Network, Inc. and Affiliated Companies as of September

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30, 1996 and 1997, and for the years ended September 30, 1996 and 1997; the
consolidated financial statements of BG Presents, Inc. and Subsidiaries as of
January 31, 1997 and 1998 and for the years ended January 31, 1996, 1997 and
1998; the combined financial statements of Concert/Southern Promotions and
Affiliated Companies as of December 31, 1997, and for the year ended December
31, 1997; the combined financial statements of Falk Associates Management
Enterprises, Inc. as of December 31, 1996 and 1997, and for the years ended
December 31, 1996 and 1997, and the consolidated financial statements of
Blackstone Entertainment LLC as of December 31, 1996 and 1997 and for the
years ended December 31, 1996 and 1997, included in the Prospectus and
Registration Statement of the Company have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing
elsewhere herein, and are included in reliance on such reports given on the
authority of such firm as experts in accounting and auditing.

Arthur Andersen LLP, independent public accountants, audited the following
financial statements (as set forth in their reports thereon appearing
elsewhere herein and in the Registration Statement), each appearing in this
Prospectus and the Registration Statement: the combined financial statements
of Connecticut Performing Arts, Inc. and Connecticut Performing Arts Partners
as of December 31, 1995 and 1996, and for the years ended December 31, 1995
and 1996; the combined financial statements of Deer Creek Partners, L.P. and
Murat Centre, L.P. as of December 31, 1995 and 1996, and for the years ended
December 31, 1995 and 1996; the consolidated financial statements of PACE
Entertainment Corporation and Subsidiaries as of September 30, 1997, and for
the year ended September 30, 1997; the consolidated financial statements of
Pavilion Partners as of September 30, 1997, and for the year ended September
30, 1997; the financial statements of Riverport Performing Arts Centre, Joint
Venture as of December 31, 1997 and 1996 and for the years ended December 31,
1997 and 1996, which are included in reliance on such reports given on the
authority of such firm as experts in accounting and auditing.

The financial statements of Pavilion Partners for the year ended October
31, 1995, for the eleven months ended September 30, 1996 and as of September
30, 1996 included in this Prospectus and the Registration Statement have been
so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

The Board expects to appoint Ernst & Young LLP as the Company's
independent auditors to audit the Company's consolidated financial
statements.

ADDITIONAL INFORMATION

The Company is a reporting company under the Exchange Act. The Company has
filed a Registration Statement on Form S-1 under the Securities Act with the
SEC with respect to the Common Stock described in this Prospectus. This
Prospectus, which is part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement and the exhibits
thereto. For further information with respect to the Company and its common
stock offered hereby, reference is hereby made to the Registration Statement
(No. 333-50079) and its exhibits, which may be inspected without charge at
the office of the SEC at 450 Fifth Street, NW, Washington, D.C. 20549 and at
the regional offices of the SEC located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at 500 West Madison (Suite 1400),
Chicago, Illinois 60661. Copies of this material may also be obtained at
prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. The SEC maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements
and other information regarding issuers that file electronically with the
SEC. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete; in each
instance, reference is made to the copy of the contract or document filed as
an exhibit to the Registration Statement, and each such statement is
qualified in all respects by this reference.

124
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
SFX ENTERTAINMENT, INC.
Consolidated Balance Sheets as of December 31, 1997 and March 31, 1998 (unaudited) ..... F-4
Consolidated Statements of Operations for the three months ended March 31, 1997
and 1998 (unaudited)................................................................... F-5
Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and
1998 (unaudited)....................................................................... F-6
Notes to Consolidated Financial Statements (unaudited).................................. F-7
Reports of Independent Auditors......................................................... F-15
Consolidated Balance Sheets as of December 31, 1997 and 1996 (Predecessor) ............ F-17
Consolidated Statements of Operations for the years ended December 31, 1997, 1996
(Predecessor) and 1995 (Predecessor) .................................................. F-18
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996
(Predecessor) and 1995 (Predecessor) .................................................. F-19
Notes to Consolidated Financial Statements.............................................. F-20
CONNECTICUT PERFORMING ARTS, INC. AND CONNECTICUT PERFORMING ARTS PARTNERS
Report of Independent Public Accountants................................................ F-34
Combined Balance Sheets as of December 31, 1995 and 1996................................ F-35
Combined Statements of Operations for the years ended December 31, 1995
and 1996............................................................................... F-36
Combined Statements of Shareholders' and Partners' Equity (Deficit) for the years ended
December 31, 1995 and 1996............................................................. F-37
Combined Statements of Cash Flows for the years ended December 31, 1995 and 1996 ....... F-38
Notes to Combined Financial Statements.................................................. F-39
DEER CREEK PARTNERS, L.P. AND MURAT CENTRE, L.P.
Report of Independent Public Accountants ............................................... F-47
Combined Balance Sheets as of December 31, 1995 and 1996................................ F-48
Combined Statements of Operations and Partners' Equity (Deficit) for the years ended
December 31, 1995 and 1996............................................................. F-50
Combined Statements of Cash Flows for the years ended December 31, 1995
and 1996............................................................................... F-51
Notes to Combined Financial Statements.................................................. F-52
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
Report of Independent Public Accountants ............................................... F-58
Report of Independent Auditors.......................................................... F-59
Consolidated Balance Sheets as of September 30, 1996 and 1997 and December 31, 1997
(unaudited) ........................................................................... F-60
Consolidated Statements of Operations for the years ended September 30, 1995, 1996 and
1997 and the three months ended December 31, 1996 and 1997 (unaudited) ............... F-61
Consolidated Statements of Shareholders' Equity for the years ended September 30, 1995,
1996 and 1997 and the three months ended December 31, 1997 (unaudited) ............... F-62
Consolidated Statements of Cash Flows for the years ended September 30, 1995, 1996 and
1997 and the three months ended December 31, 1996 and 1997 (unaudited) ............... F-63
Notes to Consolidated Financial Statements.............................................. F-64

F-1
<PAGE>
PAGE
---------
PAVILION PARTNERS
Report of Independent Public Accountants ............................................... F-78
Report of Independent Accountants ...................................................... F-79
Consolidated Balance Sheets as of September 30, 1996 and 1997 and December 31, 1997
(unaudited) ........................................................................... F-80
Consolidated Statements of Income for the year ended October 31, 1995, eleven months
ended September 30, 1996, the year ended September 30, 1997 and the three months ended
December 31, 1996 and 1997 (unaudited) ................................................ F-81
Consolidated Statements of Partners' Capital for the year ended October 31, 1995,
eleven months ended September 30, 1996, the year ended September 30, 1997 and the
three months ended December 31, 1997 (unaudited) ...................................... F-82
Consolidated Statements of Cash Flows for the year ended October 31, 1995, eleven
months ended September 30, 1996, the year ended September 30, 1997 and the three
months ended December 31, 1996 and 1997 (unaudited) ................................... F-83
Notes to Consolidated Financial Statements ............................................. F-84
CONTEMPORARY GROUP
Report of Independent Auditors ......................................................... F-93
Combined Balance Sheets as of December 31, 1996 and 1997 ............................... F-94
Combined Statements of Operations for the years ended December 31, 1996 and 1997 ....... F-95
Combined Statements of Cash Flows for the years ended December 31, 1996 and 1997 ....... F-96
Combined Statements of Stockholders' Equity for the years ended December 31, 1996 and
1997 .................................................................................. F-97
Notes to Combined Financial Statements ................................................. F-98
RIVERPORT PERFORMING ART CENTRE, JOINT VENTURE
Report of Independent Public Accountants ............................................... F-102
Balance Sheets as of December 31, 1997 and 1996 ........................................ F-103
Statements of Income and Changes in Partners' Equity for the years ended December 31,
1997 and 1996 ......................................................................... F-104
Statements of Cash Flows for the years ended December 31, 1997 and 1996 ............... F-105
Notes to Financial Statements .......................................................... F-106
SJS ENTERTAINMENT CORPORATION
Report of Independent Auditors ......................................................... F-109
Combined Balance Sheets as of December 31, 1996 and 1997 ............................... F-110
Combined Statements of Operations and Retained Earnings for the years ended December
31, 1996 and 1997 ..................................................................... F-111
Combined Statements of Cash Flows for the years ended December 31, 1996 and 1997 ....... F-112
Notes to Combined Financial Statements ................................................. F-113
THE ALBUM NETWORK, INC. AND AFFILIATED COMPANIES
Report of Independent Auditors ......................................................... F-117
Combined Balance Sheets as of September 30, 1996 and 1997 .............................. F-118
Combined Balance Sheet as of December 31, 1997 (unaudited) ............................. F-119
Combined Statements of Operations and Stockholders' Deficit for the years ended
September 30, 1996 and 1997 ........................................................... F-120
Combined Statements of Operations and Stockholders' Deficit for the three months ended
December 31, 1997 (unaudited) ......................................................... F-121

F-2
<PAGE>
PAGE
---------
Combined Statements of Cash Flows for the years ended September 30, 1996 and 1997 ...... F-122
Combined Statements of Cash Flows for the three months ended December 31, 1997
(unaudited) ........................................................................... F-123
Notes to Combined Financial Statements ................................................. F-124
BG PRESENTS, INC. AND SUBSIDIARIES
Report of Independent Auditors ......................................................... F-128
Consolidated Balance Sheets as of January 31, 1997 and 1998 ............................ F-129
Consolidated Statements of Operations for the years ended January 31, 1996, 1997 and
1998 .................................................................................. F-130
Consolidated Statements of Cash Flows for the years ended January 31, 1996, 1997 and
1998 .................................................................................. F-131
Consolidated Statements of Stockholders' Equity for the years ended January 31, 1996,
1997 and 1998 ......................................................................... F-132
Notes to Consolidated Financial Statements ............................................. F-133
CONCERT/SOUTHERN PROMOTIONS AND AFFILIATED COMPANIES
Report of Independent Auditors ......................................................... F-139
Combined Balance Sheet as of December 31, 1997 ......................................... F-140
Combined Statement of Operations for the year ended December 31, 1997 ................. F-141
Combined Statement of Cash Flows for the year ended December 31, 1997 ................. F-142
Combined Statements of Stockholders' Equity for the year ended
December 31, 1997 ..................................................................... F-143
Notes to Combined Financial Statements ................................................. F-144
FALK ASSOCIATES MANAGEMENT ENTERPRISES, INC.
Report of Independent Auditors.......................................................... F-147
Combined Balance Sheets as of December 31, 1996 and 1997 and March 31, 1998 (unaudited) F-148
Combined Statements of Operations and Stockholders' Equity (Deficit) for the years
ended December 31, 1996 and 1997 and the three months ended March 31, 1997 and 1998
(unaudited)............................................................................ F-149
Combined Statements of Cash Flows for the years ended December 31, 1996 and 1997 and
the three months ended March 31, 1997 and 1998 (unaudited) ............................ F-150
Notes to Combined Financial Statements.................................................. F-151
BLACKSTONE ENTERTAINMENT LLC
Report of Independent Auditors.......................................................... F-155
Combined Balance Sheets as of December 31, 1996 and 1997 and March 31, 1998
(unaudited)............................................................................ F-156
Combined Statements of Income for the years ended December 31, 1996 and 1997 and
for the three months ended March 31, 1997 and 1998 (unaudited)......................... F-157
Combined Statements of Cash Flows for the years ended December 31, 1996 and 1997 ....... F-158
Combined Statement of Members' Equity .................................................. F-159
Notes to Combined Financial Statements.................................................. F-160
</TABLE>

F-3
<PAGE>

SFX ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................... $ 93,992 $ 5,979
Accounts receivable .......................................... 36,251 3,831
Prepaid expenses and other current assets .................... 19,132 1,410
--------------
Total current assets .......................................... 149,375 11,220
Property and equipment, net ................................... 196,732 59,685
Deferred acquisition costs .................................... -- 6,213
Goodwill and other intangible assets, net ..................... 470,721 60,306
Investment in equity investees ................................ 18,506 937
Note receivable from employees ................................ 4,060 900
Other assets .................................................. 19,032 7,681
----------- --------------
TOTAL ASSETS .................................................. $858,426 $146,942
=========== ==============
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses ........................ $ 50,501 $ 2,715
Deferred revenue ............................................. 54,943 3,603
Income taxes payable ......................................... 15,160 1,707
Due to SFX Broadcasting ...................................... 125,378 11,539
Current portion of long-term debt ............................ 12,127 755
Current portion of capital lease obligations ................. 326 168
Current portion of deferred purchase consideration .......... 1,730 1,950
----------- --------------
Total current liabilities ..................................... 260,165 22,437

Long-term debt, less current portion .......................... 518,574 14,929
Capital lease obligations, less current portion ............... 11,976 326
Deferred purchase consideration, less current portion ........ 4,128 4,289
Deferred income taxes ......................................... 50,559 2,817
----------- --------------
Total liabilities ............................................. 845,402 44,798

Minority interest ............................................. 1,570 --
Temporary equity-Stock subject to redemption .................. 16,500 --
Shareholder's equity (deficit):
Net capital transferred from SFX Broadcasting ................. (21,410) 98,184
Preferred Stock, $.01 par value, 25,000,000 shares authorized,
10 shares issued and outstanding at March 31, 1998 and no
shares issued and outstanding at December 31, 1997 .......... -- --
Class A common stock, $.01 par value, 100,000,000 shares
authorized, 13,579,024 shares issued and outstanding ........ 136 136
Class B common stock, $.01 par value, 10,000,000 shares
authorized, 1,047,037 shares issued and outstanding ......... 10 10
Paid-in capital ............................................... 39,975 --
Accumulated (deficit) earnings ................................ (23,757) 3,814
----------- --------------
Total shareholder's equity (deficit)........................... (5,046) 102,144
----------- --------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT) .......... $858,426 $146,942
=========== ==============
</TABLE>

See accompanying notes.

F-4
<PAGE>

SFX ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
----------- ---------
<S> <C> <C>
Revenue .................................................. $ 60,994 $ 7,789
Operating expenses:
Cost of revenue ......................................... 58,175 7,738
Depreciation and amortization............................ 4,428 660
Corporate expenses, net of Triathlon fees of $133 in
1998 and $641 in 1997 .................................. 1,314 858
----------- ---------
63,917 9,256
----------- ---------
Loss from operations ..................................... (2,923) (1,467)
Investment income ........................................ (897) (26)
Interest expense ......................................... 6,748 103
Other expenses, principally relating to the Spin-Off .... 18,385 --
Minority interest ........................................ 82 --
Pretax income of equity investees ........................ (445) --
----------- ---------
Loss before provision for income taxes ................... (26,796) (1,544)
Provision for income taxes ............................... 500 --
----------- ---------
Net loss ................................................. (27,296) (1,544)
Accretion on Stock subject to redemption.................. (275) --
----------- ---------
Net loss applicable to Common Shares...................... $(27,571) $(1,544)
=========== =========
</TABLE>

See accompanying notes.

F-5
<PAGE>
SFX ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Operating activities:
Net loss ............................................................ $ (27,296) $ (1,544)
Adjustment to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization ...................................... 4,428 660
Pretax income of equity investees, net of distributions received .. (351) --
Other expenses, principally relating to Spin-Off.................... 18,385 --
Minority interest................................................... 82 --
Changes in operating assets and liabilities, net of amounts
acquired:
Accounts receivable................................................ 3,390 (260)
Prepaid expenses and other current assets.......................... (1,207) (603)
Other assets....................................................... (1,150) 1,384
Accounts payable and accrued expenses.............................. 4,586 (81)
Deferred revenue................................................... 8,273 751
----------- -----------
Net cash provided by operating activities............................ 9,140 307
Investing activities:
Acquisition of businesses, net of cash acquired..................... (367,997) (22,590)
Purchase of property and equipment.................................. (11,785) (22)
----------- -----------
Net cash used in investing activities................................ (379,782) (22,612)
----------- -----------
Financing activities:
Capital transferred from SFX Broadcasting........................... -- 24,956
Repayment of debt................................................... (1,158) (29)
Proceeds from issuance of senior subordinated notes and borrowings
under credit agreement............................................. 500,000 --
Spin-Off related payments .......................................... (17,107) --
Due to SFX Broadcasting ............................................ (6,161) --
Other, principally debt issuance costs ............................. (16,920) --
----------- -----------
Net cash provided by financing activities............................ 458,654 24,927
Net increase in cash and cash equivalents............................ 88,012 2,622
Cash and cash equivalents at beginning of period..................... 5,980 0
----------- -----------
Cash and cash equivalents at end of period........................... $ 93,992 $ 2,622
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest............................................... $ 274 $ --
=========== ===========
Cash paid for income taxes........................................... $ -- $ --
=========== ===========
</TABLE>

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

Supplemental disclosure of non-cash investing and financing activities:

o Issuance of equity securities, including deferred equity security
issuance and assumption of debt in connection with certain acquisitions
(see Note 1).

o Agreements to pay future cash consideration in connection with certain
acquisitions (see Note 1).

o The balance sheet includes certain assets and liabilities which have
been contributed by SFX Broadcasting to the Company in connection with
the Spin-Off.

See accompanying notes.

F-6
<PAGE>
SFX ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. ORGANIZATION AND BASIS OF PRESENTATION

SFX Entertainment, Inc. ("SFX" or the "Company") was formed as a
wholly-owned subsidiary of SFX Broadcasting, Inc. ("SFX Broadcasting") in
December 1997 and as the parent company of SFX Concerts, Inc ("Concerts").
Concerts was formed in January of 1997 to acquire and hold SFX Broadcasting's
live entertainment operations. During 1997 and 1998, the Company made several
acquisitions as described below. The Company had no substantive operations
until its acquisition of Delsener/Slater Enterprises, Ltd. and Affiliated
Companies ("Delsener/Slater") in January 1997.

Information with respect to the three months ended March 31, 1998 and 1997
is unaudited. The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the unaudited interim financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the financial position, results of
operations and cash flows of the Company, for the periods presented.

In June 1997, the Financial Accounting Standards Board issued Statement
No. 131 ("SFAS 131"), "Disclosure About Segments of an Enterprise and Related
Information," which establishes new standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that these enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS 131 is effective for financial
statements for fiscal years beginning after December 31, 1997, and therefore
the Company will adopt the new requirements in 1998. Management has not yet
completed its review of SFAS 131 but does not expect that its adoption will
have a material effect on the Company's statement of position or revenues,
only on the composition of its reportable segments.

The Company's operations and revenues are largely seasonal in nature, with
generally higher revenue generated in the second and third quarters of the
year. The Company's outdoor venues are primarily utilized in the summer
months and do not generate substantial revenue in the late fall, winter and
early spring. Similarly, the musical concerts that the Company promotes
largely occur in the second and third quarters. To the extent that the
Company's entertainment marketing and consulting relate to musical concerts,
they also predominantly generate revenues in the second and third quarters.

In August 1997, SFX Broadcasting agreed to the merger (the "Broadcasting
Merger Agreement") among SBI Holdings, Inc. (the "Buyer"), SBI Radio
Acquisition Corporation, a wholly-owned subsidiary of the Buyer, and SFX
Broadcasting (the "Broadcasting Merger") and to the spin-off of the Company
to the shareholders of SFX Broadcasting (the "Spin-Off"). The Spin-Off was
completed on April 27, 1998 and the Broadcasting Merger is expected to be
completed in the second quarter of 1998.

Pursuant to the terms of the Spin-Off, SFX Broadcasting contributed to the
Company all of the assets relating to its live entertainment businesses and
the Company assumed all of SFX Broadcasting's liabilities pertaining to the
live entertainment businesses, as well as certain other liabilities including
the obligation to make change of control payments to certain employees of SFX
Broadcasting of approximately $5,000,000 as well as the obligation to
indemnify one-half of certain of these employees' excise tax. At the time of
the Broadcasting Merger, SFX Broadcasting will contribute its positive
Working Capital (as defined in the Broadcasting Merger Agreement) to the
Company. If Working Capital is negative, the Company must pay the amount of
the shortfall to SFX Broadcasting. As of March 31, 1998, SFX Broadcasting had
advanced approximately $5,378,000 to the Company for use in connection with
certain acquisitions and capital expenditures. This obligation and other
costs subsequently incurred in connection with the Spin-Off were reimbursed
in April 1998.

F-7
<PAGE>

SFX Broadcasting and the Company have entered into a tax sharing
agreement, pursuant to which the Company is responsible for certain taxes,
including income taxes imposed with respect to income generated by the
Company for the periods prior to the Spin-Off and taxes resulting from gain
recognized in the Spin-Off. The Company will be allowed to offset any gain or
income by the net operating losses of SFX Broadcasting (including net
operating losses generated in the current year prior to the Spin-Off) which
are available to offset such gain or income. The Company believes that the
amount of taxes that it will be required to pay in connection with the
Spin-Off will be determined by reference to the average of the high and low
sales price of the Class A Common Stock on April 27, 1998 (the date of the
distribution of Common Stock pursuant to the Spin-Off). Increases or
decreases in the value of the Common Stock subsequent to such date will not
affect the tax liability. The average of the high and low sales price of the
Class A Common Stock on the Nasdaq National Market on April 27, 1998 was
$30.50 per share and management estimates that the Company will be required
to pay approximately $120.0 million pursuant to such indemnification
obligation. Most of the tax liability relates to certain deferred
intercompany transactions creating taxable income for the Company. Management
believes that these deferred intercompany transactions will give rise to
additional tax basis which will be available to offset future taxable income
of the Company. Management's estimates of the amount of the indemnity payment
and additional taxable basis are based on certain assumptions which
management believes are reasonable. However, upon completion of the relevant
tax forms, including any potential audits, such assumptions could be modified
in a manner which would result in a significant variance in the actual
amounts of the tax indemnity and of the additional basis. The Company intends
to use a substantial portion of the net proceeds from an equity offering to
make such payment and expects that such payment will be due on or about June
15, 1998. Such payment will not result in any corresponding increase in the
Company's assets or cash flows.

2. RECENT ACQUISITIONS

Delsener/Slater

In January 1997, SFX Broadcasting acquired Delsener/Slater, a leading
concert promotion company, for an aggregate consideration of approximately
$27,600,000, including $2,900,000 for working capital and the present value
of deferred payments of $3,000,000 to be paid without interest over five
years and $1,000,000 to be paid without interest over ten years.
Delsener/Slater has long-term leases or is the exclusive promoter for seven
of the major concert venues in the New York City metropolitan area, including
the Jones Beach Amphitheater, a 14,000-seat complex located in Wantagh, New
York, and the PNC Bank Arts Center (formerly known as the Garden State Arts
Center), a 17,500-seat complex located in Holmdel, New Jersey.

Meadows

In March 1997, the Company acquired the stock of certain companies which
own and operate the Meadows Music Theater (the "Meadows"), a 25,000-seat
indoor/outdoor complex located in Hartford, Connecticut for $900,000 in cash,
250,838 shares of SFX Broadcasting Class A Common Stock with a value of
approximately $7,500,000 and the assumption of approximately $15,400,000 in
debt.

In connection with the acquisition of the Meadows, SFX Broadcasting
obtained an option to repurchase 250,838 shares of its Class A common stock
(the "Meadows Shares") for an aggregate purchase price of $8.3 million (the
"Meadows Repurchase"). Pursuant to the terms of the SFX Merger Agreement, if
the Meadows Shares are outstanding at the effective time of the SFX Merger,
Working Capital would be decreased by approximately $10.5 million. However,
SFX Broadcasting was restricted from exercising the Meadows Repurchase by
certain loan covenants and other restrictions.

In January 1998, Robert F.X. Sillerman, the Executive Chairman of the
Company, committed to finance the $8.3 million exercise price of the Meadows
Repurchase in order to avoid the $10.5 million reduction to Working Capital.
In consideration for such commitment, the board of directors of SFX
Broadcasting agreed that Mr. Sillerman would receive approximately the number
of shares of Class A Common Stock to be issued in the Spin-Off with respect
to the Meadows Shares. At the time SFX

F-8
<PAGE>

Broadcasting accepted Mr. Sillerman's commitment, the board of directors of
SFX Broadcasting valued the Class A Common Stock to be issued in the Spin-Off
at $4.20 per share, the value attributed to such shares in the fairness
opinion obtained by SFX Broadcasting in connection with the Broadcasting
Merger. In April 1998, SFX Broadcasting assigned the option for the Meadows
Shares to an unaffiliated third party and, in connection therewith, paid such
party a fee of $75,000. Mr. Sillerman subsequently advanced such party the
$8.3 million exercise price for the Meadows Repurchase which will become due
on the earlier of the date on which the Meadows Shares are disposed of by the
third party or January 16, 1999. If the SFX Merger is consummated, the
Meadows Shares will be tendered in the SFX Merger without any gain or loss to
the third party. In the event that the SFX Merger is not consummated on or
before December 31, 1998, SFX Broadcasting has the option, for a limited
time, to repurchase the Meadows Shares for an aggregate consideration of
approximately $10.0 million. The third party has agreed to transfer to Mr.
Sillerman the Class A Common Stock to be issued in the Spin-Off with respect
to the Meadows Shares. The transaction has been approved by SFX
Broadcasting's board of directors, including the independent directors. A
non-cash charge to earnings of approximately $7.5 million will be recorded in
the second quarter of 1998 based on the fair value of the shares received by
Mr. Sillerman as of the date of the Meadows Repurchase.

Sunshine Promotions

In June 1997, the Company acquired the stock of Sunshine Promotions, Inc.
and certain other related Companies ("Sunshine Promotions"), one of the
largest concert promoters in the Midwest, for $53,900,000 in cash, of which
$2,000,000 is payable over five years, 62,792 shares of SFX Broadcasting
Class A Common Stock issued with a value of approximately $2,000,000, shares
of SFX Broadcasting stock issuable over a two year period with a value of
approximately $2,000,000 and the assumption of approximately $1,600,000 of
debt. The shares of stock to be issued in the future are classified as
deferred purchase consideration on the balance sheet. Sunshine Promotions
owns the Deer Creek Music Theater, a 21,000-seat complex located in
Indianapolis, Indiana, and the Polaris Amphitheater, a 20,000-seat complex
located in Columbus, Ohio, and has a long-term lease to operate the Murat
Centre (the "Murat"), a 2,700-seat theater and 2,200-seat ballroom located in
Indianapolis, Indiana. Pursuant to the Broadcasting Merger Agreement, the
Company is responsible for the payments owing under the Sunshine note, which
by its terms accelerates upon the change in control of SFX Broadcasting
resulting from the consummation of the Broadcasting Merger.

The Delsener/Slater, Meadows, and Sunshine Promotions acquisitions are
collectively referred to herein as the "1997 Acquisitions." The cash portion
of the 1997 Acquisitions were financed through capital contributions from SFX
Broadcasting and were accounted for under the purchase method of accounting.
The purchase price of Sunshine Promotions has been preliminarily allocated to
the assets acquired and liabilities assumed and is subject to change.

Westbury

BGP

F-9
<PAGE>
the issuance upon the Spin-Off of 562,640 shares of common stock of the
Company valued by the parties at $7,500,000). The sellers of BGP provided net
working capital (as defined in the acquisition agreement) at the closing in
an amount equal to or greater than long-term debt.

PACE

On February 25, 1998, the Company acquired all of the outstanding capital
stock of PACE Entertainment Corporation ("PACE"), one of the largest
diversified producers and promoters of live entertainment in the United
States, having what the Company believes to be the largest distribution
network in the United States in each of its music, theater and specialized
motor sports businesses (the "PACE Acquisition"), for total consideration of
approximately $150,100,000 (including issuance upon the Spin-Off of 1,500,000
shares of the Company's common stock valued by the parties at $20,000,000 and
assumption of approximately $20,600,000 of debt). In related transactions,
the Company acquired, for total consideration of $90,600,000 comprised of
$41,400,000 in cash, the repayment of approximately $43,100,000 of debt and
the assumption of approximately $6,100,000 of debt related to a capital
lease, the 66 2/3% ownership interests of Blockbuster Entertainment
Corporation and Sony Music Entertainment, Inc. in Amphitheater Entertainment
Partnership, a partner of PACE in the Pavilion Partners venue partnership. As
a result, the Company owns 100% of Pavilion Partners.

The PACE acquisition agreement further provides that each seller of PACE
shall have an option, exercisable during a period beginning on the fifth
anniversary of the closing of the PACE acquisition and ending 90 days
thereafter, to require the Company to purchase up to one-third of the PACE
consideration stock received by such PACE seller for a cash purchase price of
$33.00 per share. With certain limited exceptions, these option rights are
not assignable by the PACE sellers.

Under the terms of an employment agreement entered into by the Company
with an officer of PACE, the officer will have the right, two years from the
date of the acquisition, to purchase PACE's motor sports division at fair
value. If the motor sports division has been sold by the Company, the officer
would be entitled to purchase PACE's theatrical division for the fair value.

In addition, on March 25, 1998 PACE paid $4,000,000 to acquire a 67%
interest in certain assets and liabilities of USA Motor Sports. The remaining
33% interest is owned by the Contemporary Group.

Contemporary

On February 27, 1998, the Company acquired the Contemporary Group
("Contemporary"), a fully-integrated live entertainment and special event
promoter and producer, venue owner and operator and consumer marketer, for
total consideration of approximately $101,400,000 comprised of $72,800,000 in
cash, a payment for working capital of approximately $9,900,000 and the
issuance of preferred stock of the Company valued by the parties at
$18,700,000 which, upon the Spin-Off, was converted into 1,402,850 shares of
common stock of the Company (the "Contemporary Acquisition"). The
Contemporary Acquisition involved the merger of Contemporary International
Productions Corporation with and into the Company, the acquisition by a
wholly owned subsidiary of the Company of substantially all of the assets,
excluding certain cash and receivables, of the remaining members of
Contemporary and the acquisition by Contemporary of the 50% interest in the
Riverport Amphitheater Joint Venture not owned by Contemporary. If any of the
Contemporary sellers owns any shares of the Company's Class A Common Stock
received in the Contemporary Acquisition on the second anniversary of the
closing date and the average trading price of such stock over the 20-day
period ending on such anniversary date is less than $13.33 per share, then
the Company will make a one-time cash payment to each individual holding any
such shares that is equal to the product of (i) the quotient of the
difference between (A) the actual average trading price per share over such
20-day period and (B) $13.33 divided by two, multiplied by (ii) the number of
shares of Class A Common Stock of the Company received by such individual in
the Contemporary Acquisition and owned as of such anniversary date.

Network

On February 27, 1998, the Company acquired the Network Magazine Group
("Network Magazine"), a publisher of trade magazines for the radio
broadcasting industry, and SJS Entertainment Corporation

F-10
<PAGE>
("SJS"), an independent creator, producer and distributor of music-related
radio programming, services and research which it exchanges with radio
broadcasters for commercial air-time sold, in turn, to national network
advertisers (the "Network Acquisition"), for total consideration of
approximately $66,800,000 comprised of $52,000,000 in cash, a payment for
working capital of approximately $1,800,000, reimbursed sellers costs of
$500,000, the purchase of an office building and property for $2,500,000 and
the issuance upon the Spin-Off of approximately 750,000 shares of common
stock of the Company valued by the parties at $10,000,000. The $2,500,000
purchase of the office building and property is comprised of cash of
approximately $700,000 and the assumption of debt of approximately
$1,800,000. The Company is also obligated to pay the sellers an additional
payment in common stock or, at the Company's option, cash based on future
operating results, as defined, generated on a combined basis by Network
Magazine and SJS in 1998, up to a maximum of $14,000,000. In the Network
Acquisition, the Company, through a wholly owned subsidiary, acquired all of
the outstanding capital stock of each of The Album Network, Inc. and SJS
Entertainment Corporation and purchased substantially all of the assets and
properties and assumed substantially all of the liabilities and obligations
of The Network 40, Inc.

Concert/Southern

On March 4, 1998, the Company acquired Concert/Southern Promotions
("Concert/Southern"), a promoter of live music events in the Atlanta, Georgia
metropolitan area (the "Concert/Southern Acquisition"), for total cash
consideration of approximately $16,900,000, which includes a $300,000 payment
for working capital.

The PACE Acquisition, the Contemporary Acquisition, the Network
Acquisition, the BGP Acquisition and the Concert/Southern Acquisition are
collectively referred to herein as the "1998 Acquisitions." The cash portion
of the 1998 Acquisitions were financed with the proceeds of the Notes
offering and Credit Agreement (see Note 3) and were accounted for under the
purchase method of accounting. The purchase prices of the 1998 Acquisitions
have been preliminarily allocated to the assets acquired and liabilities
assumed and are subject to change.

The accompanying consolidated financial statements as of March 31, 1998
include the accounts of the Company, its subsidiaries and certain assets and
liabilities which were contributed by SFX Broadcasting to the Company in the
Spin-Off. Operating results for the 1997 Acquisitions and the 1998
Acquisitions are included herein from their respective acquisition dates.
Operating results associated with the assets and liabilities to be
contributed by SFX Broadcasting are included herein. SFX Broadcasting
provides various administrative services to the Company. It is SFX
Broadcasting's policy to allocate these expenses on the basis of direct
usage. In the opinion of management, this method of allocation is reasonable
and allocated expenses approximate what the Company would have incurred on a
stand-alone basis. Intercompany transactions and balances have been
eliminated in consolidation.

The following pro forma summary represents the consolidated results for
the three months ended March 31, 1998 and 1997 as if the 1997 Acquisitions
and the 1998 Acquisitions had occurred at the beginning of such period after
giving effect to certain adjustments, including amortization of intangible
assets and interest expense on the acquisition debt. These pro forma results
have been included 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 (in thousands).

<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1997
----------- ----------
<S> <C> <C>
Revenues .................... $173,828 $127,446
Net loss .................... $(25,933) $(17,129)
</TABLE>

3. FINANCING

On February 11, 1998, SFX completed an offering of $350.0 million of 9
1/8% Senior Subordinated Notes (the "Notes") due 2008. Interest is payable on
the Notes on February 1 and August 1 of each year.

F-11
<PAGE>

On February 26, 1998 the Company executed a Credit and Guarantee Agreement
(the "Credit Agreement") which established a $300.0 million senior secured
credit facility comprised of (i) a $150.0 million eight-year term loan (the
"Term Loan") and (ii) a $150.0 million seven-year reducing revolving credit
facility. Loans outstanding under the Credit Facility bear interest, at the
Company's option, at 1.875 to 2.375 percentage points over LIBOR or the
greater of the Federal Funds rate plus 0.50% or BNY's prime rate. The
interest rate spreads on the Term Loan and the Revolver will be adjusted
based on the Company's Total Leverage Ratio (as defined in the Credit
Agreement). The Company will pay a per annum commitment fee on unused
availability under the Revolver of 0.50% to the extent that the Company's
Leverage Ratio is greater than or equal to 4.0 to 1.0, and 0.375% if such
ratio is less than 4.0 to 1.0 and a per annum letter of credit fee equal to
the Applicable LIBOR Margin (as defined in the Credit Agreement) for the
Revolver then in effect. The Revolver and Term Loan contain provisions
providing that, at its option and subject to certain conditions, the Company
may increase the amount of either the Revolver or Term Loan by $50.0 million.
Borrowings under the Credit Agreement are secured by substantially all of the
assets of the Company, including a pledge of the outstanding stock of
substantially all of its subsidiaries and guaranteed by all of the Company's
subsidiaries. On February 27, 1998, the Company borrowed $150.0 million under
the Term Loan. As of May 4, 1998 there were no borrowings under the Revolver.
The Company intends to draw down approximately $125 million of the Revolver
to fund the Pending Acquisitions (see Note 6).

4. CAPITAL STOCK

In the Spin-Off, (a) 13,579,024 shares of Class A Common Stock were
distributed to holders on the Spin-Off record date of SFX Broadcasting's
Class A common stock, Series D preferred stock and interests in SFX
Broadcasting's director deferred stock ownership plan, (b) 1,047,037 shares
of Class B Common Stock were distributed to holders on the Spin-Off record
date of SFX Broadcasting Class B common stock and (c) 609,856 shares were
placed in escrow to be issued upon the exercise of certain warrants of SFX
Broadcasting. The financial statements have been retroactively adjusted to
reflect this transaction.

Holders of Class A Common Stock and Class B Common Stock vote as a single
class on all matters submitted to a vote of the stockholders, with each share
of Class A Common Stock entitled to one vote and each share of Class B Common
Stock entitled to ten votes, except (a) for the election of directors, (b)
with respect to any "going private" transaction between the Company and Mr.
Sillerman or any of his affiliates and (c) as otherwise provided by law.

The Board of Directors has the authority to issue preferred stock and will
assign the designations and rights at the time of issuance.

During January 1998, the Board of Directors and SFX Broadcasting, as sole
stockholder, approved and adopted a stock option and restricted stock plan
providing for the issuance of restricted shares of the Company's Class A
Common Stock and options to purchase shares of the Company's Class A Common
Stock totaling up to 2,000,000 shares. In addition, the Board, upon
recommendation of the Compensation Committee, has approved the issuance of
stock options exercisable for 252,500 shares of the Company's Class A Common
Stock. The options will vest over three years and will have an exercise price
of $5.50 per share. The Company will record non-cash compensation charges
over the three-year period of approximately $2 million annually.

During January 1998, in connection with the expectation of certain
executive officers entering into employment agreements with the Company, the
Board of Directors, upon recommendation of the Compensation Committee,
approved the sale of an aggregate of 650,000 shares of the Company's Class B
Common Stock and 190,000 shares of the Company's Class A Common Stock to
certain officers

F-12
<PAGE>

for a purchase price of $2.00 per share. Such shares were issued in April
1998. A non-cash charge to earnings will be recorded by the Company in the
second quarter of approximately $24 million associated with the sale.

The Board of Directors has also approved the issuance of shares of the
Company's Class A Common Stock to holders of stock options or stock
appreciation rights ("SARs") of SFX Broadcasting as of the Spin-Off record
date, whether or not vested. The issuance was approved to allow such holders
of these options or SARs to participate in the Spin-Off in a similar manner
to holders of SFX Broadcasting's Class A Common Stock. Additionally, many of
the option holders will become officers, directors and employees of the
Company.

5. COMMITMENTS AND CONTINGENCIES

While the Company is involved in several law suits and claims arising in
the ordinary course of business, the Company is not now a party to any legal
proceeding that the Company believes would have a material adverse effect on
its business, financial position or results of operations.

6. SUBSEQUENT EVENTS

In April and May of 1998, the Company entered into agreements and/or
letters of intent to acquire the following live entertainment and talent
representation businesses:

FAME

Don Law

Avalon

The Company entered into letters of intent to acquire all of the
outstanding equity interests of Irvine Meadows Amphitheater, New Avalon,
Inc., TBA Media, Inc. and West Coast Amphitheater (collectively, "Avalon")
for a cash purchase price of $27.0 million (subject to adjustment under
certain circumstances). Avalon is a leading concert promoter and producer
that operates predominantly in the Los Angeles area. In addition, the Company
will be obligated to reimburse the Avalon sellers' third party out of pocket
costs and expenses incurred in the development of the Camarillo Creek
Amphitheater (expected to be approximately $400,000). The Company may also be
obligated to pay an additional $1.0 million to the Avalon sellers if the
Camarillo Creek Amphitheater has been completed pursuant to certain budget
projections and the production of entertainment events at the site has
commenced.

F-13
<PAGE>
Oakdale

The Company has entered into an agreement to acquire Oakdale Concerts, LLC
and Oakdale Development Limited Partnership (collectively, "Oakdale"), a
promoter and producer of concerts in Connecticut and the owner of the 4,800
seat Oakdale Music Theater, for a purchase price of $11.9 million in cash. At
the closing the Company will also make a non-recourse loan to Oakdale in the
amount of $11.4 million. In addition, the Company may be obligated to make an
additional payment based on the combined operating performance (as defined in
the acquisition agreement) of the Oakdale Music Theater and Meadows for 1999.

EMI

The Company has entered into an agreement to acquire an approximately 80%
interest in Event Merchandising, Inc. ("EMI"), a leading event merchandising
contractor in the United States for approximately $8.5 million. In addition,
the Company is required to make a loan to the EMI sellers in an amount equal
to certain taxes incurred by the EMI sellers in connection with the
transaction. The Company expects that the amount of the loan will be
approximately $750,000. EMI has concession contracts with 26 amphitheaters,
including 13 venues owned and/or operated by the Company.

The acquisitions of FAME, Don Law, Avalon, Oakdale and EMI are
collectively referred to herein as the "Pending Acquisitions." The Company
intends to use a portion of the proceeds from an equity offering and
additional borrowings under the Credit Agreement (collectively, the
"Financing") to consummate the Pending Acquisitions. The Company expects to
complete all of the Pending Acquisitions in the second quarter of 1998.
However, the timing and completion of the Pending Acquisitions are subject to
a number of conditions, certain of which are beyond the Company's control and
there can be no assurance that any of the Pending Acquisitions will be
consummated during such period, on the terms described herein, or at all. The
Company is also currently pursuing certain additional acquisitions; however,
it has not entered into any definitive agreements with respect to such
acquisitions and there can be no assurance that it will do so.

F-14
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
SFX Entertainment, Inc.

We have audited the accompanying consolidated balance sheet of SFX
Entertainment, Inc. as of December 31, 1997, and the related consolidated
statements of operations and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.

We conducted our audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of SFX Entertainment, Inc. at December 31, 1997, and the consolidated results
of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

New York, New York
March 5, 1998, except
for Notes 1 and 11, as to
which the date is April 27, 1998

F-15
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
Delsener/Slater Enterprises, Ltd.

We have audited the accompanying consolidated balance sheet of
Delsener/Slater Enterprises, Ltd. and Affiliated Companies as of December 31,
1996, and the related consolidated statements of operations and cash flows
for each of the two years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with 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 consolidated financial position
of Delsener/Slater Enterprises, Ltd. and Affiliated Companies at December 31,
1996, and the consolidated results of their operations and their cash flows
for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

New York, New York
October 2, 1997

F-16
<PAGE>

SFX ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
PREDECESSOR
1997 1996
---------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 5,979 $5,253
Accounts receivable .................................................... 3,831 159
Prepaid expenses and other current assets .............................. 1,410 779
---------- -------------
Total current assets .................................................... 11,220 6,191
Property and equipment, net ............................................. 59,685 2,231
Deferred acquisition costs .............................................. 6,213 --
Goodwill, net ........................................................... 60,306 --
Investment in unconsolidated subsidiaries ............................... 937 458
Note receivable from employee ........................................... 900 --
Other assets ............................................................ 7,681 --
---------- -------------
Total assets ............................................................ $146,942 $8,880
=============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses................................... $ 2,715 $6,078
Deferred revenue ....................................................... 3,603 18
Income taxes payable ................................................... 1,707 --
Due to stockholder ..................................................... -- 1,877
Due to SFX Broadcasting ................................................ 11,539 --
Current portion of long-term debt ...................................... 923 --
Current portion of deferred purchase consideration ..................... 1,950 --
---------- -------------
Total current liabilities ............................................... 22,437 7,973
Long-term debt, less current portion .................................... 15,255 --
Deferred purchase consideration, less current portion ................... 4,289 --
Deferred income taxes ................................................... 2,817 --
Commitment and contingencies ............................................
Shareholder's equity (Note 11):
Capital contributed by SFX Broadcasting ................................. 98,184 --
Preferred Stock, $.01 par value, 25,000,000 shares authorized, none
issued and outstanding ................................................. -- --
Class A common stock, $.01 par value, 100,000,000 shares authorized,
13,579,024 issued and outstanding ...................................... 136 --
Class B common stock, $.01 par value, 10,000,000 shares authorized,
1,047,037 issued and outstanding ....................................... 10 --
Combined stockholder's equity--predecessor .............................. -- 907
Retained earnings ....................................................... 3,814 --
---------- -------------
Total shareholder's equity .............................................. 102,144 907
---------- -------------
Total Liabilities and shareholder's Equity .............................. $146,942 $8,880
========== =============
</TABLE>

See accompanying notes.

F-17
<PAGE>

SFX ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
PREDECESSOR PREDECESSOR
1997 1996 1995
--------- ------------- -------------
<S> <C> <C> <C>
Concert revenue......................................... $96,144 $50,362 $47,566
Operating expenses:
Cost of concerts ...................................... 83,417 50,686 47,178
Depreciation and amortization ......................... 5,431 747 750
Corporate expenses, net of Triathlon fees of $1,794 in
1997 ................................................. 2,206 -- --
--------- ------------- -------------
$91,054 $51,433 $47,928
--------- ------------- -------------
Income (loss) from operations .......................... 5,090 (1,071) (362)
Investment income ...................................... 295 198 178
Interest expense ....................................... (1,590) (60) (144)
Equity in pretax income of unconsolidated subsidiaries 509 524 488
--------- ------------- -------------
Income (loss) before provision for income taxes ....... $ 4,304 $ (409) $ 160
Provision for income taxes ............................. 490 106 13
--------- ------------- -------------
Net income (loss)....................................... $ 3,814 $ (515) $ 147
========= ============= =============
</TABLE>

See accompanying notes.

F-18
<PAGE>

SFX ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
PREDECESSOR PREDECESSOR
1997 1996 1995
---------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ..................................... $ 3,814 $ (515) $ 147
Adjustment to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation of property and equipment ............... 2,686 746 750
Amortization of goodwill.............................. 2,745 -- --
Equity in pretax income of unconsolidated
subsidiaries, net of distributions received ......... (479) 16 2
Deferred income taxes................................ (427) -- --
Changes in operating assets and liabilities, net of
amounts acquired:
Accounts receivable.................................. (923) (159) 384
Prepaid expenses and other current assets............ 419 (649) 374
Other assets......................................... (275) -- --
Accounts payable and accrued expenses................ (325) 4,759 (1,326)
Income taxes payable................................. 917 -- --
Deferred revenue..................................... (7,147) 16 (784)
---------- ------------- -------------
Net cash provided by (used in) operating activities .. 1,005 4,214 (453)
INVESTING ACTIVITIES:
Purchase of concert promotion businesses, net of cash
acquired ............................................ (71,213) -- --
Investment in GSAC Partnership ....................... -- (435) --
Purchase of property and equipment ................... (2,083) -- --
---------- ------------- -------------
Net cash used in investing activities ................. (73,296) (435) --
---------- ------------- -------------
FINANCING ACTIVITIES:
Capital contributed by SFX Broadcasting .............. 79,093 -- --
Payment of debt ...................................... (823) -- --
Proceeds from issuance of common stock and capital
contributions ....................................... -- 152 --
Loan from stockholder ................................ -- 47 --
Distributions paid ................................... -- (1,630) (216)
---------- ------------- -------------
Net cash provided by (used in) financing activities .. 78,270 (1,431) (216)
Net increase in cash and cash equivalents ............. 5,979 2,348 (669)
Cash and cash equivalents at beginning of period ..... -- 2,905 3,574
---------- ------------- -------------
Cash and cash equivalents at end of period ............ $ 5,979 $ 5,253 $ 2,905
========== ============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ................................ $ 1,504 $ 60 $ 144
========== ============= =============
Cash paid for income taxes ............................ $ -- $ 106 $ 13
========== ============= =============
</TABLE>

SUPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

o Issuance of equity securities, including deferred equity security issuance
and assumption of debt in connection with certain acquisitions (see Note
1).

o Agreements to pay future cash consideration in connection with certain
acquisitions (see Note 1).

o The balance sheet includes certain assets and liabilities which have been
contributed by SFX Broadcasting to the Company in connection with the
Spin-Off.

See accompanying notes.

F-19
<PAGE>
SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

SFX Entertainment, Inc. ("SFX" or the "Company") was formed as a
wholly-owned subsidiary of SFX Broadcasting, Inc. ("SFX Broadcasting") in
December 1997 and as the parent company of SFX Concerts, Inc ("Concerts").
Concerts was formed in January of 1997 to acquire and hold SFX Broadcasting's
live entertainment operations. During 1997, the Company made several
acquisitions as described below. The Company had no substantive operations
until its acquisition of Delsener/Slater Enterprises, Ltd. and Affiliated
Companies ("Delsener/Slater" or the "Predecessor") in January 1997, and
Delsener/Slater is considered the Company's predecessor for financial
reporting purposes.

Delsener/Slater

Meadows

The Company may assume the obligation to exercise an option held by SFX
Broadcasting to repurchase 250,838 shares of SFX Broadcasting's Class A
Common Stock for an aggregate purchase price of $8.3 million (the "Meadows
Repurchase"). This option was granted in connection with the acquisition of
the Meadows Music Theater. If the option were exercised by SFX Broadcasting,
the exercise would result in a reduction of Working Capital as defined in the
Spin-Off (see below) by approximately $8.3 million. If the option were not
exercised, Working Capital would decrease by approximately $10.5 million.

Sunshine Promotions

The Delsener/Slater, Meadows, and Sunshine Promotions acquisitions are
collectively referred to herein as the "Completed Acquisitions." The cash
portion of the Completed Acquisitions were financed

F-20
<PAGE>
SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

through capital contributions from SFX Broadcasting and were accounted for
under the purchase method of accounting. The purchase prices have been
preliminarily allocated to the assets acquired and are subject to change.

The accompanying consolidated financial statements as of December 31, 1997
include the accounts of Delsener/Slater, Sunshine Promotions, the Meadows,
and certain assets and liabilities which have been contributed by SFX
Broadcasting to the Company in connection with the Spin-Off (as defined
herein) under the terms of the Broadcasting Merger (as defined herein)
Agreement. Operating results for the Completed Acquisitions are included
herein from their respective acquisition dates. Operating results associated
with the assets and liabilities to be contributed are included herein. SFX
Broadcasting provides various administrative services to the Company. It is
SFX Broadcasting's policy to allocate these expenses on the basis of direct
usage. In the opinion of management, this method of allocation is reasonable
and allocated expenses approximate what the Company would have incurred on a
stand-alone basis. Intercompany transactions and balances among these
companies have been eliminated in consolidation.

The following unaudited pro forma summary represents the consolidated
results for the years ended December 31, 1997 and 1996 as if the Completed
Acquisitions had occurred at the beginning of such year after giving effect
to certain adjustments, including amortization of goodwill and interest
expense on the acquisition debt. These pro forma results have been included
for comparative purposes only and do not purport to be indicative of what
would have occurred had the acquisition been made as of that date or of
results which may occur in the future (in thousands).

<TABLE>
<CAPTION>
PRO FORMA
(UNAUDITED)
------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Revenues..... $110,387 $104,784
Net income .. $ 734 $ 2,668
</TABLE>

Spin-Off

Pursuant to the terms of the Spin-Off, SFX Broadcasting contributed to the
Company all of its concert and other live entertainment assets along with an
allocation of working capital in an amount estimated by management of SFX
Broadcasting to be consistent with the proper operation of SFX Broadcasting,
and the Company assumed all of SFX Broadcasting's liabilities pertaining to
the live entertainment businesses, as well as certain other liabilities
including the obligation to make change of control payments to certain
employees of SFX Broadcasting of approximately $5,000,000 as well as the
obligation to indemnify one-half of certain of these employees' excise tax.
At the time of the Broadcasting Merger, SFX Broadcasting will contribute its
positive Working Capital (as defined in the Broadcasting Merger Agreement) to
the Company. If Working Capital is negative, the Company must pay the amount
of the shortfall to SFX Broadcasting. As of December 31, 1997, SFX
Broadcasting had advanced approximately $11,539,000 to the Company for use in
connection with certain acquisitions and capital expenditures. This
obligation and other costs subsequently incurred in connection with the
Spin-Off were reimbursed with the proceeds from the Senior Subordinated Notes
and the Credit Agreement (see Note 2). SFX Broadcasting advanced additional
amounts to the Company prior to the consummation of the Spin-Off which were
reimbursed in April 1998.

F-21

<PAGE>

SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SFX Broadcasting and the Company entered into a tax sharing agreement.
Under the tax sharing agreement, the Company will agree to pay to SFX
Broadcasting the amount of the tax liability of SFX Broadcasting and the
Company combined, to the extent properly attributable to the Company for the
period up to and including the Spin-Off, and will indemnify SFX Broadcasting
for any tax adjustment made in subsequent years that relates to taxes
properly attributable to the Company during the period prior to and including
the Spin-Off. SFX Broadcasting, in turn, will indemnify the Company for any
tax adjustment made in years subsequent to the Spin-Off that relates to taxes
properly attributable to the SFX Broadcasting during the period prior to and
including the Spin-Off. The Company also will be responsible for any taxes of
SFX Broadcasting resulting from the Spin-Off, including any income taxes but
only to the extent that the income taxes result from the gain on the
distribution that exceeds the net operating losses of SFX Broadcasting and
the Company available to offset such gain including net operating losses
generated in the current year prior to the Spin-Off.

The actual amount of the gain will be based on the excess of the value of
the Company's Common Stock on the date of the Spin-Off over the tax basis of
that stock. The Company believes that the value of the Company's Common Stock
for tax purposes will be determined by no later than the first trading day
following the date on which the Company's Common Stock is distributed in the
Spin-Off. Increases or decreases in the value of the Company's Common Stock
subsequent to such date will not effect the tax liability. The Company
expects that such indemnity payment will be due on or about June 15, 1998.

2. RECENT ACQUISITIONS AND FINANCING

On February 11, 1998, SFX completed the private placement of $350.0
million of 9 1/8% Senior Subordinated Notes (the "Notes") due 2008. Interest
is payable on the Notes on February 1 and August 1 of each year.

On February 26, 1998 the Company executed a Credit and Guarantee Agreement
(the "Credit Agreement") which established a $300.0 million senior secured
credit facility comprised of (i) a $150.0 million eight-year term loan (the
"Term Loan") and (ii) a $150.0 million seven-year reducing revolving credit
facility. Loans outstanding under the Credit Facility bear interest, at the
Company's option, at 1.875 to 2.375 percentage points over LIBOR or the
greater of the Federal Funds rate plus 0.50% or BNY's prime rate. The
interest rate spreads on the Term Loan and the Revolver will be adjusted
based on the Company's Total Leverage Ratio (as defined in the Credit
Agreement). The Company will pay a per annum commitment fee on unused
availability under the Revolver of 0.50% to the extent that the Company's
Leverage Ratio is greater than or equal to 4.0 to 1.0, and 0.375% if such
ratio is less than 4.0 to 1.0 and a per annum letter of credit fee equal to
the Applicable LIBOR Margin (as defined in the Credit Agreement) for the
Revolver then in effect. The Revolver and Term Loan contain provisions
providing that, at its option and subject to certain conditions, the Company
may increase the amount of either the Revolver or Term Loan by $50.0 million.
Borrowings under the Credit Agreement are secured by substantially all of the
assets of the Company, including a pledge of the outstanding stock of
substantially all of its subsidiaries and guaranteed by all of the Company's
subsidiaries. On February 27, 1998, the Company borrowed $150.0 million under
the Term Loan. Together with the proceeds from the Notes, the proceeds from
the Term Loan were used to finance the Recent Acquisitions (as defined
below.)

On February 24, 1998, the Company acquired all of the outstanding capital
stock of BG Presents ("BGP"), one of the oldest promoters of, and
owner-operators of venues for, live entertainment in the United States, and a
leading promoter in the San Francisco Bay area (the "BGP Acquisition"), for
total consideration of approximately $80,300,000 (including the repayment of
$12,000,000 in BGP debt and the issuance upon the Spin-Off of 562,640 shares
of common stock of the Company valued by the parties at $7,500,000). The
sellers of BGP provided net working capital (as defined in the acquisition
agreement) at the closing in an amount equal to or greater than long-term
debt.

F-22
<PAGE>

SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On February 25, 1998, the Company acquired all of the outstanding capital
stock of PACE Entertainment Corporation ("PACE"), one of the largest
diversified producers and promoters of live entertainment in the United
States, having what the Company believes to be the largest distribution
network in the United States in each of its music, theater and specialized
motor sports businesses (the "PACE Acquisition"), for total consideration of
approximately $150,100,000 (including issuance upon the Spin-Off of 1,500,000
shares of the Company's common stock valued by the parties at $20,000,000 and
assumption of approximately $20,600,000 of debt). Under the terms of the
agreement, additional cash consideration would be required if the deemed
value of the Company's common stock was less than $13.33 per share as a
result of changes in the consummation of acquisitions. In related
transactions, the Company acquired, for total consideration of $90,600,000
comprised of $41,400,000 in cash, the repayment of approximately $43,100,000
of debt and the assumption of approximately $6,100,000 of debt related to a
capital lease, the 66 2/3% ownership interests of Blockbuster Entertainment
Corporation and Sony Music Entertainment, Inc. in Amphitheater Entertainment
Partnership, a partner of PACE in the Pavilion Partners venue partnership. As
a result, the Company owns 100% of Pavilion Partners.

Under the terms of an employment agreement to be entered into by the
Company with an officer of PACE, the officer will have the right, two years
from the date of the acquisition, to purchase PACE's motor sports division at
fair value. If the motor sports division has been sold by the Company, the
officer would be entitled to purchase PACE's theatrical division for the fair
value.

On February 27, 1998, the Company acquired the Contemporary Group
("Contemporary"), a fully-integrated live entertainment and special event
promoter and producer, venue owner and operator and consumer marketer, for
total consideration of approximately $101,400,000 comprised of $72,800,000 in
cash, a payment for working capital of approximately $9,900,000 and the
issuance upon the Spin-Off of 1,402,850 shares of common stock of the Company
valued by the parties at $18,700,000. (the "Contemporary Acquisition"). The
Contemporary Acquisition involved the merger of Contemporary International
Productions Corporation with and into the Company, the acquisition by a
wholly owned subsidiary of the Company of substantially all of the assets,
excluding certain cash and receivables, of the remaining members of
Contemporary and the acquisition by Contemporary of the 50% interest in the
Riverport Amphitheater Joint Venture not owned by Contemporary. If any of the
Contemporary sellers owns any shares of the Company's Class A Common Stock
received in the Contemporary Acquisition on the second anniversary of the
closing date and the average trading price of such stock over the 20-day
period ending on such anniversary date is less than $13.33 per share, then
the Company will make a one-time cash payment to each individual holding any
such shares that is equal to the product of (i) the quotient of the
difference between (A) the actual average trading price per share over such
20-day period and (B) $13.33 divided by two, multiplied by (ii) the number of
shares of Class A Common Stock of the Company received by such individual in
the Contemporary Acquisition and owned as of such anniversary date.

On February 27, 1998, the Company acquired the Network Magazine Group
("Network Magazine"), a publisher of trade magazines for the radio
broadcasting industry, and SJS Entertainment Corporation ("SJS"), an
independent creator, producer and distributor of music-related radio
programming, services and research which it exchanges with radio broadcasters
for commercial air-time sold, in turn, to national network advertisers (the
"Network Acquisition"), for total consideration of approximately $66,800,000
comprised of $52,000,000 in cash, a payment for working capital of
approximately $1,800,000,

F-23

<PAGE>

SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

reimbursed sellers costs of $500,000, the purchase of an office building and
property for $2,500,000 and the issuance upon the Spin-Off of 750,188 shares
of common stock of the Company valued by the parties at $10,000,000. The
$2,500,000 purchase of the office building and property is comprised of cash
of approximately $700,000 and the assumption of debt of approximately
$1,800,000. The Company is also obligated to pay the sellers an additional
payment in common stock or, at the Company's option, cash based on future
operating results, as defined, generated on a combined basis by Network
Magazine and SJS in 1998, up to a maximum of $14,000,000. In the Network
Acquisition, the Company, through a wholly owned subsidiary, acquired all of
the outstanding capital stock of each of The Album Network, Inc. and SJS
Entertainment Corporation and purchased substantially all of the assets and
properties and assumed substantially all of the liabilities and obligations
of the Network 40, Inc.

The PACE Acquisition, the Contemporary Acquisition, the Network
Acquisition, the BGP Acquisition and the Concert/Southern Acquisition are
collectively referred to herein as the "Recent Acquisitions."

Each of the Recent Acquisition agreements other than Concert/Southern
provide that, should the Spin-Off not occur prior to July 1, 1998, the
sellers may require the Company to repurchase the shares of the Company's
common stock issued to the sellers for $13.33 each.

3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Cash and Cash Equivalents

The Company considers all investments purchased with a maturity of three
months or less to be cash equivalents. Included in cash and cash equivalents
at December 31, 1997 is $1,235,000 of cash which has been deposited in a
separate account and will be used to fund committed capital expenditures at
PNC Bank Arts Center.

PROPERTY AND EQUIPMENT

Land, buildings and improvements and furniture and equipment are stated at
cost. Depreciation is provided on a straight-line basis over the estimated
useful lives of the assets as follows:

<TABLE>
<CAPTION>
<S> <C>
Buildings and improvements ....7-40 years
Furniture and equipment ........ 5-7 years
</TABLE>

Leasehold improvements represent the capitalized costs to renovate the
Jones Beach Theatre. The costs to renovate the theatre included permanent
seats, a new stage and lavatory facilities. These costs are being amortized
over the term of the lease.

Goodwill

Goodwill represents the excess of the purchase price over the fair market
value of the assets purchased in the Completed Acquisitions and is net of
accumulated amortization of $2,745,000. Goodwill is being amortized using the
straight-line method over 15 years. Management reviews the carrying value of
goodwill against anticipated cash flows on a non-discounted basis to
determine whether the carrying amount will be recoverable.

Other Assets

Other assets includes $4,928,000 of costs associated with acquiring the
right to receive fees from Triathlon Broadcasting Company ("Triathlon"), an
affiliate, for certain financial consulting, marketing and

F-24

<PAGE>

SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

administrative services provided by the Company to Triathlon. Under the terms
of the agreement, the Company has agreed to provide consulting and marketing
services to Triathlon for an annual fee of $500,000, together with a
refundable advance of $500,000 per year against fees to be earned in respect
of transactional investment banking services. These fees, which are recorded
as a reduction of corporate, general and administrative expenses, will
fluctuate based upon the level of acquisition and financing activity of
Triathlon. The cost of acquiring the fees is being amortized over the term of
the agreement which expires on June 1, 2005. Triathlon has announced its
intention to enhance shareholder value through a sale. The Company's
management believes that the capitalized cost of acquiring the right to
receive fees from Triathlon is recoverable.

Revenue Recognition

Revenue from ticket sales is recognized upon occurrence of the event.
Advance ticket sales are recorded as deferred revenue until the event occurs.

Risks and Uncertainties

Accounts receivable are due principally from ticket companies and venue
box offices. These amounts are typically collected within 20 days of a
performance. Generally, management considers these accounts receivable to be
fully collectible; accordingly, no allowance for doubtful accounts is
required. Certain other accounts receivable, arising from the normal course
of business, are reviewed for collectibility and allowances for doubtful
accounts are recorded as required. Management believes that no allowance for
doubtful accounts is required at December 31, 1996 or 1997.

The agreement governing the partnership through which PACE holds its
interest in the Lakewood Amphitheater in Atlanta, Georgia contains a
provision that purports to restrict PACE and its affiliates from directly or
indirectly owning or operating another amphitheater in Atlanta. In
management's view, this provision will not materially affect the business or
prospects of the Company. However, the Company acquired an interest in the
Chastain Park Amphitheater, also in Atlanta, in the Concert/Southern
acquisition. The Company intends to seek a waiver.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Advertising Costs

Advertising costs are expensed as incurred and approximated $7,109,000,
$4,896,000 and $2,687,000 in 1997, 1996, and 1995, respectively.

Income Taxes

F-25

<PAGE>

SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company calculates its tax provision on a separate company basis.

Reclassification

Certain amounts in 1995 and 1996 have been reclassified to conform to the
1997 presentation.

4. CONNECTICUT DEVELOPMENT AUTHORITY ASSISTANCE AGREEMENT

On September 12, 1994, the Connecticut Development Authority ("CDA")
entered into a non-recourse assistance agreement with the Meadows whereby the
CDA provided grant funds for the construction and development of the Meadows
through the issuance of State of Connecticut General Fund Obligation Bonds
("GFO Bonds"). The Meadows received bond proceeds of $8,863,000. Pursuant to
such agreement, the annual tax revenues derived from the operation of the
amphitheater are utilized to satisfy the annual service requirements under
the GFO Bonds. In the event that annual tax revenues derived from the
operation of the amphitheater do not equal annual service requirements under
the GFO Bonds, the Company must deposit the lesser of the operating
shortfall, as defined, or 10% of the annual service under the GFO Bonds. An
operating shortfall has not existed since the inception of the CDA. The GFO
Bonds mature on October 15, 2024 and have an average coupon rate of 6.33%.
Annual service requirements, including interest, on the GFO Bonds for each of
the next five years and thereafter are as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
1998.......... $ 739
1999 ......... 737
2000 ......... 739
2001 ......... 740
2002 ......... 741
Thereafter .. 16,399
--------
$20,095
========
</TABLE>

The assistance agreement requires an annual Meadows attendance of at least
400,000 for each of the first three years of operations. It will not be
considered an event of default if the annual Meadows attendance is less than
400,000 provided that no operating shortfall exists for that year or if an
operating shortfall exists such amount has been deposited by the Company. If
there is an event of default, the CDA may foreclose on the construction
mortgage loan (see Note 5). If the amphitheater's operations are relocated
outside of Connecticut during the ten year period subsequent to the beginning
of the assistance agreement or during the period of the construction mortgage
loan, the full amount of the grant funds plus a penalty of 5% must be repaid
to the State of Connecticut.

5. LONG-TERM DEBT

The Predecessor did not have any long-term debt as of December 31, 1996.
As of December 31, 1997, the company's long-term debt, which is recorded at
present value, consisted of the following (in thousands):

F-26
<PAGE>
SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
<S> <C>
Meadows CDA Mortgage Loan........... $ 7,411
Meadows Concession Agreement Loans 5,872
Meadows CDA Construction Loan ..... 700
Murat notes payable ................ 790
Meadows note payable ............... 694
Polaris note payable ............... 221
Capital lease obligations .......... 490
--------
16,178
Less current portion................ 923
--------
$15,255
========
</TABLE>

Meadows CDA Mortgage Loan

On September 12, 1994, the CDA entered into a construction mortgage loan
agreement for $7,685,000 with the Meadows. The purpose of the loan was to
finance a portion of the construction and development of the Meadows. The
loan agreement contains substantially the same covenants as the CDA
assistance agreement (see Note 4). The mortgage loan bears interest at 8.73%
and is payable in monthly installments of principal and interest. The
mortgage loan matures on October 15, 2019.

The loan is collateralized by a lien on the Meadows' assets. The loan is
secured by an irrevocable standby letter of credit issued by the Company in
the amount of $785,000.

Meadows Concession Agreement Loans

In connection with the Meadows' concession agreement, the concessionaire
loaned the Meadows $4,500,000 in 1995 to facilitate the construction of the
amphitheater. Principal and interest at the rate of 7.5% per annum on the
note is payable via withholdings of the first $31,299 from each monthly
concession commission payment. As of December 31, 1997, the outstanding
balance was $4,343,000.

During 1995, the concessionaire loaned the Meadows an additional
$1,000,000. This loan bears interest at a rate of 9.75% per annum and is
payable via withholdings of an additional $11,900 of principal, plus
interest, from each monthly concession commission payment through December
20, 2002. As of December 31, 1997, the outstanding balance was $679,000.

The concession agreement also required the Company to supply certain
equipment to the concessionaire at the Company's expense. The cost of the
equipment purchased by the concessionaire was converted to a note payable for
$884,000. The note bears interest at the rate of 9.25% per annum and provides
for monthly principal and interest payments of $10,185. However, the Company
is not required to make any principal or interest payments to the extent that
5% of receipts, as defined, in any month are less than the amount of the
payment due. As of December 31, 1997, the outstanding balance was $850,000.

Meadows CDA Construction Loan

In March 1997, the Meadows entered into a $1,500,000 loan agreement with
the CDA of which $1,000,000 was funded in March 1997. Principal payments of
$150,000 are due on July 1 and October 1 of each year commencing July 1, 1997
through October 1, 2001. The note bears interest at the rate of 8.9% per
annum through February 1, 1998, and thereafter at the index rate, as defined,
plus 2.5%. In addition, the Meadows is required to make principal payments in
an amount equal to 10% of the annual gross revenue, as defined, in excess of
$13,000,000 on or before the March 1 following each calendar year commencing
March 1, 1998. In 1997, gross revenues did not exceed the defined threshold
and thus no principal payment was made on March 1, 1998.

F-27
<PAGE>
SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Murat Notes Payable

The Company has two loans payable to the Massachusetts Avenue Community
Development Corporation (MAC), an $800,000 non-interest bearing note and a
$1,000,000 note. Principal payments on the non-interest bearing note are the
lesser of $0.15 per Murat ticket sold during fiscal year or remaining net
cash flow, as defined. Interest on the other note is calculated annually and
is equal to the lesser of (1) $0.10 per Murat ticket sold during the fiscal
year, (2) prime plus 1% or (3) remaining net cash flow, as defined. Interest
and principal on the $1,000,000 note is payable at the lesser of $0.10 per
Murat ticket sold during fiscal year or remaining net cash flow, as defined.

Provisions of the $800,000 note payable requires the Murat to continue
making payments after the principal has been paid down equal to the lesser of
$0.15 per Murat ticket sold during the fiscal year or remaining cash flow.
These payments are to be made to a not-for-profit foundation and will be
designated for remodeling and upkeep of the theatre.

Meadows Note Payable

Under the terms of a Meadows ticket and sales agreement, a vendor loaned
the Company $824,500 and pays the Company an annual fee of $140,000 for nine
years commencing in March 1996. Proceeds from the annual fee are used by the
Company to make the annual principal and interest payments.

Polaris Note Payable

In 1994, a concessionaire advanced Sunshine Promotions $500,000 to be used
in the construction of the Polaris Amphitheater. The advance is interest free
and is payable in annual installments of $25,000 beginning in 1994 for a
period of 20 years.

Capital Lease Obligations

The Company has entered into various equipment leases. Interest on the
leases range from 6.5% to 18.67%.

Principal maturities of the long-term debt, notes payable and capital
lease obligations over the next five years as of December 31, 1997 are as
follows (in thousands):

<TABLE>
<CAPTION>
LONG-TERM DEBT AND CAPITAL LEASE
NOTES PAYABLE OBLIGATIONS
------------------ ---------------
<S> <C> <C>
1998.... $756 $167
1999 ... 782 157
2000 ... 611 113
2001 ... 541 53
2002.... $537 --
</TABLE>

F-28

<PAGE>

SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. PROPERTY AND EQUIPMENT

The Company's property and equipment as of December 31, 1997 and 1996
consisted of the following (in thousands):

<TABLE>
<CAPTION>
PREDECESSOR
1997 1996
--------- -------------
<S> <C> <C>
Land...................... $ 8,752 --
Building and
improvements............. 44,364 --
Furniture and equipment .. 6,503 $ 131
Leasehold improvements ... 2,676 6,726
--------- -------------
62,295 6,857
Accumulated depreciation . (2,610) (4,626)
--------- -------------
$59,685 $ 2,231
========= =============
</TABLE>

7. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES

The Company is a 49% partner in a general partnership which subleases a
theater located in New York City. Income associated with the promotion of
concerts at this theater is recorded as concert revenue. Any such promotion
revenue recognized reduces the Company's share of the partnership's profits.
The Company is also a one-third partner in GSAC Partners, a general
partnership through which it shares in the income or loss of the PNC Bank
Arts Center at varying percentages based on the partnership agreement. The
Company records these investments on the equity method. In connection with
the PACE Acquisition, the Company agreed to purchase the interest in GSAC
Partners that it did not already own and in 1998 completed the purchase.
Thus, the financial position and operations of GSAC Partners will be
consolidated into those of the Company beginning in 1998.

The following is a summary of the unaudited financial position and results
of operations of the Company's equity investees (GSAC Partners in 1997 and
1996 only) as of and for the years ended December 31, 1997, 1996 and 1995 (in
thousands):

<TABLE>
<CAPTION>
PREDECESSOR PREDECESSOR
1997 1996 1995
--------- ------------- -------------
<S> <C> <C> <C>
Current assets.......................... $ 2,818 $ 756 $ 214
Property, plant and equipment .......... 1,427 239 122
Other assets ........................... 239 819 --
--------- ------------- -------------
Total assets............................ $ 4,484 $ 1,814 $ 336
========= ============= =============

Current liabilities..................... $ 1,621 $ 1,534 $ 264
Partners' capital ...................... 2,863 280 72
--------- ------------- -------------
Total liabilities and partners'
capital................................ $ 4,484 $ 1,814 $ 336
========= ============= =============
Revenue................................. $20,047 $16,037 $4,058
Expenses................................ 17,074 14,624 2,954
--------- ------------- -------------
Net income.............................. $ 2,973 1,413 $1,104
========= ============= =============
</TABLE>

The equity income recognized by the Company represents the appropriate
percentage of investment income less amounts reported in concert revenues for
shows promoted by the Company at these theaters. Such concert revenues of
unconsolidated subsidiaries was approximately $97,000, $205,000 and $110,000
for the years ended December 31, 1997, 1996 and 1995, respectively.

F-29
<PAGE>
SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. INCOME TAXES

The provisions for income taxes for the years ended December 31, 1997,
1996 and 1995 are summarized as follows (in thousands):

<TABLE>
<CAPTION>
PREDECESSOR PREDECESSOR
1997 1996 1995
-------- --------------- ---------------
<S> <C> <C> <C>
CURRENT:
Federal ...... -- -- --
State ........ $420 $106 $13
DEFERRED:
Federal ...... -- -- --
State ........ 70 -- --
-------- --------------- ---------------
Total ........ $490 $106 $13
======== =============== ===============
</TABLE>

No Federal income taxes were provided in 1997 as a result of the Company's
inclusion in the consolidated federal income tax return with SFX
Broadcasting. If the Company had filed on a stand alone basis, its federal
tax provision would have been approximately $2,050,000, consisting of
$1,760,000 in current taxes and approximately $290,000 of deferred taxes. The
Predecessor had no Federal tax provision in 1996 or 1995 by virtue of the
status of its profitable included companies as S Corporations. State income
taxes were provided to the extent that S Corporation status was not
recognized.

Deferred income taxes reflect the tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the Company's deferred tax asset and liabilities as of December
31, 1997 are as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Deferred compensation....... $ 783
Deferred tax liabilities:
Depreciable assets ......... $3,600
--------
Net deferred tax liability $2,817
========
</TABLE>

The Predecessor had no deferred tax liabilities as of December 31, 1996.

The acquisition of the Meadows resulted in the recognition of deferred tax
liabilities of approximately $3,200,000 under the purchase method of
accounting. These amounts were based upon the excess of the financial
statement basis over the tax basis in assets, principally fixed assets. The
acquisition of Delsener/Slater resulted in the recognition of deferred tax
assets of approximately $1,200,000 under the purchase method of accounting.
These amounts were based upon the excess of the financial statements basis
over the tax basis in assets, principally deferred compensation.

F-30
<PAGE>
SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At December 31, 1997, 1996, and 1995 the effective rate varies from the
statutory Federal income tax rate as follows (in thousands):

<TABLE>
<CAPTION>
PREDECESSOR
----------------
1997 1996 1995
--------- -------- ------
<S> <C> <C> <C>
Income taxes at the statutory rate ................... $ 1,463 $(139) $ 54
Effect of Subchapter S status ........................ -- 139 (54)
Nondeductible amortization ........................... 800 -- --
Travel and entertainment ............................. 20 -- --
Effect of consolidated return loss ................... (2,283) -- --
State and local income taxes (net of Federal
benefit)............................................. 490 106 13
--------- -------- ------
Total provision ...................................... $ 490 $ 106 $ 13
========= ======== ======
</TABLE>

9. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

Pursuant to the terms of the Spin-Off, upon the consummation of the
Broadcasting Merger, the Company will assume all obligations under any
employment agreements or arrangements between SFX Broadcasting and any
employee of the Company.

While the Company is involved in several suits and claims in the ordinary
course of business, the Company is not now a party to any legal proceeding
that the Company believes would have a material adverse effect on its
business.

The Company's operating leases includes primarily leases with respect to
venues, office space and land. Total rent expense was $2,753,000 , $875,000
and $835,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. The lease terms range from 3 to 37 years. Prior to the
Spin-Off, the Company will enter into contracts with certain officers and
other key employees. No such contracts existed in 1997. The future minimum
payments for all noncancelable operating leases and employee agreements with
initial terms of one year or more are as follows (in thousands):

<TABLE>
<CAPTION>
EMPLOYMENT
OPERATING LEASES AGREEMENTS
---------------- ------------
<S> <C> <C>
1998 ................ $ 3,366 $1,900
1999 ................ 3,823 1,864
2000 ................ 1,648 1,624
2001 ................ 1,666 1,534
2002 ................ 1,678 300
2003 and thereafter 14,117 --
---------------- ------------
$26,298 $7,222
================ ============
</TABLE>

The Company has committed to expansion projects at the Jones Beach Theater
and PNC Bank Arts Center and, in connection with the BGP Acquisition, for the
construction of a new amphitheater in the Seattle, Washington market. The
Jones Beach Theater and PNC Bank Arts Center expansions are expected to be
completed in June 1998 and to cost approximately $15,000,000 and $10,500,000,
respectively. As of December 31, 1997, approximately $1,018,000 and
$1,500,000, respectively, of these costs have been incurred. The new
amphitheater in Seattle is expected to cost $10,000,000 and is expected to be
completed in the spring of 1999.

As of December 31, 1997 and 1996, outstanding letters of credit for
$1,110,000 and $400,000, respectively, were issued by banks on behalf of the
Company as security for loans and the rental of theaters.

In connection with the acquisition of Delsener/Slater, SFX Broadcasting
entered into an employment agreement with each of Ron Delsener and Mitch
Slater pursuant to which each of Messrs. Delsener and Slater serve as
Co-President and Co-Chief Executive Officer of Delsener/Slater. Each of the
employment agreements continues until December 31, 2001 unless terminated
earlier by the Company for cause or voluntarily by Mr. Delsener or Mr.
Slater.

F-31

<PAGE>

SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In certain cases, Messrs. Delsener and Slater have rights to purchase the
outstanding capital stock of Delsener/Slater for fair market value as defined
in their employment agreements.

Additionally, in the case of a return event, as defined, which may be
deemed to include the Spin-Off, the Broadcasting Merger and related
transactions, Messrs. Delsener and Slater have the right to receive a portion
of the excess of the proceeds of the return event over a fixed amount
determined in reference to the original purchase price for Delsener/Slater,
all as calculated pursuant to the Delsener and Slater employment agreements.
Management believes that, with respect to the Spin-Off, the Broadcasting
Merger and related transactions, no payment will accrue to Mr. Delsener or
Mr. Slater pursuant to their employment agreements.

The employment agreements further provide that Messrs. Delsener and Slater
shall be paid annual bonuses determined with reference to Delsener/Slater
profits, as defined, for the immediately preceding year. Management believes
that no such bonus was earned for the year ended December 31, 1997.

Messrs. Delsener and Slater and the Company are in the process of
negotiating amendments to their employment agreements to reflect, among other
things, the changes to the business of the Company as a result of the Recent
Acquisitions and the Spin-Off, and each of Messrs. Delsener and Slater have
agreed in principle to waive any rights which may accrue in connection with
the Broadcasting Merger or the Spin-Off. The Company also expects, in
connection with the foregoing, to negotiate mutually satisfactory amendments
to certain of Messrs. Delsener's and Slater's compensation arrangements,
including bonus and profit sharing provisions.

10. RELATED PARTY TRANSACTIONS

The Company's Executive Vice President, General Counsel and Director is Of
Counsel to the law firm of Baker & McKenzie. Baker & McKenzie serves as
counsel to the Company in certain matters. Baker & McKenzie compensates the
executive based, in part, on the fees it receives from providing legal
services to the Company and other clients originated by the executive. In
1997, the Company incurred fees of approximately $2,948,000 for legal
services related to the Recent Acquisitions. Such fees were funded by SFX
Broadcasting on behalf of the Company. In February 1998, the Company
reimbursed SFX Broadcasting for these fees.

Due to stockholder represents the balance due to Mr. Delsener on his
advances to renovate the Jones Beach Theatre (the "Jones Beach Loan") and the
PNC Bank Arts Center (the "PNC Loan"). Delsener /Slater paid interest at 8%
per annum on the Jones Beach Loan, which was repaid in May 1996. The PNC
Loan, which was originated in 1996 was repaid in connection with the
acquisition of Delsener/Slater by SFX Broadcasting in 1997 (See Note 1).

11. CAPITAL STOCK

In the Spin-Off, (a) 13,579,024 shares of Class A Common Stock were
distributed to holders on the Spin-Off record date of SFX Broadcasting's
Class A common stock, Series D preferred stock and interests in SFX
Broadcasting's director deferred stock ownership plan, (b) 1,047,037 shares
of Class B Common Stock were distributed to holders on the Spin-Off record
date of SFX Broadcasting Class B common stock and (c) 609,856 shares were
placed in escrow to be issued upon the exercise of certain warrants of SFX
Broadcasting. The financial statements have been retroactively adjusted to
reflect this transaction.

F-32
<PAGE>
SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Holders of the Company's Class A Common Stock are entitled to one vote and
holders of the Company's Class B Common Stock are entitled to ten votes on
all matters submitted to a vote of shareholders except for (a) the election
of directors, (b) with respect to any "going private" transaction involving
the Chairman and (c) as otherwise provided by law.

The Board of Directors has the authority to issue preferred stock and will
assign the designations and rights at the time of issuance.

12. DEFINED CONTRIBUTION PLAN

The Company sponsors a 401(k) defined contribution plan in which most
full-time employees are eligible to participate. The Plan presently provides
for discretionary employer contributions. There were no contributions in
1997.

13. SUBSEQUENT EVENTS (UNAUDITED)

During January 1998, in connection with certain executive officers
entering into employment agreements with the Company, the Board of Directors,
upon recommendation of the Compensation Committee, approved the sale of an
aggregate of 650,000 shares of the Company's Class B Common Stock and 90,000
shares of the Company's Class A Common Stock to certain executive officers
for a purchase price of $2.00 per share. Such shares will be issued on or
about the effective date of the Spin-Off. A substantial non-cash charge to
earnings will be recorded by the Company at the time of the Spin-Off based on
then fair value of such shares.

In addition, the Board, upon recommendation of the Compensation Committee,
has approved the issuance of stock options exercisable for 245,000 shares of
the Company's Class A Common Stock. The options will vest over three years
and will have an exercise price of $5.50 per share. The Company will record
non-cash compensation charges over the three-year period to the extent that
the fair value of the Company's Class A Common Stock exceeds the exercise
price.

Further, the Board of Directors has approved the issuance of shares of the
Company's Class A Common Stock to holders of stock options or stock
appreciation rights ("SARs") of SFX Broadcasting as of the Spin-Off record
date, whether or not vested. The issuance was approved to allow such holders
of these options or SARs to participate in the Spin-Off in a similar manner
to holders of SFX Broadcasting's Class A Common Stock. Additionally, many of
the option holders will become officers, directors and employees of the
Company.

In January 1998, Mr. Sillerman committed to finance the $8.3 million
exercise price of the Meadows Repurchase in order to avoid the $10.5 million
reduction to Working Capital. In consideration for such commitment, the board
of directors of SFX Broadcasting agreed that Mr. Sillerman would receive the
Company Class A Common Stock to be issued in the Spin-Off with respect to the
Meadows Shares. In April 1998, SFX Broadcasting assigned the option for the
Meadows Shares to an unaffiliated third party and, in connection therewith,
paid such party a fee of $75,000. Mr. Sillerman subsequently advanced such
party the $8.3 million exercise price for the Meadows Repurchase which will
become due on the earlier of the date on which the Meadows Shares are
disposed of by the third party or January 16, 1999. In the event the Meadows
Shares are tendered in the SFX Merger, the third party has agreed to pay
$10.5 million to the Company, which is an amount equal to the Meadows
Reduction. In the event that the SFX Merger is not consummated on or before
December 31, 1998, SFX Broadcasting has the option, for a limited time, to
repurchase the Meadows Shares for an aggregate consideration of approximately
$10.0 million. The third party has agreed to transfer to Mr. Sillerman the
Company Class A Common Stock to be issued in the Spin-Off with respect to the
Meadows Shares.

F-33
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Connecticut Performing Arts, Inc. and
the Partners of Connecticut Performing Arts Partners:

We have audited the accompanying combined balance sheets of Connecticut
Performing Arts, Inc. and Connecticut Performing Arts Partners (collectively,
the Company) as of December 31, 1995 and 1996, and the related combined
statements of operations, shareholders' and partners' equity (deficit) and
cash flows for the years then ended. These combined financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 1995 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Hartford, Connecticut
March 21, 1997

F-34
<PAGE>

CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
ASSETS:
Current assets:
Cash ........................................................... $ 63,061 $ 6,778
Accounts receivable............................................. 192,382 152,205
Accounts receivable--related party.............................. 124,700 226,265
Prepaid interest ............................................... 54,982 54,279
Prepaid insurance .............................................. 69,797 87,869
Other current assets ........................................... 21,156 60,784
Deposit ........................................................ -- 110,000
Subscription receivable ........................................ 100 100
------------- -------------
Total current assets ......................................... 526,178 698,280
------------- -------------

Plant and equipment:
Building and building improvements ............................. 14,127,632 14,208,153
Furniture, fixtures and equipment .............................. 1,899,041 1,973,911
Leasehold improvements ......................................... 1,221,069 1,224,071
------------- -------------
17,247,742 17,406,135
Less: Accumulated depreciation and amortization ................ (408,897) (1,620,297)
------------- -------------
16,838,845 15,785,838
------------- -------------
Other assets:
Deferred costs, net of accumulated amortization of $165,300 and
$503,766 in 1995 and 1996, respectively ....................... 2,453,553 2,115,087
Deposit ........................................................ 110,000 --
Other .......................................................... -- 2,332
------------- -------------
Total other assets ........................................... 2,563,553 2,117,419
------------- -------------
$19,928,576 $18,601,537
============= =============
LIABILITIES AND SHAREHOLDERS' AND PARTNERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ............................................... $ 915,280 $ 908,986
Accrued expenses ............................................... 1,356,132 655,207
Deferred income ................................................ 679,476 737,440
Notes payable .................................................. 1,100,000 1,450,000
Current portion of long-term debt and capital lease obligations 493,362 824,800
------------- -------------
Total current liabilities .................................... 4,544,250 4,576,433
------------- -------------
Long-term debt and capital lease obligations,
less current portion .......................................... 13,398,700 13,982,196
------------- -------------
COMMITMENTS AND CONTINGENCIES
(Notes 2, 4, 5, 6, 9 and 10)

Shareholders' and Partners' Equity (Deficit):
Shareholders' equity--
Common stock................................................... 1,000 1,000
Series A Preferred Stock....................................... 1,346,341 1,372,174
Series B Preferred Stock....................................... 1,250,000 1,250,000
Accumulated deficit............................................ (273,114) (1,999,823)
Partners' equity (deficit)...................................... (338,601) (580,443)
------------- -------------
Total shareholders' and partners' equity (deficit) .......... 1,985,626 42,908
------------- -------------
$19,928,576 $18,601,537
============= =============
</TABLE>

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

F-35
<PAGE>

CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996
-------------- -------------
<S> <C> <C>
Operating revenues:
Concert revenue ............... $ 6,830,681 $ 8,122,797
Cost of concerts .............. (5,524,043) (6,191,777)
-------------- -------------
1,306,638 1,931,020
Ancillary income .............. 1,431,577 2,052,592
-------------- -------------
2,738,215 3,983,612
-------------- -------------
Operating expenses:
General and administrative .... 3,068,162 3,080,914
Depreciation and amortization 574,197 1,549,894
Other ......................... 20,046 33,577
-------------- -------------
3,662,405 4,664,385
-------------- -------------
Loss from operations......... (924,190) (680,773)
Other income (expense):
Interest income................ 428,869 30,015
Interest expense............... (509,225) (1,274,660)
-------------- -------------
Loss before income taxes ... (1,004,546) (1,925,418)
Provision for income taxes ... 10,796 17,300
-------------- -------------
Net loss .................... $(1,015,342) $(1,942,718)
============== =============
</TABLE>

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

F-36
<PAGE>

CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
COMBINED STATEMENTS OF SHAREHOLDERS'
AND PARTNERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
PARTNERS'
SHAREHOLDERS' EQUITY (DEFICIT) EQUITY
-------------------------------------- (DEFICIT)
COMMON PREFERRED ACCUMULATED
STOCK STOCK DEFICIT
-------- ------------ --------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994............ $1,000 $2,500,000 $ (32) $ 500,000
Accretion of Series A Preferred
Stock................................ -- 96,341 (96,341) --
Net loss.............................. -- -- (176,741) (838,601)
-------- ------------ -------------- -----------
Balance, December 31, 1995............ 1,000 2,596,341 (273,114) (338,601)
Accretion of Series A Preferred
Stock................................ -- 25,833 (25,833) --
Net loss.............................. -- -- (1,700,876) (241,842)
-------- ------------ -------------- -----------
Balance, December 31, 1996............ $1,000 $2,622,174 $(1,999,823) $(580,443)
======== ============ ============== ===========
</TABLE>

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

F-37
<PAGE>

CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................ $ (1,015,342) $ (1,942,718)
Adjustments to reconcile net loss to net cash provided
by
(used in) operating activities:
Depreciation and amortization .......................... 574,197 1,549,894
Loss on disposal of equipment .......................... -- 1,031
Changes in operating assets and liabilities:
Accounts receivable .................................... (192,382) 40,177
Accounts receivable--related party ..................... -- (101,565)
Prepaid expenses and other assets ...................... (143,703) (59,329)
Accounts payable ....................................... -- (6,294)
Accrued expenses ....................................... 505,199 150,008
Deferred income ........................................ 679,476 57,964
--------------- ---------------
Net cash provided by (used in) operating activities .. 407,445 (310,832)
--------------- ---------------
Cash flows from investing activities:
Purchases of plant and equipment ....................... (23,242,858) (159,452)
Grant proceeds.......................................... 7,680,161 --
Deferred start-up costs ................................ (264,975) --
Accounts receivable--related party...................... 827,170 --
Accounts payable........................................ (438,350) --
--------------- ---------------
Net cash used in investing activities ................ (15,438,852) (159,452)
--------------- ---------------
Cash flows from financing activities:
Proceeds from borrowings on notes payable and long-term
debt .................................................. 13,943,316 1,278,068
Repayments of notes payable, long-term debt and capital
lease obligations...................................... (176,917) (864,067)
Proceeds from sales of common and preferred stock ...... 900 --
--------------- ---------------
Net cash provided by financing activities ............. 13,767,299 414,001
--------------- ---------------
Net decrease in cash .................................... (1,264,108) (56,283)
Cash, beginning of year ................................. 1,327,169 63,061
--------------- ---------------
Cash, end of year........................................ $ 63,061 $ 6,778
=============== ===============
Supplemental Disclosures:
Cash Paid For--
Interest................................................ $ 554,342 $ 1,108,291
=============== ===============
Income taxes............................................ $ 10,796 $ 17,300
=============== ===============
Noncash Transactions--
Capital lease obligations............................... $ 59,479 $ --
=============== ===============
Series A Preferred Stock accretion...................... $ 96,341 $ 25,833
=============== ===============
Conversion of accrued expense for equipment purchase to
note payable........................................... $ -- $ 850,933
=============== ===============
</TABLE>

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

F-38
<PAGE>
CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS

1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Operations --

Connecticut Performing Arts, Inc. (the Company) and Connecticut Performing
Arts Partners (the Partnership) were incorporated and formed, respectively,
in 1993 pursuant to the laws of the State of Connecticut. The Company's
shareholders and the Partnership's partners are Nederlander of Connecticut,
Inc. and Connecticut Amphitheater Development Corporation. The Company's
shareholders and the Partnership's partners changed in March 1997 (see Note
10). The Company and Partnership are engaged in the ownership and operation
of an amphitheater in Hartford, Connecticut. The construction of the
amphitheater commenced in December 1994 and amphitheater operations commenced
in July 1995.

Principles of combination --

The combined financial statements include the accounts of the Company and
the Partnership after elimination of intercompany accounts and transactions.

Use of estimates in the preparation of financial statements --

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.

Plant and equipment --

Plant and equipment is carried at cost. Major additions and betterments
are capitalized, while replacements, maintenance and repairs which do not
extend the lives of the assets are charged to operations as incurred. Upon
the disposition of plant and equipment, any resulting gain or loss is
recognized in the statement of operations as a component of income.

The Company received grant funds from the City of Hartford and Connecticut
Development Authority related to the construction of the amphitheater (see
Note 4). Such amounts have been accounted for as a reduction in the cost of
the amphitheater.

Depreciation of plant and equipment is provided for, commencing when such
assets become operational, using straight-line and accelerated methods over
the following estimated useful lives:

<TABLE>
<CAPTION>
USEFUL LIVES
----------------------
<S> <C>
Building and building improvements .... 39 years
Furniture, fixtures and equipment ..... 4-7 years
Leasehold improvements ................. Shorter of asset
life or lease term

</TABLE>

Effective January 1, 1996, the Company and Partnership adopted Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" which had no
effect upon adoption. This statement requires that long-lived assets and
certain identifiable intangible assets to be held and used 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.

F-39
<PAGE>
CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Deferred costs --

Deferred costs consist of start-up costs being amortized over a period of
5 years and deferred financing costs being amortized over the term of the
related debt (24 years and 4 months). As of December 31, 1995 and 1996
deferred costs were as follows:

<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Deferred start-up .............. $1,452,669 $1,452,669
Deferred financing ............. 1,166,184 1,166,184
------------ ------------
2,618,853 2,618,853
Less: Accumulated amortization (165,300) (503,766)
------------ ------------
$2,453,553 $2,115,087
============ ============
</TABLE>

Deposit --

The deposit represents a deposit held by the City of Hartford related to
an employment agreement between the Partnership and the City of Hartford for
priority hiring of Hartford residents and utilization of minority business
enterprise or women business enterprise contractors and vendors in the future
operation of the amphitheater. The deposit will be returned to the
Partnership in December 1997 if the Partnership is in compliance with the
employment agreement. As of December 31, 1996, the Partnership has
compensated the City of Hartford for noncompliance with the terms of the
agreement in connection with the construction of the facility and the hiring
of contractors and the City of Hartford has agreed to make no additional
claims with respect to this matter.

Income taxes --

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". This
statement requires a company to recognize deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized
in a company's financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement carrying amounts and the tax bases of assets
and liabilities and net operating loss carryforwards available for tax
reporting purposes, using the applicable tax rates for the years in which the
differences are expected to reverse. A valuation allowance is recorded on
deferred tax assets unless realization is more likely than not.

The income tax effects of the operations of the Partnership accrue to the
partners in accordance with the terms of the Partnership agreement and are
not reflected in the accompanying combined financial statements.

Revenue recognition --

Revenue from ticket sales is recognized upon occurrence of the event.
Advance ticket sales are recorded as deferred income until the event occurs.
Ticket revenue is recorded net of payments in lieu of taxes under the terms
of the City of Hartford lease (see Note 6) and admission taxes.

Advertising --

The Company expenses the cost of advertising when the specific event takes
place. Advertising expense was $639,424 and $689,160 for the years ended
December 31, 1996 and 1995, respectively.

F-40
<PAGE>
CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

2. SHAREHOLDERS' EQUITY:

Common stock --

The Company is authorized to issue 5,000 shares of common stock with no
par value. The subscription receivable of $100 as of December 31, 1996
represents the amount due from shareholders for 100 shares of common stock at
$10 per share, of which $900 was received in February 1995.

Preferred stock --

The Company is authorized to issue 295,000 shares of preferred stock at no
par value. As of December 31, 1996 and 1995, 125,000 of such shares have been
designated as Series A Preferred Stock and 125,000 of such shares have been
designated as Series B Preferred Stock. Series A and Series B Preferred Stock
are not entitled to dividends and have liquidation rights of $10 per share.

Series A Preferred Stock is mandatorily redeemable at the rate of 20,835
shares commencing December 31, 1995 (the Initial Redemption Date) and an
aggregate of 20,833 shares on each six month anniversary of the Initial
Redemption Date until all 125,000 shares of the Series A Preferred Stock have
been redeemed, at $11.445 per share. As of December 31, 1996, no shares of
Series A Preferred Stock had been redeemed. The Company is accreting the
difference between the redemption price and the proceeds per share over the
period from the issuance date to the respective scheduled redemption dates.

Series B Preferred Stock is mandatorily redeemable at a per share price of
$10 in whole or in part at the option of the Company at any such time as
legally available funds, as defined in the resolution establishing and
designating the preferred stock, are available. On the tenth anniversary of
the completion date of the amphitheater any Series B Preferred Stock
outstanding shall be redeemed by the Company at a per share price of $10.

The Series A and Series B Preferred Stock will not be redeemed if such
redemption would result in a violation of the provisions of the Connecticut
Development Authority assistance agreement (see Note 4) or the mortgage loan
agreement (see Note 5).

3. PARTNERS' EQUITY:

In 1993, Nederlander of Connecticut, Inc. and Connecticut Amphitheater
Development Corporation each made an initial capital contribution of
$250,000.

4. GRANT FUNDS:

Connecticut Development Authority (CDA) Assistance Agreement --

On September 12, 1994, the CDA entered into a non-recourse assistance
agreement with the Company whereby the CDA provided grant funds for the
construction and development of an amphitheater in the City of Hartford (the
Project) through the issuance of State of Connecticut General Fund Obligation
Bonds (GFO Bonds). The Company received bond proceeds of $8,863,000, which
amount is net of CDA bond issuance costs of $593,000 and withholdings of
$429,000 by the CDA to cover the expected operating shortfall, as discussed
below, through December 31, 1995. Commencing January 1, 1996, the annual tax
revenues derived from the operation of the amphitheater are utilized to
satisfy the annual debt service requirements under the GFO Bonds. In the
event that annual tax revenues derived from the operation of the amphitheater
do not equal annual debt service requirements under the GFO Bonds, the
Company must deposit the lesser of the operating shortfall, as defined, or
10% of the annual debt service under the GFO Bonds. An operating shortfall
did not exist for the year ended December 31, 1996. The GFO Bonds mature on
October 15, 2024 and have an average coupon rate of 6.33%. Annual debt
service requirements on the GFO Bonds for each of the next five years and
thereafter are as follows:

F-41
<PAGE>
CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. GRANT FUNDS: (Continued)

<TABLE>
<CAPTION>
YEAR AMOUNT
- ------------- ------------
<S> <C>
1997.......... $ 740,556
1998 ......... 738,906
1999 ......... 736,656
2000 ......... 738,856
2001 ......... 740,293
Thereafter .. 17,140,363
------------
$20,835,630
============
</TABLE>

The assistance agreement requires an annual attendance of at least 400,000
for each of the first three years of operations. It will not be considered an
event of default if the annual attendance is less than 400,000 provided that
no operating shortfall exists for that year or if an operating shortfall
exists such amount has been deposited by the Company. If there is an event of
default, the CDA may foreclose on the construction mortgage loan (see Note
5). If the amphitheater's operations are relocated outside of Connecticut
during the ten year period subsequent to the assistance agreement or during
the period of the construction mortgage loan, the full amount of the grant
funds plus a penalty of 5% must be repaid to the State of Connecticut.

City of Hartford Grant Funds --

On February 15, 1995 the Company entered into an agreement with the City
of Hartford whereby the City of Hartford provided grant funds of $2,050,000
for the remediation and closure of a solid waste disposal area near the
amphitheater. As of December 31, 1995 all funds had been received by the
Company.

5. NOTES PAYABLE AND LONG-TERM DEBT:

Notes payable --

In October 1995, the Company entered into two notes payable with related
parties for an aggregate of $2,000,000. As of December 31, 1996 and 1995,
$1,450,000 and $1,100,000, respectively was outstanding on these notes. The
notes bear interest at 6.6% per annum and are payable upon demand.

CDA mortgage loan --

On September 12, 1994, CDA entered into a construction mortgage loan
agreement for $7,685,000 with the Company. The purpose of the loan was to
finance a portion of the construction and development of the amphitheater.
The loan agreement contains substantially the same covenants as the CDA
assistance agreement (see Note 4). As of December 31, 1995, proceeds of
$6,519,000, which amount is net of deferred financing costs of approximately
$1,166,000, had been received by the Company.

F-42
<PAGE>
CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. NOTES PAYABLE AND LONG-TERM DEBT: (Continued)
The mortgage loan bears interest at 8.73% and is payable in monthly
installments of principal and interest. The mortgage loan matures on October
15, 2019. As of December 31, 1996, future principal payments are as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
- ------------- -----------
<S> <C>
1997.......... $ 111,667
1998 ......... 121,667
1999 ......... 131,667
2000 ......... 141,667
2001 ......... 152,500
Thereafter .. 6,854,498
-----------
$7,513,666
===========
</TABLE>

The loan is guaranteed by the Company's shareholders and is collateralized
by a lien on the Company's assets. As of December 31, 1996, the loan was
secured by an irrevocable standby letter of credit issued by a shareholder of
the Company in the amount of $785,000. The letter of credit was replaced in
March 1997 by a letter of credit issued by a new shareholder (see Note 10).

Ogden Entertainment, Inc. (OE) Concession Agreement --

In October 1994, the Partnership entered into a concession agreement with
OE which provides for the payment of concession commissions to the
Partnership. In connection with the concession agreement, OE loaned the
Partnership $4,500,000 in 1995 to facilitate the construction of the
amphitheater. On December 30, 1996, the concession agreement was amended and
restated retroactively to October 18, 1994. In accordance with the terms of
the amended agreement, which expires on July 7, 2025, interest only, at the
6-month LIBOR rate, through July 7, 1995 and principal and interest, at the
rate of 7.5% per annum, were due on the note payable via withholdings of the
first $41,716 from each monthly commission payment commencing July 20, 1995
through December 20, 1995. Effective January 2, 1996, and through the term of
the amended concession agreement, principal and interest, at the rate of 7.5%
per annum on the note is payable via withholdings of the first $31,299 from
each monthly commission payment.

OE loaned the Partnership an additional $1,000,000 during 1995. This loan
bears interest at a rate of 9.75% per annum and is payable via withholdings
of an additional $11,900 of principal, plus interest, from each monthly
commission payment through December 20, 2002. As of December 31, 1996,
aggregate future principal payments to OE are as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
- ------------- -----------
<S> <C>
1997.......... $ 190,722
1998 ......... 194,442
1999 ......... 198,451
2000 ......... 202,772
2001 ......... 207,427
Thereafter .. 4,218,234
-----------
$5,212,048
===========
</TABLE>

The concession agreement provided for the Partnership to supply certain
equipment to OE at the Partnership's expense. This equipment was installed
prior to the opening of the amphitheater (the Initial

F-43
<PAGE>
CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. NOTES PAYABLE AND LONG-TERM DEBT: (Continued)
Equipment). The Initial Equipment was purchased by OE at a cost of $850,933
and the Partnership was obligated to reimburse OE for the cost of the
equipment. Accordingly, this amount was reflected as an accrued expense in
the accompanying combined balance sheet as of December 31, 1995. In 1996, in
connection with the amended concession agreement, the $850,933, and an
additional $33,067 related to 1996 equipment purchases, was converted to a
note payable for $884,000. The note bears interest at the rate of 9.25% per
annum and provides for monthly principal and interest payments of $10,185 to
OE, however, the Partnership is not required to make any principal or
interest payments to the extent that 5% of receipts, as defined, in any month
are less than the amount of the payment due. As of December 31, 1996, future
principal payments to OE by the Partnership are as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
- ------------- ---------
<S> <C>
1997.......... $ 42,210
1998 ......... 46,284
1999 ......... 50,751
2000 ......... 55,650
2001 ......... 61,022
Thereafter .. 628,083
---------
$884,000
=========
</TABLE>

Conn Ticketing Company (CTC) Promissory Note Payable --

On April 1, 1995, CTC (a company related to the Company and the
Partnership via common ownership) entered into a promissory note agreement
with ProTix Connecticut General Partnership (PTCGP). Under the terms of the
agreement, CTC borrowed $825,000 at 9.375% per annum from PTCGP. Principal
and interest are repayable by CTC in nine annual installments of $139,714
which commenced March 31, 1996. In May 1995, CTC loaned $824,500 to the
Company which is also repayable in nine annual installments of principal and
interest of $139,714. The PTCGP loan to CTC is secured by CTC's receivable
from the Company. As of December 31, 1996, future principal payments to CTC
by the Company are as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
- ------------- ---------
<S> <C>
1997.......... $ 68,217
1998 ......... 74,613
1999 ......... 81,608
2000 ......... 89,259
2001 ......... 97,627
Thereafter .. 351,306
---------
$762,630
=========
</TABLE>

In January 1995, the Partnership entered into a ticket and sales agreement
with PTCGP through December 31, 2004. Under the terms of the agreement, PTCGP
pays the Partnership an annual fee of $140,000 commencing in March 1996.
Proceeds from the annual fee for the first nine years will be used by the
Partnership to make the annual principal and interest payment to CTC.

Line of credit --

The Partnership has a line of credit in the amount of $2,000,000, which
bears interest at 8.25% per annum, with a bank. As of December 31, 1996,
$395,000 was outstanding on the line of credit.

F-44
<PAGE>
CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. NOTES PAYABLE AND LONG-TERM DEBT: (Continued)
Capital lease obligations --

The Partnership entered into capital leases for certain office equipment.
The leases expire in 1998 and 2000. As of December 31, 1996 future principal
payments are as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
- ------- ---------
<S> <C>
1997 ... $16,984
1998 ... 13,905
1999 ... 4,550
2000 ... 4,213
---------
$39,652
=========
</TABLE>

6. LAND AND BUILDING LEASES:

Land lease agreement between the City of Hartford and the Partnership --

The Partnership entered into a 40 year lease agreement for certain land
with the City of Hartford, Connecticut on September 14, 1994. The lease
agreement provides for two successive options to extend the term of the lease
for a period of ten years each. The Partnership pays an annual basic rent of
$50,000 commencing July 1, 1995; and additional rent payments in lieu of real
estate taxes (PILOT) in an amount equal to 2% of all admission receipts, food
and beverage revenue, merchandise revenue and parking receipts that exceed
10% of the total admission receipts, which amount is to be net of any
surcharges and sales or like taxes levied by governmental authorities on the
price of such items.

Assignment of lease by the Partnership to the Company --

The above lease was subsequently assigned by the Partnership to the
Company on September 22, 1994 for consideration of $1.

Lease and sublease agreement between the Company and the Partnership --

On October 19, 1994, the Company subleased the land and buildings and
improvements thereon to the Partnership for a period of 40 years commencing
upon substantial completion of the amphitheater. The sublease agreement
provides for two successive options to extend the term of the lease for a
period of ten years each. The sublease agreement provides for the Partnership
to pay rent to the Company in amounts ranging from $804,000 to $831,100 per
annum for the first 25 years and $100,000 per annum thereafter including the
option periods. Additional rent of six semi-annual installments of $238,452
is also payable by the Partnership commencing six months after the start of
operations. Subsequent to the six semi-annual installments an aggregate of
$1,250,000 will be payable in semi-annual installments based on available
cash flow of the Partnership, as defined. Additionally, the Partnership is
also required to pay the annual basic rent ($50,000) and any additional
payments in lieu of taxes under the terms of the lease agreement between the
City of Hartford and the Partnership described above. The Partnership will
also pay additional rent equal to principal and interest payable by the
Company to the concession company for a previously arranged concessionaire
arrangement (see Note 5). The accompanying combined statement of operations
for the year ended December 31, 1996 includes rent expense of $50,000 which
represents the aggregate amount due to the City of Hartford under the terms
of the above agreements.

7. INCOME TAXES:

The provision for income taxes for the year ended December 31, 1996
represents minimum state income taxes for the Company. As of December 31,
1996, the Company has a net deferred tax asset of

F-45
<PAGE>
CONNECTICUT PERFORMING ARTS, INC. AND
CONNECTICUT PERFORMING ARTS PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES: (Continued)
approximately $750,000 primarily as a result of aggregate net operating
losses since inception. Usage of the net operating loss carryforwards is
restricted in the event of certain ownership changes. A valuation allowance
has been recorded for the same amount due to the uncertainty related to the
realization of this asset.

8. RELATED PARTY TRANSACTIONS:

Accounts receivable -related party as of December 31, 1996, includes net
amounts due from a shareholder of $121,265 and receivables from another
related party of $105,000.

9. CONTINGENCIES:

The Company and the Partnership are party to certain litigation arising in
the normal course of business. Management, after consultation with legal
counsel, believes the disposition of these matters will not have a material
adverse effect on the combined results of operations or financial condition.

10. SUBSEQUENT EVENTS:

Effective March 5, 1997, the Partnership and Company entered into a
$1,500,000 loan agreement with the CDA of which $1 million was funded in
March 1997. Principal payments of $150,000 are due on July 1 and October 1 of
each year commencing July 1, 1997 through October 1, 2001. The note bears
interest at the rate of 8.9% per annum through February 1, 1998, and
thereafter at the index rate, as defined, plus 2.5%. In addition, the
Partnership and Company are required to make principal payments in an amount
equal to 10% of the annual gross revenue, as defined, in excess of $13
million on or before March 1 of each calendar year commencing March 1, 1998.

In March 1997, three subsidiaries of SFX Broadcasting, Inc.
(Broadcasting), which were created for such purpose, were merged into
Nederlander of Connecticut, Inc., Connecticut Amphitheater Development
Corporation and QN Corp., a newly formed entity. In connection with the
merger, the name of Nederlander of Connecticut, Inc., was changed to NOC,
Inc. (NOC) and the directors of NOC, Inc., Connecticut Amphitheater
Development Corporation (CADCO) and QN Corp. (QN) were replaced with
directors of the Broadcasting acquisition subsidiaries. Each outstanding
share of stock of NOC, CADCO and QN was canceled and exchanged for an
aggregate of $1 million cash and shares of Broadcasting Class A Common Stock
valued at $9 million, subject to certain adjustments. The shares are subject
to a put provision between the second and seventh anniversary of the closing
whereby the holder can put each share back to Broadcasting for the per share
value of Broadcasting stock as of the merger closing date, as defined, less
10%. Additionally, the shares may be called by Broadcasting during the same
period for an amount equal to the per share value of the Broadcasting stock
as of the merger closing date, as defined, plus 10%. As consideration for
approval of the transaction, the CDA received shares of Broadcasting stock
valued at approximately $361,000.

F-46
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
of SFX Broadcasting, Inc.:

We have audited the accompanying combined balance sheets of DEER CREEK
PARTNERS, L.P. (formerly Sand Creek Partners, L.P.) and MURAT CENTRE, L.P.,
as of December 31, 1996 and 1995, and the related combined statements of
operations and partners' equity (deficit) and cash flows for the years ended
December 31, 1996 and 1995. These financial statements are the responsibility
of the Partnerships' management. Our responsibility is to express an opinion
on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Deer Creek
Partners, L.P. and Murat Centre, L.P. as of December 31, 1996 and 1995, and
the combined results of their operations and their cash flows for the years
ended December 31, 1996 and 1995 in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Indianapolis, Indiana
September 29, 1997.

F-47
<PAGE>

DEER CREEK PARTNERS, L.P. AND MURAT CENTRE, L.P.
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>
1995 1996
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................. $ 1,894,533 $ 876,776
Accounts receivable........................ 138,548 155,929
Prepaid show expense....................... -- 42,114
Prepaid expenses........................... 91,919 118,152
------------- ------------
Total current assets..................... 2,125,000 1,192,971
------------- ------------
Property and equipment:
Land....................................... 2,428,770 2,428,770
Buildings.................................. 6,155,979 6,155,979
Site improvements.......................... 2,328,369 2,230,594
Leasehold improvements..................... 5,270,038 9,663,357
Furniture and equipment.................... 1,070,547 1,722,874
------------- ------------
17,253,703 22,201,574
Less: Accumulated depreciation............. 2,167,567 2,850,077
------------- ------------
Total property and equipment............. 15,086,136 19,351,497
------------- ------------
Other Assets:
Cash surrender value--life insurance
policy.................................... 62,819 71,815
Unamortized loan acquisition costs ....... 93,439 350,055
------------- ------------
Total other assets....................... 156,258 421,870
------------- ------------
TOTAL ASSETS ............................ $17,367,394 $20,966,338
============= ============
</TABLE>

The accompanying notes are an integral part of these statements.

F-48
<PAGE>

DEER CREEK PARTNERS, L.P. AND MURAT CENTRE, L.P.
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Current portion of notes and capital lease
obligation........................................... $ 796,391 $ 611,127
Current portion of deferred ticket revenue............ 542,420 841,476
Accounts payable...................................... 472,365 520,663
Accrued interest...................................... 663,391 299,600
Accrued property taxes................................ 125,524 280,734
Current portion of loan payable....................... -- 34,200
Construction payable and other accrued liabilities .. 3,341,284 50,641
------------- -------------
Total current liabilities .......................... 5,941,375 2,638,441
------------- -------------
Long-term Liabilities:
Notes payable and capital lease obligation,
net of current portion............................... 12,998,738 17,266,768
Loan, net of current portion (Note 5)................. -- 99,200
Deferred ticket revenue, net of current portion ...... -- 168,833
------------- -------------
Total long-term liabilities......................... 12,998,738 17,534,801
------------- -------------
Partners' equity (deficit):
Contributed capital .................................. -- 2,200,000
Undistributed earnings (loss) ........................ (1,572,719) (1,406,904)
------------- -------------
(1,572,719) 793,096
------------- -------------
TOTAL LIABILITIES AND PARTNERS' EQUITY.............. $17,367,394 $20,966,338
============= =============
</TABLE>

The accompanying notes are an integral part of these statements.

F-49
<PAGE>

DEER CREEK PARTNERS, L.P. AND MURAT CENTRE, L.P.
COMBINED STATEMENTS OF OPERATIONS AND PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>
1995 1996
--------------
<S> <C> <C>
Operating revenues:
Concert revenue.................................. $11,073,491 $14,194,502
Cost of concerts................................. 8,939,022 10,724,059
-------------- --------------
2,134,469 3,470,443
Ancillary income:
Royalty commissions.............................. 1,706,458 1,799,950
Corporate sponsorships........................... 959,518 1,056,161
Other ancillary income........................... 789,433 1,375,528
-------------- --------------
5,589,878 7,702,082
Operating expenses:
General & administrative......................... 2,419,679 3,452,990
Depreciation & amortization...................... 343,567 783,167
Other operating expenses......................... 249,812 471,126
-------------- --------------
3,013,058 4,707,283
Income from operations........................... 2,576,820 2,994,799
Other income (expense):
Interest income.................................. 86,034 84,123
Interest expense................................. (2,203,690) (1,549,579)
-------------- --------------
Net Income (Loss).............................. $ 459,164 $ 1,529,343
Partners' Equity (Deficit) at beginning of year $(1,857,603) $(1,572,719)
Contributions.................................... -- 2,200,000
Distributions.................................... (174,280) (1,363,528)
-------------- --------------
Partners' Equity (Deficit) at end of year ...... $(1,572,719) $ 793,096
============== ==============
</TABLE>

The accompanying notes are an integral part of these statements.

F-50
<PAGE>

DEER CREEK PARTNERS, L.P. AND MURAT CENTRE, L.P.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Operating Activities:
Net income .................................................... $ 459,164 $ 1,529,343
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 461,678 783,167
Decrease (increase) in certain assets:
Accounts receivable........................................... (45,317) (17,381)
Prepaid show expenses......................................... -- (42,114)
Prepaid expenses and other ................................... 746,307 (33,381)
Increase (decrease) in certain liabilities:
Accounts payable, construction payable and other accrued
liabilities.................................................. 3,424,461 (3,087,135)
Deferred ticket revenue....................................... (1,266,654) 467,889
Accrued interest.............................................. 389,251 (363,791)
Other......................................................... (75,407) 44,852
------------- -------------
Net cash provided by (used in) operating activities ........ 4,093,483 (718,551)
------------- -------------
Investing Activities:
Capital expenditures.......................................... (6,713,889) (5,197,260)
------------- -------------
Net cash used by investing activities......................... (6,713,889) (5,197,260)
------------- -------------
Financing Activities:
Net proceeds from borrowings.................................. 3,060,087 5,057,249
Capital contributions......................................... -- 2,200,000
Department of Metropolitan Development Grant.................. 761,014 338,986
Principal payments on notes and loan payable and capital
leases....................................................... (20,308) (1,334,653)
Distributions to partners..................................... (174,280) (1,363,528)
------------- -------------
Net cash provided by financing activities ................... 3,626,513 4,898,054
------------- -------------
Net increase (decrease) in cash and cash equivalents .......... 1,006,107 (1,017,757)
Cash and cash equivalents:
Beginning of period........................................... 888,426 1,894,533
------------- -------------
End of period................................................. $ 1,894,533 $ 876,776
============= =============
Supplemental disclosures:
Cash paid for interest........................................ $ 1,148,049 $ 1,912,494
Equipment acquired under capital leases....................... -- 139,000
============= =============
</TABLE>

The accompanying notes are an integral part of these statements.

F-51
<PAGE>
DEER CREEK PARTNERS, L.P. AND MURAT CENTRE, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Organization

Prior to 1997 (See Note 10) Deer Creek Partners, L.P. (the Deer Creek
Partnership) owned and operated Deer Creek Music Center (Deer Creek), a
concert amphitheater located in Hamilton County, near Indianapolis, Indiana
which commenced operations in 1989. Sand Creek Partners, L.P. (the general
partner) was a 50% general partner and is responsible for the management of
the Deer Creek Partnership. Conseco, Inc. (Conseco) was a 50% limited partner
of the Deer Creek Partnership. All distributable cash, as defined by the Deer
Creek partnership agreement, is to be distributed equally between the
Partners.

The Deer Creek Partnership was formed on January 5, 1996 as a result of
Conseco exercising its option to become a 50% owner of Deer Creek. Deer Creek
was previously 100% owned by Sand Creek Partners, L.P. This change in
ownership has been accounted for as a reorganization, and thus the carrying
value of the assets and liabilities related to Deer Creek remain unchanged as
a result of the reorganization.

Murat Centre, L.P. (Murat Partnership), formed on August 1, 1995, leases
and operates the Murat Theatre (Theatre), a renovated concert and
entertainment venue located in downtown Indianapolis, Indiana. The Theatre's
grand reopening was in March, 1996. The Theatre is currently owned by and was
previously operated by the Murat Temple Association, Inc. Murat Centre, Inc.
is the general partner and is responsible for management of the Theatre.
Profits and losses of the Murat Partnership are allocated 1% to the general
partner and 99% to the limited partners. Distributions to partners are
generally limited to the income taxes payable by the partners as a result of
taxable income generated by the Murat Partnership. To the extent that cash
flow for the applicable year exceeds all payment requirements as discussed in
Note 3, the excess shall be distributed to the partners.

In connection with reopening the Theatre, the Murat Partnership expended
approximately $11.7 million for renovations which began in 1995. Start-up and
organizational costs of approximately $85,000 in 1995 and $90,000 in 1996
were expensed as incurred and have been included in general and
administrative expenses in the combined statement of operations for the years
ended December 31, 1996 and 1995. The building is leased under a 50 year
operating lease with options for 5 additional consecutive 10 year periods
under the same terms and conditions as the initial 50 year lease.

b. Basis of Accounting

The financial statements have been prepared in accordance with generally
accepted accounting principles. Such principles require management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and disclosures of contingent assets and liabilities at the date
of financial statements and the amounts of income and expenses during the
reporting period. Actual results could differ from those estimated.

c. Property and Equipment

Property and equipment are carried at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets. Buildings are depreciated over forty years,
leasehold improvements over thirty years, site improvements over twenty
years, and furniture and equipment over five to seven years.

d. Loan Acquisition Costs

Loan acquisition costs represent agency and commitment fees paid to the
lenders, closing costs and legal fees incurred in connection with the notes
payable (see Note 2). These fees are being amortized on a straight-line basis
over a fifteen year period, which represented the approximate term of the
related debt.

F-52
<PAGE>
DEER CREEK PARTNERS, L.P. AND MURAT CENTRE, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

e. Deferred Revenue

Deferred revenue includes individual show ticket revenue, season ticket
revenue, and corporate box seat revenue received in advance of events or the
next concert season and will be recognized over the period in which the shows
are held. A portion of the deferred revenue was derived from the bartering of
tickets for goods and services related to the Murat renovation. Barter
transactions are recorded at the estimated fair value of the materials or
service received.

f. Income Taxes

No provision for Federal or state income taxes is required because the
partners are taxed directly on their distributable shares of the
Partnerships' income or loss.

g. Cash Equivalents

The Partnerships consider all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

h. Advertising and Promotion

Advertising and promotion costs are expensed at the time the related
promotional event is held. The costs were approximately $930,000 in 1996 and
$595,000 in 1995.

2. NOTES PAYABLE

Notes payable and capital lease obligations as of December 31, 1995 and
1996 consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
-------------- --------------
<S> <C> <C>
MURAT PARTNERSHIP
- -----------------------------------------------------------------
Note payable to bank with 9.25% interest rate subject to
adjustment in 2001 and 2006; payable in monthly installments of
$30,876, including interest, in addition to annual contingent
principal payments based upon remaining net cash flow as defined
in Note 3; secured by assets of the Murat Partnership and
guaranteed by two of the limited partners for $375,000 each;
balance due no later than April 1, 2011. ........................ $ -- $2,928,053
Note payable with 9% non-compounding interest rate through
November 14, 1996, 12% non-compounding interest rate from
November 15, 1996 through November 14, 1998, 18% non-compounding
interest rate thereafter; all interest is cumulative; principal
and interest payments are based upon remaining net cash flow as
defined in Note 3; subordinate to above bank note payable. ..... 2,647,165 3,000,000
Note payable with 0% interest rate; principal payments the lesser
of $.15 per ticket sold during fiscal year or remaining net cash
flow as defined in Note 3; subordinate to above bank note
payable. ........................................................ -- 800,000

F-53
<PAGE>
DEER CREEK PARTNERS, L.P. AND MURAT CENTRE, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, DECEMBER 31,
1995 1996
-------------- --------------
Note payable with interest calculated annually and is equal to
the lesser of (1) $.10 per ticket sold during fiscal year, (2)
prime plus 1% or (3) remaining net cash flow as defined in Note
3; interest and principal is paid at the lesser of $.10 per
ticket sold during fiscal year or remaining net cash flow as
defined in Note 3; principal is also required to be paid down
upon sale of certain Partnership assets or the refinancing of
certain Partnership loans; subordinate to above bank note
payable ......................................................... $ -- $ 1,000,000
Other............................................................ 90,940 --
DEER CREEK PARTNERSHIP
Note payable with interest calculated annually at 9.5%; payable
in quarterly installments of approximately $353,000, including
interest, through the year 2010; secured by substantially all of
the assets of the partnership and is guaranteed up to 50%,
jointly and severally, by two officers of Sunshine Promotions,
Inc. (Sunshine), and by Sunshine (See Note 6.)................... -- 10,019,361
Note payable with interest at 11.18% payable in monthly
installments and contingent interest based upon net cash flow;
secured by substantially all of the assets of the Partnership;
principal due 1999 with the option for the holder to accelerate
the maturity date to 1996. ...................................... 11,041,024 --
Capital leases ................................................... 16,000 130,481
-------------- --------------
Total notes payable and capital lease obligations............... 13,795,129 17,877,894
Less--Current portion .......................................... 796,391 611,127
-------------- --------------
$12,998,738 $17,266,768
============== ==============
</TABLE>

Principal payments made on the Murat Partnership bank term note during
1996 totaled $71,947. The Murat Partnership's 1996 net cash flow (see Note 3)
did not require additional principal payments to be made on its notes
payable. The bank term note contains cash flow and leverage ratio covenants.
The Murat Partnership was not in compliance with the cash flow covenant as of
December 31, 1996, but received a waiver dated March 31, 1997 for the
December 31, 1996 calculation. Provisions of the $800,000 note payable
require the Murat Partnership to continue making payments after the principal
has been paid down equal to the lesser of $.15 per ticket sold during the
fiscal year or remaining cash flow, as defined in Note 3. These payments are
to be made to a not-for-profit foundation and will be designated for
remodeling and upkeep of the Theatre.

Under the terms of the note payable in 1995, the Deer Creek Partnership
incurred contingent interest, which was based on cash flow, of $885,000.
During 1995, Deer Creek Partnership's current lender (a related party)
purchased the note payable and entered into an amended and restated loan
agreement with the partnership on January 5, 1996. For each year until the
Deer Creek loan is repaid, net cash flow (as defined) in excess of $400,000
shall be paid as a principal payment on the loan, not to exceed $400,000. In
1995 and 1996, the Deer Creek Partnership's net cash flow was such that the
maximum principal payment of $400,000 was required for each year. In
addition, the promotional management fee paid to Sunshine (see Note 6) is
subordinate to the quarterly loan payments.

F-54
<PAGE>
DEER CREEK PARTNERS, L.P. AND MURAT CENTRE, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Principal maturities of notes payable for the next 5 years, excluding
principal paydowns resulting from excess cash flow:

Future capital lease payments of principal and interest are as follows:

3. MURAT CASH FLOW PAYMENTS

Each of the Murat Partnership's debt agreements require certain principal
and interest to be paid in April of each year based upon the Murat
Partnership's net cash flow for the preceding year. The Murat Partnership's
building lease agreement provides for lease payments to be made based upon
the same net cash flow calculation. Net cash flow, as defined in each
agreement, approximates net income, plus depreciation and amortization, less
capital expenditures and partnership distributions necessary to pay
applicable income taxes. Net cash flow in each year will be used by the Murat
Partnership to pay principal, interest and lease payments in the following
order of priority:

1. Payment of interest on $1,000,000 note equal to the lesser of (a) $.10 per
ticket sold, (b) prime plus 1% or (c) remaining net cash flow;

2. Additional principal payments on bank note so that the total principal
paid each month (including mandatory term payments discussed in Note 2)
equals up to, but not exceeding, $16,667. If cash flow in any fiscal year
is not sufficient to meet these additional principal payments, the
obligation carries forward to the subsequent year;

3. For 1997 and beyond, building operating lease payments not to exceed
$50,000 per year, non-cumulative;

4. Interest related to the $3 million note (including previous years'
cumulative amounts not paid);

5. Principal payment on the $3 million note until paid in full;

6. Principal payment on $800,000 note equal to lesser of $.15 per ticket sold
during fiscal year or remaining net cash flow;

If cash flow is such that only a portion is paid on the obligation in 2.
above, Sunshine, Inc.'s management fee (see Note 6.) could be reduced by the
amount paid in 1. in order to maximize the amount available to fully pay the
obligation in 2.

4. DMD GRANT

As part of the original financing for renovation of the Theatre, the
Department of Metropolitan Development (DMD) contributed approximately
$760,000 in 1995 and $340,000 in 1996 to the Murat Partnership. The DMD
stipulated that the grant was to be used for leasehold improvements on the
Theatre. As such, the grant has been recorded on the balance sheet as a
reduction of leasehold improvements and is being amortized over 30 years.

F-55
<PAGE>
DEER CREEK PARTNERS, L.P. AND MURAT CENTRE, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. AGREEMENTS WITH OUTSIDE VENDORS

Effective February 1996, the Murat Partnership entered into a ten year
agreement with a caterer to provide exclusive catering services at the
Theatre. The Murat Partnership is entitled to a commission based upon a
percentage of the caterer's net sales. As part of the agreement the caterer
loaned the Murat Partnership $165,000, at a nominal interest rate, for
leasehold improvements necessary to provide catering services. In February
1996 the Murat Partnership began repaying the loan ratably over 5 years.

Effective February 1996, the Murat Partnership entered into a ten year
agreement with a concessionaire for the exclusive license to sell concession
food and beverages at Theatre events. The Murat Partnership is entitled to
royalty commissions based upon a percentage of the concessionaire's gross
receipts. The concessionaire has paid the Murat Partnership $50,000 to be
used for leasehold improvements (which are being depreciated over 30 years)
which will be used by the concessionaire. This payment has been recorded as
deferred income and is being amortized over the term of the agreement. On
March 28, 1997 the rights to the concession agreement were acquired by the
caterer under the same terms as the original concession agreement.

Effective March 1996, the Murat Partnership entered into a five year
agreement with a stagehand union allowing the union to provide services at
all ticketed shows held in the main theater other than the broadway series.
The agreement, among other items, sets minimum hours per show and hourly
wages to be paid to union members. It also sets forth duties which must be
performed solely by union members. A separate agreement between the stagehand
union and Pace Theatrical Group, Inc. (see Note 7) governs the use of union
stagehands for the broadway series.

Effective February 1996, the Murat Partnership entered into a one year
agreement granting another party the right to manage and operate the Theatre
parking lot.

In July 1988, the Deer Creek Partnership entered into a ten-year agreement
with a concessionaire for the exclusive license to sell food and beverages at
Deer Creek events. The Deer Creek Partnership is entitled to royalty
commissions based upon a percentage of the concessionaire's gross receipts.

The Deer Creek Partnership has an agreement with another concessionaire
for an exclusive license to sell consigned nonconsumable novelties and
programs at Deer Creek events. The agreement expires on October 31, 2001. The
Deer Creek Partnership is entitled to royalty commissions based on the
concessionaire's gross receipts.

Total revenues related to the Deer Creek and Murat Center Partnership's
vendor agreements were approximately $1.8 million and $1.7 million in 1996
and 1995, respectively.

6. MANAGEMENT AGREEMENTS

The Deer Creek Partnership and Murat Partnership have entered into
agreements which expire in 2009 and 2015, respectively, with Sunshine whose
stockholders are also the limited partners of the general partner. Sunshine
provides the overall promotional management and booking of the entertainment
events held at respective venues, along with other general management
responsibilities. As compensation for Sunshine's services, the Deer Creek
Partnership pays Sunshine 4 percent of gross ticket sales, royalty income and
various other revenues. Total fees to Sunshine for these services were
approximately $581,000 in 1995 and $560,000 in 1996. The Murat pays Sunshine
an annual management fee of $300,000, adjusted annually each January 1 by the
greater of 4% or the annual increase in the consumer price index. In 1996 no
such fee was recognized by the Murat Partnership as Sunshine permanently
waived the $300,000 management fee due for 1996.

In June 1988, the Deer Creek Partnership entered into a ten-year agreement
with an unrelated management company to provide the on-site operations
management for Deer Creek. At the end of 1995, this agreement was terminated
by mutual consent of both parties. The Deer Creek Partnership

F-56

<PAGE>

DEER CREEK PARTNERS, L.P. AND MURAT CENTRE, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

entered into a new agreement with the former management company whereby it
agreed to pay $75,000 in 1996, 1997 and 1998 and also to provide to the
former management company selected season tickets at Deer Creek in 1997 and
1998. In return, for 1996, 1997 and 1998, the Deer Creek Partnership is to
receive advertising and promotion.

7. BROADWAY SERIES PARTNERSHIP

In 1996 the Murat Partnership entered into a 5 year partnership agreement
with Pace Theatrical Group, Inc. (Pace) and Broadway Series Management (BSMG)
to co-present a subscription series of touring Broadway type shows in
Indianapolis. This agreement calls for net profits and losses derived from
the series to be split, after the allocation of certain revenues to the Murat
Partnership and Pace, as follows: 45% Murat Partnership, 45% Pace, and 10%
BSMG. No capital was invested by any of the parties and all income has been
distributed to the parties. The Murat Partnership is responsible for the
local marketing and management of the series, while Pace is responsible for
booking, series management, and season ticket sales for the series. The Murat
Partnership recognized earnings related to this partnership of $270,000 in
1996.

8. RELATED PARTIES

In addition to the management agreement with Sunshine discussed in Note 6,
the Deer Creek Partnership and Murat Partnership have conducted business with
certain related parties in which the limited partners of the general partner
have significant interests. Fees paid to all other related parties for
catering, uniforms and marketing services totaled $249,000 in 1995 and
$65,000 in 1996 from the Deer Creek Partnership and $46,000 in 1996 from the
Murat Partnership.

9. SALE OF MURAT PARTNERSHIP AND DEER CREEK PARTNERSHIP

In June 1997, the partners of the Murat Partnership and the Deer Creek
Partnership agreed to sell all of the assets of the Murat Partnership and
Deer Creek Partnership to SFX Broadcasting, Inc. (Broadcasting). The total
sales price to Broadcasting of the combined partnership assets was
approximately $33 million. As a part of the sale, Broadcasting assumed or
retired virtually all liabilities and acquired all assets of the Murat
Partnership and the Deer Creek Partnership.

F-57
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To PACE Entertainment Corporation:

We have audited the accompanying consolidated balance sheet of PACE
Entertainment Corporation (a Texas Corporation) and subsidiaries as of
September 30, 1997, and the related consolidated statements of operations,
shareholders' equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PACE
Entertainment Corporation and subsidiaries as of September 30, 1997, and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
December 15, 1997 (except with respect
to the matters discussed in
Note 12, as to which the date
is December 22, 1997)

F-58
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
PACE Entertainment Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheet of PACE
Entertainment Corporation and subsidiaries as of September 30, 1996, and the
related consolidated statements of operations, cash flows, and shareholders'
equity for each of the two years in the period ended September 30, 1996.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of PACE
Entertainment Corporation and subsidiaries at September 30, 1996, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Houston, Texas
December 13, 1996

F-59
<PAGE>

PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
-------------------- -------------
1996 1997 1997
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................ $23,165 $23,784 $27,702
Trade receivables, net ............................... 4,097 4,562 6,741
Accounts receivable, related parties ................. 1,010 1,007 1,096
Notes receivable ..................................... 3,040 386 81
Prepaid expenses ..................................... 6,106 9,967 10,586
Investments in theatrical productions ................ 2,489 4,402 3,958
Deferred tax asset ................................... 1,872 979 943
--------- --------- -------------
Total current assets ................................ 41,779 45,087 51,107
INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS ............ 8,816 13,899 15,613
NOTES RECEIVABLE, related parties ..................... 6,958 8,024 7,766
INTANGIBLE ASSETS, net ................................ 17,244 17,894 17,633
OTHER ASSETS, net ..................................... 4,484 4,933 6,047
--------- --------- -------------
Total assets ........................................ $79,281 $89,837 $98,166
========= ========= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities ............. $10,285 $11,078 9,277
Deferred revenue ..................................... 26,909 32,093 33,208
Current maturities of long-term debt ................. 2,576 2,394 2,688
--------- --------- -------------
Total current liabilities ........................... 39,770 45,565 45,173
LONG-TERM DEBT ........................................ 21,863 23,129 31,543
OTHER NONCURRENT LIABILITIES .......................... 2,496 1,607 2,080
REDEEMABLE COMMON STOCK ............................... 3,264 2,456 2,983
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $1 par value; 500,000 shares
authorized,
2,579 shares issued as of September 30, 1996 and
1997 ................................................ 3 3 3
Additional paid-in capital ........................... 1,910 1,942 2,097
Retained earnings .................................... 10,115 15,275 14,427
Treasury stock, at cost, 544 shares .................. (140) (140) (140)
--------- --------- -------------
Total shareholders' equity .......................... 11,888 17,080 16,387
--------- --------- -------------
Total liabilities and shareholders' equity ......... $79,281 $89,837 $98,166
========= ========= =============
</TABLE>

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

F-60
<PAGE>

PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30
-------------------------------------
1995 1996 1997
----------- ----------- -----------

<S> <C> <C> <C>
GROSS REVENUES ..................... $ 150,385 $ 156,325 $ 176,046
COST OF SALES ...................... (131,364) (135,925) (148,503)
EQUITY IN EARNINGS (LOSS) OF
UNCONSOLIDATED PARTNERSHIPS AND
THEATRICAL PRODUCTIONS ............ 2,183 3,048 6,838
----------- ----------- -----------
Gross profit ..................... 21,204 23,448 34,381
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES .......................... (13,351) (15,951) (21,260)
STOCK COMPENSATION ................. (25) (3,675) (456)
LITIGATION SETTLEMENT .............. -- (3,657) --
DEPRECIATION AND AMORTIZATION ..... (1,223) (1,737) (1,896)
----------- ----------- -----------
Operating profit (loss) .......... 6,605 (1,572) 10,769
INTEREST INCOME, related parties .. 305 329 403
INTEREST INCOME, other ............. 147 176 60
INTEREST EXPENSE ................... (655) (1,206) (1,997)
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST ............. 6,402 (2,273) 9,235
INCOME TAX (PROVISION) BENEFIT .... (2,575) 714 (3,529)
MINORITY INTEREST .................. (485) (446) (546)
----------- ----------- -----------
NET INCOME (LOSS) .................. $ 3,342 $ (2,005) $ 5,160
=========== =========== ===========
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31
----------------------
1996 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
GROSS REVENUES ..................... $ 38,430 $ 38,552
COST OF SALES ...................... (34,221) (33,687)
EQUITY IN EARNINGS (LOSS) OF
UNCONSOLIDATED PARTNERSHIPS AND
THEATRICAL PRODUCTIONS ............ (111) 1,185
---------- ----------
Gross profit ..................... 4,098 6,050
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES .......................... (4,072) (5,018)
STOCK COMPENSATION ................. (6) (683)
LITIGATION SETTLEMENT .............. -- --
DEPRECIATION AND AMORTIZATION ..... (434) (523)
---------- ----------
Operating profit (loss) .......... (414) (174)
INTEREST INCOME, related parties .. 75 178
INTEREST INCOME, other ............. 35 6
INTEREST EXPENSE ................... (480) (867)
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST ............. (784) (857)
INCOME TAX (PROVISION) BENEFIT .... 222 182
MINORITY INTEREST .................. (130) (173)
---------- ----------
NET INCOME (LOSS) .................. $ (692) $ (848)
========== ==========
</TABLE>

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

F-61
<PAGE>

PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
-------- ------------ ----------
<S> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1994 ................ $ 3 $1,465 $ 8,778
Amortization of deferred stock compensation . -- 25 --
Net income .................................. -- -- 3,342
-------- ------------ ----------
BALANCE AT SEPTEMBER 30, 1995 ................ 3 1,490 12,120
Issuance of restricted stock and
amortization of deferred stock compensation -- 420 --
Net loss .................................... -- -- (2,005)
-------- ------------ ----------
BALANCE AT SEPTEMBER 30, 1996 ................ 3 1,910 10,115
Issuance of restricted stock and
amortization of deferred stock compensation -- 32 --
Net income .................................. -- -- 5,160
-------- ------------ ----------
BALANCE AT SEPTEMBER 30, 1997 ................ 3 1,942 15,275
Issuance of restricted stock and
amortization of deferred stock compensation
(unaudited)................................. -- 155 --
Net loss (unaudited) ........................ -- -- (848)
-------- ------------ ----------
BALANCE AT DECEMBER 31, 1997 (unaudited) .... $ 3 $2,097 $14,427
======== ============ ==========
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
TOTAL
TREASURY SHAREHOLDERS'
STOCK EQUITY
---------- ---------------
<S> <C> <C>
BALANCE AT SEPTEMBER 30, 1994 ................ $(140) $10,106
Amortization of deferred stock compensation . -- 25
Net income .................................. -- 3,342
---------- ---------------
BALANCE AT SEPTEMBER 30, 1995 ................ (140) 13,473
Issuance of restricted stock and
amortization of deferred stock compensation -- 420
Net loss .................................... -- (2,005)
---------- ---------------
BALANCE AT SEPTEMBER 30, 1996 ................ (140) 11,888
Issuance of restricted stock and
amortization of deferred stock compensation -- 32
Net income .................................. -- 5,160
---------- ---------------
BALANCE AT SEPTEMBER 30, 1997 ................ (140) 17,080
Issuance of restricted stock and
amortization of deferred stock compensation
(unaudited)................................. -- 155
Net loss (unaudited) ........................ -- (848)
---------- ---------------
BALANCE AT DECEMBER 31, 1997 (unaudited) .... $(140) $16,387
========== ===============
</TABLE>

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

F-62
<PAGE>

PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30
---------------------------------
1995 1996 1997
--------- ---------- ----------

<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................... $ 3,342 $ (2,005) $ 5,160
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities-
Depreciation and amortization .................. 1,223 1,737 1,896
Equity in (earnings) loss of unconsolidated
partnerships .................................. (1,624) (486) (4,912)
Distributions from unconsolidated partnerships 1,297 1,090 2,354
Restricted stock compensation .................. 25 3,675 456
Deferred income tax expense (benefit) ......... 848 (4,541) 2,037
Changes in operating assets and liabilities- ...
Trade receivables ............................. 447 (826) (465)
Notes receivable .............................. (1,813) (1,227) 2,654
Prepaid expenses .............................. (221) 1,466 (3,861)
Investments in theatrical productions ........ 305 (335) (1,913)
Other assets .................................. (37) (1,130) (421)
Accounts payable and accrued liabilities ..... 947 (1,142) (920)
Deferred revenue .............................. (1,082) (1,008) 5,184
Other liabilities ............................. 171 1,601 (34)
--------- ---------- ----------
Net cash provided by (used in) operating
activities .................................. 3,828 (3,131) 7,215
--------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired .............. -- (13,233) (2,215)
Capital expenditures ............................ (728) (827) (1,008)
Loans and advances to related parties ........... (2,301) (535) (2,295)
Contributions to unconsolidated partnerships ... (1,212) (1,806) (2,162)
--------- ---------- ----------
Net cash used in investing activities ....... (4,241) (16,401) (7,680)
--------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt additions .................... 8,927 24,043 24,287
Payments on debt ................................ (8,928) (6,512) (23,203)
--------- ---------- ----------
Net cash provided by (used in) financing
activities .................................. (1) 17,531 1,084
--------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ...................................... (414) (2,001) 619
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .. 25,580 25,166 23,165
--------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR ....... $25,166 $ 23,165 $ 23,784
========= ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ................................... $ 620 $ 1,117 $ 1,900
Income taxes paid ............................... 2,276 2,804 2,103
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31
--------------------
1996 1997
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................... $ (692) $ (848)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities-
Depreciation and amortization .................. 434 522
Equity in (earnings) loss of unconsolidated
partnerships .................................. 607 (1,150)
Distributions from unconsolidated partnerships 1,073 411
Restricted stock compensation .................. 6 683
Deferred income tax expense (benefit) ......... 36 (574)
Changes in operating assets and liabilities- ...
Trade receivables ............................. 383 (2,179)
Notes receivable .............................. 1,140 305
Prepaid expenses .............................. (2,099) (619)
Investments in theatrical productions ........ (1,658) 444
Other assets .................................. (39) (469)
Accounts payable and accrued liabilities ..... (264) (2,626)
Deferred revenue .............................. (7,004) 1,115
Other liabilities ............................. 130 3,083
--------- ---------
Net cash provided by (used in) operating
activities .................................. (7,947) (1,902)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired .............. -- (178)
Capital expenditures ............................ (407) (900)
Loans and advances to related parties ........... 2 169
Contributions to unconsolidated partnerships ... (618) (1,980)
--------- ---------
Net cash used in investing activities ....... (1,023) (2,889)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt additions .................... 557 14,593
Payments on debt ................................ (873) (5,884)
--------- ---------
Net cash provided by (used in) financing
activities .................................. (316) 8,709
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ...................................... (9,286) 3,918
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .. 23,165 23,784
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR ....... $13,879 $27,702
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ................................... $ 180 $ 644
Income taxes paid ............................... 565 93
</TABLE>

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

F-63
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION:

Description of Business

PACE Entertainment Corporation (referred to herein as PACE or the
Company), a Texas corporation, is a diversified live entertainment company
operating principally in the United States. The Company presents and produces
theatrical shows, musical concerts and specialized motor sports events.
Through certain unconsolidated partnerships, the Company also owns interests
in and operates amphitheaters, which are used primarily for the presentation
of live performances by musical artists.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
PACE and its majority-owned subsidiaries. The Company accounts for its
investments in 50 percent or less owned entities, including theatrical
production partnerships, using the equity method. Intercompany balances are
eliminated.

The Company has various agreements related to the presentation of events
with other live entertainment organizations whereby the Company retains 50
percent to 80 percent of the profits from such events. The Company
consolidates the revenues and related costs from these events and records the
amounts paid to the other parties in cost of sales.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. At September 30,
1997, the Company had restricted cash and cash equivalents of $2,950,000,
which secured letters of credit totaling $3,750,000.

Trade Receivables

Trade receivables are shown net of allowance for doubtful accounts of
$120,000 and $134,000 at September 30, 1996 and 1997, respectively.

Prepaid Expenses

Prepaid expenses include show advances and deposits, event advertising
costs and other costs directly related to future events. Such costs are
charged to operations upon completion of the related events.

As of September 30, 1996 and 1997, prepaid expenses included event
advertising costs of $1,337,000 and $1,498,000, respectively. The Company
recognized event advertising expenses of $13,818,000, $14,861,000 and
$13,802,000 in cost of sales for the years ended September 30, 1995, 1996 and
1997, respectively.

Investments in Theatrical Productions

Theatrical production partnerships are typically formed to invest in a
single theatrical production and, therefore, have limited lives which are
generally less than one year. Accordingly, the Company's investments in such
partnerships are generally shown as current assets. The partnerships amortize
production costs over the estimated life of each production based on the
percentage of revenues earned in relation to projected total revenues.

F-64
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Intangible Assets

Intangible assets consisted of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Goodwill .................................... $16,599 $17,851
Noncompete agreements and other intangibles 3,940 3,857
--------- ---------
20,539 21,708
Accumulated amortization .................... (3,295) (3,814)
--------- ---------
$17,244 $17,894
========= =========
</TABLE>

Goodwill, which represents the excess of costs of business acquisitions
over the fair value of net assets acquired, is being amortized on a
straight-line basis over periods not exceeding 40 years. The noncompete
agreements and other intangibles are being amortized on a straight-line basis
over periods generally not exceeding five years. The Company evaluates on an
ongoing basis whether events and circumstances indicate that the amortization
periods of intangibles warrant revision. Additionally, the Company
periodically assesses whether the carrying amounts of intangibles exceed
their expected future benefits and value, in which case an impairment loss
would be recognized. Such assessments are based on various analyses,
including cash flow and profitability projections.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following (in
thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------
1996 1997
--------- --------
<S> <C> <C>
Accounts payable .......... $ 1,192 $ 1,866
Accrued payroll ........... 2,384 2,936
Other accrued liabilities 6,709 6,276
--------- --------
$10,285 $11,078
========= ========
</TABLE>

Revenue Recognition

Revenues from the presentation and production of an event, including
interest on advance ticket sales, are recognized upon completion of the
event. Deferred revenue relates primarily to advance ticket sales.

The Company barters event tickets and sponsorship rights for products and
services, including event advertising. These barter transactions are not
recognized in the accompanying consolidated financial statements and are not
material to the Company's financial position or results of operations.

Stock-Based Compensation

The Company adopted Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation," during the year ended
September 30, 1997, and implemented its disclosure provisions. While SFAS No.
123 encourages companies to recognize expense for stock options at estimated
fair value based on an option-pricing model, the Company has elected to
continue to follow Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its employee stock options.

F-65
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Financial Instruments

The carrying amounts of cash equivalents approximate fair value because of
the short maturities of these investments. The carrying amount of long-term
debt approximates fair value as borrowings bear interest at current market
rates.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain 1995 and 1996 amounts have been reclassified to conform with the
1997 presentation.

Interim Financial Information

The interim financial data as of December 31, 1997 and for the three-month
periods ended December 31, 1996 and 1997 is unaudited and certain information
and disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted.
However, in the opinion of management, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results for the interim periods. The results of
operations for the interim periods are not necessarily indicative of the
results to be expected for the entire year.

2. ACQUISITIONS:

On March 13, 1996, the Company acquired substantially all the assets of
SRO Motorsports (SRO), a division of Madison Square Garden, L.P., under an
asset purchase agreement for an aggregate initial purchase price of
approximately $13,300,000 in cash and $3,800,000 in assumed liabilities. The
agreement also provides for a contingent deferred purchase price not to
exceed $1,000,000, payable if annual earnings before interest, taxes,
depreciation and amortization of the Company's motor sports operations, as
defined, exceed $8,000,000 for any fiscal year through September 30, 2001. No
deferred purchase price costs had been incurred through September 30, 1997.

The acquisition of SRO was accounted for under the purchase method and the
assets acquired and liabilities assumed were recorded at fair value,
resulting in the recognition of $14,250,000 of goodwill and $400,000 of other
intangibles. The results of operations of SRO since March 13, 1996, have been
included in the accompanying consolidated financial statements.

The following unaudited pro forma information assumes that the Company had
acquired SRO as of October 1, 1994. The pro forma information includes
adjustments for interest expense that would have been incurred to finance the
acquisition, amortization of goodwill and other intangibles, the income tax
effects of the operations of SRO, and the elimination of certain intercompany
balances. The unaudited pro forma information, which is not necessarily
indicative of what actual results would have been, is as follows (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30
----------------------
1995 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
Gross revenues ... $167,422 $172,952
Net income (loss) 3,742 (257)
</TABLE>

F-66

<PAGE>

PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS AND THEATRICAL
PRODUCTIONS:

Investments in unconsolidated partnerships and theatrical productions
consisted of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------
1996 1997
--------- --------
<S> <C> <C>
Investment in--
Pavilion Partners ......................... $ 3,131 $ 4,810
Universal/PACE Amphitheaters Group, L.P. . 3,380 3,991
Other ..................................... 2,305 5,098
--------- --------
Investments in unconsolidated partnerships 8,816 13,899
Investments in theatrical productions ..... 2,489 4,402
--------- --------
$11,305 $18,301
========= ========
</TABLE>

The Company's share of earnings and the distributions received from these
investments were as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Equity in earnings (losses) of--
Pavilion Partners ....................... $1,872 $ 103 $2,803
Universal/PACE Amphitheaters Group, L.P. 551 871 645
Other ................................... (799) (488) 1,464
-------- -------- --------
Equity in earnings of unconsolidated
partnerships ............................ 1,624 486 4,912
Equity in earnings of theatrical
productions ............................. 559 2,562 1,926
-------- -------- --------
$2,183 $3,048 $6,838
======== ======== ========
Distributions received from--
Pavilion Partners ....................... $ 992 $1,002 $1,124
Universal/PACE Amphitheaters Group, L.P. 166 78 34
Other ................................... 139 10 1,196
-------- -------- --------
Distributions from unconsolidated
partnerships ............................ 1,297 1,090 2,354
Distributions from theatrical
productions.............................. 4,240 5,836 6,803
-------- -------- --------
$5,537 $6,926 $9,157
======== ======== ========
</TABLE>

F-67
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pavilion Partners

Pavilion Partners is a Delaware general partnership between the Company
and Amphitheater Entertainment Partnership (AEP). AEP is a partnership
between Sony Music Entertainment Inc. (Sony) and Blockbuster Entertainment
Corporation (Blockbuster). Pavilion Partners owns and operates amphitheaters,
which are used primarily for the presentation of live performances by musical
artists. Pavilion Partners had interests in 10 and 11 amphitheaters at
September 30, 1996 and 1997, respectively. The Company owns a 33-1/3 percent
interest in, and is the managing partner of, Pavilion Partners.

In general, all of Pavilion Partners' income is allocated to the partners
in proportion to their respective ownership interests. The partnership
agreement generally restricts cash distributions to 35 percent of cash flow
after scheduled debt service. Additionally, PACE has been entitled to certain
priority allocations of net income based, in part, on the cash flow from one
of the amphitheaters it contributed to Pavilion Partners. During the periods
ended September 30, 1995, 1996 and 1997, the priority allocations of net
income included in the Company's equity in earnings of Pavilion Partners were
$771,000, $725,000 and $119,000, respectively. The cumulative amount of the
priority allocations of net income was limited; PACE is not entitled to any
future priority allocations. AEP is entitled to receive priority allocations
of net income once a loan related to an amphitheater contributed by
Blockbuster is repaid. The cumulative priority allocations of net income to
AEP is limited to $7,000,000. The loan is scheduled to mature in 2004 and no
such allocation has yet been made.

PACE also received booking fees of $323,000, $235,000 and $395,000 from
Pavilion Partners for the years ended September 30, 1995, 1996 and 1997,
respectively. In addition, the Company is reimbursed for certain costs of
providing management services to Pavilion Partners. These reimbursements
totaled $1,629,000, $1,824,000 and $1,968,000 during the periods ended
September 30, 1995, 1996 and 1997, respectively, and offset general and
administrative expenses.

Summarized financial information as of and for the years ended September
30, 1995, 1996 and 1997, for Pavilion Partners follows (in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ----------
<S> <C> <C> <C>
Current assets .......................... $15,787 $20,700 $ 30,178
Noncurrent assets ....................... 64,619 72,793 72,598
--------- --------- ----------
Total assets ........................... $80,406 $93,493 $102,776
========= ========= ==========
Current liabilities ..................... $ 9,467 $17,194 $ 19,748
Noncurrent liabilities .................. 51,578 58,695 59,166
Partners' capital ....................... 19,361 17,604 23,862
--------- --------- ----------
Total liabilities and partners' capital $80,406 $93,493 $102,776
========= ========= ==========
Gross revenues .......................... $69,372 $89,223 $100,209
========= ========= ==========
Gross profit ............................ $19,440 $27,993 $ 36,157
========= ========= ==========
Net income (loss) ....................... $ 3,104 $ (839) $ 6,986
========= ========= ==========
</TABLE>

F-68
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Universal/PACE

The Company owns a 32.5 percent interest in Universal/PACE Amphitheaters
Group, L.P. (Universal/PACE), a limited partnership between the Company and
Universal Concerts, Inc., which controls two amphitheaters. PACE earned
management fees of $167,000, $79,000 and $34,000 from Universal/PACE for the
years ended September 30, 1995, 1996 and 1997, respectively. Summarized
financial information as of and for the years ended September 30, 1995, 1996
and 1997, for Universal/PACE follows (in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current assets .......................... $ 4,085 $ 3,420 $ 6,659
Noncurrent assets ....................... 14,654 14,185 14,156
--------- --------- ---------
Total assets ........................... $18,739 $17,605 $20,815
========= ========= =========
Current liabilities ..................... $ 6,599 $ 3,876 $10,221
Noncurrent liabilities .................. 6,467 5,618 602
Partners' capital ....................... 5,673 8,111 9,992
--------- --------- ---------
Total liabilities and partners' capital $18,739 $17,605 $20,815
========= ========= =========
Gross revenues .......................... $24,070 $20,336 $25,299
========= ========= =========
Gross profit ............................ $ 5,968 $ 6,361 $ 5,817
========= ========= =========
Net income .............................. $ 1,183 $ 2,438 $ 1,880
========= ========= =========
</TABLE>

Other

The Company also has investments in numerous theatrical production and
other unconsolidated partnerships. Summarized financial information as of and
for the years ended September 30, 1995, 1996 and 1997, for these
partnerships, excluding Pavilion Partners and Universal/PACE, follows (in
thousands):

<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current assets .......................... $ 10,410 $ 12,433 $ 35,743
Noncurrent assets ....................... 5,668 7,267 14,050
---------- ---------- ----------
Total assets ........................... $ 16,078 $ 19,700 $ 49,793
========== ========== ==========
Current liabilities ..................... $ 7,539 $ 6,566 $ 19,134
Noncurrent liabilities .................. 2,315 2,250 2,957
Partners' capital ....................... 6,224 10,884 27,702
---------- ---------- ----------
Total liabilities and partners' capital $ 16,078 $ 19,700 $ 49,793
========== ========== ==========
Gross revenues .......................... $113,854 $111,715 $249,707
========== ========== ==========
Gross profit ............................ $ 221 $ 10,440 $ 34,454
========== ========== ==========
Net income (loss) ....................... $ (1,863) $ 9,823 $ 32,164
========== ========== ==========
</TABLE>

F-69

<PAGE>

PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. LONG-TERM DEBT:

Long-term debt consisted of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Term loan ................ $14,464 $12,322
Revolving line of credit 9,250 12,950
Other notes payable ..... 725 251
--------- ---------
24,439 25,523
Less-Current portion .... (2,576) (2,394)
--------- ---------
$21,863 $23,129
========= =========
</TABLE>

In March 1996, the Company entered into a new credit agreement with
certain financial institutions. The credit agreement provides for a term loan
and a revolving line of credit, both of which bear interest at either LIBOR
plus 2 percent or prime, at the option of the Company. At September 30, 1997,
the weighted average interest rate was 7.8 percent. The term loan is
scheduled to mature in March 2001 and is payable in quarterly installments of
$536,000 plus interest, with a balloon payment at maturity. The Company may
borrow $27,000,000 under the revolving line of credit until February 1998;
subsequently, borrowings are limited to $13,000,000 until March 2001, when
the revolving line of credit expires. The Company must pay a quarterly
commitment fee equal to 0.375 percent per annum on the average daily unused
portion of the revolving line of credit. The term loan and the revolving line
of credit are secured by substantially all of the Company's assets, including
pledges of the capital stock of its subsidiaries. The credit agreement
contains various restrictions and requirements relating to, among other
things, mergers, sales of assets, investments and maintenance of certain
financial ratios.

At September 30, 1997, scheduled maturities of long-term debt were as
follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
For the year ending September
30--
1998 ............................ $ 2,394
1999 ............................ 2,143
2000 ............................ 2,143
2001............................. 18,843
--------
$25,523
========
</TABLE>

F-70
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAXES:

Deferred taxes reflect the tax effects of temporary differences between
the financial statement carrying amounts and the tax bases of assets and
liabilities. Significant components of the Company's deferred tax assets and
liabilities were as follows (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
-----------------
1996 1997
-------- -------
<S> <C> <C>
Deferred tax assets--
Investments in unconsolidated partnerships
and theatrical productions .................. $ 286 $ 237
Accounts payable and accrued liabilities .... 1,014 1,480
Restricted stock compensation ................ 1,387 409
Other noncurrent liabilities ................. 1,717 --
Other ........................................ 107 281
-------- -------
Total deferred tax assets ................... 4,511 2,407
-------- -------
Deferred tax liabilities--
Investments in unconsolidated partnerships
and theatrical productions .................. 1,522 1,099
Prepaid expenses ............................. 907 1,237
Intangibles .................................. 646 672
-------- -------
Total deferred tax liabilities .............. 3,075 3,008
-------- -------
$1,436 $ (601)
======== =======
</TABLE>

Deferred taxes are included in the consolidated balance sheets as follows
(in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------
1996 1997
-------- ---------
<S> <C> <C>
Current deferred tax assets . $1,872 $ 979
Other noncurrent liabilities (436) (1,580)
-------- ---------
$1,436 $ (601)
======== =========
</TABLE>

The income tax (provision) benefit consisted of the following (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
----------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current--
Federal ...................... $(1,251) $(2,817) $(1,319)
State ........................ (476) (1,010) (173)
Deferred--
Federal ...................... (692) 3,705 (1,777)
State ........................ (156) 836 (260)
---------- ---------- ----------
Total tax (provision) benefit $(2,575) $ 714 $(3,529)
========== ========== ==========
Effective tax rate ............ 44% 26% 41%
========== ========== ==========
</TABLE>

F-71
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The reconciliation of income tax computed at the U.S. federal statutory
rates to the income tax (provision) benefit is as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-------------------------------
1995 1996 1997
---------- ------- ----------
<S> <C> <C> <C>
Tax at the federal statutory rate .... $(2,012) $ 924 $(2,954)
Increases resulting from--
State income taxes, net of federal
tax effect .......................... (417) (112) (286)
Nondeductible expenses ............... (60) (98) (185)
Other ................................ (86) -- (104)
---------- ------- ----------
Total income tax (provision) benefit $(2,575) $ 714 $(3,529)
========== ======= ==========
</TABLE>

6. REDEEMABLE COMMON STOCK:

At September 30, 1997, the Company had outstanding 155 shares of common
stock that are redeemable under conditions that are not solely within the
control of the Company. The Company granted this redeemable stock to certain
executives during the years ended September 30, 1996 and 1997. To the extent
that the grants related to prior service, the Company recognized compensation
costs on the grant date. Additionally, the Company recognizes compensation
costs for the change in value of certain shares that, as discussed below, the
Company may be required to purchase from the executives at fair market value.
Restricted stock compensation related to these grants totaled $3,260,000 and
$425,000 during the years ended September 30, 1996 and 1997, respectively.
The Company has the right of first refusal to purchase the redeemable common
stock at fair market value.

Agreements with one executive who received 140 shares of redeemable stock
provide that the Company will have call options to purchase these shares from
the executive for a total of $3,420,000. These agreements also provide that
the executive will have put options to sell such shares to the Company for
$3,420,000. The put and call options are only exercisable if the executive's
employment is terminated before an initial public offering of the Company's
common stock.

Of the redeemable stock granted to this executive, 123 shares were granted
during the year ended September 30, 1996, and vested during the year ended
September 30, 1997. Since the grant related to prior service, the Company
recognized compensation costs on the grant date. During the year ended
September 30, 1997, the Company executed a promissory note in the amount of
$1,232,000 with this executive. This note bears interest at 5.45 percent, is
secured by 140 shares of the Company's common stock, and is scheduled to
mature in October 2001. The proceeds of the note were used to pay the
executive's tax liability related to the 123 shares that vested during the
year ended September 30, 1997. Accordingly, the value of redeemable stock
outstanding has been reduced by this note receivable.

The remaining 17 shares of redeemable stock received by this executive
were granted during the year ended September 30, 1997, and vest ratably
during the years ending September 30, 1999 and 2000. To fund the executive's
tax liability related to these 17 shares, the Company may be required to
purchase up to 41 percent of the shares at fair market value when the shares
vest. The Company has similar agreements with the other executives who
received the remaining 15 shares of redeemable stock, which were granted
during the year ended September 30, 1996. In order to fund the executives'
tax liabilities related to these grants and related restricted common stock
grants, these 15 shares of redeemable stock must be purchased at fair market
value when the shares vest during the years ended September 30, 1998 and
1999. Although all 32 shares that the Company may be required to purchase in
order to satisfy executives' tax liabilities have future vesting
requirements, the Company recognized compensation costs on the grant dates to
the extent the grants related to prior service. The difference between such
expense recognition and recognition over the vesting periods is not material
to the Company's results of operations and financial position.

F-72
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. SHAREHOLDER'S EQUITY:

The Company granted 23 shares of restricted common stock to certain
executives during the year ended September 30, 1996. These shares vest
ratably during the years ended September 30, 1998 and 1999. Although the
shares have future vesting requirements, the Company recognized compensation
costs on the grant dates to the extent the grants related to prior service.
The difference between such expense recognition, which totaled $390,000 and
$6,000 during the years ended September 30, 1996 and 1997, respectively, and
recognition over the vesting periods is not material to the Company's results
of operations and financial position. The Company has the right of first
refusal to purchase at fair market value all of the shares granted during the
year ended September 30, 1996. Additionally, if the executives' employment is
terminated before an initial public offering of the Company's common stock,
the Company has a call option to purchase the vested shares at fair market
value.

Effective October 15, 1993, the Company and one of its officers entered
into an employment agreement which provided for the granting of 45 shares of
the Company's common stock. The shares vested over a five-year period and the
Company recorded related compensation expense of $25,000 for each of the
years ended September 30, 1995, 1996 and 1997.

8. STOCK OPTIONS:

The Company adopted the 1996 Stock Incentive Compensation Plan during the
year ended September 30, 1996. Under the plan, the Company may grant awards
based on its common stock to employees and directors. Such awards may
include, but are not limited to, restricted stock, stock options, stock
appreciation rights and convertible debentures. Up to 325 shares of common
stock may be issued under the plan. During the year ended September 30, 1996,
the Company granted options to purchase 117 shares of common stock at a
weighted average exercise price of $18,989 per share, which approximated fair
value on the date of grant. Such options vest and are generally exercisable
ratably over a four-year period. The options expire in 10 years.

An option to purchase 22 shares of common stock at $10,000 per share was
granted to an executive during the year ended September 30, 1994. This option
was canceled subsequent to September 30, 1997.

Because the exercise prices of the Company's employee stock options
equaled the fair market value of the underlying stock on the date of grant,
no compensation expense was recognized in accordance with APB Opinion No. 25.
Had compensation cost for the options been determined based on the fair value
at the grant date pursuant to SFAS No. 123, the Company's net income would
have decreased by $49,000 and $148,000 for the years ended September 30, 1996
and 1997, respectively. For this purpose, the fair value of the options was
estimated using the minimum value method assuming that the risk-free interest
rate was 6.7 percent and that no dividends will be paid.

9. RELATED-PARTY TRANSACTIONS:

The Company contracts with certain theatrical partnerships of which it is
a minority partner to obtain the rights to present theatrical productions in
the Company's markets. Approximately $20,000,000, $33,400,000 and $31,200,000
of expenses were incurred for such rights and included in cost of sales
during the years ended September 30, 1995, 1996 and 1997, respectively.

The Company contracts with certain unconsolidated partnerships to sell the
rights to present musical concerts. Approximately $2,446,000 of revenues was
earned from the sale of such rights during the year ended September 30, 1997.
No such rights were sold during the years ended September 30, 1995 and 1996.

As of September 30, 1997, notes receivable, related parties included
$6,453,000 due from executives and $1,571,000 due from other related parties.
Two of the notes receivable from executives

F-73
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

are promissory notes from the Company's principal shareholder. As of
September 30, 1997, these two notes totaled $5,961,000, including accrued
interest of $550,000. One note, in the original principal amount of
$2,911,000, bears interest at 5.83 percent, is secured by 254 shares of PACE
common stock and matures on March 28, 1999. The other note is for $2,500,000,
bears interest at 6.34 percent, is secured by 246 shares of PACE common stock
and was scheduled to mature on November 3, 1997. This note has been extended
to mature on November 4, 2000. Interest income on these two notes was
approximately $300,000 for each of the years ended September 30, 1995, 1996
and 1997. At September 30, 1997, the Company also had a $583,000 receivable
from its principal shareholder. The principal shareholder has represented his
intention to pay the outstanding loans and receivable balance from personal
assets or if necessary, the liquidation of certain ownership interests in the
Company.

At September 30, 1997, notes receivable from other related parties
included $945,000 due from a joint venture partner. The terms of the related
joint venture agreement provide for the Company to loan to the joint venture
partner any required capital contributions, to be repaid on a priority basis
from the profits allocated to the joint venture partner. The advances accrue
interest at the prime rate plus 4 percent (12.5 percent at September 30,
1997) and are secured by the joint venture partner's 50 percent interest in
the joint venture.

10. LITIGATION SETTLEMENT:

The Company was previously named as a defendant in a case filed in Wake
County, North Carolina (Promotion Litigation). There were several other
defendants named in the litigation, including Pavilion Partners, with various
causes of action asserted against one or more of each of the defendants,
including (a) breach of alleged contract, partnership, joint venture and
fiduciary duties between certain of the defendants and Pro Motion Concerts,
(b) constructive fraud, (c) interference with prospective advantage, (d)
unfair trade practices, (e) constructive trust and (f) unjust enrichment. The
essence of the plaintiffs' claims was that certain of the defendants agreed
to enter into a partnership with plaintiffs for the development and operation
of an amphitheater.

On May 1, 1997, the Promotion Litigation was settled. All defendants were
fully and finally released with prejudice from any and all claims and causes
of action. The defendants did not acknowledge or admit any liability. The
settlement called for payments from defendants totaling $4,500,000. The
Company was obligated to pay $1,500,000 immediately after the settlement and
is obligated to pay an additional $2,000,000 on or before May 1, 1998. To
guarantee payment of this $2,000,000 obligation, the Company had a standby
letter of credit outstanding at September 30, 1997. The remaining $1,000,000
of the settlement was paid by Pavilion Partners during the year ended
September 30, 1997. This expense and related legal expenses were charged to
operations for the year ended September 30, 1996.

F-74
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES:

Leases

The Company leases office facilities under noncancelable operating leases
with future minimum rent payments as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
For the year ending September
30--
1998 ............................ $1,006
1999 ............................ 417
2000 ............................ 215
2001 ............................ 193
2002 ............................ 195
Thereafter ....................... 33
--------
Total ........................... $2,059
========
</TABLE>

Rent expense was $676,000, $765,000 and $1,084,000 for the years ended
September 30, 1995, 1996 and 1997, respectively.

Change in Control Provisions

The Company and its unconsolidated partnerships, including Pavilion
Partners, have entered into numerous leases and other contracts in the
ordinary course of business. Certain of these agreements either contain
restrictions on their assignability or would require third-party approval of
a change in control of the Company.

Employment Agreements

The Company has employment agreements with certain key employees. Such
agreements generally provide for minimum salary levels, guaranteed bonuses
and incentive bonuses which are payable if specified financial goals are
attained. As of September 30, 1997, the Company's minimum commitment under
these agreements were as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
For the year ending September
30--
1998 ............................ $4,463
1999 ............................ 3,825
2000 ............................ 2,789
2001 ............................ 1,430
2002 ............................ 743
</TABLE>

The Company is currently negotiating certain other employment agreements
that may result in additional future commitments.

Insurance

The Company carries a broad range of insurance coverage, including general
liability, workers' compensation, stop-loss coverage for its employee health
plan and umbrella policies. The Company carries deductibles of up to $10,000
per occurrence for general liability claims and is self-insured for annual
healthcare costs of up to $25,000 per covered employee and family. The
Company has accrued for estimated potential claim costs in satisfying the
deductible and self-insurance provisions of the insurance policies for claims
occurring through September 30, 1997. The accrual is based on known facts and
historical trends, and management believes such accrual to be adequate.

F-75
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Legal Proceedings

Various legal actions and claims are pending against the Company, most of
which are covered by insurance. In the opinion of management, the ultimate
liability, if any, which may result from these actions and claims will not
materially affect the financial position or results of operations of the
Company.

Guarantees

The Company has guaranteed a $2,438,000 debt of a partnership in which
Pavilion Partners holds a 50 percent interest. PACE has agreements with its
partners whereby they would assume approximately 50 percent of any liability
arising from this guarantee. The debt matures June 1, 2003. Management does
not believe that the guarantee will result in a material liability to the
Company.

Income Taxes

The Internal Revenue Service is examining several years of returns of a
majority-owned subsidiary. Management is currently discussing a possible
settlement of approximately $600,000, which has been accrued in the Company's
financial statements.

Subscription Agreement

During April 1995, the Company acquired an interest in a company
incorporated in the United Kingdom. Pursuant to a subscription agreement, the
Company made payments totaling $1,355,000 prior to September 30, 1997. The
Company has agreed to pay an additional pounds sterling239,000 in April 1998.

Construction Commitments

An unconsolidated partnership has committed to certain renovation work at
its amphitheater. The Company may be obligated to fund up to approximately
$7.3 million of these renovations. Through its investment in another
unconsolidated partnership, the Company has an interest in a performance hall
being constructed for musical and theatrical presentations. The Company had
funded $0.4 million of the performance hall construction costs through
September 30, 1997; the Company's estimated additional funding commitments
are approximately $2.0 million. In addition, the Company and several third
parties are currently negotiating definitive agreements to develop a
theatrical venue. The Company may be obligated to fund approximately $3.0
million of the costs of this development over an undetermined period of time.

Put Option Agreement

The Company has entered into put option agreements with two banks whereby
the Company may be required to repurchase a total of 1,000 shares of the
Company's common stock held by an affiliate that collateralizes the personal
loans of the Company's principal shareholder at a per share price of $1,500.
The put options are effective only in the event of a loan default of the
shareholder prior to July 31, 1999. At September 30, 1997, the loans were not
in default.

12. SUBSEQUENT EVENTS:

Subsequent to September 30, 1997, the Company entered into certain
agreements with an executive who previously had been granted an option to
purchase 22 shares of common stock at $10,000 per share. Pursuant to the new
agreements, the option was canceled and the executive was granted 22 shares
of restricted common stock.

In December 1997, the Company and its shareholders entered into an
agreement with SFX Entertainment, Inc. (SFX), whereby the shareholders would
sell their interests in the Company to SFX (SFX Transaction). The purchase
price of $109 million in cash and 1,500,000 shares of SFX Class A Common
Stock is subject to adjustment prior to closing. Closing is subject to
certain conditions, including

F-76
<PAGE>
PACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

approval of certain third parties. Concurrent with closing, the agreement
requires, among other things, the repayment of all outstanding loans and
receivables due from the Company's principal shareholder (see Note 9) and the
repayment of the promissory note received from an executive in connection
with a stock grant (see Note 6). Additionally, the agreement provides for the
settlement of all restricted and redeemable stock, as well as all outstanding
stock options. This settlement is expected to result in a one-time charge by
the Company of approximately $4.7 million, net of related tax effects. The
agreement also requires SFX to provide the Company with a $25 million line of
credit (Acquisition Facility) to be used for certain acquisitions being
contemplated by the Company. If the acquisition of the Company is not
consummated, this line of credit will be converted to a term loan in the
amount of advances then outstanding or, under certain circumstances, will
become immediately due and payable. This bridge financing is secured by the
assets acquired and an option to purchase the Company's interest in Pavilion
Partners.

In December 1997, the Company entered into agreements to effectively
purchase substantially all of the assets of United Sports of America (USA
Transaction), a producer and presenter of demolition derbies, thrill shows,
air shows, monster truck shows, tractor pull events, motorcycle racing and
bull riding in the United States and Canada. Pursuant to the agreements, the
total purchase price is $6,000,000 in cash of which an option amount of
$500,000 was paid upon the execution of the agreement and closing is subject
to the satisfactory completion of due diligence by the Company. Management
does not expect this transaction to close until May 1998. In the event the
transaction does not close, the option amount will be forfeited if certain
conditions are not met.

In December 1997, the Company entered into an agreement to purchase
Blockbuster's 33 1/3 percent interest in Pavilion Partners (Blockbuster
Transaction) for $4,171,000 in cash, $2,940,000 in assumed liabilities and
the assumption of certain indemnification obligations of Blockbuster under
the Pavilion Partners Partnership Agreement. In addition, the Company has
agreed to purchase a note with a balance of $9,507,000, including accrued
interest of $1,601,000, at September 30, 1997. The transaction is contingent
on, among other things, obtaining acceptable financing including the release
of Blockbuster from certain debt obligations and the approval of Sony. (Note
3)

On December 22, 1997, the Company entered into an agreement to purchase
Sony's 33 1/3 percent interest in Pavilion Partners (Sony Transaction) for
$27,500,000 in cash. The transaction is contingent on, among other things,
government approval and obtaining acceptable financing including the release
of Sony from certain debt obligations. (see Note 3)

EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT (Unaudited)

Effective February 25, 1998, the SFX Transaction, Blockbuster Transaction
and Sony Transaction closed. In conjunction with the closing, SFX retired the
Company's outstanding term loan and revolving line of credit and purchased or
retired a substantial portion of the indebtedness of Pavilion Partners,
including debt which was previously guaranteed by PACE. No borrowings had
been made under the Acquisition Facility, which expired with the closing of
the SFX Transaction. Additionally, all put option agreements related to the
Company's common stock were terminated.

During February 1998, the Company granted 40 shares of restricted common
stock to an executive. This grant combined with the settlement of all
restricted and redeemable stock, all outstanding stock options and certain
bonuses paid in conjunction with the SFX Transaction resulted in a one-time
charge during February 1998 of approximately $6.4 million, net of related tax
effects.

The USA Transaction closed on March 25, 1998. To effect the USA
Transaction, PACE contributed $4,000,000 to a newly formed partnership and
that partnership acquired a 67% interest in certain assets and liabilities of
United Sports of America from third parties. The remaining 33% interest in
those assets and liabilities was contributed to the partnership by a
subsidiary of SFX.

F-77
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of Pavilion Partners:

We have audited the accompanying consolidated balance sheet of Pavilion
Partners, a Delaware general partnership, as of September 30, 1997, and the
related consolidated statements of income, partners' capital and cash flows
for the year then ended. These consolidated financial statements are the
responsibility of the partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Pavilion
Partners as of September 30, 1997, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
December 15, 1997 (except with
respect to the matters discussed
in Note 11, as to which the date
is December 22, 1997)

F-78
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of Pavilion Partners

In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of partners' capital and of cash
flows present fairly, in all material respects, the financial position of
Pavilion Partners and its subsidiaries (the Partnership) at September 30,
1996 and the results of their operations and their cash flows for the year
ended October 31, 1995 and the eleven months ended September 30, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
Houston, Texas
December 12, 1996

F-79
<PAGE>

PAVILION PARTNERS
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------- DECEMBER

1996 1997 1997
-------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................. $ 8,554 $ 17,898 $15,464
Accounts receivable ................................... 7,842 6,167 2,067
Accounts receivable, related parties .................. 1,878 3,878 1,687
Notes receivable, related parties ..................... 1,218 1,218 1,218
Prepaid expenses and other current assets ............. 1,208 1,017 622
--------- ---------- -------------
Total current assets ............................... 20,700 30,178 21,058
Prepaid rent .......................................... 7,075 6,938 6,898
Property and equipment, net ........................... 61,292 59,938 59,291
Other assets .......................................... 4,426 5,722 5,777
--------- ---------- -------------
Total assets ....................................... $93,493 $102,776 $93,024
========= ========== =============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable ...................................... $ 1,404 $ 1,193 $ 260
Accounts payable, related parties ..................... 1,866 3,948 2,193
Accrued liabilities ................................... 8,112 7,032 5,614
Deferred revenue ...................................... 3,602 5,081 3,067
Current portion of notes payable and capital lease
obligation ........................................... 1,573 1,614 1,639
Current portion of note payable, related party ....... 637 880 945
--------- ---------- -------------
Total current liabilities .......................... 17,194 19,748 13,718
Notes payable ......................................... 43,680 42,192 41,879
Note payable, related party ........................... 7,268 7,025 6,961
Capital lease obligation .............................. 6,130 5,989 5,952
Other liabilities and minority interests in
consolidated subsidiaries ............................ 1,617 3,960 2,911
--------- ---------- -------------
Total liabilities .................................. 75,889 78,914 71,421
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL ...................................... 17,604 23,862 21,603
--------- ---------- -------------
Total liabilities and partners' capital ........... $93,493 $102,776 $93,024
========= ========== =============
</TABLE>

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

F-80
<PAGE>

PAVILION PARTNERS
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED
OCTOBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1997
--------- -------- ----------

TICKET REVENUES .......... $43,266 $50,151 $ 58,479
<S> <C> <C> <C>
OTHER OPERATING REVENUES 28,109 33,942 41,730
------------- --------------- ---------------
Total revenues ......... 71,375 84,093 100,209
COST OF SALES ............ 49,226 57,723 64,052
------------- --------------- ---------------
Gross profit ........... 22,149 26,370 36,157
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 8,329 9,774 10,858
DEPRECIATION AND
AMORTIZATION ............ 2,461 3,346 3,975
OTHER OPERATING COSTS ... 5,345 7,390 8,531
LITIGATION EXPENSES AND
SETTLEMENT .............. -- 2,380 --
------------- --------------- ---------------
Operating profit (loss) 6,014 3,480 12,793
INTEREST INCOME .......... 504 391 532
INTEREST EXPENSE ......... 2,793 3,855 4,413
------------- --------------- ---------------
INCOME (LOSS) BEFORE
MINORITY INTEREST ....... 3,725 16 8,912
MINORITY INTEREST ........ 276 308 1,926
------------- --------------- ---------------
NET INCOME (LOSS) ........ $ 3,449 $ (292) $ 6,986
============= =============== ===============
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-------------------
1996 1997
-------- --------
(Unaudited)
<S> <C> <C>
TICKET REVENUES .......... $ 4,186 $ 4,554
OTHER OPERATING REVENUES 3,254 3,141
---------- ---------
Total revenues ......... 7,440 7,695
COST OF SALES ............ 4,862 5,229
---------- ---------
Gross profit ........... 2,578 2,466
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,299 1,987
DEPRECIATION AND
AMORTIZATION ............ 961 1,031
OTHER OPERATING COSTS ... 961 723
LITIGATION EXPENSES AND
SETTLEMENT .............. -- --
---------- ---------
Operating profit (loss) (1,643) (1,275)
INTEREST INCOME .......... 74 167
INTEREST EXPENSE ......... 1,127 1,102
---------- ---------
INCOME (LOSS) BEFORE
MINORITY INTEREST ....... (2,696) (2,210)
MINORITY INTEREST ........ (63) (59)
---------- ---------
NET INCOME (LOSS) ........ $(2,633) $(2,151)
========== =========
</TABLE>

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

F-81
<PAGE>

PAVILION PARTNERS
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS)

<TABLE>
<CAPTION>
AMPHITHEATER
ENTERTAINMENT
PARTNERSHIP SM/PACE, INC. TOTAL
--------------- --------------- ---------
<S> <C> <C> <C>
BALANCE, October 31, 1994 .............. $13,108 $2,805 $15,913
Net income ............................ 1,788 1,661 3,449
Distributions ......................... -- (699) (699)
--------------- --------------- ---------
BALANCE, October 31, 1995 .............. 14,896 3,767 18,663
Net income (loss) ..................... (330) 38 (292)
Distributions ......................... -- (767) (767)
--------------- --------------- ---------
BALANCE, September 30, 1996 ............ 14,566 3,038 17,604
Net income ............................ 4,578 2,408 6,986
Distributions ......................... -- (728) (728)
--------------- --------------- ---------
BALANCE, September 30, 1997 ............ $19,144 $4,718 $23,862
Net loss (unaudited) .................. (1,435) (716) (2,151)
Distributions (unaudited) ............. -- (108) (108)
--------------- --------------- ---------
BALANCE, December 31, 1997 (unaudited) $17,709 $3,894 $21,603
=============== =============== =========
</TABLE>

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

F-82
<PAGE>

PAVILION PARTNERS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
FOR THE ELEVEN MONTHS FOR THE
YEAR ENDED ENDED YEAR ENDED
OCTOBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1997
------------ ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) ............... $ 3,449 $ (292) $ 6,986
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities--
Depreciation and amortization . 2,461 3,346 3,975
Minority interest .............. 276 308 1,926
Changes in assets and
liabilities--
Accounts receivable ........... (1,455) (3,647) 1,669
Accounts receivable and
payable, related parties .... 32 (756) 82
Prepaid expenses and other
current assets ............... 191 (296) 266
Accounts payable and accrued
liabilities .................. (512) 1,695 (2,184)
Deferred revenue and other
liabilities .................. 1,304 2,110 2,284
Other, net .................... (785) (1,259) (1,548)
------------- --------------- ---------------
Net cash provided by (used
in) operating activities ... 4,961 1,209 13,456
------------- --------------- ---------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payments of preoperating costs . (1,318) (1,114) (59)
Capital expenditures ............ (25,856) (7,483) (1,879)
------------- --------------- ---------------
Net cash used in investing
activities .................. (27,174) (8,597) (1,938)
------------- --------------- ---------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Funding of capital commitments
by partners .................... 4,046 -- --
Distributions to partner ........ (699) (767) (728)
Proceeds from borrowings ........ 24,322 8,323 --
Repayments of borrowings ........ (639) (1,072) (1,446)
------------- --------------- ---------------
Net cash provided by (used
in) financing activities ... 27,030 6,484 (2,174)
------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 4,817 (904) 9,344
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD ............. 4,641 9,458 8,554
------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD ....................... $ 9,458 $ 8,554 $17,898
============= =============== ===============
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
----------------------
1996 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) ............... $(2,633) $(2,151)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities--
Depreciation and amortization . 961 1,031
Minority interest .............. (63) (59)
Changes in assets and
liabilities--
Accounts receivable ........... 5,124 4,100
Accounts receivable and
payable, related parties .... (299) 436
Prepaid expenses and other
current assets ............... 774 435
Accounts payable and accrued
liabilities .................. (1,925) (2,350)
Deferred revenue and other
liabilities .................. (2,082) (2,092)
Other, net .................... (141) (1,210)
---------- ----------
Net cash provided by (used
in) operating activities ... (284) (1,860)
---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payments of preoperating costs . (271) --
Capital expenditures ............ (15) (178)
---------- ----------
Net cash used in investing
activities .................. (286) (178)
---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Funding of capital commitments
by partners .................... -- --
Distributions to partner ........ (728) (108)
Proceeds from borrowings ........ -- --
Repayments of borrowings ........ (375) (288)
---------- ----------
Net cash provided by (used
in) financing activities ... (1,103) (396)
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (1,673) (2,434)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD ............. 8,554 17,898
---------- ----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD ....................... $ 6,881 $15,464
========== ==========
</TABLE>

F-83
<PAGE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-83
<PAGE>
PAVILION PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION:

Pavilion Partners (the Partnership) is a Delaware general partnership
between SM/PACE, Inc. (PACE), which is a wholly owned subsidiary of PACE
Entertainment Corporation, and Amphitheater Entertainment Partnership (AEP).
AEP is a partnership between a wholly owned subsidiary of Sony Music
Entertainment Inc. (Sony) and two wholly owned subsidiaries of Blockbuster
Entertainment Corporation (Blockbuster). PACE is the managing partner of the
Partnership. AEP owns a 66 2/3 percent interest in the Partnership, and PACE
owns a 33 1/3 percent interest in the Partnership.

In April 1990, Sony and PACE formed YM/PACE Partnership which changed its
name to the Sony Music/PACE Partnership. Effective April 1, 1994, the
partners entered into an agreement whereby Blockbuster obtained an indirect
33 1/3 percent interest in Sony Music/PACE Partnership, which was renamed
Pavilion Partners. In accordance with the agreement, Sony contributed an
interest-bearing note in the amount of $4,250,000 and its existing interest
in Sony Music/PACE Partnership to AEP. Concurrently, Blockbuster contributed
an interest-bearing note in the amount of $4,250,000 and its interest in
three existing amphitheaters to AEP. AEP in turn contributed these assets to
the Partnership. At the same time, PACE Entertainment Corporation contributed
its interest in two existing amphitheaters to the Partnership. Upon
completion of these contributions to the Partnership, AEP owned a 66 2/3
percent interest in the Partnership and PACE owned a 33 1/3 percent interest
in the Partnership.

The Partnership owns and operates amphitheaters, which are primarily used
for the presentation of live performances by musical artists. As of September
30, 1997, the Partnership owned interests in or leased 10 amphitheaters and
had a long-term management contract to operate an additional amphitheater.
All of the amphitheaters owned or operated by the Partnership are located in
the United States.

In April 1997, the Partnership entered into a new partnership agreement
with a third party to be known as Western Amphitheater Partners (WAP). The
Partnership contributed or licensed the assets and liabilities of the Glen
Helen Amphitheatre, and the other partner contributed or licensed the assets
and liabilities of the Irvine Meadows Amphitheatre. Each partner has a 50
percent interest in WAP. Under the terms of the Partnership agreement, the
partners are required to make an additional capital contribution of
approximately $850,000 each in WAP which was accrued by the Partnership at
September 30, 1997. The fiscal year-end for the WAP partnership will be
December 31.

During 1996, the Partnership changed its fiscal year-end from October 31
to September 30.

2. SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements of the Partnership include all of
its wholly owned subsidiaries and other partnerships in which Pavilion
Partners holds a controlling interest. All partnerships in which Pavilion
Partners holds less than a controlling interest are reported on the equity
method of accounting. All significant intercompany transactions have been
eliminated in consolidation.

Basis of Contributed Assets

All assets contributed to the Partnership by the partners were recorded at
the carrying values of the contributing entities.

Revenue Recognition

The Partnership records revenues from the presentation of events at the
completion of the related event. Advance ticket sales are classified as
deferred revenue until the event has occurred. Sponsorship and other revenues
that are not related to any single event are classified as deferred revenue
and amortized over each of the amphitheaters' various shows during the
operating season.

F-84
<PAGE>
PAVILION PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Partnership barters event tickets and sponsorship rights for products
and services, including event advertising. These barter transactions are not
recognized in the accompanying consolidated financial statements and are not
material to the Partnership's financial position or results of operations.

Income Taxes

No provision for federal or state income taxes is necessary in the
financial statements of the Partnership because, as a partnership, it is not
subject to federal or state income taxes and the tax effect of its activities
accrues to the partners.

Prepaid Expenses

As of September 30, 1996 and 1997, prepaid expenses included event
advertising costs of $160,000 and $137,000, respectively. The Partnership
recognized event advertising expenses of $5,815,000, $6,439,000 and
$6,569,000 in cost of sales for the year ended October 31, 1995, the eleven
months ended September 30, 1996, and the year ended September 30, 1997,
respectively.

Other Assets

The Partnership incurs certain costs in identifying and selecting
potential sites for amphitheater development. All costs incurred by the
Partnership during the initial site selection phase are expensed as incurred.
Certain incremental start-up costs that are incurred after a decision has
been made to develop a site are capitalized as preoperating costs. After an
amphitheater is fully developed, these preoperating costs are amortized on a
straight-line basis over a five-year period.

Contract acquisition costs include fees associated with securing a
contract with a booking agent for one of the Partnership's amphitheaters.
These costs are amortized on a straight-line basis over the life of the
contract which is 10 years.

Property and Equipment

Property and equipment is stated at cost. Repair and maintenance costs are
expensed as incurred. Interest incurred in connection with the construction
of an amphitheater is capitalized as part of the cost of the amphitheater.
During 1995 and 1996, the Partnership capitalized interest in connection with
the construction of amphitheaters of $645,000 and $161,000, respectively. No
interest was capitalized in 1997.

Leasehold improvements are amortized on a straight-line basis over the
shorter of their estimated useful lives or the term of the lease. Other
property and equipment is depreciated on a straight-line basis over the
estimated useful lives of the assets. A summary of the principal ranges of
useful lives used in computing the annual provision for depreciation and
amortization is as follows:

<TABLE>
<CAPTION>
RANGE OF YEARS
--------------
<S> <C>
Buildings .............. 27-31.5
Leasehold improvements 5-31.5
Equipment .............. 3-7
Furniture and fixtures 5-10
</TABLE>

The Partnership evaluates on an ongoing basis whether events and
circumstances indicate that the estimated useful lives of property and
equipment warrant revision. The Partnership adopted Statement of Financial
Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," in 1997. The
adoption of SFAS No. 121 did not have a material effect on the Partnership's
financial position or results of operations.

F-85
<PAGE>
PAVILION PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Fair Value of Financial Instruments

The carrying amounts of the Partnership's financial instruments
approximate their fair value at September 30, 1996 and 1997.

Statement of Cash Flows

The Partnership considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Interest paid was
$2,319,000, $3,652,000 and $3,917,000 for 1995, 1996 and 1997, respectively.
During the year ended October 31, 1995, the Partnership issued a note payable
with a fair value of $1,300,000 to a vendor in exchange for certain equipment
with a fair value which approximated the amount of the note. During 1997, the
Partnership contributed or licensed the assets and liabilities of the Glen
Helen Amphitheatre into the new WAP Partnership in which it holds a 50
percent interest. The net book value of the investment made in the WAP
Partnership was $54,000.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires the Partnership to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain amounts in the 1995 and 1996 consolidated financial statements
have been reclassified to conform to the 1997 presentation.

Interim Financial Information

3. PARTNERSHIP AGREEMENT:

The Partnership agreement provides, among other things, for the following:

Contributions and Project Loans

In addition to the initial contributions as discussed in Note 1, the
partners are obligated to contribute, in proportion to their respective
Partnership interests, any deficiency in the funding for the construction of
each approved amphitheater development or any operational shortfall, as
defined in the Partnership agreement. No such funding was required in 1995,
1996 or 1997.

In addition, AEP is responsible for providing project financing, as
defined, for each approved amphitheater development. To the extent AEP does
not fulfill this responsibility, AEP must indemnify, defend and hold harmless
the Partnership from all claims, demands, liabilities or other losses
(including the loss of any earnest money deposits and any reasonable
attorneys' fees) which might result from AEP's failure to provide such
project loan.

Income Allocation

In general, all of the Partnership's income is allocated to the partners
in proportion to their respective Partnership interests. However, PACE
receives a priority allocation of net income, as defined in the Partnership
agreement, until the cumulative amount of such allocations is equal to
$2,000,000 increased

F-86
<PAGE>
PAVILION PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

by 7 percent of the unpaid allocation on the last day of each fiscal year.
Any such allocation of net income to PACE is distributed in the following
year. The priority allocation of net income to PACE for 1995, 1996 and 1997
was approximately $767,000, $716,000 and $119,000, respectively. This
allocation obligation was fully satisfied with the distribution of the fiscal
1997 income allocation amount during October 1997.

AEP is entitled to receive a priority allocation of net income once a loan
related to an amphitheater contributed by Blockbuster is repaid. At September
30, 1997, the loan balance is $7,905,000 and is payable in quarterly
installments with a balloon payment due at its maturity on April 1, 2004. The
priority allocation of net income is equal to 65 percent of the cash flow
attributable to the amphitheater, as defined in the Partnership agreement.
The cumulative priority allocation of net income to AEP is limited to
$7,000,000. No such allocation was made in 1995, 1996 or 1997.

On November 1 of each calendar year, the executive committee of the
Partnership determines if any excess cash exists in the Partnership's
accounts above what is necessary to fund future operations and obligations.
Any such excess cash may be distributed to the partners in proportion to
their respective interests in the Partnership. No distributions of excess
cash flow have been made.

4. PROPERTY AND EQUIPMENT:

The components of the Partnership's property and equipment are as follows
(in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------
1996 1997
--------- --------
<S> <C> <C>
Property ....................................... $ 695 $ 695
Buildings ...................................... 10,817 10,817
Leasehold improvements ......................... 53,148 53,826
Equipment ...................................... 5,007 4,488
Furniture and fixtures ......................... 705 722
Construction in progress ....................... -- 786
--------- --------
70,372 71,334
Less--Accumulated depreciation and amortization 9,080 11,396
--------- --------
$61,292 $59,938
========= ========
</TABLE>

Depreciation and amortization expense associated with property and
equipment for 1995, 1996 and 1997 was $1,905,000, $2,693,000 and $3,179,000,
respectively.

Assets under capital lease included above are as follows (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
------------------
1996 1997
-------- --------
<S> <C> <C>
Building ...................... $5,333 $5,333
Furniture and equipment ...... 841 841
-------- --------
6,174 6,174
Less--Accumulated depreciation 2,068 2,237
-------- --------
$4,106 $3,937
======== ========
</TABLE>

Amortization expense associated with assets under capital lease for 1995,
1996 and 1997 was $169,000, $156,000 and $169,000, respectively.

F-87
<PAGE>
PAVILION PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. OTHER ASSETS:

Other assets consist of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
------------------
1996 1997
-------- --------
<S> <C> <C>
Preoperating costs, net of accumulated amortization of $2,092,000 and
$1,094,000, respectively................................................. $2,153 $1,709
Investment in unconsolidated partnerships ................................ 1,302 2,797
Contract acquisition costs, net of accumulated amortization of $45,000
and $129,000, respectively .............................................. 624 815
Other .................................................................... 347 402
-------- --------
$4,426 $5,723
======== ========
</TABLE>

During 1995, 1996 and 1997, the Partnership recognized equity in earnings
of unconsolidated partnerships of $263,000, $129,000 and $1,592,000,
respectively, which is included in other operating revenues.

6. ACCRUED LIABILITIES:

Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
-----------------
1996 1997
-------- -------
<S> <C> <C>
Interest ........................... $ 544 $ 522
Rent ............................... 638 580
Taxes .............................. 748 613
Litigation expenses and settlement 1,873 --
Insurance .......................... 1,216 1,656
Other .............................. 3,093 3,660
-------- -------
$8,112 $7,031
======== =======
</TABLE>

Accrued liabilities do not include accrued interest on the notes payable
to Blockbuster (see Note 7). Such accrued interest, which is included in
accounts payable, related parties, was $1,082,000 and $1,601,000 as of
September 30, 1996 and 1997, respectively.

F-88
<PAGE>
PAVILION PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. NOTES PAYABLE:

Notes payable to third parties consist of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Note payable to a bank, interest at LIBOR plus 0.18% (6% at
September 30, 1996 and 1997), payments due semiannually with
a balloon payment due on maturity in July 2005, guaranteed by
Sony ......................................................... $13,122 $12,573
Note payable to a bank, interest at 8.35% through July 2002
and LIBOR plus 0.18% thereafter, due in July 2005, guaranteed
by Sony....................................................... 10,000 10,000
Note payable to a bank, interest at LIBOR plus 0.85% (6.78% at
September 30, 1996 and 1997), payments due annually with a
balloon payment due on maturity in December 2005, guaranteed
by Blockbuster and Sony....................................... 7,732 7,575
Note payable to a bank, interest at prime minus 105 basis
points (7.2% and 7.45% at September 30, 1996 and 1997,
respectively), payments due quarterly with a balloon payment
due on maturity in April 2000, guaranteed by Sony............. 6,449 6,356
Note payable to a bank, interest at 9.46%, payments due
quarterly with a balloon payment due on maturity in December
1999, guaranteed by Sony...................................... 3,958 3,914
Note payable to a vendor, interest imputed at 8.98%, payments
due weekly through May 2005................................... 1,826 1,671
Other notes payable to vendors, interest at fixed rates
ranging from 8.2% to 10.72%, due in equal installments with
final maturities ranging from December 1996 through February
2006.......................................................... 2,040 1,591
--------- ---------
Total........................................................ 45,127 43,680
Less--Current maturities....................................... 1,447 1,488
--------- ---------
Noncurrent portion........................................... $43,680 $42,192
========= =========
Note payable to a related party consist of the following (in
thousands):
SEPTEMBER 30
--------------------
1996 1997
--------- ---------
Note payable to Blockbuster, interest at 7%, payments due
quarterly with a balloon payment due on maturity in April
2004, secured by property and equipment with a net book value
of $6,212 .................................................... $ 7,905 $ 7,905
Less--Current maturities....................................... 637 880
--------- ---------
Noncurrent portion........................................... $ 7,268 $ 7,025
========= =========
</TABLE>

The terms of contracts with concessionaires such as food and beverage
vendors generally require the vendors to make a significant initial payment
to the Partnership at the time of the construction of an amphitheater. These
advances are repayable in periodic installments from amounts otherwise due to
the Partnership under the concession contracts. As of September 30, 1997, the
notes payable to vendors

F-89

<PAGE>

PAVILION PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

under such arrangements had a weighted-average effective interest rate of
9.15 percent. The Partnership's weighted-average interest rate on notes
payable to banks was 7.3 percent on September 30, 1997.

Interest expense on the note payable to a related party was $547,000,
$489,000 and $519,000 for 1995, 1996 and 1997, respectively. Principal and
interest on the note payable to a related party have not been paid as
accounts receivable, related parties from Blockbuster remain outstanding.

As of September 30, 1997, scheduled maturities of notes payable were as
follows:

<TABLE>
<CAPTION>
<S> <C>
1998 ......... $ 2,368
1999 ......... 1,841
2000 ......... 11,560
2001 ......... 1,751
2002 ......... 1,811
Thereafter .. 32,254
--------
$51,585
========
</TABLE>

8. LEASE COMMITMENTS:

The Partnership leases various amphitheaters under operating and capital
leases. Initial lease terms are 25 to 60 years with varying renewal periods
at the Partnership's option on most leases. A number of the amphitheater
leases provide for escalating rent over the lease term. Rental expense on
operating leases is recognized on a straight-line basis over the life of such
leases. The majority of the amphitheater leases provide for contingent
rentals, generally based upon a percentage of gross revenues, as defined in
the respective lease agreements. Minimum rental expense associated with
operating leases for 1995, 1996 and 1997 was $648,000, $2,353,000 and
$2,612,000, respectively. Contingent rental expense associated with operating
leases for 1995, 1996 and 1997 was $2,407,000, $2,515,000 and $2,571,000,
respectively. Contingent rental expense associated with capital leases for
1995, 1996 and 1997 was $144,000, $155,000 and $149,000, respectively.

Minimum rental commitments on long-term capital and operating leases at
September 30, 1997, were as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
<S> <C> <C>
Year ending September 30--
1998 .................................... $ 757 $ 2,902
1999 .................................... 757 3,056
2000 .................................... 756 3,148
2001 .................................... 757 3,248
2002 .................................... 757 3,297
Thereafter .............................. 9,714 54,693
--------- -----------
13,498 $70,344
===========
Less--Amount representing interest ...... 7,383
---------
Present value of minimum rental payments 6,115
Less--Current portion .................... 126
---------
Noncurrent portion........................ $ 5,989
=========
</TABLE>

9. RELATED PARTIES:

The responsibility for the day-to-day business and affairs of the
Partnership has been delegated by the partners to a managing director and
support staff employed by PACE Entertainment Corporation and

F-90
<PAGE>
PAVILION PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

its subsidiaries. PACE Entertainment Corporation and its subsidiaries provide
the Partnership with management and consulting services in connection with
the development, construction, maintenance and operation of amphitheaters
owned or leased by the Partnership. The Partnership paid $1,650,000,
$1,687,000 and $1,968,000 during 1995, 1996 and 1997, respectively, to PACE
Entertainment Corporation as reimbursement for the costs of these services.

The Partnership paid PACE Music Group (PMG), a subsidiary of PACE
Entertainment Corporation, $289,000, $225,000 and $395,000 during 1995, 1996
and 1997, respectively, for services provided by PMG as a local presenter at
one of the Partnership's amphitheaters.

Accounts receivable from and accounts payable to related parties at
September 30, 1997, of $3,878,000 and $3,948,000, respectively, relate to
amounts owed to and due from the partners arising from the formation of the
Partnership and general and administrative expenses paid by or on behalf of
the Partnership.

Notes receivable, related parties consist of two notes due from AEP which
bear interest at 5.62 percent per annum and matured April 1, 1997. Principal
payments on the notes are due upon request by the Partnership in order to
fund the construction of proposed amphitheaters. Interest on the partners'
notes amounted to $192,000, $63,000 and $68,000 for 1995, 1996 and 1997,
respectively.

10. COMMITMENTS AND CONTINGENCIES:

Commitments

The Partnership guarantees 50 percent of a $2,305,000 promissory note
issued by its 50 percent equity partner in the Starwood Amphitheater. The
note matures on June 1, 2003.

The Partnership has committed to fund certain renovation work at one of
its amphitheaters in proportion to its 66 2/3 percent partnership interest in
that amphitheater. The renovations are to include increasing seating capacity
and upgrading the amphitheater's concession plazas and parking facilities.
The total budget for these renovations is approximately $11.0 million of
which $5.0 million will be funded by the minority partner and a note payable
to vendor, therefore the Partnership's funding commitment is approximately
$6.0 million.

The Partnership maintains cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Partnership has not experienced any
losses in such accounts. Management performs periodic evaluations of the
relative credit standards of the financial institutions with which it deals.
Additionally, the Partnership's cash management and investment policies
restrict investments to low-risk, highly liquid securities. Accordingly,
management does not believe that the Partnership is currently exposed to any
significant credit risk on cash and cash equivalents.

The Partnership is subject to other claims and litigation arising in the
normal course of its business. The Partnership does not believe that any of
these proceedings will have a material adverse effect on its financial
position or results of operations.

The Partnership was previously named as a defendant in a case filed in
Wake County, North Carolina (Promotion Litigation). There were several
defendants named in the litigation with various causes of action asserted
against one or more of each of the defendants, including (a) breach of
alleged contract, partnership, joint venture and fiduciary duties between
certain of the defendants and Pro Motion Concerts, (b) constructive fraud,
(c) interference with prospective advantage, (d) unfair trade practices, (e)
constructive trust and (f) unjust enrichment. The essence of the plaintiff's
claims was that certain of the defendants agreed to enter into a partnership
with the plaintiffs for the development and operation of an amphitheater. On
May 1, 1997, the Promotion Litigation was settled. All defendants were fully
and finally released with prejudice from any and all claims and causes of
action. Although the defendants believe that they would have prevailed at a
trial of the Promotion Litigation, the defendants chose to settle

F-91

<PAGE>

PAVILION PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

rather than risk the uncertainties of a trial. The defendants did not
acknowledge or admit any liability. The settlement called for payments to
plaintiffs totaling $4.5 million, of which $1.0 million was paid by the
Partnership. The Partnership recorded litigation settlement expense of $1.0
million at September 30, 1996. The settlement was paid during May 1997.

Change in Control Provisions

The Partnership has entered into numerous leases and other contracts in
the ordinary course of business. Certain of these agreements either contain
restrictions on their assignability or would require third-party approval of
a change in control of the Partnership.

Employment Agreements

The Partnership has employment agreements with certain key employees. Such
agreements generally provide for minimum salary levels, guaranteed bonuses
and incentive bonuses which are payable if specified financial goals are
attained. As of September 30, 1997, the Company's minimum commitment under
these agreements were as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
For the year ending September
30--
1998 ............................. $335
1999 ............................. 177
</TABLE>

Insurance

The Partnership carries a broad range of insurance coverage, including
general liability, workers' compensation, employee health coverage and
umbrella policies. The Partnership carries deductibles of up to $10,000 per
occurrence for general liability claims. The Partnership has accrued for
estimated potential claim costs in satisfying the deductible provisions of
the insurance policies for claims occurring through September 30, 1997. The
accrual is based on known facts and historical trends, and management
believes such accrual to be adequate.

11. SUBSEQUENT EVENTS:

In December 1997, the managing partner and its shareholders entered into
an agreement whereby the shareholders would sell their interests in PACE
Entertainment Corporation to SFX Entertainment, Inc. (SFX Transaction).
Closing is subject to certain conditions, including the approval of third
parties.

On December 19, 1997, the PACE Entertainment Corporation entered into an
agreement to purchase Blockbuster's 33 1/3 percent interest in the
Partnership (Blockbuster Transaction) for $4,171,000 in cash, $2,940,000 in
assumed liabilities and the assumption of certain indemnification obligations
of Blockbuster under the Partnership agreement. In addition, PACE
Entertainment Corporation has agreed to purchase the note payable to
Blockbuster with a balance of $9,507,000, including accrued interest of
$1,601,000, at September 30, 1997. The transaction is contingent on, among
other things, obtaining acceptable financing including the release of
Blockbuster from certain debt obligations and the approval of Sony.

On December 22, 1997, PACE Entertainment Corporation entered into an
agreement to purchase Sony's 33 1/3 percent interest in the Partnership (Sony
Transaction) for $27,500,000 in cash. The transaction is contingent on, among
other things, government approval and obtaining acceptable financing
including the release of Sony from certain debt obligations (see Note 7).

12. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT (Unaudited)

Effective February 25, 1998, the SFX Transaction, Blockbuster Transaction
and Sony Transaction closed. In conjunction with the closing, SFX purchased
or retired approximately $38 million of the Partnership's outstanding notes
payable.

F-92
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Boards of Directors
Contemporary Group

We have audited the accompanying combined balance sheets of Contemporary
Group as of December 31, 1996 and 1997 and the related combined statements of
operations, cash flows and stockholders' equity for the years then ended.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements 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 combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
Contemporary Group at December 31, 1996 and 1997 and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
Ernst & Young LLP

New York, New York
March 20, 1998

F-93
<PAGE>

CONTEMPORARY GROUP
COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1996 1997
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................................ $ 2,972,409 $10,427,805
Accounts receivable ............................................. 4,067,444 7,672,187
Notes receivable -related party ................................. -- 1,000,000
Prepaid expenses and other current assets ....................... 272,105 210,640
-------------- -------------
Total current assets ............................................. 7,311,958 19,310,632
Property and equipment, at cost, less accumulated depreciation
and amortization of $2,723,986 in 1996 and $3,264,972 in 1997 .. 2,438,210 2,813,902
Reimbursable event costs.......................................... 474,469 152,617
Deferred event expenses........................................... 250,973 402,460
Investment in Riverport........................................... 4,934,513 5,436,717
Other assets...................................................... 120,256 199,518
-------------- -------------
Total assets...................................................... $15,530,379 $28,315,846
============== =============
LIABILITIES AND COMBINED STOCKHOLDERS' EQUITY
Current liabilities:
Accrued compensation and bonuses................................. $ 2,906,153 $ 6,721,459
Accrued expenses and other current liabilities................... 1,994,036 6,169,861
Accounts payable................................................. 1,733,676 1,347,539
Current portion of note payable.................................. 667,138 1,075,000
-------------- -------------
Total current liabilities......................................... 7,301,003 15,313,859
Deferred revenue and other liabilities............................ 2,586,880 5,570,295
Note payable, less current portion................................ 1,659,723 739,424
Combined stockholders' equity..................................... 3,982,773 6,692,268
-------------- -------------
Total liabilities and combined stockholders' equity............... $15,530,379 $28,315,846
============== =============
</TABLE>

See accompanying notes.

F-94
<PAGE>

CONTEMPORARY GROUP
COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1996 1997
------------- -------------
<S> <C> <C>
Operating revenues:
Event promotion revenue ............ $38,023,454 $48,057,060
Marketing revenue .................. 12,969,621 30,195,359
Other event revenue ................ 8,859,218 10,800,118
------------- -------------
59,852,293 89,052,537
Cost of revenue ..................... 46,410,935 66,940,088
------------- -------------
13,441,358 22,112,449
Operating expenses:
Salary and bonus expense ........... 8,010,991 18,992,476
Depreciation and amortization ..... 566,573 540,986
General and administrative expenses 3,767,111 4,887,615
------------- -------------
12,344,675 24,421,077
Income (loss) from operations ....... 1,096,683 (2,308,628)
Other income (expense):
Interest income .................... 158,512 201,310
Interest expense ................... (213,658) (192,130)
Loss on asset disposal ............. -- (84,261)
Equity in income of Riverport ..... 822,716 1,002,204
------------- -------------
767,570 927,123
------------- -------------
Income before income taxes .......... 1,864,253 (1,381,505)
Federal and state taxes ............. 35,367 --
------------- -------------
Net income (loss) ................... $ 1,828,886 $(1,381,505)
============= =============
</TABLE>

See accompanying notes.

F-95
<PAGE>

CONTEMPORARY GROUP
COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1996 1997
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income .................................................. $ 1,828,886 $(1,381,505)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .............................. 566,573 540,986
Loss on asset disposal ..................................... -- 84,261
Non cash interest expense................................... 148,113 154,701
Equity in income of Riverport, net of distributions
received .................................................. (222,716) (502,204)
Changes in operating assets and liabilities:
Accounts receivable ....................................... (899,830) (3,604,743)
Prepaid expenses and other current assets ................. 225,754 61,465
Reimbursable event costs .................................. (207,355) 321,852
Deferred event expenses ................................... (159,393) (151,487)
Other assets .............................................. (29,923) (79,262)
Accounts payable .......................................... (186,876) (386,137)
Accrued compensation and bonuses .......................... 1,489,179 3,815,306
Accrued expenses and other current liabilities ........... 1,116,003 4,175,825
Deferred revenue .......................................... 1,324,206 3,227,827
Other liabilities ......................................... (1,134,683) (244,412)
------------- --------------
Net cash provided by operating activities ................... 3,857,938 6,032,473
INVESTING ACTIVITIES
Loan to related party ....................................... -- (1,000,000)
Purchase of property and equipment .......................... (1,159,382) (1,063,848)
Proceeds from sale of property and equipment ................ -- 62,909
------------- --------------
Net cash used in investing activities ....................... (1,159,382) (2,000,939)
FINANCING ACTIVITIES
Borrowings .................................................. 626,970 --
Payments of notes payable ................................... (109,832) (667,138)
Proceeds received from capital contributions ................ -- 5,000,000
Distributions paid .......................................... (2,993,000) (909,000)
------------- --------------
Net cash provided by (used in) financing activities ........ (2,475,862) 3,423,862
------------- --------------
Net increase in cash ........................................ 222,694 7,455,396
Cash at beginning of period ................................. 2,749,715 2,972,409
------------- --------------
Cash at end of period ....................................... $ 2,972,409 $10,427,805
============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest ...................................... $ 143,271 $ 37,421
============= ==============
Cash paid for income taxes .................................. $ 34,550 $ 27,077
============= ==============
</TABLE>

See accompanying notes.

F-96
<PAGE>

CONTEMPORARY GROUP
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
Year ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
<S> <C>
Balance, January 1, 1996 ....................... $ 5,146,887
Distributions to stockholders ................. (2,993,000)
Net income for the year ended December 31,
1996 ......................................... 1,828,886
-------------
Balance, December 31, 1996 ..................... 3,982,773
Distributions to stockholders ................. (909,000)
Capital contributions ......................... 5,000,000
Net loss for the year ended December 31, 1997 (1,381,505)
-------------
Balance, December 31, 1997 ..................... $ 6,692,268
=============
</TABLE>

See accompanying notes.

F-97
<PAGE>
CONTEMPORARY GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Combination

The accompanying combined financial statements include the accounts of
Contemporary International Productions Corporation, Contemporary Productions
Incorporated, Contemporary Marketing, Inc. ("CMI"), Contemporary Sports
Incorporated, Innovative Training and Education Concepts Corporation, n/k/a
Contemporary Group, Inc., Contemporary Investments Corporation ("CIC"),
Contemporary Investments of Kansas, Inc., Continental Entertainment
Associates, Inc., Dialtix, Inc., and Capital Tickets L.P. (collectively, the
"Contemporary Group" or the "Companies"). Intercompany transactions and
balances among these companies have been eliminated in combination. The
Companies are subject to common ownership and to the transaction described in
Note 8.

The Contemporary Group is a live entertainment and special events
producer, venue operator and consumer marketer. Income from operations
originates from the operation of the concert division which earns promotion
income in two ways: either a fixed fee for organizing and promoting an event
or an arrangement that entitles it to a profit percentage based on a
predetermined formula. The Companies recognize revenue from the promotion of
events when earned, which is generally upon exhibition. The Companies record
commissions on booking acts as well as sponsorship and concession income as
other event revenues.

CIC is a 50% partner in Riverport Performing Arts Centre Joint Venture
("Riverport"), a Missouri general partnership which operates a 20,000 seat
outdoor amphitheater located in St. Louis, Missouri. The investment in
Riverport is recorded under the equity method of accounting.

Income Taxes

As of December 31, 1997, all of the entities combined are either "S
Corporations" or partnerships and therefore no tax provision has been
provided. In 1996, certain of the entities were "C Corporations" for which a
tax provision has been provided.

For the year ended December 31, 1996, with respect to the "C
Corporations," the total provision for income taxes is $35,367.

Certain of the "C Corporations" filed elections to be treated as "S
Corporations" beginning January 1, 1997. Therefore, with respect to such
corporations, no provision for income taxes has been provided for the year
ended December 31, 1997. These Companies have subsequently revoked the
election to be taxed as "S Corporations", effective January 1, 1998.

Accounts Receivable

Accounts receivable consist of amounts due from ticket vendors, venue box
offices and customers of marketing services. Management considers these
accounts receivable as of December 31, 1997 and 1996 to be collectible;
accordingly, no allowance for doubtful accounts is recorded.

Revenue Recognition

Deferred revenue relates primarily to an advance on future concession
revenues which is evidenced by a noninterest bearing note payable and
advances on marketing services. Payments collected in advance are recognized
as income as events occur or services are provided. Reimbursable event costs
represent amounts paid by the Companies on behalf of co-promoters and other
parties with interests in the events which will be reimbursed by such
parties.

Sales under long-term contracts for the Company's marketing division are
recorded under the percentage-of-completion method, wherein revenues and
estimated costs are recorded as the work is performed.

F-98
<PAGE>
CONTEMPORARY GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Significant Customer

CMI's most significant customer is AT&T, which provided approximately 23%
and 12% of the Companies' combined revenues for the years ended December 31,
1997 and 1996, respectively. In March 1998, AT&T has indicated that it will
no longer be using the services of CMI.

Advertising Costs

Advertising costs are expensed as incurred. For the year ended December
31, 1997 and 1996, advertising costs were $115,634 and $71,879, respectively.

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed on
either the straight-line method or accelerated methods over the estimated
useful lives of the assets or the term of the related lease as follows:

<TABLE>
<CAPTION>
<S> <C>
Furniture, fixtures and equipment ....5-7 years
Land improvements ..................... 15 years
Leasehold improvements ................ 10 years
</TABLE>

Risks and Uncertainties

Reclassification

Certain amounts in the 1996 financial statements have been reclassified to
conform with the current year's presentation.

2. INVESTMENTS

The following is a summary of the financial position and results of
operations of Riverport as of and for the year ended December 31, 1996 and
1997:

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1996 1997
------------- -------------
<S> <C> <C>
Current assets .......................... $ 473,275 $ 284,424
Property and equipment .................. 11,815,552 11,188,826
Other assets ............................ 16,553 --
------------- -------------
Total assets ............................ $12,305,380 $11,473,250
============= =============
Current liabilities ..................... $ 1,993,981 $ 318,028
Other liabilities ....................... 442,374 281,789
Partners' capital ....................... 9,869,025 10,873,433
------------- -------------
Total liabilities and partners' capital $12,305,380 $11,473,250
============= =============
Revenue ................................. $11,693,138 $14,247,109
Net operating income .................... $ 1,970,887 $ 2,616,839
Net income .............................. $ 1,645,431 $ 2,004,408
</TABLE>

F-99

<PAGE>

CONTEMPORARY GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

During the years ended December 31, 1997 and 1996, CIC received a cash
distribution of $500,000 and $600,000, respectively, from Riverport.

3. NOTES PAYABLE

At December 31, 1997 and 1996, CIC held a $2,322,500 non interest-bearing
note payable to its partner in Riverport. The carrying value of the note was
$1,814,424 and $1,734,723 at December 31, 1997 and 1996, respectively, which
includes imputed interest at a rate of approximately 9%. The note, which was
payable in installments through December 1, 2000 and was secured by CIC's
investment in Riverport, was repaid in 1998 in connection with the
transaction described in Note 8.

At December 31, 1996, the Companies had a $592,138 bank note payable which
bore interest based on the prime lending rate (8.25% in 1996, 8.5% in 1997)
and was repaid in full during 1997.

4. COMMON STOCK

The Companies' stock and tax status for 1997 are as follows:

<TABLE>
<CAPTION>
TAX SHARES SHARES PAR
STATUS AUTHORIZED ISSUED VALUE
------------- ------------ -------- -------
<S> <C> <C> <C> <C>
Contemporary International Productions
Corporation............................... S-Corp. 30,000 10 $1
Contemporary Productions Incorporated .... S-Corp. 30,000 100 $1
Contemporary Marketing, Inc. .............. S-Corp. 30,000 100 $1
Contemporary Sports, Incorporated ........ S-Corp. 30,000 100 $1
Innovative Training and Education Concepts
Corporation n/k/a Contemporary Group,
Inc....................................... S-Corp. 30,000 100 $1
Contemporary Investments Corporation ..... S-Corp. 30,000 200 $1
Contemporary Investments of Kansas, Inc. .. S-Corp. 30,000 30,000 $1
Continental Entertainment Associates,
Inc....................................... C-Corp. 300 6 $100
Dialtix, Inc. ............................. S-Corp. 300 6 $100
Capital Tickets L.P. ...................... Partnership N/A N/A N/A
</TABLE>

5. COMMITMENTS AND CONTINGENCIES

Leases

The Companies lease office facilities and concert venues under
noncancellable leases which expire at various dates through 2004. Such leases
contain various operating escalations and renewal options.

Total rent expense for the year ended December 31, 1997 and 1996 was
$705,489 and $818,123, respectively.

F-100
<PAGE>
CONTEMPORARY GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Future minimum lease payments under noncancellable operating leases as of
December 31, 1997 are as follows:

<TABLE>
<CAPTION>
<S> <C>
1998 ......... $ 858,757
1999 ......... 863,757
2000 ......... 440,050
2001 ......... 264,000
Thereafter .. 317,000
-----------
$2,743,564
===========
</TABLE>

Compensation

During 1996, CMI entered into an employment agreement with one of its
employees which provided her rights to future cash payments based on the fair
value of CMI, as defined. These rights would vest on January 1, 2002 or upon
the occurrence of certain transactions, including a change of control. On
December 31, 1997, in connection with an amendment to her employment
agreement, the rights became fully vested and CMI paid this employee
$1,329,284. In addition, she is entitled to receive as a bonus $2,854,899
under the amendment, which will be paid in 1998 and is accrued at December
31, 1997.

Litigation

The Companies are party to various legal proceedings generally incidental
to their businesses. Although the ultimate disposition of these proceedings
is not presently determinable, management, after discussions with counsel,
does not expect the outcome of these proceedings to have a material adverse
effect on the financial condition of the Companies.

6. EMPLOYEE RETIREMENT PLAN

In January 1992, the Companies began a retirement plan for their employees
under Section 401(k) of the Internal Revenue Code. All employees are eligible
to participate once they obtain the minimum age requirement of 21 years and
have satisfied the service requirement of one year with the Companies.
Participant contributions are subject to the limitations of Section 402(g) of
the Internal Revenue Code. The Companies contribute to participant employees'
accounts at the rate of 25% of the first 5% of the participating employees'
contributions. During the years ended December 31, 1996 and 1997, the
Companies contributions totaled approximately $25,600 and $37,769,
respectively.

7. RELATED PARTY TRANSACTIONS

During 1997, the Company loaned $1,000,000 to its co-presidents. The loans
which bore a rate of interest of approximately 5.8% were repaid in full in
early 1998.

8. SUBSEQUENT EVENTS

In February 1998, the owners of the Companies sold 100% of the capital
stock of Contemporary International Productions Corporation and the assets of
the remaining companies comprising the Contemporary Group, excluding cash and
1997 receivables, to SFX Entertainment, Inc. for an aggregate consideration
of $62,300,000 in cash and the issuance of preferred stock convertible into
1,402,851 shares of SFX Entertainment Class A Common Stock upon a spin-off or
redeemable into cash if the spin-off does not occur by July 1, 1998. In
connection with this transaction, SFX Entertainment and its affiliates also
acquired the 50% interest of Riverport not owned by CIC for $12,585,000.

F-101
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Riverport Performing Arts Centre, Joint Venture:

We have audited the accompanying balance sheets of Riverport Performing
Arts Centre, Joint Venture (a Missouri General Partnership) as of December
31, 1997 and 1996, and the related statements of income and changes in
partners' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Joint Venture's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Riverport Performing Arts
Centre, Joint Venture as of December 31, 1997 and 1996, and the results of
its operations and its cash flows for the years then ended, in conformity
with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

St. Louis, Missouri,
February 27, 1998

F-102
<PAGE>
RIVERPORT PERFORMING ARTS CENTRE, JOINT VENTURE
BALANCE SHEETS -- AS OF DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................. $ 202,251 $ 76,231
Accounts receivable....................... -- 324,275
Prepaid expenses and other current
assets................................... 82,173 72,769
------------- -------------
Total current assets....................... 284,424 473,275
------------- -------------
FACILITY:
Land and leasehold interest............... 5,156,342 5,156,342
Buildings and improvements................ 8,516,251 8,449,225
Furniture, fixtures and equipment ........ 2,293,356 2,218,987
Less-Allowance for depreciation........... (4,777,123) (4,009,002)
------------- -------------
11,188,826 11,815,552
------------- -------------
OTHER ASSETS--Deferred financing fees, net -- 16,553
------------- -------------
$11,473,250 $12,305,380
============= =============
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ..... $ 160,585 $ 1,376,762
Accounts payable and accrued expenses .... 120,043 453,804
Deferred income........................... 37,400 163,415
------------- -------------
Total current liabilities.................. 318,028 1,993,981
LONG-TERM DEBT............................. 281,789 442,374
------------- -------------
599,817 2,436,355
PARTNERS' EQUITY........................... 10,873,433 9,869,025
------------- -------------
$11,473,250 $12,305,380
============= =============
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-103
<PAGE>

RIVERPORT PERFORMING ARTS CENTRE, JOINT VENTURE
STATEMENTS OF INCOME AND CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
REVENUES:
Show admission............................ $ 9,901,214 $ 8,053,939
Sponsorships and promotions............... 1,113,100 914,690
Concession rental......................... 1,970,742 1,724,060
Parking................................... 1,122,979 843,283
Other..................................... 139,074 157,166
------------- -------------
Operating revenues....................... 14,247,109 11,693,138
------------- -------------
EXPENSES:
Talent.................................... 5,825,962 4,382,735
Other show expenses....................... 1,866,910 1,706,317
Advertising and marketing................. 1,037,048 887,673
Producer fees and commissions............. 1,187,253 1,071,946
General and administrative................ 1,713,097 1,673,580
------------- -------------
Operating expenses....................... 11,630,270 9,722,251
------------- -------------
Net operating income..................... 2,616,839 1,970,887
------------- -------------
OTHER EXPENSES (INCOME):
Depreciation and amortization............. 779,278 767,258
Interest, net............................. 13,167 112,947
Other income.............................. (180,014) (554,749)
------------- -------------
Other expenses, net...................... 612,431 325,456
------------- -------------
Net income............................... 2,004,408 1,645,431
PARTNERS' EQUITY AT THE BEGINNING OF
PERIOD..................................... 9,869,025 9,423,594
DISTRIBUTION TO PARTNERS................... (1,000,000) (1,200,000)
------------- -------------
PARTNERS' EQUITY AT THE END OF THE PERIOD . $10,873,433 $ 9,869,025
============= =============
</TABLE>

The accompanying notes are an integral part of these statements.

F-104
<PAGE>

RIVERPORT PERFORMING ARTS CENTRE, JOINT VENTURE
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 2,004,408 $ 1,645,431
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization............................ 779,278 767,258
Change in accounts receivable............................ 324,275 (215,712)
Change in prepaid expenses and other current assets ..... (4,008) (3,606)
Change in accounts payable and accrued expenses ......... (333,761) 284,945
Change in deferred income................................ (126,015) (31,505)
------------- -------------
Net cash provided by operating activities............... 2,644,177 2,446,811
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Facility additions........................................ (141,395) (182,801)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt......................................... (1,376,762) (1,160,585)
Distribution to Partners.................................. (1,000,000) (1,200,000)
------------- -------------
Net cash used in financing activities................... (2,376,762) (2,360,585)
------------- -------------
Change in cash and cash equivalents..................... 126,020 (96,575)
CASH AND CASH EQUIVALENTS, beginning of year............... 76,231 172,806
------------- -------------
CASH AND CASH EQUIVALENTS, end of year..................... $ 202,251 $ 76,231
============= =============
</TABLE>

The accompanying notes are an integral part of these statements.

F-105
<PAGE>
RIVERPORT PERFORMING ARTS CENTRE, JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996

1. SIGNIFICANT ACCOUNTING POLICIES:

Organization

The Riverport Performing Arts Centre, Joint Venture (the Joint Venture) is
a Missouri General Partnership between Contemporary Investments Corporation
(Contemporary) and Sverdrup/BRC Joint Venture (formerly Sverdrup/MDRC Joint
Venture). The partners each hold a 50% interest in the equity and operations
of the Joint Venture. The term of the Joint Venture continues until December
31, 2045. The Joint Venture is the developer, owner and operator of a 20,000
seat outdoor amphitheater located in St. Louis, Missouri. The Joint Venture
contracts with popular musical performing artists for the entertainment of
its guests. Entertainment is provided during the months of April through
October to guests primarily from the St. Louis metropolitan area.

Cash and Cash Equivalents

Cash equivalents consist of investments with a maturity of three months or
less when purchased. Cash equivalents are carried at cost, which approximates
market. Interest income of $61,199 and $56,708 for 1997 and 1996,
respectively, is netted against interest expense in the accompanying
statements of income.

Depreciation and Amortization

Depreciation is provided using the straight-line method over estimated
useful lives of 5 to 20 years. Deferred financing fees are amortized over the
life of the related debt.

Leasehold Interest

The facility was constructed on land obtained through a leasehold interest
that expires on April 25, 2011. The Sverdrup/BRC Joint Venture sold to
Contemporary an undivided 50% interest in the leasehold interest.
Concurrently, both Sverdrup/BRC Joint Venture and Contemporary contributed
their undivided 50% interests in the leasehold interest into the Joint
Venture. Ground rent is $1 per year under the lease with the Joint Venture
assigned as landlord.

Deferred Income

Deferred income reflects advance sales of season tickets for the
subsequent operating season and is amortized into show admission revenues as
the subsequent operating season progresses.

Income Taxes

Income taxes have not been provided for in the financial statements since
the Joint Venture is organized as a partnership, and each partner is liable
for its own tax payments.

F-106
<PAGE>
RIVERPORT PERFORMING ARTS CENTRE, JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. LONG-TERM DEBT

Notes payable outstanding at December 31 are as follows:

<TABLE>
<CAPTION>
1997 1996
---------- ------------
<S> <C> <C>
Mortgage note due in installments through 1997, bearing
interest at prime plus 1/2% which averaged 8.875%
during 1997 and 1996.................................... $ -- $1,216,178
Noninterest-bearing note due in installments through
2000.................................................... 442,374 602,958
---------- ------------
442,374 1,819,136
Less-Current maturities.................................. 160,585 1,376,762
---------- ------------
$281,789 $ 442,374
========== ============
</TABLE>

The mortgage note contains covenants that require the Joint Venture to
maintain certain financial ratios and also prohibit certain transactions. The
mortgage note is secured by buildings, improvements, furniture, fixtures and
equipment, limited to the remaining term of the leasehold interest expiring
April 25, 2011. The mortgage note was paid off on September 25, 1997. The
noninterest-bearing note is secured by all concession equipment. Cash paid
for interest totaled $79,391 and $173,172 for 1997 and 1996, respectively.

Maturities of long-term debt are as follows:

3. CONCESSION RENTAL:

The Joint Venture rents certain premises at its location for the sale of
concessions under a lease that expires in 2000. Rental income is based on a
percentage of gross receipts for some products sold and gross margin for
other products sold.

4. RELATED-PARTY TRANSACTIONS

Contempro Group, Inc., an affiliate of Contemporary, provides various
services to the Joint Venture. These services include marketing, media
placement, sales and show production. Approximately $2,235,000 and $1,766,000
was paid for these services in 1997 and 1996, respectively.

In addition to the payments described above, the Joint Venture also
compensates Contempro Group, Inc. as an agent for the procurement of these
services.

Sverdrup Investments, Inc., an affiliate of Sverdrup/BRC Joint Venture,
was paid $36,000 for accounting services in 1997 and $147,000 for accounting
and landscaping services in 1996.

Riverport Trust, an affiliate of Sverdrup/BRC Joint Venture, provides
ground maintenance to the tenants of the Riverport complex. The fees charged
for these services is based on the total space occupied by the tenant. The
Joint Venture paid approximately $62,000 and $73,000 for these services in
1997 and 1996, respectively.

The Joint Venture had liabilities for related-party transactions and
pass-through costs to affiliates of Contemporary totaling approximately
$56,000 and $416,000 as of December 31, 1997 and 1996, respectively. The
Joint Venture also had receivables for income collected by Contemporary
totaling approximately $273,000 as of December 31, 1996.

F-107
<PAGE>
RIVERPORT PERFORMING ARTS CENTRE, JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. CONTINGENCIES:

From time to time, the Joint Venture is a party to certain lawsuits and
other claims related to the normal conduct of its business. Management
believes that liabilities, if any, resulting from the resolution of pending
or threatened proceedings would not materially affect the financial condition
or results of operations of the Joint Venture.

6. SUBSEQUENT EVENT:

On February 27, 1998, Sverdrup/BRC Joint Venture and Contemporary sold
their 50% interests in the equity and operations of the Joint Venture to SFX
Entertainment, Inc. and Contemporary Acquisition Corporation, respectively.

F-108
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
SJS Entertainment Corporation

We have audited the accompanying combined balance sheets of SJS
Entertainment Corporation as of December 31, 1996 and 1997, and the related
combined statements of operations and retained earnings and cash flows for
the years then ended. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of SJS
Entertainment Corporation at December 31, 1996 and 1997 and the combined
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP

New York, New York
March 18, 1998

F-109
<PAGE>
SJS ENTERTAINMENT CORPORATION

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................... $ 230,280 $ 330,315
Accounts receivable ................................ 2,257,110 2,954,730
Due from officers .................................. 616,177 --
Prepaid expenses ................................... 27,962 54,475
------------ -------------
Total current assets................................. 3,131,529 3,339,520
Fixed assets, at cost:
Furniture, fixtures and office equipment .......... 309,756 414,904
Production equipment ............................... 95,317 190,721
Leasehold improvements ............................. 61,228 61,228
------------ -------------
466,301 666,853
Accumulated depreciation and amortization .......... 187,546 314,940
------------ -------------
Net fixed assets .................................... 278,755 351,913
Other assets ........................................ 23,658 24,737
------------ -------------
Total assets ........................................ $3,433,942 $3,716,170
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable--bank ................................ $1,900,000 1,500,000
Accounts payable ................................... 694,055 955,876
Accrued expenses ................................... 857,423 399,614
Due to officers .................................... -- 1,294,291
------------ -------------
Total current liabilities............................ 3,451,478 4,149,781
Stockholders' equity:
Common stock ....................................... 27,200 27,200
Retained earnings (deficit) ........................ 30,264 (385,811)
Treasury stock ..................................... (75,000) (75,000)
------------ -------------
Total stockholders' equity (deficit) ................ 17,536 (433,611)
------------ -------------
Total liabilities and combined stockholders' equity $3,433,942 $3,716,170
============ =============
</TABLE>

See accompanying notes.

F-110
<PAGE>
SJS ENTERTAINMENT CORPORATION

COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1997
------------- -------------
<S> <C> <C>
Net sales, including management fees from related
party
(Note 2) ............................................. $11,374,672 $14,218,435
Cost of sales ......................................... 4,039,320 4,320,654
------------- -------------
Gross profit........................................... 7,335,352 9,897,781
------------- -------------
Operating expenses:
Officers salaries and bonus .......................... 2,965,353 4,000,000
Employee payroll and taxes ........................... 2,211,372 3,087,185
Consulting fees ...................................... 272,233 290,693
Messengers and delivery expense ...................... 208,697 255,814
Telephone and utilities .............................. 341,649 468,878
Travel and Transportation expenses ................... 240,218 351,748
Advertising and promotion ............................ 149,907 382,640
Rent expense, net .................................... 182,012 261,834
Depreciation and amortization ........................ 84,001 127,394
Other, net ........................................... 648,128 1,002,727
------------- -------------
7,303,570 10,228,913
------------- -------------

Income (loss) from operations ......................... 31,782 (331,132)
Interest expense--net ................................. (3,229) (35,657)
Other income .......................................... -- 77,510
------------- -------------
Income before provision for income taxes .............. 28,553 (289,279)
Provision for income taxes ............................ 91,197 126,796
------------- -------------
Net loss .............................................. (62,644) (416,075)
Retained earnings at beginning of year ................ 92,908 30,264
------------- -------------
Retained earnings (deficit) at end of year ............ $ 30,264 $ (385,811)
============= =============
</TABLE>

See accompanying notes.

F-111
<PAGE>
SJS ENTERTAINMENT CORPORATION

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1997
------------- -------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss ............................................. $ (62,644) $ (416,075)
Adjustments to reconcile net loss to net cash
provided
by (used in) operating activities:
Depreciation and amortization ...................... 84,001 127,394
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ....... 241,679 (697,620)
(Increase) in prepaid expenses .................... (5,445) (26,513)
(Increase) Decrease in other assets ............... 4,737 (1,079)
Increase (decrease) in accounts payable .......... (130,667) 261,821
Increase (decrease) in accrued expenses .......... 636,011 (457,809)
Increase in due to affiliate ...................... 22,137 --
------------- -------------
Net cash provided by operating activities ............ 789,809 (1,209,881)
------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES
Cash used to acquire fixed assets .................... (184,132) (200,552)
------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES
Officers' loans, net ................................. (2,204,564) 1,910,468
Repayments of bank loan .............................. (275,760) (1,900,000)
Proceeds from new bank loans ......................... 1,900,000 1,500,000
Payments towards treasury stock financing agreement . (12,500) --
------------- -------------
Net cash provided by (used by) financing activities . (592,824) 1,510,468
------------- -------------
Net increase in cash ................................. 12,853 100,035
------------- -------------
Cash at beginning of year ............................ 217,427 230,280
------------- -------------
Cash at end of year .................................. $ 230,280 $ 330,315
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid during period .......................... $ 9,003 $ 33,222
============= =============
Income taxes paid during period ...................... $ 180,636 $ 77,333
============= =============
</TABLE>

See accompanying notes.

F-112
<PAGE>
SJS ENTERTAINMENT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements present the combined financial position and
results of operations of SJS Entertainment Corporation and its wholly-owned
subsidiary SJS Research Corporation, and Urban Entertainment Corp.
(collectively, the "Company") which is affiliated through common management
and ownership. All intercompany balances and transactions have been
eliminated in combination.

Nature of Business

The Company creates, produces and distributes music-related radio programs
and services which it barters or exchanges with radio broadcasters for
commercial air time, which is then sold to national network advertisers.
Through SJS Research, incorporated in September 1997, the Company provides
statistical information relating to the Entertainment Industry based upon
telephone surveys.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management use of estimates based
upon available information, which directly affect reported amounts. Actual
results could differ from those estimates.

Depreciation and Amortization

Depreciation of furniture, fixtures and equipment is computed using the
straight-line and declining balance methods, at rates adequate to allocate
the cost of the applicable asset over its expected useful life. Amortization
of leasehold improvements is computed using the straight-line method over the
shorter of the lease term or the expected useful life of the asset.

<TABLE>
<CAPTION>
<S> <C>
Estimated useful life ranges are as follows:
Furniture, fixtures and office equipment ...... 5-7 years
Production equipment ........................... 5 years
Leasehold improvements ......................... 5-10 years
</TABLE>

Concentration of Credit Risk

The Company maintains bank balances with Sterling National Bank in excess
of the federally insured limit of $100,000.

Reclassification

Certain 1996 amounts have been reclassified to conform to the 1997
presentation. Retained earnings at January 1, 1996 was adjusted to reflect
the underaccrual of $51,831 of state and local taxes and $115,000 of sales
commissions related to 1995.

2. RELATED PARTY TRANSACTIONS

Due from/to Officers

The Company maintains a running loan/exchange account with its officers in
order to satisfy the cash flow needs of operations. There is no interest
charged by either party on these temporary loans.

As of January 1, 1996, the Company owed its officers $1,589,146. During
1996, the officers loaned the Company an additional $354,780, while the
Company paid to its officers a total of $2,560,103.

As of January 1, 1997, the officers owed the companies $616,177. During
the year, the officers paid back this amount, and loaned the Company an
additional $1,294,291.

F-113
<PAGE>
SJS ENTERTAINMENT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

In addition, the Company pays its officers in total $2,000 per month
towards the business use of their home. These amounts are charged to rent
expense and totaled $24,000 for each of the years ended December 31, 1996 and
1997.

Salaries and bonuses paid to officers is determined annually by the
Company's board of directors.

Management Services

The Company managed the operations of a related company which is 40% owned
by the officers of the Company. In exchange for the services provided, the
Company received management fees of $40,000 per month. In addition, the
Company had subleased a portion of its premises to this related company and
is also reimbursed for other direct operating expenses (telephone, utilities,
cleaning, bookkeeping and administrative) and indirect overhead costs. This
arrangement terminated at the end of April 1997.

During the years ended December 31, 1996 and 1997, the Company received
the following amounts from this related company:

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Management fees ................. $480,000 $160,000
Rental income ................... 69,780 32,490
Direct expense reimbursement ... 25,519 13,347
Indirect overhead reimbursement 108,000 27,914
---------- ----------
$683,299 $233,751
========== ==========
</TABLE>

Management fees, rental income, the direct expense reimbursement and
indirect overhead reimbursement are reflected as an adjustment to the related
income or expense account in the accompanying statement of operations.

The Company received $77,510 from an unrelated third party as
consideration for the termination of the management services agreement and
sublease agreement, which was recorded as other income in 1997.

3. LOANS PAYABLE--BANK

At December 31, 1997, the Company owed to Sterling National Bank a term
loan of $1,500,000, which was secured by all corporate receivables and is
personally guaranteed by the officers of the Company. Interest charged to the
Company was at a rate of prime plus 1%. This amount was fully repaid on
February 28, 1998.

At December 31, 1996, the Company owed to Sterling National Bank a term
loan of $1,600,000 which was secured by personal certificates of deposit
totaling $1,600,000 and a $300,000 line-of-credit which was secured by all
corporate assets and guaranteed by the officers/shareholders. Interest
charged to the Company was at the rate of prime plus 1%.

On February 20, 1997 the certificates matured, at which time they were
transferred into the Company as an officers' loan repayment and used to
pay-off the bank loan. In 1997, the Company also repaid the $300,000
line-of-credit from Sterling National Bank.

4. COMMITMENTS AND CONTINGENCIES

Automobile Lease

The Company leases automobiles with monthly payments of $1,834 due through
February, 1999.

F-114
<PAGE>
SJS ENTERTAINMENT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Office and Audio Production Studio Leases

The Company maintains several offices for sales and administration
throughout the United States, as well as two production studios. The main
premises are located in New York City and is subject to an operating lease
expiring March 31, 2006. Other premises are subject to operating leases with
various terms ranging from month-to-month, to January 31, 2001.

Future minimum commitments for automobile, office and studio leases,
including two new leases entered into during 1997, are as follows:

<TABLE>
<CAPTION>
<S> <C>
1998 ......... $ 311,200
1999 ......... 300,000
2000 ......... 267,000
2001 ......... 240,100
2002 ......... 246,200
Thereafter .. 852,500
-----------
$2,217,000
===========
</TABLE>

Rent expense for offices and production studios, net of the subtenant
lease income (see note 2 below), totaled $261,834 for the year ended December
31, 1997 compared to $182,012 for the year ended December 31, 1996, while the
automobile lease cost was approximately $22,000 for both 1996 and 1997.

Consulting Agreements

Urban Entertainment Corp. is a party to consulting agreements with two
individuals, requiring monthly payments totaling $9,583 to be paid through
December 31, 1999.

5. SHAREHOLDERS' EQUITY

Shareholders' equity consists of the following:

<TABLE>
<CAPTION>
PAR
COMPANY CLASS VALUE AUTHORIZED
- ----------------------------- --------------- ------- ------------
<S> <C> <C> <C>
SJS Entertainment
Corporation.................. -- None 1,000
Urban Entertainment Corp. .... A (voting) None 840
B (nonvoting) None 160

</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
ISSUED AND
COMPANY OUTSTANDING VALUE
- ----------------------------- ------------- ---------
<S> <C> <C>
SJS Entertainment
Corporation.................. 1,000 $27,000
Urban Entertainment Corp. .... 840 100
160 100
------------- ---------
$27,200
------------- =========
</TABLE>

6. INCOME TAXES

Urban Entertainment Corporation has elected "S" Corporation status for
both federal and state tax purposes. Accordingly, all items of income, loss,
deduction or credit are reported by the stockholders on their respective
personal income tax returns. Therefore, no federal or state tax has been
provided.

SJS Entertainment Corporation is subject to corporate taxes at the federal
level and eight state and local jurisdictions.

The provision for income taxes for the years ended December 31, 1997 and
1996 is summarized as follows:

<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Current:
Federal..... $ 9,647 $ 28,266
State....... 81,550 98,530
Deferred: .. -- --
--------- ----------
Total....... $91,197 $126,796
========= ==========
</TABLE>

F-115
<PAGE>
SJS ENTERTAINMENT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Deferred income taxes reflect the tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. As of December 31,
1997, the Company had deferred tax assets of approximately $124,000 relating
to start-up costs which is offset in full by a valuation allowance.

The provision for income taxes differed from the U.S. statutory rate
principally due to nondeductible meals and entertainment expense, state and
local taxes and in 1997 only, the valuation allowance.

7. EMPLOYEE RETIREMENT PLAN

The Company maintains a retirement plan for their employees under Section
401(k) of the Internal Revenue Code. All employees are eligible to
participate once they obtain the minimum age requirement of 21 years, and
have satisfied the service requirement of six months with the Company.
Participants may make voluntary contributions into the plan of up to 15% of
their compensation. The Company contributes to each participant's account an
amount equal to 25% of the participant's voluntary contribution, or $2,000,
whichever is less.

During the years ended December 31, 1996 and 1997, employer contributions
totaled $16,758 and $18,747 respectively.

8. LEGAL MATTERS

The Company has been named in various lawsuits arising in the normal
course of business. It is not possible at this time to assess the probability
of any liability against the Company as a result of these lawsuits.
Management has stated that all cases will be vigorously defended.

9. SUBSEQUENT EVENTS

On February 27, 1998, the Company was acquired by SFX Entertainment Inc.

F-116
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
The Album Network, Inc.

We have audited the accompanying combined balance sheets of The Album
Network, Inc. and Affiliated Companies as of September 30, 1997 and 1996, and
the related combined statements of operations and stockholders' deficit and
cash flows for the years then ended. These financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these financial statements 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 financial statements referred to above present fairly,
in all material respects, the combined financial position of The Album
Network, Inc. and Affiliated Companies at September 30, 1997 and 1996, and
the combined results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

November 20, 1997
New York, New York

F-117
<PAGE>

THE ALBUM NETWORK, INC. AND AFFILIATED COMPANIES
COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1996 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................................... $ 160,453 $ 272,423
Accounts receivable, less allowance for doubtful
accounts of $153,728 in 1997and $95,450 in 1996 ................ 2,148,159 2,229,237
Officers' loans receivable ...................................... 423,447 390,794
Prepaid expenses and other current assets ....................... 125,558 234,914
------------- -------------
Total current assets ............................................. 2,857,617 3,127,368
Property, plant and equipment, at cost, less accumulated
depreciation of $1,056,689 in 1997 and $914,513 in 1996 ........ 278,898 303,614
Deferred software costs, less accumulated amortization of
$106,639 in 1997 and $45,768 in 1996 ............................ 172,302 262,061
Other noncurrent assets .......................................... 39,477 37,033
------------- -------------
Total assets ..................................................... $ 3,348,294 $ 3,730,076
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accrued officers' bonuses ....................................... $ 1,200,000 $ 1,251,000
Accounts payable and other accrued expenses ..................... 1,081,469 1,208,424
Officers' loans payable ......................................... 650,000 489,085
Unearned subscription income .................................... 530,255 406,529
Taxes payable and other current liabilities ..................... 339,551 224,011
Current portion of long-term debt ............................... 636,723 506,228
------------- -------------
Total current liabilities ........................................ 4,437,998 4,085,277
Long-term debt ................................................... 1,294,133 1,051,881
Deferred income taxes ............................................ 279,434 114,178
Combined stockholders' deficit ................................... (2,663,271) (1,521,260)
------------- -------------
Total liabilities and stockholders' deficit ...................... $ 3,348,294 $ 3,730,076
============= =============
</TABLE>

See accompanying notes.

F-118
<PAGE>

THE ALBUM NETWORK, INC. AND AFFILIATED COMPANIES
COMBINED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................ $ 169,498
Accounts receivable, less allowance for doubtful
accounts of $157,682 ............................................ 2,268,205
Officers' loans receivable ....................................... 406,421
Prepaid expenses and other current assets ........................ 133,293
-------------
Total current assets .............................................. 2,977,417
Property, plant and equipment, at cost, less accumulated
depreciation of $1,098,747 ....................................... 307,096
Deferred software costs, less accumulated amortization of $127,116 282,453
Other noncurrent assets ........................................... 9,525
-------------
Total assets ...................................................... $ 3,576,491
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and other accrued expenses ...................... $ 1,346,095
Officers' loans payable .......................................... 717,336
Unearned subscription income ..................................... 558,358
Taxes payable and other current liabilities ...................... 749,108
Current portion of long-term debt ................................ 635,464
-------------
Total current liabilities ......................................... 4,006,361
Long-term debt .................................................... 939,200
Deferred income taxes ............................................. 53,575
Combined stockholders' deficit .................................... (1,422,645)
-------------
Total liabilities and stockholders' deficit ....................... $ 3,576,491
=============
</TABLE>

See accompanying notes.

F-119
<PAGE>

THE ALBUM NETWORK, INC. AND AFFILIATED COMPANIES
COMBINED STATEMENTS OF OPERATIONS AND
STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1996 1997
-------------- -------------
<S> <C> <C>
OPERATING REVENUES
Advertising revenue ................................ $ 7,040,465 $ 7,619,751
Research services revenue .......................... 2,453,026 2,441,703
Direct mail & subscription revenue ................. 1,791,887 1,837,248
Broadcast revenue .................................. 2,085,714 2,235,788
Consulting revenue.................................. 720,000 470,000
Other revenue ...................................... 675,790 1,152,448
-------------- -------------
14,766,882 15,756,938
Direct costs of revenue ............................ 4,408,997 4,107,328
-------------- -------------
10,357,885 11,649,610
OPERATING EXPENSES
Officers' salary expense ........................... 3,384,870 3,662,427
Other salary expense ............................... 3,956,910 3,949,715
Depreciation and amortization ...................... 183,976 203,047
General and administrative expenses ................ 2,524,704 2,483,197
-------------- -------------
10,050,460 10,298,386
-------------- -------------
Income from operations ............................. 307,425 1,351,224
OTHER INCOME (EXPENSE)
Interest income--officers' loans ................... 35,000 41,600
Interest income--third party ....................... 6,961 1,295
Interest expense--officers' loans .................. (35,000) (55,940)
Interest expense--third party ...................... (256,164) (175,490)
-------------- -------------
Income before income taxes ......................... 58,222 1,162,689
INCOME TAXES
Provision for income taxes ......................... 211,832 20,678
-------------- -------------
Net income (loss) .................................. (153,610) 1,142,011
Combined stockholders' deficit at beginning of year (2,509,661) (2,663,271)
-------------- -------------
Combined stockholders' deficit at end of year ..... $(2,663,271) $(1,521,260)
============== =============
</TABLE>

See accompanying notes.

F-120
<PAGE>

THE ALBUM NETWORK, INC. AND AFFILIATED COMPANIES
COMBINED STATEMENT OF OPERATIONS AND
STOCKHOLDERS' DEFICIT
THREE MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C> <C>
OPERATING REVENUES
Advertising revenue .................................. $ 1,605,422
Research services revenue ............................ 604,961
Direct mail & subscription revenue ................... 521,851
Broadcast revenue .................................... 825,686
Other revenue ........................................ 97,437
-------------
3,655,357
Direct costs of revenue .............................. 1,056,785
-------------
2,598,572
OPERATING EXPENSES
Officers' salary expense ............................. 209,424
Other salary expense ................................. 1,090,662
Depreciation and amortization ........................ 62,535
General and administrative expenses .................. 1,034,159
-------------
2,396,780
-------------
Income from operations ............................... 201,792

OTHER INCOME (EXPENSE)
Interest income--officers' loans ..................... 4,171
Interest income--third party ......................... 169
Interest expense--officers' loans .................... (15,596)
Interest expense--third party ........................ (26,921)
-------------
Income before income taxes ........................... 163,615

INCOME TAXES
Provision for income taxes ........................... 65,000
-------------
Net income (loss) .................................... 98,615

Combined stockholders' deficit at beginning of period (1,521,260)
-------------
Combined stockholders' deficit at end of period ..... $(1,422,645)
=============
</TABLE>

See accompanying notes.

F-121
<PAGE>

THE ALBUM NETWORK, INC. AND AFFILIATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ......................................................... $(153,610) $1,142,011
Adjustment to reconcile net income to net cash (used in) provided
by operating activities:
Depreciation and amortization .................................... 183,976 203,047
Provision for doubtful accounts .................................. 13,584 58,278
Changes in operating assets and liabilities:
Accounts receivable ............................................. (246,873) (139,356)
Prepaid expenses and other current assets ....................... 154,120 (109,356)
Other non current assets ........................................ (3,378) 2,444
Accounts payable and accrued expenses ........................... 69,816 126,955
Unearned subscription income .................................... 101,623 (123,726)
Accrued officers' bonus ......................................... 639,000 51,000
Deferred income taxes ........................................... 39,268 (165,256)
Taxes payable and other current liabilities ..................... 143,423 (115,540)
------------ ------------
Net cash provided by operating activities .......................... 940,949 930,501
------------ ------------
INVESTING ACTIVITIES
Purchase of property and equipment ................................. (65,731) (166,892)
Deferred software costs ............................................ (97,463) (150,630)
------------ ------------
Net cash used in investing activities .............................. (163,194) (317,522)
------------ ------------
FINANCING ACTIVITIES
Payments on long term debt ......................................... (860,236) (527,747)
Proceeds from additional debt borrowings ........................... 52,500 155,000
Proceeds from (repayments of) officers' loans, net ................. 61,355 (128,262)
------------ ------------
Net cash used in financing activities .............................. (746,381) (501,009)
------------ ------------
Net increase in cash and cash equivalents .......................... 31,374 111,970
Cash and cash equivalents at beginning of year ..................... 129,079 160,453
------------ ------------
Cash and cash equivalents at end of year ........................... $ 160,453 $ 272,423
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest ............................................. $ 304,726 $ 190,168
============ ============
Cash paid for income taxes ......................................... $ 21,375 $ 26,316
============ ============
</TABLE>

See accompanying notes.

F-122
<PAGE>

THE ALBUM NETWORK, INC. AND AFFILIATED COMPANIES
COMBINED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES
Net income ......................................................... $ 98,615
Adjustment to reconcile net income to net cash (used in) provided
by operating activities:
Depreciation and amortization .................................... 62,535
Provision for doubtful accounts .................................. 3,954
Changes in operating assets and liabilities:
Accounts receivable ............................................. (42,922)
Prepaid expenses and other current assets ....................... 101,621
Other non current assets ........................................ 27,508
Accounts payable and accrued expenses ........................... 137,671
Unearned subscription income .................................... 151,829
Accrued officers' bonus ......................................... (1,251,000)
Deferred income taxes ........................................... (60,603)
Taxes payable and other current liabilities ..................... 525,097
-------------
Net cash used in operating activities .............................. (245,695)
INVESTING ACTIVITIES
Purchase of property and equipment ................................. (45,540)
Deferred software costs ............................................ (40,869)
-------------
Net cash used in investing activities .............................. (86,409)
FINANCING ACTIVITIES
Payments on long term debt ......................................... (112,681)
Proceeds from additional debt borrowings ........................... 129,236
Proceeds from officers' loans, net ................................. 212,624
-------------
Net cash provided by financing activities .......................... 229,179
-------------
Net decrease in cash and cash equivalents .......................... (102,925)
Cash and cash equivalents at beginning of year ..................... 272,423
-------------
Cash and cash equivalents at end of year ........................... $ 169,498
=============
</TABLE>

See accompanying notes.

F-123
<PAGE>
THE ALBUM NETWORK, INC. AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Principles of Combination

The accompanying combined financial statements include the accounts of The
Album Network, Inc., The Network 40, Inc., The Urban Network, Inc. and
In-the-Studio (collectively, the "Companies"). Intercompany transactions and
balances among the Companies have been eliminated in combination.

On August 27, 1997, the board of directors and shareholders of the
Companies approved a plan of agreement and merger which provided that The
Urban Network, Inc. merge into The Album Network, Inc. (the "Company")
effective September 24, 1997. The Companies accounted for the transaction as
a merger of companies under common control.

The Companies publish six music trade magazines, produce rock, urban and
top 40 programming specials and manufacture compact disc samplers. They also
serve as product marketing advisors to contemporary music talent and their
managers in providing creative content and innovative marketing campaigns. In
addition, the Companies provide research services for radio station program
directors and record label executives. The Companies publishes five print
periodicals for rock and top 40 music broadcasters, retailers and music
industry executives. The weekly publications are the "Album Network" and the
"Network 40". The monthly publications are the "Virtually Alternative" and
"Totally Adult" and the quarterly publication is titled "AggroActive."
Additionally, "The Urban Network" trade magazine is published each week.

Revenue Recognition

The Companies' magazines generate revenue from advertising sales,
complemented by subscription sales and incremental direct mail revenue.

Unearned subscription income represents revenues on subscriptions for
which publications have not been delivered to customers as of the balance
sheet date. Unearned subscription income at September 30, 1996 also includes
unearned income on certain advertising and direct mail packages.

Revenue from research services is recognized straight-line over the
license term or upon the sale of computer software developed for licensees
and other customers. Advertising and broadcast revenues are recognized when
advertisements are run or aired.

Furniture and Equipment

Furniture and equipment are valued at cost less accumulated depreciation.
Depreciation is provided on the straight-line and declining balance methods
over the estimated useful lives of the assets, as follows:

<TABLE>
<CAPTION>
<S> <C>
Computer hardware ...........5 years
Software .................... 5 years
Furniture and equipment .... 5-7 years
Leasehold improvements ..... 5 years
</TABLE>

Deferred Software Costs

Costs incurred to produce software masters and subsequent enhancements to
such software are capitalized and amortized over the remaining economic life
of the master (generally, five years). Costs of maintenance and customer
support are charged to expense when incurred.

Cash and Cash Equivalents

The Companies consider all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.

Income Taxes

Each of the affiliated Companies file a separate tax return. The Album
Network, Inc. and the Urban Network, Inc. are "C Corporations." The Network
40, Inc. has elected to be taxed as an "S Corporation". The "S Corporation"
election is effective for both federal and state tax purposes. Accordingly
all items of income, loss, deduction or credit are reported by the
shareholders on their respective personal income tax returns. The corporate
tax rate for S Corporations in California is one and one-half percent (1.5%).

F-124
<PAGE>
THE ALBUM NETWORK, INC. AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Risks and Uncertainties

Concentration of Credit Risk

The Company maintains bank balances with City National Bank in excess of
the federally insured limit of $100,000.

Reclassification

Certain amounts in the financial statements have been reclassified to
conform with the current presentations.

Interim Financial Information

Financial information as of December 31, 1997 and for the three months
ended December 31, 1997 is unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of the results for such period
have been included, all adjustments are of a normal and recurring nature.
Interim results are not necessarily indicative of results for a full year.

2. RELATED PARTY TRANSACTIONS

Officers' Loans

The Companies have several loan agreements outstanding with its officers
in order to satisfy the cash flow needs of operations. The interest rates on
the loans to and from the officers range from approximately 10% to 12%.

At October 1, 1995, the officers owed the Companies $471,918 and the
Companies owed the officers $637,116. During the year ended September 30,
1996, the officers repaid $48,471 and loaned the Companies an additional
$12,884.

At October 1, 1996, the officers owed the Companies $423,447 and the
Companies owed the officers $650,000. During the year ended September 30,
1997, the officers repaid $32,653 to the Companies and the Companies repaid
$160,915 to the officers.

3. LONG-TERM DEBT

A summary of long-term debt as of September 30, 1997 and 1996 is as
follows:

<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------------
1996 1997
------------ -----------
<S> <C> <C>
Note payable to City National Bank, collateralized by certain
equipment and personally guaranteed by the stockholders;
payable in monthly installments of $2,917 plus interest at
10.5%; due May 1999 ........................................... $ 96,994 $ 62,740
Note payable to City National Bank, personally guaranteed by
the stockholders; payable in monthly installments of $41,233
plus interest at 8.75% through January 22, 1997 and at 8.25%
thereafter; due December 2000.(A) ............................. 1,821,862 1,415,369
Other........................................................... 12,000 80,000
------------ -----------
1,930,856 1,558,109
Less current portion ........................................... 636,723 506,228
------------ -----------
Long-term debt ................................................. $1,294,133 $1,051,881
============ ===========
</TABLE>

(A) In September 1995 The Album Network, Inc., The Network 40, Inc. and The
Urban Network, Inc. entered into a loan agreement with City National Bank
for $2,330,000 in connection with a redemption of common stock. Interest
was set at 8.75% per year and principal and interest were payable in
monthly installments of $57,846 through September 1999. In January 1997,
the loan agreement was revised. Interest was reset at 8.25% and monthly
payments of $41,233 were extended through December 2000. The principal
balance at the date of revision was $1,687,560.

F-125
<PAGE>
THE ALBUM NETWORK, INC. AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

4. COMMON STOCK

The Companies' stock and tax status at September 30, 1997 are as follows:

<TABLE>
<CAPTION>
SHARES
ISSUED
TAX SHARES AND
STATUS AUTHORIZED OUTSTANDING
------------- ------------ -------------
<S> <C> <C> <C>
The Album Network, Inc. C-Corp. 1,000,000 220
The Network 40, Inc. ... S-Corp. 100,000 825
The Urban Network, Inc. C-Corp. 100,000 825
In-the-Studio ........... Partnership n/a n/a
</TABLE>

5. COMMITMENTS AND CONTINGENCIES

Leases

The Companies lease an office facility under noncancellable leases which
expire in February 1998.

Total rent expense for the years ended September 30, 1997 and 1996 under
operating leases was $262,812 and $256,026, respectively.

Future minimum lease payments under noncancellable operating leases as of
September 30, 1997 total $121,155, all of which is payable in 1998.

Other Matters

As of September 30, 1997, approximately $80,000 was drawn on lines of
credit with City National Bank. There were no amounts drawn as of September
30, 1996.

6. INCOME TAXES

The Album Network has received a Statutory Notice of Deficiency from the
Internal Revenue Service ("IRS") for the years ended September 30, 1994, 1995
and 1996 asserting tax deficiencies resulting primarily from an IRS position
that compensation paid to officers was unreasonable and excessive. In total,
approximately $3.5 million of adjustments increasing taxable income have been
proposed. The total additional tax, penalties and interest through September
30, 1997 related to these adjustments would be approximately $1.8 million.
The company has analyzed these matters with tax counsel and believes it has
meritorious defenses to the deficiencies asserted by the IRS. The company has
filed a petition with the United States Tax Court contesting the asserted
liability. While the company believes that a successful defense of this case
may be made, in light of the economic burdens of the defense, the company may
entertain a settlement for up to $291,000. Accordingly, the company has
recorded reserves in such amount, including $23,000, $115,000 and $153,000
for the years ended September 30, 1997, 1996 and prior periods, respectively.

F-126
<PAGE>
THE ALBUM NETWORK, INC. AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

For the years ended September 30, 1996 and 1997 the provision for income
taxes is as follows:

<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Current:
Federal .. $129,911 $ 143,056
State ..... 17,710 42,878
---------- -----------
Total .... 147,621 185,934
---------- -----------
Deferred:
Federal .. 49,764 (150,383)
State ..... 14,447 (14,873)
---------- -----------
Total .... 64,211 (165,256)
---------- -----------
Total ...... $211,832 $ 20,678
========== ===========
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the Companies' deferred tax assets and liabilities as of
September 30, 1996 and 1997 are as follows:

<TABLE>
<CAPTION>
1996 1997
---------- ---------
<S> <C> <C>
Deferred tax assets:
Contributions carryforward .... $ 8,194 $ 10,078
Deferred tax liabilities:
Fixed assets ................... 12,280 11,830
Intangible assets .............. 275,346 112,424
---------- ---------
Total deferred tax liabilities 287,628 124,254
---------- ---------
Net deferred tax liabilities ... $279,434 $114,176
========== =========
</TABLE>

7. EMPLOYEE RETIREMENT PLAN

In January 1997, the Companies began a retirement plan for their employees
under Section 401(k) of the Internal Revenue Code. All employees are eligible
to participate once they obtain the minimum age requirement of 21 years, and
have satisfied the service requirement of one year with the Companies.
Participant contributions are subject to the limitations of Section 402 (g)
of the Internal Revenue Code. The Companies contribute monthly to
participating employees accounts at the rate of 10% of the participating
employees contributions. During the year ended September 30, 1997, the
Companies contributions totaled approximately $14,000.

8. SUBSEQUENT EVENTS (UNAUDITED)

On February 27, 1998, the Company was acquired by SFX Entertainment Inc.

F-127
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
BG Presents, Inc.

We have audited the accompanying consolidated balance sheets of BG
Presents, Inc. and Subsidiaries as of January 31, 1997 and 1998, and the
related consolidated statements of income, cash flows and stockholders'
equity for each of the three years in the period ended January 31, 1998.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements 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 consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of BG Presents,
Inc. and subsidiaries at January 31, 1997 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended January 31, 1998, in conformity with generally accepted
accounting principles.

Ernst & Young LLP

New York, New York
March 20, 1998

F-128
<PAGE>

BG PRESENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JANUARY 31
----------------------------
1997 1998
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................. $11,819,831 $ 5,380,984
Accounts receivable--trade ............................. 3,164,543 5,460,915
Accounts receivable--related parties ................... 1,347,150 776,174
Investments ............................................ 370,000 --
Inventories ............................................ 236,078 227,766
Prepaid assets ......................................... 450,883 3,001,450
Income tax receivable .................................. 418,528 --
Deferred income taxes .................................. 94,000 --
Other current assets.................................... -- 118,455
------------- -------------
Total current assets .................................... 17,901,013 14,965,744
Property and equipment, net ............................. 9,661,910 8,904,509
Goodwill, net of accumulated amortization of $238,400
and $357,600 at January 31, 1997 and 1998,
respectively............................................ 1,549,600 1,430,400
Other assets (Note 6).................................... 167 4,100,011
------------- -------------
Total assets ............................................ $29,112,690 $29,400,664
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable--current portion ......................... $ 722,966 $ 879,040
Lease commitment--current portion ...................... 35,676 --
Accounts payable ....................................... 3,229,054 1,816,959
Deferred revenue ....................................... 1,362,533 1,480,145
Accrued liabilities and other current liabilities ...... 3,721,749 3,753,613
------------- -------------
Total current liabilities ............................... 9,071,978 7,929,757
Lease commitment, less current portion .................. 6,704,719 --
Notes payable, less current portion ..................... 5,233,709 11,134,834
Deferred income taxes ................................... 2,617,000 2,617,000

Stockholders' equity:
Common stock, no par value; 10,000,000 shares
authorized; 1,000,000 shares issued and outstanding in
1997 and 1998.......................................... 1,198,947 1,198,947
Retained earnings....................................... 4,286,337 6,520,126
------------- -------------
Total stockholders' equity............................... 5,485,284 7,719,073
------------- -------------
Total liabilities and stockholders' equity............... $29,112,690 $29,400,664
============= =============
</TABLE>

See accompanying notes.

F-129
<PAGE>
BG PRESENTS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
--------------------------------------------
1996 1997 1998
------------- ------------- --------------
<S> <C> <C> <C>
REVENUES
Concert revenues......................... $62,996,606 $74,981,534 $ 75,898,464
Contract management ..................... 7,844,248 10,255,060 23,632,596
Concessions/merchandise ................. 5,536,287 7,094,593 6,021,845
------------- ------------- --------------
76,377,141 92,331,187 105,552,905
Cost of revenues ........................ 54,383,763 69,916,840 81,092,377
------------- ------------- --------------
21,993,378 22,414,347 24,460,528
EXPENSES
General and administrative .............. 17,614,296 17,602,501 18,866,259
Depreciation and amortization ........... 1,441,439 1,474,414 1,026,684
------------- ------------- --------------
Income from operations .................. 2,937,643 3,337,432 4,567,585

OTHER INCOME (EXPENSE)
Interest expense ........................ (1,324,219) (1,257,758) (916,723)
Interest income ......................... 307,756 295,057 294,888
Miscellaneous ........................... 535,191 289,222 (24,300)
------------- ------------- --------------
Income before provision for income taxes 2,456,371 2,663,953 3,921,450
Provision for income taxes .............. 1,160,718 1,272,190 1,687,661
------------- ------------- --------------
Net income............................... $ 1,295,653 $ 1,391,763 $ 2,233,789
============= ============= ==============
</TABLE>

See accompanying notes.

F-130
<PAGE>
BG PRESENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
-------------------------------------------
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income........................................... $ 1,295,653 $ 1,391,763 $ 2,233,789
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment.......................................... 1,322,239 1,355,214 907,484
Amortization of goodwill............................ 119,200 119,200 119,200
Loss on sale of property and equipment ............. 13,603 -- --
Changes in operating assets and liabilities:
Accounts receivable--trade ........................ 524,566 (1,356,263) (2,296,372)
Accounts receivable--related parties .............. (496,971) (821) 570,976
Inventories ....................................... (228,294) (7,784) 8,312
Prepaid assets and other .......................... (322,524) 478,391 (2,550,567)
Income tax receivable ............................. (50,888) (328,390) 300,073
Accounts payable and accrued expenses ............. (491,982) 3,128,476 (1,380,231)
Deferred income taxes ............................. 1,139,000 45,000 94,000
Deferred revenue .................................. (67,859) 379,748 117,612
Other ............................................. 288,367 160 74,347
------------- ------------- -------------
Net cash provided by (used in) operating activities 3,044,110 5,204,694 (1,801,377)

INVESTING ACTIVITIES
Purchase of SAP limited partnership interest ....... (4,250,000) -- --
Proceeds from sale of equipment ..................... 13,150 -- --
Capital expenditures, including White River
Amphitheatre........................................ (469,447) (367,678) (4,247,528)
Other ............................................... (644,496) (247,000) 293,254
------------- ------------- -------------
Net cash used in investing activities ............... (5,350,793) (614,678) (3,954,274)

FINANCING ACTIVITIES
Payments of notes payable ........................... (444,985) (775,756) --
Borrowings on notes payable.......................... -- 1,000,000 6,057,199
Payments of lease commitments ....................... (395,330) (405,275) (6,740,395)
Retirement of stock ................................. -- (21,053) --
------------- ------------- -------------
Net cash used in financing activities ............... (840,315) (202,084) (683,196)
Net increase (decrease) in cash and cash
equivalents......................................... (3,146,998) 4,387,932 (6,438,847)
Cash and cash equivalents at beginning of year ..... 10,578,897 7,431,899 11,819,831
------------- ------------- -------------
Cash and cash equivalents at end of year............. $ 7,431,899 $11,819,831 $ 5,380,984
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest............................... $ 1,324,219 $ 1,257,664 $ 1,092,356
Cash paid for income taxes .......................... 888,738 1,280,000 1,325,000
</TABLE>

See accompanying notes.

F-131
<PAGE>

BG PRESENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
<S> <C>
Balance--January 31, 1995 ...................... $2,818,921
Net income for the year ended January 31, 1996 1,295,653
------------
Balance--January 31, 1996 ...................... 4,114,574
Net income for the year ended January 31, 1997 1,391,763
Repurchase and retirement of stock ............. (21,053)
------------
Balance--January 31, 1997 ...................... 5,485,284
Net income for the year ended January 31, 1998 2,233,789
------------
Balance--January 31, 1998 ...................... $7,719,073
============
</TABLE>

See accompanying notes.

F-132
<PAGE>
BG PRESENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1998

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Business and Principles of Consolidation

BG Presents, Inc. ("BGP" or the "Company") is a holding company for
various operating subsidiaries which principally promote and manage musical
and special events in the San Francisco Bay Area. In addition, the Company
owns the Shoreline Amphitheatre in Mountain View, California. Bill Graham
Enterprises, Inc. ("BGE"), Bill Graham Presents, Inc. ("BGPI"), Bill Graham
Management, Inc. ("BGM"), AKG, Inc. ("AKG"), Shoreline Amphitheatre, Ltd.
("SAL"), Fillmore Fingers, Inc. ("FF"), and Shoreline Amphitheatre Partners
("SAP" and, collectively, the "Companies") are wholly-owned subsidiaries of
the Company. The accompanying consolidated financial statements include the
accounts of the Company and all of its wholly-owned subsidiaries.
Intercompany transactions and balances have been eliminated in consolidation.

BGE and BGPI earn promotion income in two ways: either a fixed fee for
organizing and promoting an event, or an arrangement that entitles them to a
profit percentage based on a predetermined formula. In addition, the
Companies earn revenue from merchandise and concessions sold during events
which they promote. BGM manages the careers of various artists and records a
percentage of the artists' gross sales from publishing rights, record sales,
and tours as contract management revenue.

AKG operates the Fillmore, Warfield, and Punchline theatres located in San
Francisco, which generate revenue from food and beverage sales, sponsorships,
and ticket sales. Bill Graham Special Events, a division of AKG, records
management/contract fees from organizing corporate and other parties at
various venues in the San Francisco Bay Area. FF provides table service (food
and beverage) for two theatres located in Los Angeles owned by third parties.

Revenue Recognition

Revenue from talent management and the sales of tickets is recognized when
earned. Cash received from the sale of tickets for events not yet performed
is deferred. Revenue from the direct sale of compact discs is recognized upon
the date of sale. The Company's revenue included $305,017, $14,562,000 and
$13,483,683 during the fiscal years ended January 31, 1996, 1997 and 1998,
respectively, from various gymnastics tours, ice skating tours and television
specials.

Cash and Cash Equivalents

The Company considers all investments purchased with an original maturity
date of three months or less to be cash equivalents. At January 31, 1996,
1997 and 1998, the Companies had cash balances in excess of the federally
insured limits of $100,000 per institution.

Use of Estimates

Generally accepted accounting principles require management to make
assumptions in estimates that affect the amount reported in the financial
statements for assets, liabilities, revenues, and expenses. In addition,
assumptions and estimates are used to determine disclosure for contingencies,
commitments, and other matters discussed in the notes to the financial
statements. Actual results could differ from those estimates.

Accounts Receivable

The Company's accounts receivable are principally due from ticket service
and merchandising companies in the San Francisco Bay Area. In addition,
related party receivables include amounts due from owners of the Company and
from affiliated companies. Management believes that all accounts receivable
as of January 31, 1996, 1997 and 1998 were fully collectible; therefore, no
allowance for doubtful accounts was recorded.

F-133
<PAGE>
BG PRESENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
(CONTINUED)

Property and Equipment

Property and equipment are recorded at cost and depreciated over their
estimated useful lives, which range from 3 to 40 years. Leasehold
improvements are amortized on the straight-line basis over the shorter of the
lease term or estimated useful lives of the assets. Maintenance and repairs
are charged to expense as incurred.

Goodwill

The Company amortizes goodwill over a 15 year period.

Income Taxes

The Companies account for income taxes under the liability method, whereby
deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse.

Inventories

Inventories, which consist principally of compact discs and beverage
items, are stated at first-in, first-out (FIFO) cost, which is not in excess
of market.

Advertising and Promotion Costs

The Company expenses all advertising and promotion costs as incurred,
except in instances where management believes these costs generate a direct
response from customers. Advertising expenses were $3,408,322, $4,319,291 and
$4,519,049 for the fiscal years ended January 31, 1996, 1997 and 1998,
respectively.

2. INCOME TAXES

The provision for income taxes for the fiscal years ended January 31, 1997
and 1998 is summarized as follows:

<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
Current:
Federal .. $ 984,500 $1,304,837
State...... 285,800 378,824
------------ ------------
1,270,300 1,683,661
Deferred:
Federal .. 1,500 3,100
State ..... 400 900
------------ ------------
1,900 4,000
------------ ------------
$1,272,200 $1,687,661
============ ============
</TABLE>

Deferred income taxes reflect the tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company's net
deferred tax liabilities as of January 31, 1997 and 1998 are primarily the
result of the difference between the book basis of depreciable assets and the
related tax basis.

The difference between the tax provision at Federal statutory rates and
the effective rate is due to state taxes, amortization of goodwill and other
nondeductible items.

F-134
<PAGE>
BG PRESENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. PROPERTY AND EQUIPMENT

Property and equipment as of January 31, 1997 and 1998 consists of the
following:

<TABLE>
<CAPTION>
1997 1998
-------------- --------------
<S> <C> <C>
Buildings ................... $ 8,234,231 $ 8,251,729
Leasehold improvements ..... 10,326,553 10,403,033
Equipment ................... 2,166,037 2,184,855
Office furniture ............ 693,068 711,235
Computer equipment .......... 330,367 343,493
Vehicle ..................... 61,211 67,205
-------------- --------------
21,811,467 21,961,550
Accumulated depreciation and
amortization ............... (12,783,510) (13,528,140)
-------------- --------------
9,027,957 8,443,410
Land ........................ 633,953 633,953
-------------- --------------
$ 9,661,910 $ 9,067,363
============== ==============
</TABLE>

4. PENSION PLAN

The Company sponsors a 401(k) Tax Advantage Savings Plan that covers
employees who have one year of service, have worked at least 1,000 hours, are
21 years of age or older, and are not covered by a union contract. At its
discretion, the Company may contribute a percentage of gross pay to the plan,
up to a maximum gross pay of $150,000 per participant. In addition, the
Company makes a matching contribution of 25% of each participant's account up
to $400 of their salary deferral each year, for a maximum company matching
contribution of $100. Total contributions to the plan were approximately
$182,000, $186,000 and $213,049 for the years ended January 31, 1996, 1997
and 1998, respectively.

F-135
<PAGE>
BG PRESENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. NOTES PAYABLE

Notes payable as of January 31, 1997 and 1998 consists of the following:

<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
Note payable to Midland Loan Services LP; monthly
payments of $16,574, including interest at the bank's
index rate plus 3.5% (8.4% and 8.375% at January 31,
1997 and 1998, respectively; matures May 1, 2004;
secured by deed ...................................... $2,215,001 $ 2,193,732
Note payable to Sanwa Bank; quarterly payments range
from $75,000 to $200,000, interest accrued monthly at
the bank's prime rate plus 0.5% (8.75% and 8.75% at
January 31, 1997 and 1998, respectively); matures
January 31, 2001...................................... 2,925,000 2,425,000
Note payable to Sanwa Bank; monthly payments of
$16,666, including interest at a rate of London
Inter-Bank Offered Rate (LIBOR) plus 2.5%; matures
January 31, 2002; secured by assets of the Company
(excluding the office building)....................... 816,674 616,682
Note payable to Sanwa Bank; monthly payments range
from $12,000 to $25,000, interest accrued monthly at
the bank's index rate plus 2.375%; matures March 1,
2007; secured by deed................................. -- 6,778,460
------------ ------------
5,956,675 12,013,874
Less current portion .................................. (722,966) (879,040)
------------ ------------
$5,233,709 $11,134,834
============ ============
</TABLE>

The first note payable with Sanwa Bank also provided for a line-of-credit
of up to $1,000,000 that expired on April 30, 1997. At January 31, 1998,
there were no borrowings outstanding against this credit line.

F-136
<PAGE>
BG PRESENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. NOTES PAYABLE (CONTINUED)

At January 31, 1998, the Company has a $3,000,000 unused line-of-credit
with a bank to be drawn upon as needed, with interest at the bank's prime
rate plus 0.5%. In addition, the Company may use up to $1,500,000 of the line
for letters-of-credit. This line-of-credit is secured by the assets of the
Company.

Maturities of long-term debt are approximately as follows:

<TABLE>
<CAPTION>
<S> <C>
Year ended January 31:
1999 ................. $ 879,040
2000 ................. 893,998
2001 ................. 1,851,908
2002 ................. 227,764
2003 ................. 246,791
Thereafter ............ 7,914,373
------------
$12,013,874
============
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases nightclubs, theaters and storage space pursuant to
noncancellable operating leases. Certain leases require contingent rentals to
be paid based on a percentage of gross sales of tickets, merchandise, and
food and beverage. These leases expire on various dates through June 2021.

At January 31, 1998, the future minimum operating lease payments under
noncancelable operating leases are as follows:

<TABLE>
<CAPTION>
<S> <C>
Year ended January 31:
1999 ................. $ 543,354
2000 ................. 547,211
2001 ................. 485,961
2002 ................. 451,694
2003 ................. 425,633
Thereafter ............ 2,367,353
-----------
$4,821,206
===========
</TABLE>

Total minimum rental expense included in operating expenses for the years
ended January 31, 1996, 1997 and 1998 was $810,956, $438,500 and $706,219,
respectively, and the contingent rental expense was $541,334, $627,222 and
$725,787, respectively. Included in cost of revenues is $6,145,944,
$6,392,616 and $7,265,769 of contingent rentals paid based on gross sales for
the years ended January 31, 1996, 1997 and 1998, respectively.

Shoreline Amphitheater Lease and Agreement

The Shoreline Amphitheater Lease and Agreement, as amended, provides for,
among other things, that the City of Mountain View, California (the "City")
owns certain real property (the "Site") which it has leased to the Company
for the purpose of constructing and operating the amphitheater. The lease
terminates after 35 years on November 30, 2021, and the Company has the
option to extend for three additional five-year periods.

The Company is obligated to pay as rent to the City a certain percentage
of "gross receipts" received annually by the Company and additional rent
based on the "net available cash" of the Company, as such terms are defined
in the agreement.

F-137
<PAGE>
BG PRESENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. COMMITMENTS AND CONTINGENCIES (CONTINUED)

Rent expense charged to operations for the years ended January 31, 1996,
1997 and 1998 amounted to $594,002, $396,789 and $613,933, respectively.

As of the year ended January 31, 1997, the Company was obligated to pay
the City $93,200 monthly, which related to $9,500,000 of funds provided the
Company by the City pursuant to the lease. Prior to the refinancing of this
arrangement as a $6.9 million note payable to Sanwa Bank (see Note 5), the
Company had accounted for this obligation as a long-term liability
amortizable on a monthly basis over the 20-year period commencing August 1,
1986. The principal and interest (10.24%) on this liability were being
amortized monthly. At January 31, 1997, the outstanding balance amounted to
$6,740,395, of which $35,676 was current.

Seattle White River Amphitheatre

The Company has committed payments for the construction of an amphitheatre
in the Seattle, Washington market totaling $10 million. Through January 31,
1998, the Company has paid $3,921,812 toward this project. This amount is
included in other assets on the balance sheet. The Company has also
capitalized interest pertaining to the capital expenditures for the
amphitheatre of $175,633 at January 31, 1998, which is also included in other
assets on the balance sheet.

Employment Contracts

The Company has entered into employment contracts with certain key
employees which amount to $2,300,000 per year. These contracts are in effect
until the first note payable to Sanwa Bank (see Note 5) is paid in full or
six years, whichever comes first. According to these agreements, compensation
and other benefits will cease if discharged with just cause, death or
disability, and resignation of employment. Benefits do not cease if
discharged without just cause.

Contingencies

The Company is involved in various legal and other matters arising in the
normal course of business. Based upon information available to management,
its review of these matters to date and consultation with counsel, management
believes that any liability relating to these matters would not have a
material effect on the Company's financial position and results of
operations.

7. SUBSEQUENT EVENTS

Acquisition of Companies by SFX Entertainment, Inc.

On February 24, 1998, the stockholders of the Company sold all of the
outstanding capital stock of the Companies to SFX Entertainment, Inc. for
cash consideration of $60.8 million (including the repayment of $12 million
in the Companies' debt and the issuance of 562,640 shares of common stock of
SFX Entertainment, Inc.). The Company has agreed to have net working capital,
as defined, at the closing at least equal to the Company's debt.

F-138
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Concert/Southern Promotions

We have audited the accompanying combined balance sheet of
Concert/Southern Promotions and Affiliated Companies as of December 31, 1997,
and the related combined statements of operations, cash flows and
stockholders' equity for the year then ended. These financial statements are
the responsibility of management. Our responsibility is to express an opinion
on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Concert/Southern
Promotions and Affiliated Companies at December 31, 1997, and the combined
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP

New York, New York
March 13, 1998

F-139
<PAGE>
CONCERT/SOUTHERN PROMOTIONS AND AFFILIATED COMPANIES
COMBINED BALANCE SHEET
DECEMBER 31, 1997

<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents .......................... $ 612,967
Accounts receivable ................................ 185,437
Due from owners (Note 3) ........................... 332,754
Prepaid expenses and other current assets ......... 115,844
------------
Total current assets ................................ 1,247,002

Investments in equity investees (Note 2)............. 895,790
Property and equipment:
Land ............................................... 19,638
Leasehold improvements ............................. 286,998
Furniture and equipment ............................ 496,265
------------
802,901
Accumulated depreciation and amortization ......... 460,483
------------
342,418
------------
Total assets ........................................ $2,485,210
============

LIABILITIES AND COMBINED STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses .............. $ 229,558
Deferred income .................................... 368,150
------------
Total current liabilities ........................... 597,708
Combined stockholders' equity (Note 4) .............. 1,887,502
------------
Total liabilities and combined stockholders' equity $2,485,210
============
</TABLE>
See accompanying notes.

F-140
<PAGE>

CONCERT/SOUTHERN PROMOTIONS AND AFFILIATED COMPANIES
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
<S> <C>
Operating revenues:
Concert revenue .................... $14,796,977
Cost of concerts.................... 9,877,586
-------------
4,919,391
Operating expenses:
Salaries--officers ................. 364,000
Bonuses--officers .................. 564,767
Salaries--other .................... 367,356
Rent expense ....................... 207,220
Legal and accounting fees .......... 201,435
Depreciation and amortization ..... 78,682
General and administrative expenses 1,367,304
-------------
3,150,764
-------------

Income from operations............... 1,768,627
Other income:
Interest income .................... 59,624
Losses from equity investees ...... (79,629)
-------------
Net income .......................... $ 1,748,622
=============
</TABLE>

See accompanying notes.

F-141
<PAGE>

CONCERT/SOUTHERN PROMOTIONS AND AFFILIATED COMPANIES
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES
Net income ...................................................................... $ 1,748,622
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ................................................. 78,682
Losses from equity investees................................................... 79,629
Changes in operating assets and liabilities:
Accounts receivable .......................................................... 1,000,781
Prepaid expenses and other current assets .................................... 69,896
Accounts payable and accrued expenses ........................................ (452,361)
Deferred income .............................................................. 368,150
Net cash provided by operating activities ....................................... 2,893,399
FINANCING ACTIVITIES
Due to/from owner ............................................................... (398,080)
Distributions paid to stockholder ............................................... (2,722,827)
-------------
Net cash used in financing activities ........................................... (3,120,907)
-------------
Net decrease in cash and cash equivalents ....................................... (227,508)
Cash and cash equivalents at beginning of year .................................. 840,475
-------------
Cash and cash equivalents at end of year ........................................ $ 612,967
=============
</TABLE>

See accompanying notes.

F-142
<PAGE>

CONCERT/SOUTHERN PROMOTIONS AND AFFILIATED COMPANIES
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
<S> <C>
Balance, January 1, 1997 .... $ 2,861,707
Distributions to stockholder (2,722,827)
Net income ................... 1,748,622
-------------
Balance, December 31, 1997 .. $ 1,887,502
=============
</TABLE>

See accompanying notes.

F-143
<PAGE>
CONCERT/SOUTHERN PROMOTIONS AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Principles of Combination

The accompanying combined financial statements include the accounts of
Southern Promotions, Inc., High Cotton, Inc., Buckhead Promotions, Inc.,
Northern Exposure, Inc., Pure Cotton, Inc., Cooley and Conlon Management,
Inc. ("CCMI") and Interfest, Inc. and their wholly-owned subsidiaries:
Concert/Southern Chastain Promotions ("Concert/Southern"), Roxy Ventures,
Cotton Club and Midtown Music Festival (collectively, the "Companies").
Intercompany transactions and balances among these companies have been
eliminated in combination. The Companies are presented on a combined basis to
reflect common ownership by Alex Cooley, Peter Conlon and Stephen Selig III.

Concert/Southern is the predominant musical event promoter in the Atlanta,
Georgia region, and through Chastain Joint Ventures ("Chastain Ventures") is
the operator, pursuant to a long-term lease with the City of Atlanta, of the
Chastain Park Amphitheater. Chastain Ventures is owned equally by
Concert/Southern and the Atlanta Symphony Orchestra, and is accounted for by
Concert/Southern on the equity method. Buckhead Promotions and Northern
Exposure equally own Roxy Ventures which holds a long-term lease for the Roxy
Theatre, and Pure Cotton holds a long-term lease for the Cotton Club.
Interfest, Inc. promoted the three-day Midtown Music Festival held in
downtown Atlanta during 1997. In addition, High Cotton owns 52.6% of HC
Properties, Inc., a real estate investment company which is accounted for on
the equity method.

The Companies record revenue when earned. Concert revenue includes
ticketing, concession, and sponsorship revenue. Deferred income relates
primarily to deposits received in advance of the concert season.

Property and Equipment

Land, leasehold improvements, and furniture and equipment are stated at
cost. Depreciation of furniture and equipment is provided primarily by the
straight-line method over the estimated useful lives of the respective
classes of assets. Leasehold improvements are amortized over the life of the
lease or of the improvement, whichever is shorter.

Income Taxes

The Companies have been organized as either partnerships or corporations
which have elected to be taxed as "S Corporations." The "S Corporation"
elections are effective for both federal and state tax purposes. Accordingly,
all items of income, loss, deduction or credit are reported by the partners
or shareholders on their respective personal income tax returns and,
therefore, no current or deferred federal or state taxes have been provided
in the accompanying combined financial statements.

The difference between the tax basis and the reported amounts of the
Companies' assets and liabilities was $16,576 at December 31, 1997.

Risks and Uncertainties

Accounts receivable are due from ticket vendors and venue box offices.
These amounts are typically collected within 20 days of a performance.
Management considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required.

Use of Estimates

F-144
<PAGE>
CONCERT/SOUTHERN PROMOTIONS AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

2. INVESTMENTS IN EQUITY INVESTEES

The following is a summary of the financial position and results of
operations of the Companies' equity investees as of and for the period ended
December 31, 1997:

<TABLE>
<CAPTION>
CHASTAIN
PARK AMPHITHEATER HC PROPERTIES
----------------- ---------------
(50% OWNED) (52.6% OWNED)
<S> <C> <C>
Current assets .......................... $322,527 $ 51,820
Property and equipment .................. 468,145 810,480
Other assets ............................ -- 415,145
----------------- ---------------
Total assets ............................ $790,672 $1,277,445
================= ===============
Current liabilities ..................... $129,953 $ 1,927
Partners' capital ....................... 660,719 1,275,518
----------------- ---------------
Total liabilities and partners' capital $790,672 $1,277,445
================= ===============
Revenue ................................. $653,251 $ 87,407
Expenses ................................ 747,055 165,328
----------------- ---------------
Net income (loss) ....................... $(93,804) $ (77,921)
================= ===============
</TABLE>

3. RELATED PARTY TRANSACTIONS

The Companies have an arrangement with Stephen Selig III whereby the cash
receipts of Concert/Southern, Buckhead Promotions and Roxy Ventures are
transferred to the Selig Enterprises, Inc. Master Cash Account (the "Master
Account"). All subsequent payments made by the Companies are funded by the
Master Account. Accordingly, the Companies' cash held by the Master Account
of $281,058 is recorded as due from owner.

In addition, CCMI has recorded a receivable from its stockholders of
$51,696.

4. STOCKHOLDERS' EQUITY

The Companies' stocks are as follows:

<TABLE>
<CAPTION>
SHARES SHARES PAR
AUTHORIZED ISSUED VALUE
------------ -------- -------
<S> <C> <C> <C>
Southern Promotions 1,000,000 5,000 $1
High Cotton ......... 10,000 550 1
Buckhead Promotions 1,000,000 500 1
Northern Exposure .. 1,000,000 1,000 1
Pure Cotton ......... 100,000 500 1
CCMI ................ 10,000 1,000 1
Interfest ........... 100,000 500 1
--------
9,050
========
</TABLE>

F-145
<PAGE>
CONCERT/SOUTHERN PROMOTIONS AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

5. COMMITMENTS AND CONTINGENCIES

Leases

The following is a schedule of future minimum rental payments under
operating leases (principally office and venue facilities) that have initial
or remaining lease terms in excess of one year as of December 31, 1997:

<TABLE>
<CAPTION>
<S> <C>
Year ended December 31:
1998 .................. $ 222,539
1999 .................. 183,198
2000 .................. 188,991
2001 .................. 133,350
2002 .................. 136,350
Thereafter ............ 174,375
-----------
Total ................. $1,038,803
===========
</TABLE>

Certain office facilities have renewal and escalation clauses.

Legal Matters

On October 10, 1997, Concert/Southern settled a lawsuit agreeing to pay
$100,000. Such amount has been provided for in the accompanying combined
statement of operations.

The Companies have also been named in various other lawsuits arising in
the normal course of business. It is not possible at this time to assess the
probability of any liability against the Companies as a result of these
lawsuits. Management has stated that all cases will be vigorously defended.

6. SUBSEQUENT EVENTS

On March 4, 1998, SFX Entertainment Inc. acquired the Companies for a
total cash purchase price of $16,900,000 (including a working capital payment
of $300,000).

Prior to the sale of the Companies to SFX, the sole shareholder of High
Cotton received a distribution of High Cotton's interest in HC Properties,
Inc.

F-146
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Falk Associates Management Enterprises, Inc.

We have audited the accompanying combined balance sheets of Falk
Associates Management Enterprises, Inc. as of December 31, 1996 and 1997, and
the related combined statements of operations and stockholders' equity
(deficit) and cash flows for the years then ended. These financial statements
are the responsibility of management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
Falk Associates Management Enterprises, Inc. at December 31, 1996 and 1997,
and the combined results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP

New York, New York
April 10, 1998

F-147

<PAGE>

FALK ASSOCIATES MANAGEMENT ENTERPRISES, INC.
COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
1996 1997 1998
---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash ............................................. $ 964,265 $ 34,586 $ 691,718
Cash surrender value of officers' life insurance 73,336 115,436 125,436
Accounts receivable .............................. 641,204 614,051 663,484
Current portion of stockholder loan receivable .. 92,669 116,524 237,528
Other current assets ............................. 13,428 33,456 24,904
------------- -------------
1,784,902 914,053 1,743,070
------------- -------------
Fixed assets, net of accumulated depreciation and
amortization ..................................... 85,200 63,714 62,377
Certificate of deposit, noncurrent ................ 200,906 211,331 202,044
Accounts receivable ............................... 514,051 -- --
Stockholder loan receivable ....................... 506,400 389,873 136,542
Other ............................................. 58,900 7,119 7,119
------------- -------------
Total assets ...................................... $3,150,359 $ 1,586,090 $ 2,151,152
============= =============
LIABILITIES AND COMBINED STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable and accrued expenses ............ $ 221,952 $ 165,504 $ 898,054
Payroll taxes payable ............................ 907,446 - --
Stockholder loan payable ......................... 95,000 95,000 95,000
Current portion of settlement agreement ......... 134,552 145,652 149,253
Current portion of deferred revenue .............. 673,744 1,358,149 1,263,080
Current portion of long-term debt ................ 309,313 310,162 310,472
------------- -------------
2,342,007 2,074,467 2,715,859
------------- -------------
Settlement agreement, less current portion ....... 658,756 513,103 473,103
Deferred revenue, less current portion ............ -- 1,031,250 937,500
Long-term debt, less current portion .............. 46,548 36,200 33,428
Combined stockholders' equity (deficit) .......... 103,048 (2,068,930) (2,008,738)
------------- -------------
Total liabilities and combined stockholders'
equity (deficit) ................................. $3,150,359 $ 1,586,090 $ 2,151,152
============= =============
</TABLE>

See accompanying notes.

F-148
<PAGE>

FALK ASSOCIATES MANAGEMENT ENTERPRISES, INC.
COMBINED STATEMENTS OF OPERATIONS AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31
-------------------------- ------------------------
1996 1997 1997 1998
-------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Agent fees .............................. $6,364,503 $10,881,588 $1,219,282 $ 1,812,804
EXPENSES
Stockholders' salary expense ............ 4,732,430 10,594,773 1,173,341 1,289,251
Other salary expense .................... 969,293 1,177,197 130,372 143,250
Depreciation and amortization ........... 113,486 115,309 29,897 14,053
Travel and entertainment ................ 503,475 552,951 118,418 140,141
General and administrative expenses .... 627,174 677,453 137,664 169,452
------------ -------------- ------------ -------------
6,945,858 13,117,683 1,589,692 1,756,147
-------------- ------------ -------------
(Loss) income from operations ........... (581,355) (2,236,095) (370,410) 56,657
OTHER INCOME (EXPENSE)
Interest income--stockholders' loan .... 32,305 27,237 6,810 9,288
Interest income--third party ............ 142,917 115,714 28,148 15,171
Interest expense--third party ........... (91,996) (78,834) (21,414) (20,924)
Other income ............................ 2,200 -- -- --
-------------- ------------ -------------
85,426 64,117 13,544 3,535
Net (loss) income ....................... (495,929) (2,171,978) (356,866) 60,192
Combined stockholders' equity at
beginning of year ...................... 598,977 103,048 103,048 (2,068,930)
-------------- ------------ -------------
Combined stockholders' equity (deficit)
at end of year ......................... $ 103,048 $(2,068,930) $ (253,818) $(2,008,738)
============== ============ =============
</TABLE>

See accompanying notes.

F-149
<PAGE>

FALK ASSOCIATES MANAGEMENT ENTERPRISES, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------- ------------------------
1996 1997 1997 1998
---------- ------------ ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income ................................. $(495,929) $ (2,171,978) $(356,866) $ 60,192
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation and amortization ................... 113,486 115,309 29,897 14,053
Non-cash interest expense ....................... 75,702 65,447 16,399 13,601
Non-cash interest income ........................ (32,188) (37,753) (9,402) 4,041
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable ...... 17,538 541,204 47,786 (49,433)
Decrease (increase) in other current assets ..... 559 (20,028) (7,736) 8,552
Increase (decrease) in accounts payable and
accrued expenses ............................... 71,526 (56,448) 325,813 732,550
Increase (decrease) in payroll taxes payable ... 461,584 (907,446) (907,446) --
Increase (decrease) in deferred revenue ........ 479,319 1,715,655 229,918 (188,819)
--------------- ------------ -----------
Net cash provided by (used in) operating
activities ....................................... 691,597 (756,038) (631,637) 594,737
--------------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets .......................... (70,467) (42,042) (20,441) (12,716)
Increase in cash surrender value of officers' life
insurance ........................................ (31,336) (42,100) (10,000) (10,000)
--------------- ------------ -----------
Net cash used in investing activities ............. (101,803) (84,142) (30,441) (22,716)
--------------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt ........................ (300,000) (309,499) (102,432) (2,462)
Proceeds from long-term debt borrowings .......... 355,861 300,000 -- --
Proceeds from stockholder loan receivable ........ -- 120,000 120,000 137,573
Payment on settlement agreement ................... (200,000) (200,000) (50,000) (50,000)
--------------- ------------ -----------
Net cash (used in) provided by financing
activities ....................................... (144,139) (89,499) (32,432) 85,111
--------------- ------------ -----------
Net increase (decrease) in cash ................... 445,655 (929,679) (694,510) 657,132
Cash at beginning of period ....................... 518,610 964,265 964,265 34,586
--------------- ------------ -----------
Cash at end of period ............................. $ 964,265 $ 34,586 $ 269,755 $ 691,718
=============== ============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest ............................ $ 16,294 $ 13,386 $ 5,014 $ 7,324
=============== ============ ===========
</TABLE>

See accompanying notes.

F-150
<PAGE>

FALK ASSOCIATES MANAGEMENT ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Combination

The accompanying combined financial statements include the accounts of
Falk Associates Management Enterprises, Inc. ("FAME") and Financial Advisory
Management Enterprises, Inc. ("FINAD") (collectively, the "Companies").
Transactions and balances among the Companies have been eliminated in
combination. The Companies are subject to common ownership.

In exchange for a percentage fee or commission, FAME provides
representation services regarding the negotiation of professional sporting
contracts and marketing and endorsement contracts. FINAD provides financial
management services including, but not limited to, the implementation of
financial planning to meet clients' savings and financial goals, the receipt
and deposit of funds, cash flow budgeting and analysis, preparation of
financial statements and tax return services, in exchange for an annual fixed
fee and an additional percentage fee based on the dollar value of assets
managed and monitored.

Revenue Recognition

The Companies revenues arise primarily from percentage fees or commissions
received for the negotiation of professional sporting contracts and marketing
and endorsement contracts. The Companies recognize revenue ratably over the
period of the associated contract. Deferred revenue is recorded on the
accompanying combined balance sheets when funds are received in advance of
the performance period and is recognized over the period of performance.

Accounts Receivable

Accounts receivable consist of amounts due from professional athletes for
services rendered or for fees due related to prior performance that has been
contractually deferred to a later date. Management considers these accounts
receivable as of December 31, 1996 and 1997 to be collectible; accordingly,
no allowance for doubtful accounts is recorded.

Fixed Assets

Fixed assets are stated at cost. Depreciation and amortization of fixed
assets is provided on the straight-line method over the estimated useful
lives of the assets including 5 years for technical equipment, 7 years for
furniture and office equipment and 10 years for leasehold improvements.

Income Taxes

The Companies are cash-basis taxpayers and have elected to be taxed as S
Corporations for federal and state income tax purposes. All items of income,
loss and credits are reported by the Companies stockholders on their
respective personal income tax returns. Accordingly, no current and deferred
federal corporate income taxes have been provided in the accompanying
combined financial statements. However, since the Companies operate in the
District of Columbia ("D.C.") they are subject to D.C. income tax. No D.C.
income tax benefits have been provided on the Companies' D.C. net operating
loss carryforwards and other deductible temporary differences due to the
uncertainty of recognizing future tax benefits for these items.

Risks and Uncertainties

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.

F-151
<PAGE>
FALK ASSOCIATES MANAGEMENT ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

The Companies derive substantially all of its agent fees from the
representation services they provide regarding the negotiation of
professional sporting contracts and marketing and endorsement contracts for
professional athletes in the National Basketball Association ("NBA"). In
March 1998, the NBA Board of Governors voted to exercise the league's right
to re-open its Collective Bargaining Agreement (the "Agreement") with the
National Basketball Players Association. As a result, the Agreement will
expire as of June 30, 1998. As a matter of Collective Bargaining, the
Agreement, when it expires, continues in place until it is replaced by a
successor agreement, or until some other labor remedies are utilized by one
party or the other, meaning a strike or a lockout or a moratorium
collectively. Should there be a work stoppage due to either a lockout or
strike and NBA games are not played, it would be likely that the Companies
agent fees would be negatively impacted.

Significant Customer

The Companies three most significant sources of revenue provided a
majority of the Companies combined agent fees for the year ended December 31,
1996 and 1997, respectively.

Interim Financial Information

The interim financial data as of March 31, 1998 and for three-month
periods ended March 31, 1997 and 1998 is unaudited and certain information
and disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted.
However, in the opinion of Management, the interim data includes all
adjustments, consisting only of normal recurring adjustments necessary for a
fair statement of the results for the interim periods. The results of
operations for the interim periods are not necessarily indicative of the
results to be expected for the entire year.

2. FIXED ASSETS

Fixed assets consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1997
--------- -----------
<S> <C> <C>
Furniture and office equipment ................. $ 150,739 $ 159,467
Technical equipment ............................ 169,112 200,300
Leasehold improvements ......................... 4,841 6,967
-----------
324,692 366,734
Less accumulated depreciation and amortization (239,492) (303,020)
-----------
$ 85,200 $ 63,714
===========
</TABLE>

3. LONG-TERM DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1997
--------- ----------
<S> <C> <C>
Time note (A) ........... $ 200,000 $ 200,000
Line of credit (B) ...... 100,000 100,000
Note payable (C) ........ 55,861 46,362
-----------
Long term debt .......... 355,861 346,362
Less current maturities (309,313) (310,162)
-----------
Total long-term debt ... $ 46,548 $ 36,200
========= ===========
</TABLE>

- ------------
(A) On December 31, 1996 and 1997, respectively, the Companies had
outstanding a six-month $200,000 time note (the "Time Note") with a
bank (the "Bank"). Interest was set at the prime rate which
approximated 8.25% at both December 31, 1996 and 1997, respectively.
Interest is payable monthly in arrears. The Companies may repay the
principal at any time during the six-month period ended June 30, 1998,
with all remaining principal and outstanding interest in full on June
30, 1998. The time note contains covenants which, among other things,
restrict the pledging of assets without prior written approval of the
Bank.

F-152
<PAGE>
FALK ASSOCIATES MANAGEMENT ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

(B) On December 31, 1996 and 1997, respectively, the Companies had
outstanding a $100,000 one-year line of credit with the Bank which was
fully drawn as of those dates. Interest was set at the prime rate which
approximated 8.25% at both December 31, 1996 and 1997, respectively.
Interest is payable monthly in arrears. Principal and any outstanding
interest is payable in full at December 31, 1998. The line of credit
contains covenants which are similar to those in the Time Note.
(C) In December 1996, the Companies entered into a five year $55,861 note
payable with the Bank. Interest was fixed at 8.75%. Commencing January
1997, the note became payable in 59 monthly installments consisting of
principal and interest with the final payment equal to any remaining
principal and interest due. The note is secured by specific computer
hardware and software which was purchased with the proceeds of the note
payable.

At December 31, 1997, the aggregate amounts of long-term debt due during
the next four years are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER
31 AMOUNT
- ---------------------- ----------
<S> <C>
1998 ................. $310,162
1999 ................. 11,088
2000 ................. 12,098
2001 ................. 13,014
----------
$346,362
==========
</TABLE>

4. COMMITMENTS AND CONTINGENCIES

The Companies are obligated under certain noncancellable operating leases.
Rent expense, principally for office space, amounted to approximately
$149,400 and $167,300 for the years ended December 31, 1996 and 1997,
respectively. In March 1998, the Companies entered into a sublease for
additional office space.

Future minimum rental payments under noncancellable operating leases are
as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER
31 OPERATING LEASES
- ---------------------- ----------------
<S> <C>
1998 ................. $ 214,000
1999 ................. 244,000
2000 ................. 247,000
2001 ................. 250,000
2002 ................. 184,000
----------------
$1,139,000
================
</TABLE>

Settlement Agreement

In 1994, the Companies were party to a $1.9 million legal settlement
arising from a civil suit wherein they were jointly and severally liable to
make settlement payments over a seven year period. The carrying value of the
settlement agreement was approximately $793,300 and $658,800 at December 31,
1997 and 1996, respectively, discounted at a 8.25% interest rate.

Agreement and Memorandum of Understanding

In January 1992, an Agreement and Memorandum of Understanding (the
"Agreement") was executed between the Companies' principal stockholder and a
third party which formerly employed the principal stockholder. Under the
terms of the Agreement, the Companies are obligated to remit to the third
party a percentage of the Companies fees as received for the representation
services provided regarding the negotiation of professional sporting
contracts and marketing and endorsement contracts. Agreement terms are
limited to those professional athletes who became clients of the Companies at
the time of the Companies formation and generally does not give the third
party any right to fees related to contract renewals.

F-153
<PAGE>
FALK ASSOCIATES MANAGEMENT ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

Stock Appreciation Rights

In December 1996, the Companies issued stock appreciation rights ("SARs")
to a stockholder and executive vice president of the Companies. The SARs are
exercisable only upon the occurrence of defined terms and conditions,
including the sale or merger of the Companies to a third party or upon
termination of employment. Accordingly, upon the exercise of the SAR's, the
Companies will record expense in the combined statement of operations equal
to the fair value of the SARs.

5. RELATED PARTY TRANSACTIONS

Stockholder Loan Receivable

In January 1993, the Companies entered into two eight-year promissory loan
notes with a stockholder of the Companies for face amounts of $384,000 and
$96,000. The loans accrue interest at a fixed rate of 5.7% with monthly
payments of principal and accrued interest commencing January 1, 1997.

Stockholder Loan Payable

In January 1993, the principle stockholder of the Companies made a $95,000
non-interest bearing advance to the Companies in connection with its
formation. This advance is due on demand and has been classified as a current
liability in the accompanying combined balance sheets.

Stockholders' Life Insurance

The Companies are the owners and beneficiaries of key-man life insurance
policies carried on the lives of its stockholders' with cash surrender values
totaling approximately $73,300 and $115,400 as of December 31, 1996 and 1997,
respectively. No loans are outstanding against the policies, but there is no
restriction in the policy regarding loans.

The life insurance contracts are accompanied by mandatory stock purchase
agreements relating to the amount of the proceeds of the life insurance. Upon
death, the insured's estate will be obligated to sell, and the Companies will
be obligated to purchase the insured's stock up to the value of the stock or
the proceeds of insurance, whichever is lesser. The purpose is to protect the
Companies against an abrupt change in ownership.

6. EMPLOYEE BENEFIT PLAN

During 1997, the Companies began sponsoring a deferred contribution plan
(the "Plan"). The Plan enables all full time employees who have completed one
year of service with the Companies to make voluntary contributions to the
Plan not to exceed the dollar limits as prescribed by the Internal Revenue
Service. Under the Plan, the Companies matches an employee's contribution up
to a maximum of 3% of their salary. The Companies contribution for the year
ended December 31, 1997 was approximately $40,800.

7. STOCKHOLDERS AGREEMENT

The stockholders of the Companies currently maintain a Stockholders
Agreement (the "Agreement") which place restrictions on the transfer (as
defined in the Agreement) of their stock.

8. SUBSEQUENT EVENT

On April 29, 1998 the stockholders of the Companies entered into an
agreement with a subsidiary of SFX Entertainment, Inc. ("SFX") whereby SFX
will acquire all of the outstanding capital stock of the Companies for a
total purchase price of approximately $82.9 million (including approximately
$7.9 million which the Companies anticipate receiving for the reimbursement
of certain taxes that they will be subject to) and the issuance of 1.0
million shares of SFX's Class A Common Stock.

F-154
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Members
Blackstone Entertainment LLC

We have audited the accompanying combined balance sheets of Blackstone
Entertainment LLC as of December 31, 1996 and 1997, and the related
combined statements of income, members' equity and cash flows for the
years then ended. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We have 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 combined financial statements referred to above
present fairly, in all material respects, the combined financial position
of Blackstone Entertainment LLC at December 31, 1996 and 1997, and the
combined results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.

May 1, 1998 Ernst & Young LLP
New York, New York

F-155
<PAGE>

BLACKSTONE ENTERTAINMENT LLC
COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31
---------------------------- MARCH 31
1996 1997 1998
--------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including $50,000
and $55,000 of restricted cash at December
31, 1996 and 1997, respectively .............. $ 2,025,731 $ 3,529,135 $ 5,034,279
Accounts receivable ........................... 551,776 275,820 1,354,821
Due from related parties....................... 60,751 310,874 192,958
Due from members............................... 234,822 165,117 --
Other current assets........................... 151,872 219,789 562,794
------------- -------------
Total current assets............................ 3,024,952 4,500,735 7,144,852
Fixed assets, net............................... 14,680,344 13,394,676 12,744,735
Intangible assets, net.......................... 212,682 177,823 157,344
------------- -------------
Total assets.................................... $17,917,978 $18,073,234 $20,046,931
============= =============
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ......... $ 819,690 $ 1,675,061 $ 2,596,363
Notes payable, current portion................. 1,427,172 1,388,806 1,423,426
Capital leases payable, current portion ....... 344,038 487,334 497,232
Deferred income................................ 545,537 547,270 3,198,080
Due to related parties......................... 241,677 -- --
Loans payable to members....................... 1,500,000 2,461,239 1,500,000
------------- -------------
Total current liabilities...................... 4,878,114 6,559,710 9,215,101
Notes payable, net of current portion........... 8,564,888 6,816,668 7,060,442
Capital leases payable, net of current portion . 1,080,959 693,061 533,141
Other........................................... 50,825 -- 49,496
------------- -------------
Total liabilities............................... 14,574,786 14,069,439 16,858,180
Members' equity................................. 3,343,192 4,003,795 3,188,751
------------- -------------
Total liabilities and members' equity........... $17,917,978 $18,073,234 $20,046,931
=========== ============= =============
</TABLE>

See accompanying notes.

F-156
<PAGE>

BLACKSTONE ENTERTAINMENT LLC
COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31 31
---------------------------- --------------------------
1996 1997 1997 1998
----------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues ..................... $48,824,066 $50,587,721 $5,642,625 $4,548,894

Operating costs and expenses:
Operating costs ................... 35,631,428 35,806,833 4,389,928 3,268,329
Promotion expenses ................ 2,596,861 2,837,208 321,145 313,471
General and administrative
expenses.......................... 4,634,399 5,756,993 853,379 1,136,621
Depreciation and amortization .... 2,026,637 2,033,245 502,259 475,193
------------- ------------ ------------
Total operating costs and expenses 44,889,325 46,434,279 6,066,711 5,193,614
Operating income (loss) ............ 3,934,741 4,153,442 (424,086) (644,720)
Investment income .................. 189,970 329,696 7,767 30,314
Interest expense ................... (1,132,556) (1,071,731) (218,196) (200,638)
----------- ------------- ------------ ------------
Net income (loss) .................. $ 2,992,155 $ 3,411,407 $ (634,515) $ (815,044)
=========== ============= ============ ============
</TABLE>

See accompanying notes.

F-157
<PAGE>

BLACKSTONE ENTERTAINMENT LLC
COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1996 1997
----------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................ $ 2,992,155 $ 3,411,407
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization............................ 2,226,637 2,033,245
Other ................................................... 543 --
(Increase) decrease in assets:
Accounts receivable....................................... (180,773) 275,956
Other current assets...................................... 284,240 (67,917)
Increase (decrease) in liabilities:
Deferred income......................................... (149,523) 1,733
Accounts payable and accrued expenses................... (34,164) 855,371
Due to/from related parties and members ................ (68,475) (422,095)
Other................................................... (11,461) (50,825)
----------- ------------
Net cash provided by operating activities.................. 5,059,179 6,036,875
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets................................ (1,678,666) (28,630)
----------- ------------
Net cash used in investing activities...................... (1,678,666) (28,630)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable and consulting agreement ....... (1,227,498) (1,867,788)
Payments on to capital leases.............................. (17,182) (370,337)
Changes in loans payable to members........................ (119,189) --
Distributions to members, net ............................. (1,720,546) (2,266,716)
Net cash used in financing activities...................... (3,084,415) (4,504,841)
------------ ------------
Net increase in cash and cash equivalents.................. 296,098 1,503,404
Cash and cash equivalents, beginning of period............. 1,729,633 2,025,731
----------- ------------
Cash and cash equivalents, end of period................... $ 2,025,731 $ 3,529,135
=========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash capital contribution ............................. $ -- $ 484,088
Cash paid during the year for interest .................... $ 1,301,210 $ 1,017,371
</TABLE>

See accompanying notes.

F-158
<PAGE>

BLACKSTONE ENTERTAINMENT LLC
COMBINED STATEMENT OF MEMBERS' EQUITY

<TABLE>
<CAPTION>
MEMBERS'
EQUITY
-------------
<S> <C>
Balance, January 1, 1996............. $ 2,071,583
Net income .......................... 2,992,155
Distributions to members ............ (1,770,546)
Capital contributions ............... 50,000
-------------
Balance, December 31, 1996 .......... 3,343,192
Net income .......................... 3,411,407
Distributions, net .................. (2,750,804)
-------------
Balance, December 31, 1997........... 4,003,795
Net loss ............................ (815,044)
-------------
Balance, March 31, 1998 (unaudited) $ 3,188,751
=============
</TABLE>

See accompanying notes.

F-159
<PAGE>

BLACKSTONE ENTERTAINMENT LLC
NOTES TO COMBINED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Blackstone Entertainment LLC ("the Company") was organized on October 1,
1997 as a Massachusetts Limited Liability Company. On that date, the net
assets of the following companies (collectively, "Don Law and Affiliates"),
which had been commonly controlled and functionally related, and a related
parcel of land located in Mansfield, Massachusetts were contributed in
formation of the Company:

o Great Woods, Inc.

o Time Trust Associates Joint Venture

o Harborlights Pavilion, Inc.

o NEXT, Inc.

o Don Law Company, Inc.

o Orpheum Management Corporation

o Black and Copper, Ltd.

o Andrew Trust LLC

These financial statements reflect the businesses subject to the transaction
described in Note 10 and accordingly, represent the combined results of
Blackstone Entertainment LLC and Don Law and Affiliates as a predecessor. The
net assets transferred to the Company have been recorded at their historical
book values.

Nature of Business

Great Woods, Inc., a Massachusetts corporation, managed and operated the
Great Woods Center for the Performing Arts in Mansfield, Massachusetts. Time
Trust Associates Joint Venture, a Massachusetts general partnership, held
title to the real estate on which the facility is situated.

Harborlights Pavilion, Inc., a Massachusetts corporation, managed and
operated the Harborlights Pavilion in Boston, Massachusetts.

NEXT, Inc., a Massachusetts corporation, operated a computerized ticketing
system for entertainment facilities and theaters throughout the New England
area.

Don Law Company, Inc., a Massachusetts corporation, promoted concerts and
other entertainment events throughout the New England area.

Orpheum Management Corporation, a Massachusetts corporation, managed the
Orpheum Theatre in Boston, Massachusetts.

Black and Copper, Ltd., a Massachusetts corporation, provided graphic
design, advertising, marketing and promotional services principally to its
related entities.

Andrew Trust LLC owned additional parcels of land surrounding the Great
Woods Center for the Performing Arts in Mansfield, Massachusetts.

Limited Liability Company

The Company's operating agreement provides that liability of its members
is limited to their capital invested in the Company. The Company's operating
agreement does not limit its term of existence, and provides for dissolution
upon the occurrence of certain events, one of which is the acquisition by one
member of all of the outstanding ownership interest.

F-160
<PAGE>

BLACKSTONE ENTERTAINMENT LLC
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

Member Classes and Priorities

The Company's operating agreement provides for one of its members to
receive a priority distribution of current year earnings and liquidation
proceeds to $2,250,000. The remaining members receive a matching distribution
subsequent to the priority distribution of $2,250,000. All additional
proceeds are then divided evenly among the members. The operating agreement
provides for both priorities to disappear upon the Company's attainment of
certain distribution levels.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash, time deposits, commercial paper
and money market mutual funds. The Company invests its excess cash in highly
rated companies and financial institutions. These deposits have original
maturities that do not exceed three months. During the course of the year,
the Company maintained balances in financial institutions in excess of FDIC
insured limits. Included in cash and cash equivalents at December 31, 1996
and 1997 is approximately $50,000 and $55,000, respectively, of restricted
cash to be used for future Orpheum Theatre renovations and improvements.

Fixed Assets

Fixed assets are stated at cost. Depreciation is computed over estimated
useful lives ranging from three to thirty-nine years utilizing straight-line
and accelerated methods. Depreciation expense charged to operations was
$1,992,321 and $1,798,386 during the years ended December 31, 1996 and 1997,
respectively.

Intangible Assets, Net

Intangible assets consisting of goodwill which is being amortized over
fifteen years using the straight-line method and organization costs incurred
when Harborlights Pavilion, Inc. and NEXT, Inc. were established are being
amortized over five years using the straight-line method. These assets are
shown on the combined balance sheets net of accumulated amortization of
$125,665 and $360,524 as of December 31, 1996 and 1997. Total amortization
expense charged to operations was $34,316 and $234,859 during the years ended
December 31, 1996 and 1997.

Revenue Recognition

All divisions, except for NEXT, recognize event-related revenue upon
completion of each performance. Advance ticket receipts for performances are
recorded as deferred revenue. Costs incurred which relate to future
performances are recorded as prepaid expenses. The NEXT division recognizes
revenues as tickets are sold and services are performed.

Income Taxes

The Company is treated as a partnership for federal and state income tax
purposes. The Company's earnings and losses are included in the members'
income tax returns in relation to their respective ownership interests;
accordingly, no provision is required for federal and state income taxes.

Advertising Expense

The Company expenses advertising costs as incurred. Advertising expense
amounted to approximately $1,849,000 and $2,061,000 during the years ended
December 31, 1996 and 1997, respectively.

F-161
<PAGE>

BLACKSTONE ENTERTAINMENT LLC
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.

Year 2000 (unaudited)

The Company has addressed the risks associated with year 2000 compliance
with respect to its ticketing system based on consultation with its vendors.
Future costs associated with such compliance are not expected to be
significant.

Interim Financial Information

The interim financial data as of March 31, 1998 and for the three-month
periods ending March 31, 1997 and 1998 is unaudited and certain information
and disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted.
However, in the opinion of Management, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results for the interim period. The results of
operations for the interim periods are not necessarily indicative of the
results to be expected for the entire year.

2. FIXED ASSETS, NET

Fixed assets, net consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1996 1997
------------ -------------
<S> <C> <C>
Performing art facilities ..... $ 21,454,305 $ 21,496,711
Land and site improvements .... 2,133,905 2,327,127
Equipment under capital leases 1,426,874 1,567,690
Machinery and equipment ........ 1,484,682 1,628,996
Furniture and fixtures ......... 494,480 522,372
Leasehold improvements ......... 243,982 244,982
Motor vehicles ................. 156,135 189,663
------------ -------------
27,394,363 27,977,541
Less accumulated depreciation . (12,714,019) (14,582,865)
------------ -------------
$ 14,680,344 $ 13,394,676
============ ==============
</TABLE>

F-162
<PAGE>

BLACKSTONE ENTERTAINMENT LLC
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

3. NOTES PAYABLE

Notes payable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1996 1997
---------- ------------
<S> <C> <C>
1.The Company is obligated under a note payable to the FDIC
dated May 11, 1988 in the original amount of $10,600,000. On
May 9, 1995, the note was modified and extended to mature
February 15, 2005. At such time, a balloon payment of
approximately $3,500,000 will be required. The note is
payable in monthly principal installments of $44,167 plus
interest at 8.98% per annum. The note is collateralized by
substantially all assets of the Great Woods Inc. and Time
Trust Join Venture, including a mortgage on the real estate
and facility, and a security interest in all operating
permits and licenses, programming and concession contracts,
and insurance policies on the lives of two members. .......... $7,752,942 $7,222,942
2.The Company is obligated to a concessionaire under an
unsecured five-year installment note in the original amount
of $1,600,000 which matures on June 30, 1998. The note is
payable in annual principal installments of $320,000 with
interest payable quarterly at 1.5% over the prime rate. ...... 640,000 320,000
3.The Company is obligated under a five-year installment note
dated May 18, 1994 payable to a bank in the original amount
of $1,600,000. The note is payable in monthly installments of
$33,136 including interest at 8.9% per annum and is
collateralized by all assets of the Harborlights Pavilion
Inc........................................................... 829,118 492,532
4.The Company is obligated to a concessionaire under an
unsecured installment note dated August 19, 1994 in the
original amount of $350,000 bearing interest at 1% over the
prime rate. The remaining outstanding principal balance and
any accrued interest is due November 1, 1998. The note is
personally guaranteed by the members of the Company. ......... 210,000 140,000
5.The Company is obligated to a concessionaire under an
unsecured and noninterest bearing note dated July 11, 1994 in
the original amount of $150,000. The note is due in annual
installments of $30,000 with the final installment due
October 15, 1998.............................................. 60,000 30,000
6.The Company is obligated under a note payable from Andrew
Trust LLC to a bank dated December 12, 1996 in the original
amount of $500,000. Interest is payable monthly at 0.75% over
the prime rate and the principal reaches maturity on December
12, 1999...................................................... 500,000 --
------------ ------------
9,992,060 8,205,474
Current maturities ........................................... 1,427,172 1,388,806
------------ ------------
Long-term debt ............................................... $8,564,888 $6,816,668
============ ============
</TABLE>

F-163
<PAGE>

BLACKSTONE ENTERTAINMENT LLC
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

<TABLE>
<CAPTION>
<S> <C>
Maturities of long-term debt are as follows:
December 31:

</TABLE>

<TABLE>
<CAPTION>
<S> <C>
1999 ......... $ 653,726
2000 ......... 530,000
2001 ......... 530,000
2002 ......... 530,000
2003 ......... 530,000
Thereafter .. 4,042,942
-----------
$6,816,668
===========
</TABLE>

The Company has an unsecured demand line of credit with a bank of
$2,000,000 which expires April 30, 1998. Interest is payable monthly at 1%
over the prime rate. The Company had no amounts outstanding under this line
of credit as of December 31, 1996 and 1997.

The bank note payable collaterialized by the assets of Harborlights Pavilion,
Inc. and the demand line of credit are subject to several financial covenants
which the company is currently in the process of renegotiating. For the years
ended December 31, 1996 and 1997, Harborlights Pavilion, Inc. failed at least
one of these financial covenants. Management anticipates that based upon
discussions with the bank, the loan will not be called.

4. CAPITAL LEASE OBLIGATIONS

The Company is obligated under capital lease agreements for certain
business equipment. The leases have been capitalized at the fair value of the
leased equipment with a corresponding liability recorded. Each payment is
allocated between a reduction of the liability and interest expense to yield
a constant periodic rate of interest on the remaining balance of the
obligation.

At December 31, 1997, future minimum payments due on the lease agreements
are as follows:
Year ended December 31:

<TABLE>
<CAPTION>
<S> <C>
1998 ........................................ $ 564,474
1999 ........................................ 564,625
2000 ........................................ 155,095
2001 ........................................ 15,961
-----------
1,300,155
Amount representing interest ................ 119,760
-----------
Present value of net minimum lease payments 1,180,395
Current portion ............................. 487,334
-----------
Long-term portion ........................... $ 693,061
===========
</TABLE>

5. LOANS PAYABLE TO MEMBERS

The Company is obligated to members in the amount of $961,239 which
represents the balance of advances made by them in conjunction with the
transfer of assets on October 1, 1997. The loans are unsecured and
noninterest bearing, and are expected to be repaid during 1998.

The Company is obligated to two members for loans totaling $1,500,000 at
both December 31, 1996 and 1997. The loans are unsecured, bear interest at
6.5% per annum, and have no formal repayment terms.

F-164
<PAGE>

BLACKSTONE ENTERTAINMENT LLC
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

6. COMMITMENTS AND RELATED PARTY TRANSACTIONS

Lease Commitments and Rent Expense

Total rent expense amounted to approximately $487,000 and $577,000 for the
years ended December 31, 1996 and 1997, respectively, of which $92,700 was
paid to an affiliate during 1996 and 1997. At December 31, 1997, the Company
is committed under the following noncancellable operating leases:

1) The Company is obligated under a five-year license agreement dated
March 31, 1994 for the lease of a parcel of real estate located on Fan Pier
in Boston, Massachusetts. The agreement provides for a minimum annual rent of
$250,000 through 1998. Additional rent is required based on the number of
tickets sold annually in excess of a 100,000 ticket base. The landlord has
the right to terminate the license agreement upon giving written notice by
November of each year, for termination in the following calendar year.

2) Under an agreement with the owner of the Orpheum Theatre, the Company
has exclusive booking and scheduling rights for the Theatre and sole
responsibility for granting concessions for the sale of food and refreshments
at the Theatre. Under the terms of the agreement, the Company is required to
pay a hall rental charge of $4,750 per performance for the period January
1998 through December 2000, plus additional amounts for artist rehearsals.
The Company is reimbursed for the hall rental charges by the shows' promoters
and earns commissions from the Theatre's owner based on the annual volume of
rental fees paid.

3) The company is obligated under three leases with an affiliate. During
1996 and 1997, the combined rent for these three leases was $92,700 each
year.

4) The company is obligated under a one year lease for the NEXT, Inc.
premises for rent payments of $53,750 through December 31, 1998.

Other Commitments

The Company is obligated under a ten-year consulting agreement with the
former owner of a concert promotion business which was acquired in 1992. The
consulting agreement requires scheduled annual payments totaling of $828,000
over the next four years.

The Company is obligated under a consulting agreement with a member
requiring annual payments of $100,000 renewable annually.

7. PROFIT SHARING PLANS

The Company maintains 401(k) profit sharing plans covering eligible
employees who meet certain age and length of service requirements. Employees
may elect voluntary salary reductions; company contributions are made at the
discretion of the managing member. The Company did not make any matching
contributions during the years ended December 31, 1996 and 1997.

8. LITIGATION

Great Woods, Inc. is a defendant in several lawsuits that management
believes are without merit. In the event of an adverse judgment, management
believes its insurance coverage is sufficient to cover any potential losses.

9. EMPLOYMENT AGREEMENTS

Two employees have employment agreements pursuant to which they may
received contingent consideration upon the occurrence of specified events.
One of the employees is entitled to 0.6% of the

F-165
<PAGE>
BLACKSTONE ENTERTAINMENT LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

net proceeds from the sale, refinancing or other disposition of the Company
or its ownership interests. The other is entitled to 5% of the defined after
tax proceeds from the sale of Great Woods , Inc. less certain defined
contingent consideration paid prior to the date of sale. The Company is
obligated under an informal employment arrangement with the General Manager
of the NEXT, Inc. which provides for a base salary of $150,000 in addition to
a bonus based on performance. The arrangement is renewable annually.

In connection with employment agreements, certain employees were paid
$610,000 in 1997 in connection with the sale of membership interests by the
principal owner to the Company. Such amount was recorded as a charge to
earnings in 1997.

10. SUBSEQUENT EVENT

On April 29, 1998 the members of the Company entered into an agreement
with SFX Entertainment, Inc. ("SFX") whereby SFX will acquire certain assets
of the Company for a total purchase price of approximately $90.0 million,
including the repayment of $10.0 million in debt. SFX, may at its option, pay
up to $16.0 million or the purchase price in 531,782 shares of SFX's Class A
Common Stock. The purchase price will be increased or decreased, as
applicable, to the extent that the Company's Net Working Capital (as defined
in the acquisition agreement) is positive or negative at the closing. The
Company has received a $100,000 non-refundable deposit in connection with the
proposed sale.

F-166
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each
of such Underwriters for whom Goldman, Sachs & Co. and Lehman Brothers Inc.
are acting as representatives, has severally agreed to purchase from the
Company, the respective number of shares of Class A Common Stock set forth
opposite its name below:

<TABLE>
<CAPTION>
NUMBER
OF SHARES
OF CLASS A
UNDERWRITERS COMMON STOCK
- ------------------------------------- ----------------
<S> <C>
Goldman, Sachs & Co. .................
Lehman Brothers Inc. .................
Bear, Stearns & Co. Inc. .............
Cowen & Company.......................
Morgan Stanley & Co. Incorporated.....
Prudential Securities Incorporated ..
----------------
Total...............................
================
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.

The Underwriters propose to offer the shares of Class A Common Stock in
part directly to the public at the public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share
to certain brokers and dealers. After the shares of Class A Common Stock are
released for sale to the public, the offering price and other selling terms
may from time to time be varied by the representatives.

The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of
additional shares of Class A Common Stock to cover over-allotments, if any.
If the Underwriters exercise their over-allotment option, the Underwriters
have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
shares of Class A Common Stock offered.

The Company and certain of its directors and executive officers have
agreed that, such officers and directors will not, without the prior written
consent of Goldman, Sachs & Co., during the period commencing on the date
hereof and ending 180 days after the date of this Prospectus, (i) offer,
pledge, sell, or otherwise transfer or dispose of, directly or indirectly,
any shares of the Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or any right to acquire Common
Stock, or (ii) enter into any swap or similar agreement that transfers, in
whole or in part, the economic risk of ownership of the Common Stock. The
foregoing provisions shall not apply to (i) exercise of options or warrants,
or (ii) transfers, without consideration, of the Common Stock or any
securities convertible into, or exercisable or exchangeable for Common Stock
to family members or to one or more trusts established for the benefit of one
or more family members, provided that the transferee executes and delivers to
Goldman, Sachs & Co., an agreement whereby the transferee agrees to be bound
by all of the foregoing terms and provisions. Goldman, Sachs & Co. in its
sole discretion and at any time without notice, may release all or any
portion of the securities subject to the Lock-Up Agreements or may waive the
covenants contained in the Underwriting Agreement. Any such decision to
release securities would likely be based upon individual stockholder
circumstances, prevailing market conditions and other relevant factors. Any
such release could have a material adverse effect upon the price of the Class
A Common Stock. Upon the expiration or termination of the Lock-Up Agreements,
the shares held by affiliates will be eligible for sale subject to compliance
with the provisions of Rule 144 or pursuant to an effective registration
statement filed with the Securities and Exchange Commission.

In connection with the Offering, the Underwriters may purchase and sell
the Class A Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions,

U-1
<PAGE>
"passive" market making and purchases to cover syndicate short positions
created in connection with the Offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a
decline in the market price of the Class A Common Stock; and syndicate short
positions involve the sale by the Underwriters of a greater number of Class A
Common Stock than they are required to purchase from the Company in the
Offering. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect
of the securities sold in the Offering for their account may be reclaimed by
the syndicate if such Class A Common Stock are repurchased by the syndicate
in stabilizing or covering transactions. These activities may stabilize,
maintain or otherwise affect the market price of the Class A Common Stock,
which may be higher than the price that might otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any time.
These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.

As permitted by Rule 103 under the Exchange Act, certain Underwriters (and
selling group members, if any) that are market makers ("passive market
makers") in the Class A Common Stock may make bids for or purchases of the
Class A Common Stock in the Nasdaq National Market until such time, if any,
when a stabilizing bid for such securities has been made. Rule 103 generally
provides that (1) a passive market maker's net daily purchases of the Class A
Common Stock may not exceed 30% of its average daily trading volume in such
securities for the two full consecutive calendar months (or any 60
consecutive days ending within the 10 days) immediately preceding the filing
date of the registration statement of which this Prospectus forms a part, (2)
a passive market maker may not effect transactions or display bids for the
Class A Common Stock at a price that exceeds the highest independent bid for
the Class A Common Stock by persons who are not passive market makers and (3)
bids made by passive market makers must be identified as such.

Certain of the Underwriters or their affiliates have from time to time
provided investment banking and financial advisory services to the Company and
its affiliates in the ordinary course of business, for which they have received
customary fees, and they may continue to provide such services to the Company
and its affiliates in the future. In addition, affiliates of certain of the
Underwriters are lenders to the Company under the Credit Agreement.

The Class A Common Stock is listed for quotation on the Nasdaq National
Market under the symbol "SFXE."

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.

U-2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Prospectus Summary...................... 2
Risk Factors............................ 16
Use of Proceeds......................... 29
Price Range of Class A Common Stock ... 30
Dividend Policy......................... 30
Capitalization.......................... 31
Selected Consolidated Financial Data of
the Company............................ 32
Unaudited Pro Forma Condensed Combined
Financial Statements................... 34
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 59
Overview of the Live Entertainment
Industry............................... 76
Business................................ 79
Agreements Related to the Pending
Acquisitions .......................... 96
Management.............................. 102
Principal Stockholders ................. 109
Certain Relationships and Related
Transactions........................... 111
Description of Capital Stock............ 116
Description of Indebtedness ............ 118
Shares Eligible for Future Sale ....... 122
Legal Matters........................... 123
Experts ................................ 123
Additional Information.................. 124
Index to Financial Statements .......... F-1
Underwriting ........................... U-1
</TABLE>

7,000,000 SHARES

[SFX ENTERTAINMENT LOGO]

CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)

PROSPECTUS

GOLDMAN, SACHS & CO.

LEHMAN BROTHERS

BEAR, STEARNS & CO. INC.

COWEN & COMPANY

MORGAN STANLEY DEAN WITTER

PRUDENTIAL SECURITIES INCORPORATED

REPRESENTATIVES OF THE UNDERWRITERS

<PAGE>
PART II

ITEM 13. OTHER EXPENSES OF ISSUANCE AND SPIN-OFF

The following table sets forth the various expenses in connection with the
distribution of the securities being registered. All amounts shown are
estimates except for the SEC registration fee and the Nasdaq listing fee.

<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee..................... $ 70,185
Nasdaq National Market Listing Fees ..... 17,500
NASD Fee................................. 25,000
Transfer Agent and Registrar Fees ....... 20,000
Accounting Fees and Expenses............. 400,000
Legal Fees and Expenses.................. 1,000,000
Blue Sky Fees and Expenses............... 10,000
Printing, Engraving and Mailing
Expenses................................ 650,000
Miscellaneous............................ 307,315
-----------
TOTAL.................................... $2,500,000
===========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the DGCL empowers a Delaware corporation to indemnify any
person who is, or is threatened to be made, a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was an officer
or director of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise. The indemnity may include expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with the action, suit or
proceeding, provided that he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Where an officer or
director is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which he actually and reasonably incurred in connection therewith.

The Company's Certificate of Incorporation (the "Company Certificate")
provides that no director of the Company will be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty
as a director, except for liability:

o for any breach of the director's duty of loyalty to the Company or its
stockholders;

o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

o under Section 174 of the DGCL; or

o for any transaction from which the director derived an improper
personal benefit.

In addition to the circumstances in which a director of the Company is not
personally liable as set forth above, no director will be liable to the
Company or its stockholders to such further extent as permitted by any law
enacted after the date of the Company Certificate, including any amendment to
the DGCL.

The Company Certificate requires the Company to indemnify any person who
was, is, or is threatened to be made a party to any action, suit or
proceeding, by reason of the fact that he (a) is or was a director or officer
of the Company or (b) is or was serving at the request of the Company as a
director, officer, partner, venturer, proprietor, trustee, employee, agent,
or similar functionary of another corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan, or other enterprise. This
indemnification is to be to the fullest extent permitted by the DGCL. The
right to

II-1
<PAGE>
indemnification will be a contract right and, as such, will run to the
benefit of any director or officer who is elected and accepts the position of
director or officer of the Company or elects to continue to serve as a
director or officer of the Company while this provision of the Company
Certificate is in effect. The right to indemnification includes the right to
be paid by the Company for expenses incurred in defending any such action,
suit or proceeding in advance of its final disposition to the maximum extent
permitted under the DGCL. If a claim for indemnification or advancement of
expenses is not paid in full by the Company within 60 days after a written
claim has been received by the Company, the claimant may, at any time
thereafter, bring suit against the Company to recover the unpaid amount of
the claim and, if successful in whole or in part, expenses of prosecuting his
claim. It will be a defense to any such action that the requested
indemnification or advancement of costs of defense are not permitted under
the DGCL, but the burden of proving this defense will be on the Company. The
rights described above do not exclude any other right that any person may
have or acquire under any statute, by-law, resolution of stockholders or
directors, agreement or otherwise.

The by-laws of the Company require the Company to indemnify its officers,
directors, employees and agents to the full extent permitted by the DGCL. The
by-laws also require the Company to pay expenses incurred by a director in
defending a civil or criminal action, suit or proceeding by reason of the
fact that he is/was a director (or was serving at the Company's request as a
director or officer of another corporation) in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking
by or on behalf of the director to repay the advance if it ultimately is
determined that the director is not entitled to be indemnified by the Company
as authorized by relevant sections of the DGCL. The indemnification and
advancement of expenses provided in the by-laws are not to be deemed
exclusive of any other rights provided by any agreement, vote of stockholders
or disinterested directors or otherwise.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On February 11, 1998, the Company sold $350.0 million in aggregate
principal amount of its 9 1/8% Senior Subordinated Notes due 2008. Lehman
Brothers, Goldman Sachs, & Co., BNY Capital Markets, Inc. and ING Barings
(the "Initial Purchasers") were the purchasers of the Notes and resold the
Notes (i) to certain "qualified institutional buyers," as defined in Rule
144A of the Securities Act, and (ii) outside the United States to certain
persons in reliance upon Regulation S promulgated under the Securities Act.
The aggregate cash offering price of the Notes was $350.0 million and the
aggregate discounts and commissions related to the sale were $10.5 million.
The Company relied upon an exemption from registration under Section 4(2) of
the Securities Act as a transaction not involving a public offering. The
Company has agreed to register the Notes (or a new series of securities
identical in all respects to the Notes) under the Securities Act within a
certain time period.

On February 25, 1998, the Company consummated its acquisition of PACE. In
connection with such acquisition, the Company issued to the sellers of PACE
1.5 million shares of Class A Common Stock upon consummation of the Spin-Off.

On February 27, 1998, the Company consummated its acquisition of
Contemporary. In connection with such acquisition, the Company issued to the
sellers of Contemporary shares of the Company's series A redeemable
convertible preferred stock which automatically converted into 1,402,850
shares of Class A Common Stock upon consummation of the Spin-Off.

On February 24, 1998, the Company consummated its acquisition of BGP. In
connection with such acquisition, the Company issued to the sellers of BGP
options to purchase an aggregate of 562,640 shares of Class A Common Stock
upon consummation of the Spin-Off.

On February 27, 1998, the Company consummated its acquisition of Network.
In connection with such acquisition, the Company issued to the sellers of
Network 750,188 shares of Class A Common Stock upon consummation of the
Spin-Off.

On May 1, 1998, upon the consummation of the Spin-Off, the Company issued
526,566 shares of Class A Common Stock to the holders of certain options and
SAR's issued by SFX Broadcasting.

In May 1998, the Company sold 190,000 shares of Class A Common Stock and
650,000 shares of Class B Common Stock to certain executive officers for
a purchase price of $2.00 per share.

II-2
<PAGE>

The sales of securities to the sellers of PACE, Contemporary, BGP and
Network and the issuance of shares to the holders of options and SARs were
private transactions not involving a public offering and were exempt from the
registration provisions of the Securities Act pursuant to Section 4(2)
thereof. Each of these sales was made without the use of an underwriter.

In addition, the Company has agreed to issue 1,531,782 shares of Class A
Common Stock in connection with the acquisition of FAME and Don Law.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -------------------------------------------------------------------------------------------------
<S> <C>
+1.1 Form of Underwriting Agreement
*2.1 Distribution Agreement among the Company, SFX Broadcasting and SFX Buyer
*2.2 Tax Sharing Agreement among the Company, SFX Broadcasting and SFX Buyer
*2.3 Employee Benefits Agreement among the Company, SFX Broadcasting and SFX Buyer
*3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 Bylaws of the Company (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
4.1 Indenture relating to the 9 1/8% Senior Subordinated Notes due 2008 (incorporated by reference to
Report on Form 8-K (File No. 333-43287) filed with the SEC on March 11, 1998)
+5.1 Opinion of Baker & McKenzie
10.1 Stock Purchase Agreement, dated as of October 11, 1996, by and among Delsener/Slater Enterprises,
Ltd., Beach Concerts, Inc., Connecticut Concerts Incorporated, Broadway Concerts, Inc., Arden
Productions, Ltd., In-house Tickets, Inc., Exit 116 Revisited, Inc., Ron Delsener, Mitch Slater
and SFX Broadcasting, Inc. (incorporated by reference to Registration Statement on Form S-1 (File
No. 333-43287) filed with the SEC)
10.2 License Agreement, dated January 29, 1990, by and between the State of New York and Beach
Concerts, Inc. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.3 Amendment to License Agreement of January 29, 1990, dated as of April 11, 1997, by and between
the State of New York and Beach Concerts, Inc. (incorporated by reference to Registration
Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.4 Lease Agreement, Easement Agreement and Declaration of Restrictive Covenants dated as of May 1,
1996, by and between New Jersey Highway Authority and GSAC Partners (incorporated by reference to
Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.5 Partnership Agreement, dated as of November 18, 1996, by and between Pavilion Partners Exit 116
Revisited, Inc. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.6 Asset Purchase and Sale Agreement, dated June 23, 1997, by and among Sunshine Concerts, L.L.C.,
SFX Broadcasting, Inc., Sunshine Promotions, Inc., P. David Lucas and Steven P. Sybesma
(incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed with
the SEC)

II-3
<PAGE>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -------------------------------------------------------------------------------------------------
10.7 Asset Purchase and Sale Agreement, dated as of June 23, 1997, by and among Suntex Acquisition,
L.P., SFX Broadcasting, Inc., Suntex, Inc., P. David Lucas, Steven P. Sybesma, Greg Buttrey and
John Valant (incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287)
filed with the SEC)
10.8 Asset Purchase and Sale Agreement, dated as of June 23, 1997, by and among Deer Creek
Amphitheater Concerts, L.P., SFX Broadcasting, Inc., Deer Creek Partners, L.P., Sand Creek
Partners, L.P., Sand Creek, Inc., P. David Lucas and Steven P. Sybesma (incorporated by reference
to Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.9 Asset Purchase and Sale Agreement, dated as of June 23, 1997, by and among Murat Centre Concerts,
L.P., SFX Broadcasting, Inc., Murat Centre L.P., P. David Lucas and Steven P. Sybesma
(incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed with
the SEC)
10.10 Asset Purchase and Sale Agreement, dated June 23, 1997, by and among Polaris Amphitheater
Concerts, Inc., SFX Broadcasting, Inc., Polaris Amphitheater Limited Partnership and certain of
the partners of Polaris Amphitheater Limited Partnership (incorporated by reference to
Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.11 Asset Purchase and Sale Agreement, dated as of June 23, 1997, by and among Sunshine Design, L.P.,
SFX Broadcasting, Inc., Tourdesign, Inc., P. David Lucas and Steven P. Sybesma (incorporated by
reference to Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.12 Indenture of Lease, dated as of September 1, 1995, by and between Murat Temple Association, Inc.
and Murat Centre, L.P. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.13 Agreement of Merger, dated as of February 12, 1997, by and among SFX Broadcasting, Inc., NOC
Acquisition Corp., Cadco Acquisition Corp., QN-Acquisition Corp., Nederlander of Connecticut,
Inc., Connecticut Amphitheater Development Corporation, QN Corp., Connecticut Performing Arts,
Inc., Connecticut Performing Arts Partners and the Stockholders of Nederlander of Connecticut,
Inc., Connecticut Amphitheater Development Corporation and QN Corp. (incorporated by reference to
Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.14 Agreement of Merger, dated as of February 14, 1997, by and among SFX Broadcasting, Inc., NOC
Acquisition Corp., Cadco Acquisition Corp., QN-Acquisition Corp., Nederlander of Connecticut,
Inc., Connecticut Amphitheater Development Corporation, QN Corp., Connecticut Performing Arts,
Inc., Connecticut Performing Arts Partners and the Stockholders of Nederlander of Connecticut,
Inc., Connecticut Amphitheater Development Corporation and QN Corp. (incorporated by reference to
Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.15 Second Amendment of Agreement of Merger, dated as of March 19, 1997, by and among SFX
Broadcasting, Inc., NOC Acquisition Corp., Cadco Acquisition Corp., QN-Acquisition Corp.,
Nederlander of Connecticut, Inc., Connecticut Amphitheater Development Corporation, QN Corp.,
Connecticut Performing Arts, Inc., Connecticut Performing Arts Partners and the Stockholders of
Nederlander of Connecticut, Inc., Connecticut Amphitheater Development Corporation and QN Corp.
(incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed with
the SEC)

II-4
<PAGE>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -------------------------------------------------------------------------------------------------
10.16 Lease Agreement, dated as of September 14, 1994, by and between The City of Hartford and
Connecticut Performing Arts Partners (incorporated by reference to Registration Statement on Form
S-1 (File No. 333-43287) filed with the SEC)
10.17 Agreement and Plan of Merger and Asset Purchase Agreement, dated as of December 10, 1997, by and
among SFX Entertainment, Inc., Contemporary Investments Corporation, Contemporary Investments of
Kansas, Inc., Continental Entertainment Associates, Inc., Capital Tickets, LP, Dialtix, Inc.,
Contemporary International Productions Corporation, Steven F. Schankman Living Trust, dated
10/22/82, Irving P. Zuckerman Living Trust, dated 11/24/81, Steven F. Schankman and Irving P.
Zuckerman (incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287)
filed with the SEC)
10.18 Lease Agreement, dated December 13, 1992, by and between Wyandotte County, Kansas and Wyandotte
County Parks Board and Sandstone Amphitheater Joint Venture (incorporated by reference to
Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.19 Stock Purchase Agreement, dated as of December 11, 1997, among each of the shareholders of BGP
Presents, Inc. and BGP Acquisitions, LLC (incorporated by reference to Registration Statement on
Form S-1 (File No. 333-43287) filed with the SEC)
10.20 Amphitheater Lease and Agreement, dated June 20, 1986, between the City of Mountain View, the
Mountain View Shoreline Regional Park Community and Shoreline Amphitheater Partners (incorporated
by reference to Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.21 Stock and Asset Purchase Agreement, dated December 2, 1997, between and among SFX Network Group,
L.L.C. and SFX Entertainment, Inc., and Elias N. Bird, individually and as Trustee under the Bird
Family Trust u/d/o 11/18/92, Gary F. Bird, individually and as Trustee under the Gary F. Bird
Corporation Trust u/d/o 2/4/94, Stephen R. Smith, individually and as Trustee under the Smith
Family Trust u/d/o 7/17/89, June E. Brody, Steven A. Saslow and The Network 40, Inc.
(incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed with
the SEC)
10.22 Purchase and Sale Agreement, dated as of December 15, 1997, by and among Alex Cooley, S. Stephen
Selig, III, Peter Conlon, Southern Promotions, Inc., High Cotton, Inc., Cooley and Conlon
Management, Inc., Buckhead Promotions, Inc., Northern Exposure, Inc., Pure Cotton, Inc.,
Interfest, Inc., Concert/Southern Chastain Promotions Joint Venture, Roxy Ventures Joint Venture
and SFX Concerts, Inc. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.23 Stock Purchase Agreement, dated as of December 12, 1997 by and between Pace Entertainment
Corporation and SFX Entertainment, Inc. (incorporated by reference to Registration Statement on
Form S-1 (File No. 333-43287) filed with the SEC)
10.24 Agreement and Plan of Merger, dated as of August 24, 1997, as amended on February 9, 1998, among
SFX Buyer, SFX Buyer Sub and SFX (composite version) (incorporated by reference to Report on Form
8-K (File No. 333-43287) filed with the SEC on March 11, 1998)
10.25 Reserved
10.26 Non-Negotiable Promissory Note, dated as of June 23, 1997, between SFX (as maker) and Sunshine
Promotions, Inc. (as payee)(incorporated by reference to Registration Statement on Form S-1 (File
No. 333-43287) filed with the SEC)

II-5
<PAGE>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -------------------------------------------------------------------------------------------------
10.27 Partnership Agreement, dated as of April 1, 1994, by and among SM/PACE, Inc., YM Corp., The
Westside Amphitheater Corporation, Charlotte Amphitheater Corporation and Amphitheater
Entertainment Partnership (incorporated by reference to Registration Statement on Form S-1 (File
No. 333-43287) filed with the SEC)
10.28 Purchase Agreement, dated as of December 19, 1997, by and among SM/PACE, Inc., PACE Entertainment
Corporation, Charlotte Amphitheater Corporation, The Westside Amphitheater Corporation and Viacom
Inc. (incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed
with the SEC)
10.29 Letter Purchase Agreement, dated as of December 22, 1997, by and among SM/PACE, Inc., YM Corp.
and PACE Entertainment Corporation (incorporated by reference to Registration Statement on Form
S-1 (File No. 333-43287) filed with the SEC)
10.30 Extended Events Management Agreement, dated as of November 21, 1994, by and between The Woodlands
Center for the Performing Arts and Pavilion Partners (incorporated by reference to Registration
Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.31 Operator Lease Agreement, dated as of September 26, 1989, by and between the City of Phoenix and
The Westside Amphitheatre Corp. (incorporated by reference to Registration Statement on Form S-1
(File No. 333-43287) filed with the SEC)
10.32 Addendum to Operator Lease Agreement, dated as of September 26, 1989, by and between the City of
Phoenix and Pavilion Partners (incorporated by reference to Registration Statement on Form S-1
(File No. 333-43287) filed with the SEC)
10.33 Memorandum of Lease, dated as of April 1, 1994, by and between the City of Phoenix and Pavilion
Partners (incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287)
filed with the SEC)
10.34 Lease Agreement, dated as of February 9, 1994, by and between New Jersey Development Authority
and Sony Music/Pace Partnership (incorporated by reference to Registration Statement on Form S-1
(File No. 333-43287) filed with the SEC)
10.35 First Amendment to Lease Agreement, dated as of March 11, 1994, by and between New Jersey
Economic Development and Sony Music/Pace Partnership (incorporated by reference to Registration
Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.36 Second Amendment to Lease Agreement, dated as of June 7, 1994, by and between New Jersey Economic
Development Authority and Pavilion Partners (incorporated by reference to Registration Statement
on Form S-1 (File No. 333-43287) filed with the SEC)
10.37 Third Amendment to Lease Agreement, dated as of March 15, 1995, by and between New Jersey
Economic Development Authority and Pavilion Partners (incorporated by reference to Registration
Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.38 Fourth Amendment to Lease Agreement, dated as of March 11, 1997, by and between the New Jersey
Economic Development Authority and Pavilion Partners (incorporated by reference to Registration
Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.39 Three Way Agreement, dated as of April 28, 1995, by and between New Jersey Economic Development
Authority, South Jersey Performing Arts Center, Inc. and Pavilion Partners (incorporated by
reference to Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)

II-6
<PAGE>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -------------------------------------------------------------------------------------------------
10.40 Lease Agreement, dated as of December 1, 1989, between Crossroads Properties, Incorporated and
Pace Entertainment Group, Inc. (incorporated by reference to Registration Statement on Form S-1
(File No. 333-43287) filed with the SEC)
10.41 Assignment of Ground Lease, dated as of April 6, 1990, by and between Pace Entertainment Group,
Inc. and YM/Pace Partnership (incorporated by reference to Registration Statement on Form S-1
(File No. 333-43287) filed with the SEC)
10.42 Partnership Agreement, dated as of July 1, 1991, by and between SM/PACE Partnership and CDC
Amphitheaters/I, Inc. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.43 First Amendment to Partnership Agreement, dated as of January 31, 1992, by and between SM/PACE
Partnership and CDC Amphitheaters/I, Inc. (incorporated by reference to Registration Statement on
Form S-1 (File No. 333-43287) filed with the SEC)
10.44 Lease Agreement, dated as of December 1, 1990, by and between the City of Raleigh, North Carolina
and Sony Music/Pace Partnership (incorporated by reference to Registration Statement on Form S-1
(File No. 333-43287) filed with the SEC)
10.45 Amendment to Lease Agreement, dated as of November 15, 1995, by and between Walnut Creek
Amphitheater Partnership and City of Raleigh, North Carolina (incorporated by reference to
Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.46 Mutual Recognition Agreement, dated as of December 1, 1990, by and among Walnut Creek
Amphitheater Financing Assistance Corporation, First Union National Bank of North Carolina, City
of Raleigh, North Carolina and Sony Music/Pace Partnership (incorporated by reference to
Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.47 Mutual Recognition Agreement, dated as of December 1, 1990, by and among Walnut Creek
Amphitheater Financing Assistance Corporation, First Union National Bank of North Carolina, City
of Raleigh, North Carolina and Sony Music/Pace Partnership (incorporated by reference to
Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.48 Partnership Agreement, dated as of February 28, 1986, by and between Belz Investment Company,
Inc., Martin S. Belz and Pace Productions, Inc. (incorporated by reference to Registration
Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.49 First Amendment to Partnership Agreement, dated as of June 15, 1986, by and among Belz Investment
Company, Martin S. Belz, Belz-Starwood, Inc. and Pace Productions, Inc. (incorporated by
reference to Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.50 Partnership Agreement, dated as of May 15, 1996, by and between Pavilion Partners and CDC/SMT,
Inc. (incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed
with the SEC)
10.51 Lease Agreement, Easement Agreement and Declaration of Restrictive Covenants, dated as of January
4, 1995, by and between South Florida Fair and Pam Beach County Expositions, Inc. and Pavilion
Partners (incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287)
filed with the SEC)
10.52 First Amendment to Lease Agreement, dated as of June 5, 1995, by and between South Florida Fair
and Pam Beach County Expositions, Inc. and Pavilion Partners (incorporated by reference to
Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)

II-7
<PAGE>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -------------------------------------------------------------------------------------------------
10.53 Partnership Agreement, dated as of April 4, 1997, by and between Pavilion Partners and Irvine
Meadows Amphitheater (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.54 Amended and Restated Agreement, dated as of October 1, 1991, by and between The Irvine Company
and Irvine Meadows (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.55 Concession Lease, dated as of October 19, 1992, by and between the County of San Bernardino and
Amphitheater Entertainment Corporation (incorporated by reference to Registration Statement on
Form S-1 (File No. 333-43287) filed with the SEC)
10.56 Partnership Formation Agreement, dated as of January 22, 1988, by and among MCA Concerts II, Inc.
and Pace Entertainment Group, Inc. (incorporated by reference to Registration Statement on Form
S-1 (File No. 333-43287) filed with the SEC)
10.57 Lease and Use Agreement, dated as of December 9, 1987, by and between City of Dallas and Pace
Entertainment Group, Inc. (incorporated by reference to Registration Statement on Form S-1 (File
No. 333-43287) filed with the SEC)
10.58 Agreement, dated as of October 10, 1988, by and between the City of Atlanta and MCA Concerts,
Inc. (incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed
with the SEC)
10.59 Amended Indenture of Lease, February 2, 1984, by and between the City of Atlanta and Filmworks
U.S.A., Inc. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.60 Amendment to Lease Agreement, dated as of October 10, 1988, between the City of Atlanta, Georgia
and Filmworks U.S.A., Inc. (incorporated by reference to Registration Statement on Form S-1 (File
No. 333-43287) filed with the SEC)
10.61 Agreement Regarding Sublease, dated as of January 20, 1988, by and between Filmworks U.S.A., Inc.
and MCA Concerts, Inc. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.62 First Amendment to Sublease, dated as of January 21, 1988, between Filmworks U.S.A., Inc. and MCA
Concerts, Inc. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.63 Second Amendment to Sublease, dated as of April 19, 1988, between Filmworks U.S.A., Inc. and MCA
Concerts, Inc. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.64 Third Amendment to Sublease, dated as of September 15, 1988, between Filmworks U.S.A., Inc. and
MCA Concerts, Inc. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.65 Memorandum of Agreement, dated as of October 10, 1988, by and between the City of Atlanta and MCA
Concerts, Inc. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.66 Assignment of Sublease, dated as of June 15, 1989, by Filmworks U.S.A., Inc. and MCA Concerts,
Inc. (incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed
with the SEC)

II-8
<PAGE>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -------------------------------------------------------------------------------------------------
10.67 Assignment of Sublease, dated as of June 23, 1989, by Filmworks U.S.A., Inc. and MCA Concerts,
Inc. (incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed
with the SEC)
10.68 Assignment of Agreement, dated as of June 15, 1989, by the City of Atlanta and MCA Concerts, Inc.
(incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed with
the SEC)
10.69 Assignment of Agreement, dated as of June 23, 1989, by the City of Atlanta and MCA Concerts, Inc.
(incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed with
the SEC)
10.70 Lease, dated as of June, 1997, by and between 500 Texas Avenue Limited Partnership and Bayou
Place Performance Hall General Partnership (incorporated by reference to Registration Statement
on Form S-1 (File No. 333-43287) filed with the SEC)
10.71 Master Licensed User Agreement, dated as of February 1, 1996, by and between Ticketmaster
Ticketing Co., Inc. and Pace Entertainment Corporation (incorporated by reference to Registration
Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.72 Joint Venture Agreement, dated as of July, 1995 by and between American Broadway, Inc. and Gentry
& Associates, Inc. (incorporated by reference to Registration Statement on Form S-1 (File No.
333-43287) filed with the SEC)
10.73 Amended and Restated Employment Agreement, dated as of December 12, 1997, by and between SFX
Entertainment, Inc. and Brian E. Becker (incorporated by reference to Registration Statement on
Form S-1 (File No. 333-43287) filed with the SEC)
10.74 Second Amended and Restated Partnership Agreement, dated as of April 1, 1994 by and between The
Westside Amphitheatre Corporation, San Bernardino Amphitheater Corporation and YM Corp.
(incorporated by reference to Registration Statement on Form S-1 (File No. 333-43287) filed with
the SEC)
10.75 Employment Agreement, dated as of January 2, 1997, between Delsener/Slater Enterprises, Inc., SFX
Broadcasting, Inc. and Ron Delsener (incorporated by reference to Registration Statement on Form
S-1 (File No. 333-43287) filed with the SEC)
10.76 Employment Agreement, dated as of January 2, 1997, between Delsener/Slater Enterprises, Inc., SFX
Broadcasting, Inc. and Mitch Slater (incorporated by reference to Registration Statement on Form
S-1 (File No. 333-43287) filed with the SEC)
10.77 1998 Stock Option and Restricted Stock Plan of the Company (incorporated by reference to
Registration Statement on Form S-1 (File No. 333-43287) filed with the SEC)
10.78 Reserved
10.79 Credit and Guarantee Agreement, dated as of February 26, 1998, by and among SFX Entertainment,
the Subsidiary Guarantors party thereto, the Lenders party thereto, Goldman Sachs Partners, L.P.,
as co-documentation agent, Lehman Commercial Paper, Inc., as co-documentation agent and the Bank
of New York, as administrative agent (incorporated by reference to Report on Form 8-K (File No.
333-43287) filed with the SEC on March 11, 1998)
10.80 Purchase Agreement, dated February 5, 1998, relating to the 9 1/8% Senior Subordinated Notes due
2008 of SFX Entertainment, Inc., by and among SFX Entertainment, Inc., Lehman Brothers Inc.,
Sachs & Co., BNY Capital Markets, Inc. and ING Barings (incorporated by reference to Report on
Form 8-K (File No. 333-43287) filed with the SEC on March 11, 1998)

II-9
<PAGE>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -------------------------------------------------------------------------------------------------
10.81 Amendment No. 2 to Agreement and Plan of Merger among SBI Holdings Corporation, SBI Radio
Acquisition Corporation and SFX Broadcasting, Inc., dated March 9, 1998 (incorporated by
reference to Annual Report on Form 10-K (File No. 333-43287) filed with the SEC on March 18,
1998)
*10.82 Stock Purchase Agreement, dated as of April 29, 1998, among SFX Sports Group, Inc., SFX
Entertainment, Inc. and David Falk, Curtis Polk and G. Michael Higgins
*10.83 Asset Purchase Agreement, dated April 29, 1998, by and among Blackstone Entertainment LLC, its
members, DLC Acquisition Corp., and SFX Entertainment, Inc.
*10.84 Purchase and Sale Agreement, dated April 22, 1998, by and among Oakdale Concerts, LLC, Oakdale
Development Limited Partnership and Oakdale Theater Concerts, Inc.
*10.85 Stock Purchase and Redemption Agreement, dated May 1, 1998, among Event Merchandising, Inc., its
stockholders and EMI Acquisition Sub, Inc.
*10.86 Letter of Intent, dated March 6, 1998, among SFX Entertainment, Inc., TBA Entertainment
Corporation, Brian F. Murphy, Randy Brogna and Matt Curto
*10.87 Letter of intent, dated March 9, 1998, among SFX Entertainment Inc., TBA Entertainment
Corporation, Robert E. Geddes, Thomas Miserendino and Brian E. Murphy
21.1 Subsidiaries of the Company (incorporated by reference to Annual Report on Form 10-K
(File No. 333-43287) filed with the SEC on March 18, 1998)
+23.1 Consent of Baker & McKenzie (included in Exhibit 5.1)
*23.2 Consent of Ernst & Young LLP
*23.3 Consents of Arthur Anderson LLP
*23.4 Consent of Price Waterhouse LLP
24.1 Power of Attorney (included on Page II-12)
*99.1 Consent of David Falk
</TABLE>

- ------------
* Filed herewith.
+ To be filed by amendent.
(b) Financial Schedules.

None.

II-10
<PAGE>
ITEM 17. UNDERTAKINGS

(1) The undersigned registrant hereby undertakes:

(a) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(b) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

II-11
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on May , 1998.

SFX ENTERTAINMENT, INC.
By: /s/ Howard J. Tytel
-------------------------------
Howard J. Tytel
Executive Vice President,
General Counsel
and Secretary

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- --------------------------------- ---------------
<S> <C> <C>

--------------------------- Executive Chairman, Member of May 4, 1998
Robert F.X. Sillerman the Office of Chairman and Director
(principal executive officer)

*
--------------------------- President, Chief Executive May 4, 1998
Michael G. Ferrel Officer, Member of the
Officer of the Chairman
and Director

* Executive Vice President May 4, 1998
--------------------------- Member of the Office of
Brain Becker the Chiarman and Director

* Executive Vice Presidnet, May 4, 1998
--------------------------- General Counsel
Secretary and Director

/s/ Howard J. Tytel Executive Vice President, May 4, 1998
--------------------------- General Counsel,
Howard J. Tytel Secretary and Director

* Chief Financial Officer, May 4, 1998
--------------------------- Vice President and
Thomas P. Benson Director (principal financial
and accounting officer)

* Executive Vice President May 4, 1998
--------------------------- and Director

* Vice President, Associate May 4, 1998
--------------------------- General Counsel and
D. Geoffrey Armstrong Director

* Vice President, Associate May 4, 1998
--------------------------- General Counsel and Director
Richard A. Liese

</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- --------------------------------- ---------------
<S> <C> <C>
* Director May 4, 1998
---------------------------
James F. O'Grady, Jr.

* Director May 4, 1998
---------------------------
Paul Kramer

* Director May 4, 1998
---------------------------
Edward F. Dugan

*By: /s/ Howard J. Tytel
---------------------------
Attorney-in-Fact
</TABLE>

II-13

<PAGE>

DISTRIBUTION AGREEMENT

DATED AS OF APRIL 20, 1998

AMONG

SFX BROADCASTING, INC.,

SFX ENTERTAINMENT, INC.

AND

SBI HOLDING CORPORATION

<PAGE>

TABLE OF CONTENTS

PAGE

ARTICLE 1

DEFINITIONS..................................................................2

Section 1.1 General....................................................2

ARTICLE 2

REORGANIZATION AND RELATED TRANSACTIONS .....................................4

Section 2.1 The Reorganization.........................................4
Section 2.2 Working Capital Adjustment.................................5
Section 2.3 SFX Approval...............................................8

ARTICLE 3

ASSUMPTION AND RETENTION OF LIABILITIES......................................8

Section 3.1 Assumed Liabilities........................................8
Section 3.2 Retained Liabilities.......................................8
Section 3.3 Construction of Agreements.................................8

ARTICLE 4

THE DISTRIBUTION.............................................................9

Section 4.1 The Distribution...........................................9
Section 4.2 Fractional Shares..........................................9
Section 4.3 SFX Employees.............................................10
Section 4.4 SFX Board Action..........................................10
Section 4.5 Registration and Listing; SEC Filings.....................10
Section 4.6 Third Party Consents......................................11
Section 4.7 Waivers...................................................11
Section 4.8 Termination of Merger Agreement...........................11

ARTICLE 5

SURVIVAL; MUTUAL RELEASE AND INDEMNIFICATION ...............................11

Section 5.1 Survival and Indemnification..............................11
Section 5.2 Mutual Release, Etc.......................................12
Section 5.3 Indemnification...........................................12
Section 5.4 Procedure for Indemnification.............................13

<PAGE>

ARTICLE 6

TAX MATTERS.................................................................14
Section 6.1 Tax Sharing Agreements....................................14
Section 6.2 Employee Benefits Agreement...............................15

ARTICLE 7

CERTAIN ADDITIONAL MATTERS .................................................15

Section 7.1 Conveyancing and Assumption Instruments...................15
Section 7.2 No Representations or Warranties..........................15
Section 7.3 Further Assurances; Subsequent Transfers..................15
Section 7.4 Sales and Transfer Taxes..................................16
Section 7.5 Change of Name............................................16

ARTICLE 8

ACCESS TO INFORMATION AND SERVICES..........................................16

Section 8.1 Provision of Corporate Records............................16
Section 8.2 Access to Information.....................................17
Section 8.3 Retention of Records......................................17
Section 8.4 Confidentiality...........................................17
Section 8.5 Privileged Matters........................................17

ARTICLE 9

INSURANCE...................................................................18

Section 9.1 General...................................................18
Section 9.2 Certain Insured Claims....................................18

ARTICLE 10

CONDITIONS..................................................................19
Section 10.1 Conditions................................................19

ARTICLE 11

MEDIATION...................................................................19

Section 11.1 Mediation and Binding Arbitration.........................19
Section 11.2 Initiation................................................19
Section 11.3 Submission to Mediation...................................20
Section 11.4 Selection of Mediator.....................................20
Section 11.5 Mediation.................................................20
Section 11.6 Selection of Arbitrator...................................20
Section 11.7 Cost of Arbitration.......................................20

<PAGE>

ARTICLE 12

MISCELLANEOUS...............................................................20

Section 12.1 Complete Agreement.........................................20
Section 12.2 Governing Law..............................................20
Section 12.3 Notices....................................................20
Section 12.4 Amendment and Modification.................................21
Section 12.5 Termination................................................22
Section 12.6 Successor and Assigns......................................22
Section 12.7 No Third Party Beneficiaries...............................22
Section 12.8 Counterparts...............................................22
Section 12.9 Interpretation.............................................22
Section 12.10 Annexes, Etc...............................................22
Section 12.11 Legal Enforceability.......................................22

Annex I ASSUMED LIABILITIES.......................................I-1
Annex II TRANSFERRED ASSETS.......................................II-1

iii

<PAGE>

DISTRIBUTION AGREEMENT

DISTRIBUTION AGREEMENT, dated as of April 20, 1998, by and among SFX
Broadcasting, Inc., a Delaware corporation ("SFX"), SFX Entertainment, Inc., a
Delaware corporation and a wholly-owned subsidiary of SFX ("Entertainment"),
and, with respect to Section 12.4 only, SBI Holding Corporation, a Delaware
corporation ("Parent"). Capitalized terms used and not defined herein have the
respective meanings ascribed them in the Merger Agreement. Unless the context
requires otherwise, "SFX" refers to SFX Broadcasting, Inc. and its subsidiaries
(other than Entertainment and its subsidiaries) and "Entertainment" refers to
SFX Entertainment, Inc. and its subsidiaries.

WHEREAS, SFX has entered into that Agreement and Plan of Merger dated
as of August 24, 1997, as subsequently amended, among Parent, SBI Radio
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and SFX pursuant to which SFX will become a wholly-owned
subsidiary of Parent (the "Merger Agreement");

WHEREAS, Entertainment has, among other endeavors, been engaged in the
business of venue ownership, operation and management and the booking,
promotion and/or production of entertainment events, including, without
limitation, related merchandising, concession management and Internet-based
marketing through its wholly owned subsidiary SFX Concerts, Inc., formerly
known as Delsener/Slater Enterprises, Inc., and its Subsidiaries and Affiliates
(the "Transferred Businesses"), which Transferred Businesses are principally
outside the scope of SFX's core radio broadcasting business;

WHEREAS, the Board of Directors of SFX has determined that the
interests of SFX's stockholders would be best served by restructuring the
ownership of the Transferred Businesses and ownership of the core radio
broadcasting business prior to the Merger as contemplated by Section 5.07 of
the Merger Agreement;

WHEREAS, SFX wishes to transfer and assign to Entertainment all of the
Transferred Assets as specified in this Agreement in exchange for the
assumption by Entertainment of the Assumed Liabilities as specified in this
Agreement;

WHEREAS, Entertainment is willing to assume such Assumed Liabilities;

WHEREAS, SFX intends to distribute all of the outstanding shares of
the Class A Common Stock, par value $.01 per share, of Entertainment (the
"Entertainment Class A Common Stock") and the Class B Common Stock of
Entertainment, par value $.01 per share (the "Entertainment Class B Common
Stock" and, together with the Entertainment Class A Common Stock, the
"Entertainment Common Stock"), owned by SFX to the holders of (i) the common
stock of SFX (the "SFX Common Stock"), (ii) the 6 1/2% Series D Cumulative
Convertible Exchangeable Preferred Stock due May 31, 2007 of SFX (the "Series D
Preferred Stock"), (iii) interests in the SFX Director Deferred Stock Ownership
Plan dated as of January 1, 1997 (the "SFX Director Deferred Stock Ownership
Plan") and (iv) certain warrants of SFX, with the holders of the Class A Common
Stock, par value $.01 per share, of SFX (the "SFX Class A Common Stock"), the
Series D Preferred Stock, interests in the SFX Director Deferred Stock
Ownership Plan and certain warrants of SFX receiving Entertainment Class A
Common Stock and the holders of the Class B Common Stock, par value $.01 per
share, of SFX (the "SFX Class B Common Stock") receiving Entertainment Class B
Common Stock (such distribution hereinafter referred to as the "Distribution")
on the Distribution Date (as hereinafter defined);

<PAGE>

WHEREAS, SFX and Entertainment have determined that it is necessary
and desirable to set forth the principal corporate transactions required to
effect the Distribution and to set forth other agreements that will govern
certain other matters in connection with the Distribution; and

WHEREAS, Parent has joined as a signatory and a party to this
Agreement in order to preserve and protect its rights under the Merger
Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and intending to be legally bound
hereby, SFX and Entertainment hereby agree as follows:

ARTICLE 1

DEFINITIONS

SECTION 1.1 General. As used in this Agreement, capitalized terms
defined immediately after their use shall have the respective meanings thereby
provided and the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):

Action: any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.

Affiliate: with respect to any specified person, a person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such specified person;
provided, however, that SFX and Entertainment shall not be deemed to be
Affiliates of each other for purposes of this Agreement.

Agent: ChaseMellon Shareholder Services, LLC, the distribution agent
appointed by SFX to distribute shares of Entertainment Common Stock pursuant to
the Distribution.

Assumed Liabilities: collectively, all of the Liabilities and other
obligations of SFX listed on Annex I hereto.

Books and Records: the books and records of SFX (or true and complete
copies thereof), including all computerized books and records owned by SFX,
that relate principally to the Transferred Businesses and are necessary for
Entertainment to operate the Transferred Businesses, including, without
limitation, all such books and records relating to Employees and the
Transferred Assets, the purchase of materials, supplies and services, the sale
of products by the Transferred Businesses or dealings with customers of the
Transferred Businesses and all litigation files relating to any Action being
assumed by Entertainment as part of the Assumed Liabilities.

Code: the Internal Revenue Code of 1986, as amended.

Consent Solicitation Documents: collectively, the Consent Solicitation
Statements mailed to the holders of SFX's 12 5/8% Cumulative Exchangeable
Series E Preferred Stock and 10 3/4% Senior Subordinated Notes due 2006 on
January 7, 1998 and the Information Statement related thereto, as

<PAGE>

supplemented or amended.

Conveyancing and Assumption Instruments: collectively, the various
agreements, instruments and other documents to be entered into in order to
effect the transfer to Entertainment of Transferred Assets, and the assumption
by Entertainment of the Assumed Liabilities in the manner contemplated by this
Agreement, each of which shall be in a form reasonably satisfactory to Parent.

Distribution Date: April 27, 1998 or if the Distribution shall not
have been effected on such date, any other date as of which the Distribution
shall be effected, as determined by the SFX Board of Directors, which, in any
event, shall be a date on or prior to the Closing Date.

Distribution Employees: the employees of SFX listed or referred to on
Section 5.07(h) of the Company Disclosure Schedule to the Merger Agreement.

Employee: any Distribution Employee and any employee shown on the
records of SFX as being employed by SFX and assigned to the Transferred
Businesses as of the Distribution Date, including any laid-off Employee or any
Employee on leave of absence.

Exchange Act: the Securities Exchange Act of 1934, as amended.

Form 8-A: the registration statement on Form 8-A filed by
Entertainment with the SEC to effect the registration of the Entertainment
Class A Common Stock pursuant to the Exchange Act.

Guarantees: the guarantees provided by SFX in connection with the
following agreements: (i) Agreement and Plan of Merger and Asset Purchase
Agreement, dated as of December 10, 1997 by and among SFX Entertainment, Inc.,
Contemporary Investments Corporation, Contemporary Investments of Kansas, Inc.,
Contemporary International Productions Corporation, Steven F. Schanman Living
Trust, Irving P. Zuckerman Living Trust, Steven F. Schankman and Irving P.
Zuckerman, (ii) Stock and Asset Purchase Agreement, dated December 2, 1997, by
and among SFX Network Group, L.L.C. and SFX Entertainment, Inc., and Elias N.
Bird, individually and as Trustee under the Bird Family Trust, Gary F. Bird,
individually and as Trustee under the Gary F. Bird Corporation Trust, Stephen
R. Smith, individually and as Trustee under the Smith Family Trust, June E.
Brody, Steven A. Saslow, and The Network 40, Inc. and (iii) Stock Purchase
Agreement, dated as of December 12, 1997 by and among Pace Entertainment
Corporation and SFX Entertainment, Inc.

Indemnifiable Losses: with respect to any claim by an Indemnitee for
indemnification authorized pursuant to this Agreement, all losses, Liabilities,
claims, damages, obligations, payments, costs and expenses (including, without
limitation, the costs and expenses of any and all Actions, demands,
assessments, judgments, settlements and compromises relating thereto and
reasonable attorneys' fees and expenses in connection therewith) suffered by
such Indemnitee with respect to such claim.

Indemnifying Party: any party who is required to indemnify any other
person pursuant to this Agreement.

Indemnitee: any party who is entitled to receive indemnification from
an Indemnifying Party pursuant to this Agreement.

<PAGE>

Indemnity Payment: the amount an Indemnifying Party is required to pay
an Indemnitee pursuant to this Agreement.

Insurance Program: collectively, the series of property and casualty
policies pursuant to which various insurance carriers provide insurance
coverage to SFX (including Entertainment and its subsidiaries) in respect of
claims or occurrences relating to, without limitation, property damage,
business interruption, transit, fire, extended coverage, fiduciary, fidelity,
environmental impairment, employee crime, general liability, products'
liability, automobile liability and employer's liability. The term Insurance
Program shall not include any SFX Welfare Plan (as such term is defined in the
Employee Benefits Agreement).

Liabilities: any and all debts, liabilities and obligations, whether
or not accrued, contingent, known or unknown, or reflected on a balance sheet,
including, without limitation, those arising under any law, rule, regulation,
Action, order or consent decree of any governmental entity or any judgment of
any court of any kind or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.

Record Date: April 20, 1998 or if the Distribution is not effected on
April 27, 1998, such other date as determined by the Board of Directors of SFX
as the record date for the Distribution.

Registration Statement: the registration statement on Form S-1 (Reg.
No. 333-43287) filed by Entertainment with the SEC on December 24, 1997, as
amended, to effect the registration pursuant to the Securities Act of 1933, as
amended, of the issuance in the Distribution of Entertainment Class A Common
Stock and Class B Common Stock.

Related Agreements: the Tax Sharing Agreement and the Employee
Benefits Agreement.

Retained Liabilities: all Liabilities and obligations of SFX other
than the Assumed Liabilities.

SEC: the Securities and Exchange Commission.

Transaction Documents: collectively, the Merger Agreement and the
related documents entered into on August 24, 1997, as amended.

Transferred Assets: collectively, all of the assets and properties of
SFX identified on Annex II hereto.

ARTICLE 2

REORGANIZATION AND RELATED TRANSACTIONS

SECTION 2.1 The Reorganization. Subject to the terms and conditions of
this Agreement, SFX and Entertainment shall use their respective best efforts
to cause, prior to the Distribution Date, all of SFX's right, title and
interest in and to the Transferred Assets to be conveyed, assigned, transferred
and delivered to Entertainment, free and clear of all liens or encumbrances in
favor of SFX or its subsidiaries, and all of SFX's duties, obligations and
responsibilities under the Assumed Liabilities to be assumed by Entertainment
(the "Asset and Liability Transfer"). Such transfer and assumption shall be
effected by means of the Conveyancing and Assumption Instruments, which shall
be executed and delivered by each of SFX and

<PAGE>

Entertainment prior to the Distribution Date. Subject to Section 7.3 hereof, to
the extent that any such conveyances, assignments, transfers and deliveries
shall not have been so consummated on the Distribution Date, SFX and
Entertainment shall cooperate to effect such consummation as promptly
thereafter as shall be practicable, it nonetheless being understood and agreed
by SFX and Entertainment that neither shall be liable in any manner to any
person who is not a party to this Agreement for any failure of any of the
transfers contemplated by this Article II to be consummated on or subsequent to
the Distribution Date. Whether or not all of the Transferred Assets or the
Assumed Liabilities shall have been legally transferred to, or assumed by,
Entertainment as of the Distribution Date, SFX and Entertainment agree that, as
of the Distribution Date, Entertainment shall have, and shall be deemed to have
acquired, complete and sole beneficial ownership over all of the Transferred
Assets, together with all of SFX's and its subsidiaries' rights, powers and
privileges incident thereto, and shall be deemed to have assumed all of the
Assumed Liabilities and all of SFX's and its subsidiaries' duties, obligations
and responsibilities incident thereto in accordance with the terms of this
Agreement.

SECTION 2.2 Working Capital Adjustment.

(a) In the event that the Distribution occurs prior to the Closing
Date, then on the Distribution Date, the management of SFX shall make an
allocation of working capital between Entertainment and SFX, consistent with
the proper operation of SFX in its usual, regular and ordinary course and,
immediately after the effective time of the Distribution, SFX shall deliver to
Entertainment, in immediately available funds by wire transfer to such bank
account as Entertainment shall specify, any positive amount allocated to
Entertainment.

(b) Not less than five business days prior to the Closing Date, SFX
shall deliver to Entertainment a good faith estimate of Working Capital (as
defined in Section 2.3(d)) as of the Closing Date (the "Estimated Working
Capital"), accompanied by a certificate by the Chief Executive Officer and
Chief Financial Officer of SFX certifying that the Estimated Working Capital
has been calculated in accordance with the Merger Agreement and this Agreement.
If the Estimated Working Capital is a positive number, then at the Closing SFX
shall deliver to Entertainment, in immediately available funds by wire transfer
to such bank account as Entertainment shall specify, an amount of cash equal to
the Estimated Working Capital. If the Estimated Working Capital is a negative
number, then at the Closing Entertainment shall deliver to SFX, in immediately
available funds by wire transfer to such bank account as SFX shall specify, an
amount of cash equal to the Estimated Working Capital.

(c)(i) As soon as practicable after the Closing Date, SFX will prepare
a statement of Working Capital as of the Closing Date, which will be audited by
Ernst & Young LLP (the "SFX's Working Capital Statement") at the expense of
SFX. SFX will deliver SFX's Working Capital Statement to Entertainment as soon
as practicable and in any event within ninety days after the Closing Date. If
within fifteen days following delivery of SFX's Working Capital Statement to
Entertainment, Entertainment has not given SFX notice of its objection to SFX's
Working Capital Statement (such notice must contain a statement of the basis of
such objection), then the Working Capital reflected on SFX's Working Capital
Statement shall be deemed final and conclusive and shall be the "Final Working
Capital." If Entertainment gives such notice of objection within the fifteen
day period, then the issues in dispute will be submitted to a "big six"
accounting firm (other than Ernst & Young LLP) to be selected jointly by
Entertainment and Parent within the following fifteen days or, if they fail to
agree, such accounting firm shall be Arthur Andersen (Chicago office) (it being
understood that the Chicago office of Arthur Andersen was chosen because of
representations made that neither Parent and its Affiliates, SFX and its
Affiliates nor

<PAGE>

Entertainment and its Affiliates have a material relationship with such office,
and if any of such parties prior to the calculation of the Final Working
Capital develops a material relationship with such office, the party having
such a relationship shall promptly notify the other party of such relationship
and the parties shall select another office of Arthur Andersen or another "big
six" accounting firm with which none of such parties has a material
relationship to serve as the accountants) (the "Accountants"), for resolution,
and the Accountants shall determine the "Final Working Capital" within thirty
days after the dispute is submitted to them. If issues in dispute are submitted
to the Accountants for resolution, (A) each party will furnish to the
Accountants such work papers and other documents and information relating to
the disputed issues as the Accountants may request and are available to that
party or its Subsidiaries (or its independent public accountants), and will be
afforded the opportunity to present to the Accountants any material relating to
the determination and to discuss the determination with the Accountants; (B)
the determination by the Accountants of Final Working Capital, as set forth in
a notice delivered to both parties by the Accountants, will be binding and
conclusive on the parties; and (C) Entertainment and SFX will each bear
one-half of the fees and expenses of the Accountants for such determination.
SFX shall make its employees and books and records available to Entertainment
for purposes of verifying Final Working Capital and shall cause Ernst & Young
LLP to make its work papers used in determining Final Working Capital available
to Entertainment.

(ii) On the third business day following the determination of the
Final Working Capital (the "Payment Date"), (A) if the Working Capital
Adjustment Amount (as defined below) is a positive number, then SFX will pay
such amount to Entertainment in immediately available funds by wire transfer to
such bank account as Entertainment shall specify and (B) if the Working Capital
Adjustment Amount is a negative number, then Entertainment will pay such amount
to SFX in immediately available funds by wire transfer to a bank account
specified by SFX. Notwithstanding the foregoing, if Entertainment has notified
SFX in writing prior to the Payment Date that it wishes to have all or any
portion of the Final Working Capital (such amount, the "Consideration
Adjustment") treated as an adjustment to the Class A Common Stock Merger
Consideration and the Class B Common Stock Merger Consideration, the Class A
Common Stock Merger Consideration and the Class B Common Stock Merger
Consideration shall be increased by an amount equal to the quotient of the
Consideration Adjustment divided by the fully diluted number of shares of SFX
Common Stock outstanding immediately prior to the Effective Time, and SFX shall
(X) promptly distribute the appropriate amount to the appropriate holders,
immediately prior to the Effective Time, of SFX Common Stock and Series D
Preferred Stock, (Y) promptly distribute upon exercise the appropriate amount
to holders of Options, Warrants and Unit Purchase Options unexercised
immediately prior to the Effective Time, and (Z) promptly distribute the
appropriate amount to holders of Options, Warrants, and Unit Purchase Options
who exercised such securities on and after the Effective Time and prior to the
Payment Date; provided that as a condition precedent to SFX's obligations under
this sentence, Entertainment shall have paid to SFX in immediately available
funds by wire transfer to an account specified by SFX the difference, if any,
between the Consideration Adjustment and the Working Capital Adjustment Amount
so that the aggregate net amount to be paid or received by SFX, as the case may
be, pursuant to this sentence is equal to the amount that would have been paid
or received, as the case may be, pursuant to the first sentence of this
paragraph had the Consideration Adjustment not been made.

(d) The term "Working Capital" shall mean, as of the point in time
immediately prior to the Effective Time, the sum of all current assets of SFX
and its consolidated Subsidiaries minus the sum of all current liabilities of
SFX and its consolidated Subsidiaries, each as determined in accordance with
GAAP applied on a basis consistent with the balance sheet of SFX as of June 30,
1997 included in Company SEC Documents (as defined in the Merger Agreement)
(provided that no liabilities or reserves reflected on

<PAGE>

such balance sheet shall be reduced or eliminated except by reason of a
payment or credit occurring in the ordinary course of business and consistent
with past practices).

Notwithstanding the foregoing, Working Capital shall, without
duplication either in this computation or as between this computation and the
computation of Excess Debt, (i) be increased by the lesser of (A) 50% of all
fees and expenses incurred by SFX in connection with acquiring consents from
holders of the Series E Preferred Stock and the 2006 Notes in connection with
the transactions contemplated by the Merger Agreement and (B) $1,000,000, (ii)
be increased by, if a positive number, or decreased by, if a negative number,
the product of (A) the Class A Common Stock Merger Consideration and (B) the
difference between 15,589,083 less the sum of the fully diluted number of
shares of SFX Common Stock outstanding immediately prior to the Effective Time
(excluding the Meadows Shares (as defined below)) (calculated in a manner
consistent with Section 3.01(c)(i) of the Company Disclosure Schedule, such
calculation to include, without limitation, derivative securities that will
become issuable upon consummation of the transactions contemplated by the
Merger Agreement), (iii) be reduced by the difference between $84,554,649 less
the sum of (A) the aggregate exercise price of all Options, Warrants and Unit
Purchase Options outstanding immediately prior to the Effective Time plus (B)
the aggregate exercise price of all Unit Purchase Option Warrants underlying
Unit Purchase Options outstanding immediately prior to the Effective Time plus
(C) the aggregate base price of all SARs outstanding immediately prior to the
Effective Time, (iv) be reduced by the product of (A) $42 and (B) the aggregate
number of shares of SFX Common Stock subject to a right of repurchase in favor
of SFX (the "Meadows Shares") granted pursuant to that certain Agreement of
Merger dated February 12, 1997 among SFX, Nederlander of Connecticut, Inc. and
the other parties thereto outstanding immediately prior to the Effective Time,
(v) be increased by all capital expenditures paid by SFX and its Subsidiaries
after June 30, 1997 and immediately prior to the Effective Time permitted by
Section 4.01(a)(viii) of the Merger Agreement, (vi) be decreased by all accrued
capital expenditures of SFX as of immediately prior to the Effective Time (to
the extent not reflected in current liabilities), (vii) be increased by
dividends that have been accrued immediately prior to the Effective Date whose
regularly scheduled payment date has not then yet occurred, (viii) except as
required by clause (xi) below, exclude any liabilities attributable to
Indebtedness, (ix) exclude any liabilities included in clauses (i) through (v)
of the following sentence, (x) be decreased by unpaid costs, fees and expenses
of SFX arising out of, based upon or that will arise from the transactions
contemplated by the Merger Agreement (other than as a result of actions taken
by Sub) (including, without limitation, amounts related to the termination of
any employees, broker fees, legal, accounting and advisory fees and fees
incurred in connection with third party consents, waivers and amendments of
creditors or holders of Preferred Stock), (xi) be reduced by the amount of the
Excess Debt, if a positive number, or be increased by the amount of the Excess
Debt, if a negative number, (xii) be reduced by the amount of the Series E
Premium (as defined below), and (xiii) be reduced by the difference between (A)
the aggregate amount to be paid by SFX pursuant to the Memorandum of
Understanding dated March 17, 1998, relating to the shareholder litigation in
connection with the Merger and (B) any amounts to be paid by SFX's director and
officer insurance policy.

The term "Series E Premium" shall mean the difference between (i) the
Average Trading Price times 142,032 and (ii) 14,203,200. The term "Average
Trading Price" shall mean the highest of the following averages: (i) the
average of the last sales price of the Series E Preferred Stock during the 15
consecutive business days ending on the Closing Date, or (ii) the average of
the last sales price of the Series E Preferred Stock during the 15 consecutive
business days immediately preceding February 9, 1998.

(e) The term "Excess Debt" shall mean, as of immediately prior to the
Effective Time, the difference between the sum of the following and
$899,700,000: (i) the difference between (A)

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<PAGE>

Indebtedness of SFX and its consolidated Subsidiaries less (B) the difference
between $70,000,000 and any amounts (other than the reimbursement of expenses)
actually received by SFX and its consolidated subsidiaries after August 24,
1997 under agreements relating to the sale or LMA (such LMA payments not to
exceed $30,000 per month) of its WVGO-FM and the sale or LMA of its
Jackson/Biloxi radio stations, less (C) any Indebtedness incurred to finance
acquisitions approved by Parent of stock of or substantially all of the assets
of radio stations, less (D) interest accrued as of immediately prior to the
Effective Time that is not then due and payable, (ii) the Series B Merger
Consideration, (iii) the Series C Merger Consideration, (iv) the liquidation
preference amount of the Series E Preferred Stock, and (v) Environmental Costs
or Liabilities accrued and not paid after June 30, 1997 to the extent they
exceed $100,000 in the aggregate. "Working Capital Adjustment Amount" shall
mean an amount equal to the Final Working Capital, less the Estimated Working
Capital, together with interest on the absolute value of the difference at 10%
per annum beginning on the Closing Date and ending on the date of payment of
the Working Capital Adjustment Amount as provided in Section 2.02(c)(ii)
hereof.

Notwithstanding the foregoing, Working Capital shall not include any
asset transferred to Entertainment or any of its Subsidiaries, any Liability
assumed by Entertainment, or any Liability to which none of SFX or any of its
Subsidiaries is a party immediately after the Effective Time and any such
computation shall assume that the Distribution has been consummated.

(f) All amounts loaned to Entertainment by SFX to (i) acquire (whether
by merger, stock or asset acquisition or otherwise) additional businesses
engaged in the business in which Entertainment is engaged or (ii) make capital
improvements on assets owned or leased by Entertainment, shall be paid by
Entertainment to SFX by wire transfer of immediately available funds to a bank
account specified by SFX on the Distribution Date and shall not be considered
for purposes of computing Working Capital under clause (b) of this Section 2.3.

(g) If the Merger Agreement is terminated for any reason in accordance
with its terms, then the working capital shall be allocated in accordance with
Section 2.3(a) above, and no further adjustments to working capital shall be
made.

SECTION 2.3 SFX Approval. Prior to the Distribution Date, SFX shall
cooperate with Entertainment in effecting, and if so requested by
Entertainment, SFX shall, as the sole stockholder of Entertainment, ratify any
actions which are reasonably necessary or desirable to be taken by
Entertainment to effectuate the transactions contemplated by this Agreement in
a manner consistent with the terms of this Agreement, including, without
limitation, the following: (a) the election or appointment of directors and
officers of Entertainment to serve in such capacities following the
Distribution Date, and (b) the preparation and implementation of appropriate
plans, agreements and arrangements for Employees (including, without
limitation, plans, agreements or arrangements pursuant to which Entertainment
Common Stock would be acquired by Employees).

ARTICLE 3

ASSUMPTION AND RETENTION OF LIABILITIES

SECTION 3.1 Assumed Liabilities. Upon the terms and subject to the
conditions set forth in this Agreement and in addition to any other Liabilities
otherwise expressly assumed by Entertainment pursuant to this Agreement, the
Related Agreements or any other agreement contemplated by this Agreement,

8
<PAGE>

Entertainment assumes all Assumed Liabilities and agrees with SFX to pay,
perform and discharge in due course any and all Assumed Liabilities. SFX shall
use its commercially reasonable efforts to cause Entertainment and its
Subsidiaries to be released from all debt and accrued liabilities other than
the Assumed Liabilities, prior to the Effective Time.

SECTION 3.2 Retained Liabilities. Upon the terms and subject to the
conditions set forth in this Agreement and in addition to any other Liabilities
otherwise expressly retained by SFX pursuant to this Agreement, the Related
Agreements or any other agreement contemplated by this Agreement, SFX hereby
agrees with Entertainment that SFX shall pay, perform and discharge in due
course any and all Retained Liabilities.

SECTION 3.3 Construction of Agreements. Notwithstanding any other
provisions in this Agreement to the contrary, in the event and to the extent
there shall be a conflict between the provisions of this Agreement and the
Related Agreements (or any Conveyancing and Assumption Instrument or other
instrument of assumption entered into pursuant to this Agreement) and (a) the
provisions of the Merger Agreement, then (i) prior to the Effective Time, the
provisions of the Merger Agreement shall control and (ii) subsequent to the
Effective Time, the provisions of this Agreement and the Related Agreements (or
any Conveyancing and Assumption Instrument or other instrument of assumption
entered into pursuant to this Agreement) shall control and (b) the provisions
of any other agreement entered into by SFX or Entertainment, then the
provisions of this Agreement and the Related Agreements (and any Conveyancing
and Assumption Instrument or other instrument of assumption entered into
pursuant to this Agreement) shall control. In the event and to the extent there
shall be a conflict between the provisions of this Agreement and the provisions
of the Related Agreements, then the provisions of the Related Agreements shall
control.

ARTICLE 4

THE DISTRIBUTION

SECTION 4.1 The Distribution.

(a) On or prior to the Distribution Date, SFX shall deliver to the
Agent for the benefit of holders of record of SFX Common Stock, Series D
Preferred Stock and interests in the SFX Director Deferred Stock Ownership Plan
on the Record Date, (i) certificates representing, in the aggregate, the number
of shares of Entertainment Class A Common Stock equal to the sum of (A) the
number of shares of SFX Class A Common Stock outstanding on the Record Date,
(B) the aggregate number of shares of SFX Class A Common Stock credited
pursuant to the SFX Director Deferred Stock Ownership Plan and (C) the product
of the number of shares of Series D Preferred Stock outstanding on the Record
Date multiplied by the Conversion Rate (as defined in the certificate of
designations governing the Series D Preferred Stock) and (ii) certificates
representing, in the aggregate, the number of shares of Entertainment Class B
Common Stock equal to the number of shares of SFX Class B Common Stock
outstanding on the Record Date. SFX shall instruct the Agent to distribute as
promptly as practicable following the Distribution Date to holders of the SFX
Common Stock, Series D Preferred Stock and interests in the SFX Director
Deferred Stock Ownership Plan on the Record Date (i) one share of Entertainment
Class A Common Stock for every one share of SFX Class A Common Stock, (ii) one
share of Entertainment Class A Common Stock for every one share of SFX Class A
Common Stock credited pursuant to the SFX Director Deferred Stock Ownership
Plan, (iii) the number of shares of Entertainment Class A Common Stock (rounded
down to the next whole share for each holder) equal to the Conversion Rate (as
defined in the Certificate of Designations governing the

9
<PAGE>

Series D Preferred Stock) for every one share of Series D Preferred Stock and
(iv) one share of Entertainment Class B Common Stock for every one share of SFX
Class B Common Stock. Simultaneously with the Distribution, SFX shall place
that number of shares of the Entertainment Class A Common in an escrow account
with an escrow agent selected by SFX and governed by an escrow agreement
reasonably acceptable to SFX and Parent for delivery to the holders of the IPO
Warrants, and SCMC Warrants upon exercise of such warrants that equals the
number of shares of Entertainment Class A Common Stock that the holders of such
warrants would have been entitled to receive if they had exercised all of their
IPO Warrants, and SCMC Warrants immediately prior to the Record Date. SFX and
Entertainment agree to provide to the Agent sufficient certificates in such
denominations as the Agent may request in order to effect the Distribution. All
of the shares of Entertainment Common Stock issued in the Distribution shall be
fully paid, nonassessable and free of preemptive rights.

(b) The Distribution shall be deemed to be effective on the
Distribution Date.

SECTION 4.2 Fractional Shares. No certificate or scrip representing
fractional shares of Entertainment Common Stock shall be issued as part of the
Distribution and in lieu of receiving fractional shares, each holder of a
warrant who would otherwise be entitled to receive a fractional share of
Entertainment Common Stock upon exercise of such warrant, after aggregating all
shares of Entertainment Common Stock which such holder would be entitled to
receive under Section 4.1, will receive cash for such fractional share. SFX and
Entertainment agree that Entertainment shall instruct the Agent to determine
the number of whole shares and fractional shares of Entertainment Common Stock
allocable to each holder of record of such warrant as of the date of exercise,
to aggregate all such fractional shares into whole shares and sell the whole
shares obtained thereby in the open market at the then prevailing prices on
behalf of holders who otherwise would be entitled to receive fractional shares
interests and to distribute to each such holder such holder's ratable share of
the total proceeds of such sale promptly after the date of exercise. SFX shall
bear the costs of commissions incurred in connection with such sale.

SECTION 4.3 SFX Employees. If the Distribution occurs prior to the
Closing Date, the Distribution Employees shall continue to be employed by SFX
(at SFX's expense), but shall devote such time as deemed reasonably necessary
to, consistent with their obligations to SFX, support the conduct of the
Entertainment Business by Entertainment on a basis consistent with the time and
scope of services that such employees devoted and provided to the Entertainment
Business prior to the Distribution. Effective immediately prior to the
Effective Time, Entertainment shall assume all obligations arising under any
employment agreement or arrangement (written or oral) between SFX or any of its
Subsidiaries and the Distribution Employees other than the rights, if any, of
the Distribution Employees to receive the options upon termination following a
change of control as defined in their respective employment agreements (the
"Termination Options") immediately prior to the Effective Time (with such
Termination Options being deemed granted as of such time) and all existing
rights to indemnification. SFX and its Subsidiaries, effective as of the
Effective Time (or effective as of the Distribution Date as to any member of
the Distribution Employees that devotes substantially all of his or her
business time to the Entertainment Business), shall be indemnified by
Entertainment in accordance with Article 5 hereof from all obligations arising
under such employment agreements or arrangements (except in respect of the
Termination Options and all existing rights to indemnification). Neither party
shall, directly or indirectly, solicit the employment of any employees of the
other party or its subsidiaries (other than as a result of a general
solicitation for employment); provided, however, that Entertainment may solicit
and contract for the employment effective no earlier than the Effective Time of
the Merger, of Distribution Employees.

10
<PAGE>

SECTION 4.4 SFX Board Action. The Board of Directors of SFX, in its
discretion, shall establish the Record Date and the Distribution Date and all
appropriate procedures in connection with the Distribution, subject to the
satisfaction or waiver of the conditions contained in Article 10.

SECTION 4.5 Registration and Listing; SEC Filings.

(a) Prior to the Distribution Date:

(i) SFX and Entertainment shall register the Distribution under
applicable federal and state securities laws if such registration is either
required under applicable law or would otherwise be required to cause the
securities issued in connection with the Distribution to be freely transferable
by Persons not Affiliates of Entertainment. SFX and Entertainment shall use
reasonable efforts to cause the Registration Statement to become effective
under the Securities Act as promptly as reasonably practicable. In connection
with such registration, Entertainment shall file a Form 8-A, if necessary, with
the SEC.

(ii) The parties hereto shall use reasonable efforts to take all such
action as may be necessary or appropriate under state securities and blue sky
laws in connection with the transactions contemplated by this Agreement.

(iii) Entertainment shall prepare, file and seek to make effective,
subject to official notice of issuance, an application for the listing of the
Entertainment Class A Common Stock on a national exchange, or for the inclusion
of quotations for the Entertainment Class A Common Stock on the Nasdaq Stock
Market.

(iv) The parties hereto shall cooperate in preparing, filing with the
SEC and causing to become effective any registration statements or amendments
thereto which are necessary or appropriate in order to effect the transactions
contemplated hereby.

(b) Entertainment hereby represents and warrants to SFX that each of
the Registration Statement and the Consent Solicitation Documents and each
amendment or supplement thereto did not, at the time it became effective or was
mailed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply to the extent
that any such untrue statement or material omission was made by Entertainment
in reliance upon and in conformity with written information furnished by
Parent, its representatives or affiliates to Entertainment specifically for use
in such filing.

SECTION 4.6 Third Party Consents. SFX shall obtain all necessary third
party consents to the Distribution except where the failure to obtain such
consents, in the aggregate, would not (a) have a Material Adverse Effect on
SFX, (b) impair the ability of SFX to perform its obligations under the
Transaction Documents in any material respect or (c) delay in any material
respect or prevent the consummation of any of the transactions contemplated by
the Transaction Documents. The Distribution shall be effected in compliance
with SFX's certificate of incorporation and by-laws and in material compliance
with all applicable laws and shall be subject to obtaining all applicable
consents of Governmental Entities.

SECTION 4.7 Waivers. Prior to the Distribution Date, SFX and
Entertainment shall obtain from

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Ron Delsener and Mitch Slater a release or waiver of any rights that either of
them may have to purchase or acquire all or part of the Delsener/Slater Group.

SECTION 4.8 Termination of Merger Agreement. If the Merger Agreement
is terminated for any reason in accordance with its terms, the Boards of
Directors of SFX and Entertainment shall appoint committees (the "Independent
Committees") composed solely of independent directors (none of whom shall serve
on both Boards of Directors) and shall authorize the Independent Committees to
negotiate with each other in good faith with respect to (a) the Distribution
Employees, (b) a lease arrangement for the office space of Entertainment
utilized by SFX and (c) any other matters which the Boards deem necessary to
effectuate the separation of the respective affairs of SFX and Entertainment.

ARTICLE 5

SURVIVAL; MUTUAL RELEASE AND INDEMNIFICATION

SECTION 5.1 Survival and Indemnification.

(a) Except as specifically provided herein to the contrary, all
covenants and agreements of the parties contained in this Agreement shall
survive the Distribution Date.

(b) Except as specifically provided herein, the indemnification
provisions of this Article 5 shall terminate and be of no further force and
effect on the sixth (6th) anniversary of the Distribution Date; provided,
however, that such provisions shall survive thereafter as to any claims for
indemnification asserted prior to the sixth (6th) anniversary of the
Distribution Date. Such termination shall in no way limit the obligations of
Entertainment with respect to the Assumed Liabilities or the obligations of SFX
with respect to the Retained Liabilities and related indemnification rights
under this Agreement, which shall survive indefinitely.

(c) The obligations of Entertainment and SFX under this Article 5
shall survive the sale or other transfer by either of them of any assets or
businesses or the assignment by either of them of any Liabilities. To the
extent that SFX assigns any of its Retained Liabilities (except for such
amounts of Retained Liabilities which are not material individually or in the
aggregate), SFX shall cause such transferee of such Retained Liabilities to
assume specifically its obligations with respect thereto under this Agreement
and to fulfill its obligations related to such Retained Liabilities. To the
extent Entertainment transfers to another party other than a Subsidiary of
Entertainment any of the Assumed Liabilities (except for such amounts of
Assumed Liabilities which are not material individually or in the aggregate),
Entertainment shall cause the transferee of such Assumed Liabilities to assume
specifically its obligations with respect thereto under this Agreement and to
fulfill its obligations related to such Assumed Liabilities. In the event the
transferee of the Retained Liabilities or Assumed Liabilities does not fulfill
its obligations with respect thereto, SFX and Entertainment, respectively,
shall fulfill their obligations with respect thereto.

SECTION 5.2 Mutual Release, Etc.

(a) Effective on the Distribution Date, and except for Claims arising
from or attributable to the transactions contemplated by the Transaction
Documents, this Agreement, the Related Agreements or Claims otherwise asserted
prior to the Effective Time, SFX does hereby, for itself and its Subsidiaries
(other than the Delsener/Slater Group), and anyone claiming through SFX or its
Subsidiaries, remise, release

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<PAGE>

and forever discharge the Delsener/Slater Group, their respective Affiliates
(other than SFX and its Subsidiaries), successors and assigns, the Executive
Group (as defined in the Merger Agreement), and all Persons who at any time
prior to the Distribution Date have been shareholders, directors or agents or
employees of any member of the Delsener/Slater Group (in each case, in their
respective capacities as such), and their respective heirs, executors,
administrators, successors and assigns, from any and all Claims whatsoever,
whether in law or in equity (including any right of contribution), whether
arising under any contract or arrangement, by operation of law or otherwise,
existing or arising from any acts or events occurring or failing to occur or
alleged to have occurred or to have failed to occur or any conditions existing
or alleged to have existed on or before the Distribution Date.

(b) Effective on the Distribution Date, and except for Claims arising
from or attributable to the transactions contemplated by the Transaction
Documents, this Agreement, the Related Agreements or Claims otherwise asserted
prior to the Effective Time, Entertainment does hereby, for itself and its
Subsidiaries, and anyone claiming through Entertainment or its Subsidiaries,
remise, release and forever discharge SFX, their respective Affiliates (other
than the Delsener/Slater Group), successors and assigns and all Persons who at
any time prior to the Distribution Date have been shareholders, directors or
agents or employees of any member of the SFX and its Subsidiaries (in each
case, in their respective capacities as such), and their respective heirs,
executors, administrators, successors and assigns, from any and all Claims
whatsoever, whether in law or in equity (including any right of contribution),
whether arising under any contract or arrangement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Distribution Date.

SECTION 5.3 Indemnification.

(a) SFX shall indemnify, defend and hold harmless the Delsener/Slater
Group from and against any and all Indemnifiable Losses (other than income tax
liabilities) to which the Delsener/Slater Group may be or become subject that
(i) relate to the Retained Liabilities, assets, business, operations, debts or
Liabilities of SFX or its Subsidiaries (other than the Delsener/Slater Group)
whether arising prior to, concurrent with or after the Distribution or (ii)
result from a breach by SFX or its Subsidiaries (other than the Delsener/Slater
Group) of any representation, warranty or covenant contained in this Agreement
or any Related Agreement. The rights of the directors, officers and employees
of the Delsener/Slater Group to seek indemnity from SFX shall continue to be
governed by the Merger Agreement or any other existing agreement addressing
such matter.

(b) Entertainment shall indemnify, defend and hold harmless SFX and
its Subsidiaries (other than the Delsener/Slater Group) from and against any
and all Indemnifiable Losses (other than income tax liabilities) to which SFX
or any of its Subsidiaries (other than the Delsener/Slater Group) may be or
become subject that (i) relate to the Transferred Businesses, Transferred
Assets, assets, business, operations, debts or Liabilities of the
Delsener/Slater Group, including, without limitation, Liabilities arising under
the Guarantees and Liabilities to be assumed by any member of the
Delsener/Slater Group as contemplated herein, whether arising prior to,
concurrent with or after the Distribution or (ii) result from a breach by a
member of the Delsener/Slater Group of any representation, warranty or covenant
contained in this Agreement or any Related Agreement.

(c) The amount which any party (an "Indemnifying Party") is required
to pay to any other party (an "Indemnitee") pursuant to Section 5.3(a) or
Section 5.3(b) shall be reduced (including,

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<PAGE>

without limitation, retroactively) by any insurance proceeds and other amounts
actually recovered by such Indemnitee in reduction of the related Indemnifiable
Loss. Amounts required to be paid are hereafter sometimes collectively called
"Indemnity Payments" and are individually called an "Indemnity Payment." If an
Indemnitee shall have received an Indemnity Payment in respect of an
Indemnifiable Loss and shall subsequently actually receive insurance proceeds
or other amounts in respect of such Indemnifiable Loss, then such Indemnitee
shall pay to such Indemnifying Party a sum equal to the lesser of the amount of
such insurance proceeds or other amounts actually received or the net amount of
Indemnity Payments actually received previously. The Indemnitee agrees that the
Indemnifying Party shall be subrogated to such Indemnitee under any insurance
policy and that the Indemnitee shall not waive any right of subrogation.

SECTION 5.4 Procedure for Indemnification.

(a) If an Indemnitee shall receive notice of the assertion by a person
who is not a party to this Agreement of any claim or of the commencement by any
such person of any Action (a "Third Party Claim") with respect to which an
Indemnifying Party is or may be obligated to make an Indemnity Payment, such
Indemnitee shall give such Indemnifying Party prompt notice thereof after
becoming aware of such Third Party Claim, specifying in reasonable detail the
nature of such Third Party Claim and the amount or estimated amount thereof to
the extent then feasible (which estimate shall not be conclusive of the final
amount of such claim); provided, however, that the failure of any Indemnitee to
give notice as provided in this Section 5.4 shall not relieve the related
Indemnifying Party of its obligations under this Article 5, except to the
extent that such Indemnifying Party is actually prejudiced by such failure to
give notice.

(b) An Indemnifying Party may elect to defend, at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel (which counsel
shall be reasonably satisfactory to the Indemnitee), any Third Party Claim. If
an Indemnifying Party elects to defend a Third Party Claim, it shall, within 10
days of notice of such Third Party Claim (or sooner, if the nature of such
Third Party Claim so requires), notify the related Indemnitee of its intent to
do so, and such Indemnitee shall cooperate in the defense of such Third Party
Claim. Such Indemnifying Party shall pay such Indemnitee's actual out-of-pocket
expenses (other than officers' or employees' salaries) reasonably incurred in
connection with such cooperation. After notice from an Indemnifying Party to an
Indemnitee of its election to assume the defense of a Third Party Claim, such
Indemnifying Party shall not be liable to such Indemnitee under this Article 5
for any legal or other expenses subsequently incurred by such Indemnitee in
connection with the defense thereof; provided, however, that such Indemnitee
shall have the right to employ separate counsel to represent such Indemnitee
if, in such Indemnitee's reasonable judgment, a conflict of interest between
such Indemnitee and such Indemnifying Party exists in respect of such claim,
and in that event the reasonable fees and expenses of such separate counsel
shall be paid by such Indemnifying Party. Except as so provided, if an
Indemnitee desires to participate in the defense of a Third Party Claim, it may
do so but it shall not control the defense and such participation shall be at
its sole cost and expense. If an Indemnifying Party elects not to defend
against a Third Party Claim, or fails to notify an Indemnitee of its election
as provided in this Section 5.4, such Indemnitee may defend, compromise and
settle such Third Party Claim; provided, however, that no such Indemnitee may
compromise or settle any such Third Party Claim without prior written notice to
such Indemnifying Party and except by payment of monetary damages or other
money payments. No Indemnifying Party shall consent to entry of any judgment or
enter into any compromise or settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnitee of a release from all Liability in respect to such Third Party
claim.

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available to such Indemnifying Party any personnel or any books, records or
other documents within its control that are necessary or appropriate for such
defense (the cost of copying thereof to be paid by the Indemnifying Party).

(d) Notwithstanding the foregoing provisions of this Section 5.4,
there may be Third Party Claims which reasonably could result in both SFX and
Entertainment being liable to the other under indemnification provisions of
this Agreement. In any such events, the parties shall endeavor, acting
reasonably and in good faith, to agree upon a manner of conducting the defense
of or settlement of the Third Party Claim with a view to minimizing the legal
expenses and associated costs that might otherwise be incurred by the parties,
including to the use of the same legal counsel for the defense of such claim.

(e) Except to the extent expressly provided otherwise in this Section
5.4, the indemnification provided for by this Section 5.4 shall not inure to
the benefit of any third party or parties and shall not relieve any insurer who
would otherwise be obligated to pay any claim of the responsibility with
respect thereto or, solely by virtue of the indemnification provisions hereof,
provided any subrogation rights with respect thereto.

(f) Any claim on account of an Indemnifiable Loss which does not
result from a Third Party Claim shall be asserted by written notice given by
the related Indemnitee to the related Indemnifying Party. Such Indemnifying
Party shall have a period of 60 days within which to respond thereto. If such
Indemnifying Party does not respond within such 60-day period, such
Indemnifying Party shall be deemed to have accepted responsibility to make
payment and shall have no further right to contest the validity of such claim.
If such Indemnifying Party does respond within such 60-day period and rejects
such claim in whole or in part, such Indemnitee shall be free to pursue the
remedies provided in Article 11 hereof.

ARTICLE 6

RELATED AGREEMENTS

SECTION 6.1 Tax Sharing Agreement. Except as contemplated in this
Section 6.1 hereof, any tax sharing agreement between any of the
Delsener/Slater Group and any of SFX and its Subsidiaries shall be terminated
as of the Distribution Date and will have no further effect for any taxable
year (whether the current year, a future year, or a past year). On or prior to
the Distribution Date, SFX and the Delsener/Slater Group shall enter into a Tax
Sharing Agreement in the form attached hereto as Exhibit A (the "Tax Sharing
Agreement").

SECTION 6.2 Employee Benefits Agreement. On or prior to the
Distribution Date, SFX and the Delsener/Slater Group shall enter into an
Employee Benefits and Compensation Allocation Agreement in the form attached
hereto as Exhibit B (the "Employee Benefits Agreement").

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ARTICLE 7

CERTAIN ADDITIONAL MATTERS

SECTION 7.1 Conveyancing and Assumption Instruments. In connection
with the transfer, conveyance, assignment and delivery of the Transferred
Assets and the assumption of Liabilities contemplated by this Agreement, SFX
and Entertainment agree to execute or cause to be executed by the appropriate
parties and to deliver to each other, as appropriate, the Conveyancing and
Assumption Instruments.

SECTION 7.2 No Representations or Warranties. Entertainment
understands and agrees that SFX is not, in this Agreement or in any other
agreement or document contemplated by this Agreement, nor shall SFX be deemed
or implied to be, representing or warranting in any way as to the value or
freedom from encumbrance of, or any other matter concerning, any Transferred
Assets or the Transferred Businesses or as to the legal sufficiency to convey
title to any Transferred Assets of the execution, delivery and filing of the
Conveyancing and Assumption Instruments, IT BEING AGREED AND UNDERSTOOD THAT
ALL SUCH ASSETS ARE BEING TRANSFERRED "AS IS, WHERE IS" and that Entertainment
shall bear the economic and legal risk that any conveyances of such assets
shall prove to be insufficient or that Entertainment's title to any such assets
shall be other than good and marketable and free from encumbrances.

SECTION 7.3 Further Assurances; Subsequent Transfers.

(a) Each of SFX and Entertainment will execute and deliver such
further instruments of conveyance, transfer and assignment and will take such
other actions as each of them may reasonably request of the other in order to
effectuate the purposes of this Agreement and to carry out the terms hereof.
Without limiting the generality of the foregoing, at any time and from time to
time after the Distribution Date, at the request of Entertainment, SFX will
execute and deliver to Entertainment such other instruments of transfer,
conveyance, assignment and confirmation and take such action as Entertainment
may reasonably deem necessary or desirable in order to more effectively
transfer, convey and assign to Entertainment and to confirm Entertainment's
title to all of the Transferred Assets, to put Entertainment in actual
possession and operating control thereof and to permit Entertainment to
exercise all rights with respect thereto (including, without limitation, rights
under contracts and other arrangements as to which the consent of any third
party to the transfer thereof shall not have previously been obtained). SFX
will take such actions as Entertainment may reasonably request in order to
prepare and implement appropriate plans, agreements and arrangements for the
Employees, and Entertainment will execute and deliver to SFX all instruments,
undertakings or other documents and take such other action as SFX may
reasonably request in order to have Entertainment properly assume and discharge
the Assumed Liabilities and relieve SFX of any Liability or obligations with
respect thereto and evidence the same to third parties. Notwithstanding the
foregoing, SFX and Entertainment shall not be obligated, in connection with the
foregoing, to expend monies other than reasonable out-of-pocket expenses and
attorneys' fees (which expenses and fees shall be reimbursed by the requesting
party).

(b) SFX and Entertainment will use their commercially reasonable
efforts to obtain any consent required to assign all agreements, leases,
permits, licenses and other rights of any nature whatsoever relating to the
Transferred Assets to Entertainment; provided, however, that SFX shall not be
obligated to pay any consideration therefor (except as provided in Section 2.2
and except for filing fees and other administrative charges) to the third party
from whom such consents, approvals and amendments are

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requested. In the event, and to the extent, that SFX is unable to obtain any
such required consent, SFX shall continue to be bound thereby and, unless not
permitted by law or the terms thereof, Entertainment shall pay, perform and
discharge fully all the obligations of SFX thereunder from and after the
Distribution Date and indemnify SFX for all Indemnifiable Losses arising out of
such performance by Entertainment in accordance with Article 5. SFX shall,
without further consideration therefor, pay, assign and remit to Entertainment
promptly all monies, rights and other considerations received in respect of
such performance. SFX shall exercise or exploit its rights and options under
all such agreements, leases, licenses and other rights and commitments referred
to in this Section 7.3(b) only as reasonably directed by Entertainment and at
Entertainment's expense. If and when any such consent shall be obtained or such
agreement, lease, license or other right shall otherwise become assignable or
able to be novated, SFX shall promptly assign and novate all its rights and
obligations thereunder to Entertainment without payment of further
consideration, and Entertainment shall, without the payment of any further
consideration therefore, assume such rights and obligations.

SECTION 7.4 Sales and Transfer Taxes. Entertainment and SFX agree to
cooperate to determine the amount of sales, transfer or other taxes or fees
(including, without limitation, all real estate, patent, copyright and
trademark transfer taxes and recording fees) payable in connection with the
transactions contemplated by this Agreement (the "Transaction Taxes"). SFX
agrees to file promptly and timely the returns for such Transaction Taxes with
the appropriate taxing authorities and remit payment of the Transaction Taxes,
and Entertainment will join in the execution of any such tax returns or other
documentation.

SECTION 7.5 Change of Name. Within 10 business days after the
consummation of the Merger, SFX and each of its Subsidiaries, if necessary,
shall file certificates of amendment with the appropriate Secretary of State,
amending such company's certificate of incorporation to change the name of such
Company to any name which does not include the letters "SFX." At the closing of
the Merger, SFX will assign to Entertainment or its designee all right, title
and interest, including all the good will related thereto, in and to the name
"SFX," together with all causes of action and the right to recover for past
infringements of the name "SFX." As soon as commercially practicable, but in no
event later than six months from the consummation of the Merger, SFX shall
cease all use of the name "SFX" or other trademarks, trade names or their
identifiers owned by, licensed to, or transferred pursuant to this Agreement
to, Entertainment in all modes.

ARTICLE 8

ACCESS TO INFORMATION AND SERVICES

SECTION 8.1 Provision of Corporate Records. As soon as practicable
after the Distribution Date, SFX shall deliver to Entertainment all Books and
Records in its possession. Such Books and Records shall be the property of
Entertainment from and after the Distribution Date, but shall be retained and
made available to SFX for review and duplication until the earlier of notice
from SFX that such records are no longer needed by SFX or the 20th anniversary
of the Distribution Date. Notwithstanding the foregoing, in lieu of retaining
any specific Books and Records, Entertainment may offer in writing to deliver
such Books and Records to SFX and, if such offer is not accepted within 90
days, the offered Books and Records may be destroyed or otherwise disposed of
at any time. If SFX shall request in writing prior to the scheduled date

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for such destruction or disposal that any of the Books and Records proposed to
be destroyed or disposed of be delivered to SFX, Entertainment shall promptly
arrange for delivery of such of the Books and Records as was requested (at the
cost and expense of SFX).

SECTION 8.2 Access to Information. From and after the Distribution
Date, SFX and Entertainment shall afford to each other, and to each other's
authorized accountants, counsel and other designated representatives,
reasonable access and duplicating rights (with copying costs to be borne by the
requesting party) during normal business hours to all Books and Records and
other data and information (collectively, "Information") within each other's
possession relating to the Transferred Assets, the Transferred Businesses and
the Employees, insofar as such access is reasonably required by SFX or
Entertainment, as the case may be (and shall use reasonable efforts to cause
persons or firms possessing relevant Information to give similar access).
Information may be requested under this Article 8 for, without limitation,
audit, accounting, claims, litigation and tax purposes, as well as for purposes
of fulfilling disclosure and reporting obligations.

SECTION 8.3 Retention of Records. Except as otherwise required for a
longer period by law or agreed to in writing, SFX and Entertainment shall
retain, for a period of at least 20 years following the Distribution Date, all
material Information relating to the Transferred Businesses. Notwithstanding
the foregoing, in lieu of retaining any specific Information, SFX or
Entertainment may offer in writing to deliver such Information to the other
and, if such offer is not accepted within 90 days, the offered Information may
be destroyed or otherwise disposed of at any time. If a recipient of such offer
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for delivery of such of the Information as was
requested (at the cost and expense of the requesting party).

SECTION 8.4 Confidentiality. Each of SFX and Entertainment shall hold,
and shall cause its officers, employees, agents, consultants and advisors to
hold, in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its legal counsel, by other
requirements of law (including, without limitation, any requirements imposed
under state and federal securities laws and stock exchange rules), all
non-public Information concerning the other party furnished it by such other
party or its representatives pursuant to this Agreement (except to the extent
that such Information can be shown to have been (i) available to such party on
a non-confidential basis prior to this disclosure by the other party, (ii) in
the public domain through no fault of such party or (iii) later lawfully
acquired from other sources by the party to which it was furnished), and each
party shall not release or disclose such Information to any other person,
except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors who shall be bound by the provisions of this Section
8.4. Each party shall be deemed to have satisfied its obligation to hold
confidential Information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar Information. SFX and Entertainment agree with each other that each will
maintain, preserve and assert, unless waived in writing by the other, all
attorney-client and work product privileges applicable to documents and other
Information that relate, directly or indirectly, to the Transferred Businesses
for any period prior to the Distribution Date.

SECTION 8.5 Privileged Matters. Anything herein or in the Merger
Agreement notwithstanding, the transactions contemplated hereby and by the
Merger Agreement shall not be deemed to transfer to or vest in SFX any right to
waive, nor shall they be deemed to waive, any attorney-client privilege between
SFX and its legal counsel with respect to legal advice concerning the business
or operations of Entertainment, including, without limitation, the transactions
contemplated by the Merger Agreement, this Agreement and

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the Related Agreements, in any case, concerning privileged communications (or
work product related thereto) at any time prior to the Closing Date. SFX shall
assign to Entertainment SFX's rights (if any) to any attorney-client privilege
with respect to legal advice concerning the business or operations of
Entertainment including, without limitation, the transactions contemplated by
the Merger Agreement, this Agreement and the Related Agreements, concerning
privileged communications (or work product related thereto) at any time prior
to the Closing Date. Except as otherwise determined by a court of competent
jurisdiction, SFX and its successors and assigns shall not be entitled to waive
or have access to, nor shall they attempt to waive or seek access to, any
privileged communications (or work product related thereto) between
Entertainment and its legal counsel with respect to legal advice concerning the
business or operations of Entertainment.

ARTICLE 9

INSURANCE

SECTION 9.1 General. SFX shall keep in effect all policies under its
Insurance Program in effect as of the date hereof insuring the Transferred
Assets and operations of the Transferred Businesses until the earlier of (i)
the Effective Time and (ii) 12:00 midnight on the Distribution Date, unless
Entertainment shall have earlier obtained appropriate coverage and notified SFX
in writing to that effect. Insofar as any claims made or accrued under policies
under the Insurance Program prior to the Distribution Date relate to
Entertainment or the Transferred Businesses, SFX shall use its reasonable
efforts to assure that Entertainment can continue to make and/or pursue such
claims under the policies, or that SFX can continue to make and/or pursue such
claims on behalf of Entertainment, notwithstanding assignment or transfer of
the policies (provided that Entertainment shall reimburse SFX for any
reasonable out-of-pocket expenses incurred by SFX in connection therewith).
From and after the Distribution Date, Entertainment shall be responsible for
obtaining and maintaining insurance coverage for its own account. SFX shall, if
so requested by Entertainment, use reasonable efforts to assist Entertainment
in obtaining such initial insurance coverage from and after the Distribution
Date in such amounts as are agreed upon by SFX and Entertainment. Following the
Distribution Date, each of SFX and Entertainment shall cooperate with and
assist the other party in the prevention of conflicts or gaps in insurance
coverage and/or collection proceeds.

SECTION 9.2 Certain Insured Claims. SFX shall use its reasonable
efforts to assert and pursue, for the benefit of Entertainment, claims against
the Insurance Program for any losses resulting, directly or indirectly, from
claims made or deemed made under the applicable Insurance Program which relate
to the Transferred Businesses and which arise from or relate to events or
occurrences prior to the Distribution Date. Entertainment shall pay all costs
incurred by SFX after the Distribution Date in defending or pursuing any such
claims under an insurance policy relating to the Transferred Businesses,
including the salaries of employees based on the portion of time spent on such
claims. Entertainment shall make available to SFX such of its employees as SFX
may reasonably request as witnesses or deponents in connection with SFX's
defense or pursuit of any such claims, at Entertainment's sole cost and
expense.

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ARTICLE 10

CONDITIONS

SECTION 10.1 Conditions. The obligations of SFX and Entertainment to
consummate the Distribution shall be subject to the fulfillment or waiver of
each of the following conditions:

(a) the Board of Directors of SFX shall be satisfied that SFX's
surplus would be sufficient to permit under Delaware law the Distribution and
shall have formally approved the Distribution;

(b) the Registration Statement shall have been declared effective by
the SEC, and no stop order shall have been issued or be pending with respect
thereto;

(c) the Entertainment Class A Common Stock shall have been accepted
for listing or trading, subject to official notice of issuance, on a national
exchange or the Nasdaq Stock Market;

(d) all necessary third party consents to the Distribution shall have
been obtained;

(e) the necessary stockholder approvals shall have been obtained to
consummate the Distribution as presently contemplated;

(f) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the
Distribution shall be in effect;

(g) SFX and Entertainment shall have entered into the Related
Agreements; and

(h) each of the covenants and provisions in this Agreement required to
be performed or complied with prior to the Distribution shall have been
performed or complied with.

Any determination by the Board of Directors of SFX on behalf of either
party hereto prior to the Distribution Date concerning the satisfaction or
waiver of any or all of the conditions set forth in this Section shall be
conclusive.

ARTICLE 11

MEDIATION

SECTION 11.1 Mediation and Binding Arbitration. If a dispute arises
between SFX and Entertainment as to the interpretation or the implementation of
this Agreement, the Related Agreements or any other agreement entered into
pursuant hereto (other than a dispute with respect to Working Capital, which
shall be resolved in accordance with the provisions of Section 2.2. hereof),
including, without limitation, any matter involving an Indemnifiable Loss, SFX
and Entertainment agree to use the following procedures, in lieu of either
party pursuing other available remedies and as the sole remedy, to resolve the
dispute.

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SECTION 11.2 Initiation. A party seeking to initiate the procedures
shall give written notice to the other party, describing briefly the nature of
the dispute. A meeting shall be held between the parties within 10 days of the
receipt of such notice, attended by individuals with decision-making authority
regarding the dispute, to attempt in good faith to negotiate a resolution of
the dispute.

SECTION 11.3 Submission to Mediation. If, within 30 days after such
meeting, the parties have not succeeded in negotiating a resolution of the
dispute, they agree to submit the dispute to mediation in accordance with the
Commercial Mediation Rules of the American Arbitration Association and to bear
equally the costs of the mediation.

SECTION 11.4 Selection of Mediator. The parties will jointly appoint a
mutually acceptable mediator, seeking assistance in such regard from the
American Arbitration Association or another mutually agreed-upon organization
if they have been unable to agree upon such appointment within 20 days from the
conclusion of the negotiation period.

SECTION 11.5 Mediation; Submission to Arbitration. The parties agree
to participate in good faith in the mediation and negotiations related thereto
for a period of 30 days following the initial mediation session. If the parties
are not successful in resolving the dispute through the mediation by the end of
such 30-day period, then the parties agree to submit the matter to binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, by a sole arbitrator selected in accordance with the
provisions of Section 11.6 hereof. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. ss. 1-16, and judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof.

SECTION 11.6 Selection of Arbitrator. The parties shall have 10 days
from the end of the mediation period to agree upon a mutually acceptable
neutral person not affiliated with either of the parties to act as arbitrator.
If no arbitrator has been selected within such time, an arbitrator shall be
selected for the parties by the American Arbitration Association.

SECTION 11.7 Cost of Arbitration. The costs of arbitration shall be
apportioned between SFX and Entertainment as determined by the arbitrator in
such manner as the arbitrator deems reasonable, taking into account the
circumstances of the case, the conduct of the parties during the proceeding and
the result of the arbitration.

ARTICLE 12

MISCELLANEOUS

SECTION 12.1 Complete Agreement. Subject to Section 3.3 hereof, this
Agreement, including the Annexes and Exhibits and the agreements and other
documents referred to herein, shall constitute the entire agreement between SFX
and Entertainment with respect to the subject matter hereof and shall supersede
all previous negotiations, commitments and writings with respect to such
subject matter.

SECTION 12.2 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
(regardless of the laws that might otherwise govern under applicable principles
of conflicts law) as to all matters, including, without limitation, matters of
validity, construction, effect, performance and remedies.

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SECTION 12.3 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party
to whom notice is given, on the day of transmission if sent via facsimile
transmission to the facsimile number given below, provided telephonic
confirmation of receipt is obtained promptly after completion of transmission,
on the business day after delivery to an overnight courier service or the
Express mail service maintained by the United States Postal Service, provided
receipt of delivery has been confirmed, or on the fifth day after mailing
provided receipt of delivery is confirmed, if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, properly addressed and return-receipt requested, to the party as
follows:

IF TO SFX:

PRIOR TO THE EFFECTIVE TIME: SFX Broadcasting, Inc.
650 Madison Avenue, 16th Floor
New York, New York 10022
Telecopy No.: (212) 753-3188
Attention: Howard J. Tytel

WITH A COPY TO: Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Telecopy No.: (214) 740-7313
Attention: Lawrence D. Stuart, Jr.

AFTER THE EFFECTIVE TIME: Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Telecopy No.: (214) 740-7313
Attention: Lawrence D. Stuart, Jr.

IF TO ENTERTAINMENT: SFX Entertainment, Inc.
650 Madison Avenue, 16th Floor
New York, New York 10022
Telecopy No.: (212) 753-3188
Attention: Howard J. Tytel

WITH A COPY TO: Baker & McKenzie
Two Allen Center
1200 Smith Street, Suite 1200
Houston, Texas 77002
Telecopy No.: (713) 427-5099
Attention: Amar Budarapu

Any party may change its address by giving the other party written notice of
its new address in the manner set forth above.

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SECTION 12.4 Amendment and Modification. Except as provided in Section
12.5, this Agreement may be amended, modified, supplemented, waived or
otherwise modified or terminated only by written agreement of SFX and
Entertainment and with the consent of Parent, which consent shall not be
unreasonably withheld.

SECTION 12.5 Termination. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of SFX without the approval of Entertainment or Parent. In the
event of such termination, no party shall have any Liability of any kind to any
other party.

SECTION 12.6 Successor and Assigns. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either party without the prior written consent of the other party.

SECTION 12.7 No Third Party Beneficiaries. Except for the
indemnification rights under this Agreement of any Indemnitee in their capacity
as such, and except for the mutual releases provided for in this Agreement,
this Agreement, the Exhibits hereto and the Related Agreements are solely for
the benefit of the parties hereto and are not intended to confer upon any other
person except the parties hereto any rights or remedies hereunder.

SECTION 12.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

SECTION 12.9 Interpretation. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement. As used in this Agreement, the
term "person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.

SECTION 12.10 Annexes, Etc. The Annexes, Schedules and Exhibits shall
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.

SECTION 12.11 Legal Enforceability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Upon any such
determination that a provision of this Agreement is prohibited or unenforceable
in whole or in part, the court or arbitral panel making such determination
shall have the power to modify such invalidated provision so as to effect the
original intent of the parties as closely as possible.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the day and year first above written.

SFX BROADCASTING, INC.

By: /s/ Thomas P. Benson
-----------------------------
Name: Thomas P. Benson
Title: Chief Financial Officer

SFX ENTERTAINMENT, INC.

By: /s/ Thomas P. Benson
-----------------------------
Name: Thomas P. Benson
Title: Chief Financial Officer

SBI HOLDING CORPORATION, with
respect to Section 12.4 only.

By: /s/ William Banowsky, Jr.
-----------------------------
Name: William Banowsky, Jr.
Title: Vice President

<PAGE>

ANNEX I
ASSUMED LIABILITIES

(a) Lease Agreement dated May 1, 1986, as amended, between ARDE Realty
Corp., N.V. and Sillerman-Magee Communications Management Corporation, assumed
by SFX, and that certain Lease Agreement dated May 27, 1997, between HIRO Real
Estate Co. and SFX (the "Leases");

(b) Debt and Liabilities incurred by SFX Concerts, Inc. or
Entertainment or their respective Subsidiaries after the date of execution of
the Merger Agreement in connection with acquisitions and capital expenditures
approved by their respective Boards of Directors and such other debt and
Liabilities as Entertainment deems appropriate;

(c) Liabilities under (i) the Purchase Agreement dated as of March 6,
1998 between SFX Delaware, Inc. and Bombardier Business Jet Solutions Inc. and
(ii) the Purchase Agreement dated as of February 10, 1997 between SFX Delaware,
Inc. and Bombardier Business Jet Solutions Inc. (collectively, the "Airplane
Agreements");

(d) Liabilities under the the Amended and Restated Financial
Consulting Agreement, dated as of February 1, 1996 by and between Sillerman
Communications Management Corporation and Triathlon Broadcasting Company;

(e) Liabilities under the following, subject to Section 4.3 of this
Agreement:

(i) Employment Agreement with Ron Delsener dated January 2, 1997;

(ii) Employment Agreement with Mitch Slater dated January 2,
1997;

(iii) Employment Agreement with David Lucas dated June 1997;

(iv) Employment Agreement with Steve Lybesma dated June 1997 and
all other concert division employees; and

(v) the employment agreements of all employees located on 650
Madison Avenue, New York, New York, 10022;

(f) All Liabilities and obligations of SFX and its Subsidiaries
arising under the Asset Purchase and Sale Agreement, dated as of June 23, 1997,
by and among Sunshine Design, L.P., SFX Broadcasting, Inc., Tourdesign, Inc.,
P. David Lucas and Steven P. Sybesma;

(g) All Liabilities and obligations arising under the Termination and
Assignment Agreement, dated as of April 15, 1996, by and between Sillerman
Communications Management Corporation and SFX Broadcasting, Inc.;

(h) All liabilities and obligations under SFX Entertainment's Senior
Subordinated Notes due 2008; and

(i) Obligations which accrue after the Distribution Date for all the
items above.

I-1

<PAGE>

ANNEX II
TRANSFERRED ASSETS

Subject to Section 4.3 of this Agreement, the following are the
Transferred Assets:

(a) the rights under the Airplane Agreements;

(b) the rights under the Amended and Restated Financial
Consulting Agreement, dated as of February 1, 1996 by and between
Sillerman Communications Management Corporation and Triathlon
Broadcasting Company;

(d) the note receivable resulting from the sale of SFX's radio
stations in Myrtle Beach;

(e) Employment Agreement with Ron Delsener dated January 2, 1997;

(f) Employment Agreement with Mitch Slater dated January 2, 1997;

(g) Employment Agreement with David Lucas dated June 1997;

(h) Employment Agreement with Steve Lybesma dated June 1997 and
all other concert division employees;

(i) the employment agreements of all employees located on 650
Madison Avenue, New York, New York, 10022;

(j) all accounts receivable relating to the Entertainment
Business of SFX;

(k) all assets used primarily in the Transferred Businesses
including, without limitation, permits, licences, intellectual
property and other rights;

(l) all of the capital stock of SFX Concerts, Inc. and its
subsidiaries; and

(m) rights which accrue after the Distribution Date for all of
the items listed above.

II-1

<PAGE>

TAX SHARING AGREEMENT

This TAX SHARING AGREEMENT, dated as of April 20, 1998 is entered into
by SFX Broadcasting, Inc., a Delaware corporation ("SFX"), and SFX
Entertainment, Inc., a Delaware corporation ("Entertainment"), and with respect
to Section 5.15 only, SBI Holding Corporation, a Delaware corporation
("Parent"), and shall become effective as of the time and date specified
herein.

RECITALS

WHEREAS, pursuant to the Distribution Agreement SFX will distribute
all of the shares of Entertainment it owns to SFX's stockholders.

WHEREAS, Entertainment and its subsidiaries have been or will be
included in the consolidated Federal Income Tax returns filed by SFX, and
Entertainment and certain of its subsidiaries have been or will be included
with one or more members of the SFX Group in state and local unitary or
combined Income Tax and franchise tax returns.

WHEREAS, the parties desire to set forth their agreement with respect
to the Federal, state, and local Taxes attributable to each of them and their
subsidiaries for all taxable periods beginning before the day following the
date defined herein as the "Distribution Date" (including the effect on such
Taxes of carrybacks and other transactions and occurrences that may arise in
taxable periods ending after the Distribution Date).

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement, the following definitions shall apply
in addition to those set forth above:

(a) "Adjustment" shall mean a formal notice given by the IRS or any
other relevant taxing authority which either proposes or assesses a change in
any Pre-Distribution Tax Liability or Post-Distribution Tax Liability (in each
case whether creating a Tax Benefit or a Tax Detriment).

(b) "Affiliated Group" shall mean an affiliated group of corporations
within the meaning of section 1504(a) of the Code for the taxable period in
question.

<PAGE>

business tax credit, or any other Tax Item of the Entertainment Affiliated
Group which under the Code or any other applicable Income Tax law can be used
to generate a Tax Benefit for the SFX Affiliated Group.

(d) "Code" shall mean the Internal Revenue Code of 1986 (or, if
relevant, the Internal Revenue Code of 1954), as amended, in effect for the
taxable period in question and corresponding provisions of any subsequent
federal tax laws.

(e) "Distribution" shall mean the distribution by SFX of the stock of
Entertainment to the holders of SFX stock pursuant to the terms of the
Distribution Agreement.

(f) "Distribution Agreement" shall mean the distribution agreement
between SFX Broadcasting, Inc. and SFX Entertainment, Inc. dated as of April
20, 1998.

(g) "Distribution Date" shall mean the date on which the Distribution
occurs.

(h) "Entertainment Affiliated Group shall mean, for each taxable
period beginning after the Distribution Date, the Affiliated Group of which
Entertainment is the "common parent" within the meaning of section 1504(a) of
the Code.

(i) "Entertainment Group" shall mean, with respect to any taxable
period, the corporations that were members of the SFX Affiliated Group and that
are members of the Entertainment Affiliated Group immediately after the
Distribution Date, including, without limitation, Entertainment.

(j) "Final Determination" shall mean the final resolution of any tax
liability (including all related interest and penalties) for a taxable period.
A Final Determination shall result from the first to occur of:

(i) The expiration of 30 days after official IRS acceptance
of a Waiver of Restrictions on Assessment and Collection of Deficiency
in Tax and Acceptance of Overassessment on IRS Form 870 or 870-AD (or
any successor comparable form or the expiration of a comparable period
with respect to any comparable agreement or form under the laws of
other jurisdictions), unless, within such period, the taxpayer gives
notice to the other party of the taxpayer's intention to attempt to
recover all or part of any amount paid or to be paid pursuant to the
Waiver or comparable form by the filing of a timely claim for refund;

(ii) a decision, judgment, decree, or other order by a court
of competent jurisdiction that has become final and is not subject to
further judicial review (by appeal or otherwise);

(iii) the execution of a closing agreement under section
7121 of the Code or the official acceptance by the IRS of an offer in
compromise under section 7122 of the Code, or comparable agreements
under the laws of other jurisdictions;

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(iv) the expiration of the time for filing a claim for
refund or for instituting suit in respect of a claim for refund
disallowed in whole or part by the IRS or any other taxing authority
with which a claim for refund could be or was filed;

(v) any other final disposition of the tax liability for
such period by reason of the expiration of the applicable statute of
limitations; or

(vi) any other event that the parties agree is a final and
irrevocable determination of the liability at issue.

(k) "Income Taxes" shall mean all federal, state and local Taxes
imposed upon, or measured by, income (including the federal alternative minimum
tax under Section 55 of the Code), and those franchise, excise and similar
Taxes which have been customarily included in the provision for Income Taxes on
SFX's financial statements, together with all related interest, penalties and
additions to tax.

(l) "Indemnified Party" shall have the meaning ascribed to such term
in Section 4.01(a) of this Agreement.

(m) "Indemnifying Party" shall have the meaning ascribed to such term
in Section 4.01(a) of this Agreement.

(n) "IRS" means the United States Internal Revenue Service or any
successor thereto, including, but not limited to, its agents, representatives,
and attorneys.

(o) "Merger Agreement" shall mean the agreement and plan of merger
among SBI Holding Corporation, SBI Radio Acquisition Corporation and SFX
Broadcasting, Inc. dated as of August 24, 1997.

(p) "Other Taxes" shall mean all Taxes (including all related
interest, penalties and additions to tax) other than Income Taxes.

(q) "Post-Distribution Tax Liabilities" shall mean the respective
liabilities of the members of the SFX Affiliated Group and the Entertainment
Affiliated Group for Income Taxes for all taxable periods beginning on or after
the day following the Distribution Date.

(r) "Pre-Distribution Tax Liabilities" shall mean the liability of
members of the SFX Affiliated Group for Income Taxes for all taxable periods
beginning before the day following the Distribution Date. A liability described
in the previous sentence is a Pre-Distribution Tax Liability whether the
liability has been previously assessed in whole or in part or is assessed in
whole or in part after the date of this Agreement, and whether the liability is
or was imposed on the SFX Affiliated Group collectively or on any member of
such Group separately.

(s) "SFX Affiliated Group" shall mean, for each taxable period, the
Affiliated Group of which SFX or any successor of SFX is the "common parent"
within the meaning of section 1504(a)

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<PAGE>

of the Code.

(t) "SFX Group" shall mean, with respect to any taxable period, the
corporations that were members of the SFX Affiliated Group during such period
(including, without limitation, SFX), exclusive of the corporations that are
included in the Entertainment Affiliated Group immediately after the
Distribution Date.

(u) "Tax Benefit" shall mean a reduction in the Income Tax liability
of a corporation (or of the Affiliated Group of which it is a member) for any
taxable period. Except as otherwise provided in this Agreement, a Tax Benefit
shall be deemed to have been realized or received from a Tax Item in a taxable
year only if and to the extent that the Income Tax liability of the taxpayer
(or the Affiliated Group of which it is a member) for such period is less than
it would have been if such liability were determined without regard to such Tax
Item.

(v) "Tax Detriment" shall mean an increase in the Income Tax liability
of a corporation (or of the Affiliated Group of which it is a member) for any
taxable period. Except as otherwise provided in this Agreement, a Tax Detriment
(i) shall be deemed to have been realized or suffered from a Tax Item in a
taxable year only if and to the extent that the Income Tax liability of the
taxpayer (or the Affiliated Group of which it is a member) for such period is
greater than it would have been if such liability were determined without
regard to such Tax Item and (ii) shall include the several liability imposed on
a corporation by the provisions of Treasury Regulation ss. 1.1502-6 to the
extent such liability is for Income Taxes for which such corporation is not
responsible pursuant to this Agreement.

(w) "Taxes" shall mean Income Taxes and Other Taxes.

(x) "Tax Item" shall mean any item of income, gain, loss, deduction,
credit, recapture of credit, or any other item which increases or decreases
Income Taxes paid or payable.

ARTICLE II

FILING OF TAX RETURNS

SECTION 2.01. PRE-DISTRIBUTION TAX RETURNS.

(a) SFX shall file all consolidated Federal Income Tax returns (and
any unitary, combined or consolidated state and local Income Tax returns or tax
returns for Other Taxes filed on a unitary, combined or consolidated basis) for
each member of the SFX Affiliated Group that are required to be filed for
periods beginning before (or beginning and ending on) the Distribution Date and
shall pay all Taxes attributable to these periods, including any deferred
income triggered into income under Treas. Reg. ss. 1.1502-13 and Treas. Reg.
ss. 1.1502-14 and any excess loss accounts taken into income under Treas. Reg.
ss. 1.1502-19. Entertainment acknowledges that Treas. Reg. ss. 1.1502-77(a)
confers certain authority on SFX, as the common parent of the SFX Affiliated
Group, with respect to Federal Income Tax matters for all taxable periods
beginning before the day

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<PAGE>

following the Distribution Date and agrees to enter into any election or
consent reasonably requested by SFX with respect to such matters for such
taxable years. Entertainment agrees (on behalf of itself and members of the
Entertainment Group) (i) not to make any election to exclude any member of the
Entertainment Group from the SFX consolidated Federal Income Tax return (or any
comparable state or local combined or consolidated return) for taxable periods
beginning before (or beginning and ending on) the Distribution Date and (ii)
not to take, advocate or fail to oppose any position relating to the tax
treatment of any transaction occurring prior to the Distribution Date which is
inconsistent with the manner in which such transaction was treated on the
consolidated return of the SFX Affiliated Group for the taxable periods during
which members of the Entertainment Group were members of the SFX Affiliated
Group. SFX agrees not to take, advocate or fail to oppose any position relating
to the tax treatment of any transaction occurring prior to the Distribution
which is inconsistent with the manner in which such transaction was treated on
the consolidated return of the SFX Affiliated Group for the taxable periods
during which members of the Entertainment Group were members of the SFX
Affiliated Group, except for any such actions requested by Entertainment.

(b) SFX shall be responsible for filing all returns relating to
members of the SFX Group with respect to Other Taxes and with respect to any
Income Taxes as to which consolidated, unitary or combined returns are not made
for a period beginning before (or beginning and ending on) the Distribution
Date. Entertainment shall be responsible for filing all returns relating to
members of the Entertainment Group with respect to Other Taxes and with respect
to any Income Taxes as to which consolidated, unitary or combined returns are
not made for a period beginning before (or beginning and ending on) the
Distribution Date.

SECTION 2.02. POST-DISTRIBUTION TAX RETURNS. For taxable periods
beginning after the Distribution Date: (i) SFX shall be responsible for filing
tax returns relating to members of the SFX Group; and (ii) Entertainment shall
be responsible for filing tax returns relating to members of the Entertainment
Group.

ARTICLE III
PAYMENT OF TAXES

SECTION 3.01. PRE-DISTRIBUTION CONSOLIDATED INCOME TAXES AND CERTAIN
OTHER TAXES.

(a) So as to enable the SFX Affiliated Group to prepare accurately and
completely the consolidated returns which include the Income Tax liability of
members of the Entertainment Group and in order to provide for accurate
financial reporting for tax periods or portions thereof ending on or before the
Distribution Date, Entertainment shall prepare and submit to SFX, no later than
180 days after the end of each such tax period or portion thereof (or such
later date as consented to by SFX, which consent shall not be unreasonably
withheld), complete draft Federal Income Tax returns reflecting the Tax Items
of the members of the Entertainment Group for each such tax period or portion
thereof, modified as provided in the following sentence and provide such other
information with respect to Income Taxes (or Other Taxes, the returns for which
are filed on a unitary, combined or consolidated basis) as SFX may reasonably
request. Income Taxes shall be calculated (i) using, to the extent permitted by
law, such methods, conventions and principles of taxation and making

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<PAGE>

such elections as are consistent with the methods, conventions, principles and
elections previously used by the SFX Affiliated Group or such member of the
Entertainment Group in preparing prior Income Tax returns; and (ii) for the
taxable period which ends on the Distribution Date, by apportioning Tax Items
based upon an interim closing of the books of the Entertainment Group as of the
end of the Distribution Date. Entertainment agrees not to make a ratable
allocation election under Treas. Reg. ss. 1.1502-76(b)(2)(ii)(D). Entertainment
shall bear all costs and expenses of preparation and submission of such
information, including accountants' and attorneys' fees.

(b) For taxable periods in which the Entertainment Group is included
in the SFX Affiliated Group, Entertainment shall pay to SFX an amount equal to
the Income Tax liability of the Entertainment Group (and any liability of the
Entertainment Group for Other Taxes the returns for which are filed on a
unitary, combined or consolidated basis), as determined on a separate company
basis; but only to the extent such separate Income Tax Liability of the
Entertainment Group (or separate Other Tax liability of the Entertainment
Group) is not included in the computation of working capital under Section
5.07(i) of the Merger Agreement. In addition, Entertainment shall not be
obligated to SFX under the preceding sentence to the extent the SFX Affiliated
Group's Income Tax Liability for the tax period including the Distribution Date
is less than the Income Tax Liability of the Entertainment Group for the tax
period of the Entertainment Group ending on the Distribution Date as result of
a net operating losses of the SFX Group.

SECTION 3.02. RESPONSIBILITY FOR TAX ADJUSTMENTS.

(a) Entertainment shall pay, reimburse and indemnify SFX as common
parent of the SFX Affiliated Group for any Pre-Distribution Tax Liabilities
arising from an Adjustment with respect to a Tax Item of a member of the
Entertainment Group; and

(b) SFX shall pay, reimburse and indemnify Entertainment as common
parent of the Entertainment Affiliated Group for:

(i) any Tax Benefit derived by the SFX Group from an
Adjustment with respect to a Tax Item of a member of the Entertainment
Group; and

(ii) any Tax Detriment suffered by any member of the
Entertainment Group from an Adjustment with respect to a Tax Item of a
member of the SFX Group.

SECTION 3.03. NON-CONSOLIDATED OTHER TAXES AND INCOME TAXES. Unless
otherwise provided in this Agreement, the SFX Group shall pay all Other Taxes
and any Income Taxes as to which consolidated, unitary or combined returns are
not made (and shall be entitled to receive and retain all refunds of such
Taxes) that are attributable to members of the SFX Group. Unless otherwise
provided in this Agreement, the Entertainment Group shall pay all Other Taxes
and any Income Taxes as to which consolidated, unitary or combined returns are
not made (and shall be entitled to receive and retain all refunds of such
Taxes) which are attributable to members of the Entertainment Group.

SECTION 3.04. CARRYBACKS.

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<PAGE>

(a) To the extent that any carryback period for a Carryback Item would
include any taxable period beginning before the day following the Distribution
Date, Entertainment agrees to elect (under section 172(b)(3) of the Code and,
to the extent feasible, any similar provision of any applicable state or local
Income Tax law) to relinquish such carryback period as to any Carryback Item
which could thereby be used to create or carry forward a Tax Benefit for the
SFX Group (in which event no payment shall be due from SFX to Entertainment in
respect of such Carryback Item). SFX shall not elect to retain any net
operating loss carryovers or capital loss carryovers of the Entertainment
Group.

(b) If, notwithstanding the foregoing, for any taxable period ending
after the Distribution Date, a Carryback Item is incurred, then SFX shall pay
to Entertainment an amount equal to the Tax Benefit (adjusted as provided in
the next sentence) obtained by the SFX Affiliated Group in any taxable year as
a direct consequence of the Carryback Item. In determining the Tax Benefit
obtained by SFX with respect to a taxable year, if, in addition to the
Entertainment Group Carryback Items, there are also any Tax Items or Carryback
Items generated by the SFX Group which are properly taken into account in
determining the Income Tax liability of the SFX Affiliated Group for such
taxable year, SFX shall be credited with a pro rata portion of any resulting
Tax Benefit; the amount of such Tax Benefit to be paid to Entertainment shall
be reduced by the present value (determined at the then applicable short-term
Federal rate under the Code) of any future Tax Detriment that may be suffered
by any member of the SFX Group as a consequence of such Entertainment Group
Carryback Item. Entertainment agrees to indemnify and hold the SFX Group
harmless from any Taxes resulting from the disallowance of a Tax Benefit which
previously resulted in a payment from SFX to Entertainment under this Section
3.04(b).

(c) SFX shall cooperate fully in obtaining the Tax Benefit
attributable to any Carryback Item, but any reasonable out-of-pocket expenses
incurred by SFX that are directly attributable to such efforts shall be borne
by Entertainment. In lieu of such cooperation, SFX may elect to pay to
Entertainment the Tax Benefit which would have been payable under this section
if such Carryback Item were allowed.

(d) Any refund of Tax (including any interest thereon) attributable to
the SFX Affiliated Group for any period beginning before (or beginning and
ending on) the Distribution Date shall be the property of SFX and any refund of
Tax (including any interest thereon) attributable to the Entertainment Group
for the period beginning before (or beginning and ending on) the Distribution
Date shall be the property of Entertainment.

SECTION 3.05. RESPONSIBILITY FOR DISTRIBUTION TAXES. Subject to
Section 4.01, Entertainment and any successor corporation shall be responsible
for, and shall indemnify and hold harmless SFX and each member of the SFX Group
from Income Taxes, Other Taxes and all reasonable out-of-pocket costs and
expenses arising out of, based upon or attributable to the Distribution, but,
in the case of Income Taxes, only to the extent such Income Taxes are based
upon any gain recognized by the SFX Group as a result of the Distribution in
excess of the net operating losses of the SFX Affiliated Group that are
available to offset such gain in the tax period including the Distribution
(without regard to subsequent tax years). SFX agrees to consult in good faith
with Entertainment regarding the amount of gain, if any, recognized by SFX as a
result of the

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<PAGE>

Distribution.

SECTION 3.06. PAYMENT. If SFX is required to make a payment to a
member of the Entertainment Group under this Agreement, such payment shall be
made to Entertainment or any successor corporation as the parent of the
Entertainment Affiliated Group, and any payment due under this Agreement from
any member of the Entertainment Group to SFX shall be made by Entertainment to
SFX or any successor corporation as common parent of the SFX Group. The payment
shall be made by the earlier of (i) 20 days after SFX (or a member of the
Entertainment Group, as applicable) (x) receives a refund (including, without
limitation, a refund in the form of a credit against tax liability) or realizes
a reduction in its tax liability (including, without limitation, estimated
Taxes) or (y) makes a tax payment (including, without limitation, any payment
made in connection with either an estimated or annual tax liability), (ii) 20
days after a Final Determination with respect to such tax or (iii) 20 days
after the determination by the parties or pursuant to Article V that such
payment is due. The amount of any payment required to be made by any party to
another under this Agreement shall be an amount which, after subtraction of any
additional federal, state or local Taxes payable by the recipient in respect of
the receipt of such payment, is equal to the amount payable hereunder. SFX and
Entertainment agree that, without limiting the ultimate payment obligation of
the payor set forth in the preceding sentence, to the extent there is
substantial authority (within the meaning of section 6662 of the Code) for such
position or such position is otherwise permissible under applicable law, any
payment shall be reported as non-deductible and non-taxable.

ARTICLE IV

COOPERATION AND EXCHANGE OF INFORMATION

SECTION 4.01. MATTERS GIVING RISE TO INDEMNITY.

(a) NOTICE. If any tax authority shall propose an Adjustment to the
tax liability of either Entertainment or SFX ("Indemnified Party") which would
result, if such Adjustment were to be confirmed by a Final Determination, in a
loss against which the other party ("Indemnifying Party") may be required to
indemnify Indemnified Party pursuant to this Agreement, Indemnified Party shall
promptly notify Indemnifying Party thereof in writing. Such notice to
Indemnifying Party shall include sufficient information with respect to the
issues as to which indemnity may be sought to enable Indemnifying Party to
determine whether to request Indemnified Party to contest the Adjustment.

(b) CONDUCT OF EXAMINATIONS. Indemnified Party shall keep Indemnifying
Party informed as to the status and progress of all matters materially related
to any issue that arises on the audit of Indemnified Party's tax returns that
could give rise to an obligation of Indemnifying Party to make payments to
Indemnified Party hereunder. Indemnified Party shall discuss with
representatives of Indemnifying Party the course and conduct of all material
matters that are the subject of this Agreement and shall permit such
representatives to participate in discussions with such tax authorities.
Indemnified Party will consider in good faith written proposals in connection

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with contesting such Adjustment that Indemnifying Party shall submit to it from
time to time, provided that Indemnified Party shall control the nature of all
action to be taken to contest such Adjustment.

(c) CONTEST RIGHTS AND CONDITIONS. Upon receipt of any formal notice
from the IRS (including, without limitation, a 30-day letter) or any other tax
authority proposing an Adjustment which could impose liability on Indemnifying
Party hereunder, Indemnified Party shall promptly give notice thereof to
Indemnifying Party, and Indemnified Party will contest such Adjustment if
Indemnifying Party shall so request in writing within 20 days of Indemnifying
Party's receipt of such notice from Indemnified Party. In no event, however,
shall Indemnified Party be required to contest any Adjustment unless coincident
with Indemnifying Party's request (A) Indemnified Party shall have received (i)
an indemnity from Indemnifying Party for any Income Taxes, Other Taxes and all
other liability, expense or loss arising out of or relating to the Indemnifying
Party's issues involved in the contest or claim (including, without limitation,
all out-of pocket expenses, costs, reasonable legal, accounting, engineers' and
other professional fees and disbursements, but excluding any independent
expense incurred by Indemnified Party for the purpose of monitoring the
progress of the issue) and (ii) an opinion of independent tax counsel to
Indemnifying Party (which counsel shall be reasonably acceptable to Indemnified
Party) to the effect that a reasonable basis exists for contesting the
Adjustment to the extent that the contest involves such issues; and (B) if such
contest is to be conducted in a manner requiring payment of a proposed tax
deficiency, Indemnifying Party shall have advanced to Indemnified Party, on an
interest-free basis, an amount sufficient to make payment of the proposed tax
deficiency attributable to the Adjustment, together with any required interest
or penalties in respect of such proposed tax deficiency. If any funds are
advanced by Indemnifying Party in connection with any tax contest, any refund
received to the extent fairly attributable to such advance shall be returned to
Indemnifying Party, together with any interest thereon paid by the relevant
taxing authority, promptly upon Indemnified Party's receipt of such funds. If
Indemnifying Party shall have requested Indemnified Party to contest an
Adjustment and complied with each of the terms and conditions set forth above,
such contest shall be conducted by independent tax counsel selected by
Indemnifying Party and reasonably acceptable to Indemnified Party.

(d) SETTLEMENT; RELEASE OF INDEMNIFICATION. If Indemnifying Party
shall have requested Indemnified Party to contest an Adjustment and complied
with each of the terms and conditions set forth above, Indemnified Party shall
not settle or compromise any Adjustment for which indemnity is sought hereunder
without the written consent of Indemnifying Party (which consent shall not be
unreasonably withheld) unless it simultaneously releases Indemnifying Party
from its obligations to indemnify and reimburse Indemnified Party with respect
to the issues so settled or compromised, and in the event that Indemnified
Party concludes such a settlement or compromise without Indemnifying Party's
written consent, Indemnifying Party shall be deemed conclusively to have been
so released. If Indemnifying Party shall fail to request Indemnified Party to
contest any Adjustment or shall fail to comply with the terms and conditions
entitling it to make such request as set forth in subparagraph (c), Indemnified
Party may in its sole discretion elect to contest (or not contest) such
Adjustment with counsel selected by it and may at any time settle or compromise
the matter without the consent of Indemnifying Party and without releasing its
rights to indemnity from Indemnifying Party. If Indemnifying Party shall be
willing to accept any settlement proposed by any taxing

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authority with respect to an issue as to which Indemnifying Party has an
indemnity obligation hereunder, but Indemnified Party refuses to approve such
settlement, Indemnifying Party's obligation to indemnify Indemnified Party with
respect to such issue shall thereafter be limited in amount to the amount
Indemnifying Party would have been required to pay pursuant to such settlement.

SECTION 4.02. TAX RETURN INFORMATION. Without limiting Section 4.01
hereof, SFX and Entertainment agree to cooperate fully with each other in
connection with the preparation of any tax return or claim for refund or in
conducting any audit or other proceeding in respect of Taxes for all open
taxable periods. Such cooperation shall include making personnel and records
available promptly and within 30 days (or such other period as may be
reasonable under the circumstances) after a request for such personnel or
records is made by the tax-imposing authority or the other party, in either
such case at the expense of the requesting party or the party whose Taxes are
being examined by the tax-imposing authority. If any member of the SFX Group or
the Entertainment Group, as the case may be, fails to provide any information
requested pursuant to this section, then the requesting party shall have the
right to engage a public accountant of its choice to gather such information.
Entertainment and SFX agree to permit any such public accountant full access to
all appropriate records or other information in the possession of any member of
the SFX Group or the Entertainment Group, as the case may be, during reasonable
business hours, and to reimburse or pay directly all costs and expenses in
connection with the engagement of such public accountant.

SFX agrees to indemnify and hold harmless each member of the
Entertainment Group and its officers and employees, and Entertainment agrees to
indemnify and hold harmless each member of the SFX Group and its officers and
employees, against any cost, fine, penalty or other expense of any kind
attributable to the negligence or misconduct of a member of the SFX Group or
the Entertainment Group, as the case may be, in supplying a member of the other
group with inaccurate or incomplete information.

SECTION 4.03. RECORD RETENTION. SFX and Entertainment agree to retain
all records which may contain information or provide evidence relevant to the
determination of the Income Tax liability of the SFX Affiliated Group or the
Entertainment Affiliated Group or the shareholders of either for any taxable
period until such time as a Final Determination occurs with respect to such
taxable period, provided, however, that such records need not be retained
longer than 20 years after the end of the latest taxable period to which they
relate so long as such records are offered to the other party before they are
destroyed by the party that possesses them.

ARTICLE V

MISCELLANEOUS

SECTION 5.01. EFFECTIVE DATE AND TERM OF AGREEMENT. This Agreement
shall become effective as of the day immediately prior to the Distribution
Date. Except as otherwise expressly provided herein, the respective covenants
of the parties contained herein shall continue in full force and effect
indefinitely.

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SECTION 5.02. PRIOR TAX-SHARING AGREEMENTS. At the time this Agreement
becomes effective, this Agreement shall supersede any other tax-sharing or
allocation agreement or arrangement in effect between members of the SFX Group
and members of the Entertainment Group prior to the date hereof.

SECTION 5.03. ELECTION UNDER SECTION 1552 OF THE CODE. Nothing in this
Agreement is intended to change or otherwise affect any election made by or on
behalf of the SFX Affiliated Group with respect to the calculation of earnings
and profits under section 1552 of the Code or applicable Treasury Regulations.
SFX, in its sole discretion, is authorized to seek any change in the method of
calculating earnings and profits as it deems desirable, provided, however, that
no such change shall modify the rights or obligations of the parties hereto.

SECTION 5.04. INJUNCTIONS. The parties acknowledge that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. The parties hereto shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court having jurisdiction,
such remedy being in addition to any other remedy to which they may be entitled
at law or in equity.

SECTION 5.05. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any thereof which may be hereafter declared invalid, void or
unenforceable. In the event that any such term, provision, covenant or
restriction

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is held to be invalid, void or unenforceable, the parties hereto shall use
their best efforts to find and employ an alternate means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction.

SECTION 5.06. ASSIGNMENT. Except by operation of law or in connection
with the sale of all or substantially all the assets of a party hereto, this
Agreement shall not be assignable, in whole or in part, directly or indirectly,
by any party hereby without the written consent of the other party; and any
attempt to assign any rights or obligations arising under this Agreement
without such consent shall be void; provided, however, that the provisions of
this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns.

SECTION 5.07. FURTHER ASSURANCES. Subject to the provisions hereof,
the parties hereto shall make, execute, acknowledge and deliver such other
instruments and documents, and take all such other actions, as may be
reasonably required in order to effectuate the purposes of this Agreement and
to cause the performance as contemplated by this Agreement. Subject to the
provisions hereof, each of the parties shall, in connection with entering into
this Agreement, performing its obligations hereunder and taking any and all
actions relating hereto, comply with all applicable laws, regulations, orders
and decrees, obtain all required consents and approvals and make all required
filings with any governmental agency, other regulatory or administrative
agency, commission or similar authority and promptly provide the other parties
with all such information as they may reasonably request in order to be able to
comply with the provisions of this sentence.

SECTION 5.08. PARTIES IN INTEREST. Except as herein otherwise
specifically provided, nothing in this Agreement expressed or implied is
intended to confer any right or benefit upon any person, firm or corporation
other than the parties and their respective successors and permitted assigns.

SECTION 5.09. WAIVERS, ETC. No failure or delay on the part of the
parties in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement
nor consent to any departure by the parties therefrom shall in any event be
effective unless the same shall be in writing, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.

SECTION 5.10. SETOFF. All payments to be made by any party under this
Agreement shall be made without setoff, counterclaim or withholding, all of
which are expressly waived.

SECTION 5.11. CHANGE OF LAW. If, due to any change in applicable law
or regulations or the interpretation thereof by any court of law or other
governing body having jurisdiction subsequent to the date of this Agreement,
performance of any provision of this Agreement or any transaction contemplated
thereby shall become impracticable or impossible, the parties hereto shall use
their best

-12-
<PAGE>

efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such provision.

SECTION 5.12. HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.

SECTION 5.13. COUNTERPARTS. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties hereto,
and each such executed counterpart shall be, and shall be deemed to be, an
original instrument.

SECTION 5.14. NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly given,
made or served, if in writing and delivered personally, by telegram or sent by
registered mail, postage prepaid to

SFX at: SFX Broadcasting, Inc.
200 Crescent Court, Suite 1600
Dallas, Texas 75201

Entertainment at: SFX Entertainment, Inc.
650 Madison Avenue
16th Floor
New York, New York 10022

or to such other address as any party may, from time to time, designate in a
written notice given in a like manner. Notice given by telegram shall be deemed
delivered when received by the recipient. Notice given by mail as set out above
shall be deemed delivered five calendar days after the date the same is mailed.

SECTION 5.15. AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified, supplemented, waived or otherwise modified or terminated
only by written agreement of SFX and Entertainment and with the consent of
Parent, which consent shall not be unreasonably withheld.

SECTION 5.16. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the domestic substantive laws of The
State of Delaware without regard to any choice or conflict of laws rule or
provision that would cause the application of the domestic substantive laws of
any other jurisdiction.

-13-

<PAGE>

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed by their respective officers, each of whom is duly authorized,
all as of the day and year first above written.

SFX BROADCASTING INC.

By: /s/ Thomas P. Benson
-------------------------------
Title: Vice President and Chief
Financial Officer

SFX ENTERTAINMENT, INC.

By: /s/ Thomas P. Benson
-------------------------------
Title: Vice President and Chief
Financial Officer

SBI HOLDING CORPORATION,
with respect to Section
5.15 only.

By: /s/ William Banowsky, Jr.
-------------------------------
Name: William Banowsky, Jr.
Title: Vice President

-14-

<PAGE>

Exhibit B to the Distribution Agreement

EMPLOYEE

BENEFITS

AND

COMPENSATION ALLOCATION AGREEMENT

DATED AS OF April 20, 1998

AMONG

SFX BROADCASTING, INC.,

SFX ENTERTAINMENT, INC.

AND

SBI HOLDING CORPORATION

<PAGE>

TABLE OF CONTENTS

Page

ARTICLE I. DEFINITIONS.................................................. 1

Section 1.1 General................................... 1

ARTICLE II. RETIREMENT AND WELFARE PLANS................................. 4

Section 2.1 SFX 401(k) Plan........................... 4
Section 2.2 Welfare Plans............................. 5

ARTICLE III. GENERAL PROVISIONS........................................... 7

Section 3.1 Employment Transfers...................... 7
Section 3.2 Costs and Expenses........................ 7

ARTICLE IV. MISCELLANEOUS................................................ 7

Section 4.1 Guarantee of Subsidiaries' Obligations.... 7
Section 4.2 Sharing of Information.................... 7
Section 4.3 Termination............................... 7
Section 4.4 Rights to Amend or Terminate Plans;
No Third Party Beneficiaries............ 8
Section 4.5 Complete Agreement........................ 8
Section 4.6 Governing Law............................. 8
Section 4.7 Notices................................... 8
Section 4.8 Amendment and Modification................ 8
Section 4.9 Successors and Assigns.................... 8
Section 4.10 Counterparts.............................. 8
Section 4.11 Interpretation............................ 9
Section 4.12 Legal Enforceability...................... 9
Section 4.13 References; Construction.................. 9
Section 4.14 Disputes.................................. 9

- i -

<PAGE>

EMPLOYEE BENEFITS AND COMPENSATION
ALLOCATION AGREEMENT

EMPLOYEE BENEFITS AND COMPENSATION ALLOCATION AGREEMENT, dated as of
April 20, 1998 by and between SFX Broadcasting, Inc., a Delaware corporation
("SFX"), and SFX Entertainment, Inc., a Delaware corporation and wholly-owned
subsidiary of SFX ("Entertainment"). Unless the context requires otherwise,
"SFX" refers to SFX and its subsidiaries (other than Entertainment and its
subsidiaries) and "Entertainment" refers to Entertainment and its subsidiaries.

WITNESSETH:

WHEREAS, pursuant to the terms of that certain Distribution Agreement
by and between SFX and Entertainment and dated as of April 20, 1998 (the
"Distribution Agreement), the parties have entered into this Agreement
regarding certain employment, compensation and benefit matters occasioned by
the Distribution; and

WHEREAS, SBI Holding Corporation (the "Parent") has joined as a
signatory and a party to this Agreement in order to preserve and protect its
rights under the Merger Agreement.

NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement and the Distribution Agreement, each
of the parties hereto, on behalf of itself and its subsidiaries, hereby agrees
as follows:

ARTICLE I.

DEFINITIONS

SECTION 1.1 GENERAL. Any capitalized terms that are used in this Agreement but
not defined herein shall have the meanings set forth in the Distribution
Agreement (or, if not defined therein, the meanings set forth in the Merger
Agreement), and, as used herein, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):

Adverse Consequences: means all actions, suits, proceedings,
investigations, charges, complaints, claims, demands, judgments, orders,
decrees, rulings, damages, fines, costs, amounts paid in settlement,
liabilities, losses, and expenses, including court costs and reasonable
attorneys' fees and expenses.

Agreement: this Employee Benefits and Compensation Allocation
Agreement.

<PAGE>

Alternate Payee: an alternate payee under a domestic relations order
which has been determined by the appropriate Plan administrator to be
qualified under Section 414(p) of the Code and Section 206(d) of ERISA and
which creates or recognizes an alternate payee's right to, or assigns to an
alternate payee, all or a portion of the benefits payable to a participant
under any Plan, or an alternate recipient under a medical child support
order which has been determined by the appropriate Plan administrator to be
qualified under Section 609(a) of ERISA and which creates or recognizes the
existence of an alternate recipient's right to, or assigns to an alternate
recipient the right to, receive benefits for which a participant or
beneficiary is eligible under any Plan.

Beneficiary: a beneficiary, dependent or Alternate Payee of a
participant in a Plan or the estate of a deceased participant in a Plan, in
each case, in his, her or its capacity as such a beneficiary, dependent,
Alternate Payee or estate.

Delsener/Slater Group: defined in Section 5.07(a) of the Merger
Agreement.

Distribution Agreement: defined in the recitals.

Distribution Date: defined in the Distribution Agreement.

Distribution Employees: defined in the Distribution Agreement.

Effective Time: defined in the Merger Agreement.

Employee: a Distribution Employee and any employee shown on the
payroll and other records of the Pre-Distribution Group as being assigned
to the Transferred Businesses as of the Distribution Date, if such
individual is, at the relevant time, actively at work or on a leave of
absence (including, but not limited to, vacation, holiday, sick leave,
family and medical leave, disability leave, military leave, jury duty,
layoff with rights of recall, and any other leave of absence or similar
interruption of active employment that is not considered, according to the
policies and practices of such entity, to have resulted in a permanent
termination of such individual's employment).

Entertainment: defined in the preamble.

Entertainment Participant: any individual who is an Employee or a
Beneficiary of an Employee.

Entertainment 401(k) Plan: a defined contribution plan and any related
trust established by Entertainment to receive the SFX 401(k) Plan account
balances described in Section 2.1(a).

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<PAGE>

Entertainment Plans: Plans provided by, contributed to or sponsored by
one or more members of the Delsener/Slater Group which are initially
effective on or after the Distribution Date to provide benefits to
Entertainment Participants.

Entertainment Welfare Plan: a Welfare Plan provided by, contributed to
or sponsored by one or more members of the Delsener/Slater Group which is
not a SFX Welfare Plan and is initially effective on or after the
Distribution Date to provide benefits to Entertainment Participants.

ERISA: the Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation, and the regulations promulgated
thereunder.

Executive Group: defined in the Merger Agreement.

Merger Agreement: defined in the Distribution Agreement.

Parent: defined in the recitals.

Plan: any written or unwritten plan, policy, program, payroll
practice, ongoing arrangement, trust, fund, contract, insurance policy or
other agreement or funding vehicle provided by, contributed to or sponsored
by one or more members of the SFX Group or the Delsener/Slater Group,
providing benefits to SFX Participants or Entertainment Participants,
regardless of whether it is mandated under local law or negotiated or
agreed to as a term or condition of employment or otherwise, and regardless
of whether it is governmental, private, funded, unfunded, financed by the
purchase of insurance, contributory or noncontributory.

Pre-Distribution Group: SFX and its subsidiaries prior to the
Distribution.

SFX: defined in the preamble.

SFX Employee: any individual who is not an Employee who is actively
employed or on a leave of absence from (including, but not limited to,
vacation, holiday, sick leave, family and medical leave, disability leave,
military leave, jury duty, layoff with rights of recall, and any other
leave of absence or similar interruption of active employment that is not
considered, according to the policies and practices of such entity, to have
resulted in a permanent termination of such individual's employment) or was
formerly employed by one or more members of the Pre-Distribution Group.

SFX 401(k) Plan: the SFX Broadcasting 401(k) Plan, or any successor
thereto (by merger of plans or otherwise) and any related trust.

SFX Group: the Pre-Distribution Group, excluding the Delsener/Slater
Group.

- 3 -
<PAGE>

SFX Welfare Plan: any Welfare Plan provided by, contributed to or
sponsored by one or more members of the SFX Group on, prior to or after the
Distribution Date.

Welfare Plan: any Plan that is an "employee welfare benefit plan" as
defined in Section 3(1) of ERISA (whether or not such plan is subject to
ERISA) and any Plan that is or is intended to be a cafeteria plan under
Code Section 125; provided such term shall not include any severance
obligations to the Executive Group nor any stock-based plan or arrangement.

ARTICLE II.

RETIREMENT AND WELFARE PLANS

SECTION 2.1 SFX 401(K) PLAN

(a) SFX and Entertainment shall take all actions necessary or
appropriate so that, as of the Distribution Date, all members of the
Delsener/Slater Group shall cease to be participating employers and sponsors of
the SFX 401(k) Plan. To the extent the parties determine that distribution of
the account balances of Entertainment Participants under the SFX 401(k) Plan
cannot be made in accordance with applicable law and the provisions of the SFX
401(k) Plan within ninety (90) days after the Effective Time or such other date
or dates mutually agreeable to the parties ("401(k) Distribution Deadlines"),
SFX and Entertainment shall take all actions as may be necessary or appropriate
in order to effect the transfer of the account balances of the Entertainment
Participants under the SFX 401(k) Plan to the Entertainment 401(k) Plan on or
as soon as practicable after the 401(k) Distribution Deadlines. Prior to such
transfer, SFX and Entertainment shall cooperate to preserve, subject to the
terms of the Plan, the rights of Entertainment Participants. The assets
transferred shall be equal to the liabilities transferred and shall consist of
the assets held in the SFX 401(k) Plan on behalf of the Entertainment
Participants, unless the parties mutually agree otherwise. To the extent such
transfer is made or any distributions from the SFX 401(k) Plan are submitted
for acceptance to the Entertainment 401(k) Plan as rollover contributions, such
transfers and rollover contributions shall be subject to receipt by
Entertainment of notification from SFX that the SFX 401(k) Plan is intended to
be a tax qualified plan under section 401(a) of the Code. Furthermore,
acceptance or non-acceptance of any rollover contribution from the SFX 401(k)
Plan by the Entertainment 401(k) Plan shall be solely at Entertainment's
discretion and, if accepted, shall be subject to any other conditions and
restrictions that Entertainment in its sole discretion decides to impose.

(b) With respect to the SFX 401(k) Plan and the Entertainment 401(k)
Plan, SFX and Entertainment shall cooperate in good faith in making all
submissions or filings related to the implementation of this Section 2.1 and/or
pre-Effective Time matters that are required under the Code or ERISA and the
regulations thereunder and any other applicable laws. SFX and Entertainment
shall also cooperate in good faith in providing information and copies of
documents

- 4 -
<PAGE>

that SFX or Entertainment considers appropriate or necessary with respect to
any of the aforementioned submissions or filings, implementing all appropriate
communications with partici pants, maintaining and transferring appropriate
records, notifying the other party of any Internal Revenue Service, Department
of Labor or other governmental entity examinations or other actions with
respect to the SFX 401(k) Plan and taking all such other actions as may be
necessary or appropriate to implement the provisions of this Section 2.1 and to
cause the transfers pursuant to Section 2.1(a) to take place as soon as
practicable after the date or dates described in Section 2.1(a).

SECTION 2.2 WELFARE PLANS.

(a) SFX and Entertainment shall take all actions necessary or
appropriate so that, as of the later of the Effective Time or June 1, 1998, all
members of the Delsener/Slater Group shall cease to be participating employers
and sponsors of the SFX Welfare Plans. The SFX Group shall have sole
responsibility for retaining and discharging: (1) all Liabilities and Adverse
Consequences relating to or arising out of the SFX Welfare Plans by or in
respect of Entertainment Participants who are not Distribution Employees or
Beneficiaries of Distribution Employees with respect to claims incurred on or
prior to the later of the Distribution Date or the date all members of the
Delsener/Slater Group cease to be participating employers and sponsors of the
relevant SFX Welfare Plan (which date shall not be later than the later of the
Effective Time or June 1, 1998), provided such claims are filed or submitted
within the time period required under the SFX Welfare Plan; (2) all Liabilities
and Adverse Consequences relating to or arising out of the SFX Welfare Plans by
or in respect of Entertainment Participants who are Distribution Employees or
Beneficiaries of Distribution Employees with respect to claims incurred on or
prior to the later of the Effective Time or the date all members of the
Delsener/Slater Group cease to be participating employers and sponsors of the
relevant SFX Welfare Plan (which date shall not be later than the later of the
Effective Time or June 1, 1998), provided such claims are filed or submitted
within the time period required under the SFX Welfare Plan; and (3) all
Liabilities and Adverse Consequences relating to or arising out of the SFX
Welfare Plans by or in respect of individuals who are not Entertainment
Participants. Effective as of the Distribution Date, the Delsener/Slater Group
shall have no Liabilities and shall not be responsible for any Adverse
Consequences relating to or arising out of the SFX Welfare Plans except, to the
extent one or more of its members continues to be a participating employer or
sponsor of a SFX Welfare Plan, for the amounts described in Section 2.2(c). For
purposes of this Section 2.2, a claim shall be deemed incurred when the service
is rendered and not when an individual is formally billed or charged for the
service.

(b) Except as specifically set forth in this Section 2.2,
Entertainment shall take all actions necessary or appropriate to establish
Entertainment Welfare Plans to provide such Welfare Plan benefits as
Entertainment determines necessary or appropriate, if any, to Entertainment
Participants. Entertainment shall have sole responsibility for retaining and
discharging all Liabilities and Adverse Consequences relating to or arising out
of the Entertainment Welfare Plans. Any Entertainment Welfare Plan established
on or shortly after the Effective Time to

- 5 -
<PAGE>

replace the primary self-funded medical and dental SFX Welfare Plan covering
the Entertainment Participants and their Beneficiaries as of the Effective Time
shall provide that all Entertainment Participants and their Beneficiaries who
are covered by such plan as of the Effective Time shall be initially eligible
to participate in such Entertainment Welfare Plan without being subject to any
waiting period to participate nor any limitation on pre-existing conditions.

(c) Prior to the month in which the Distribution Date occurs, the
Delsener/Slater Group shall pay premiums and contributions with respect to the
coverage of Entertainment Participants and Beneficiaries of Entertainment
Participants under the SFX Welfare Plans in accordance with past practices and
procedures. With respect to the month in which the Distribution Date occurs and
any month thereafter (or portion thereof) that one or more members of the
Delsener/Slater Group is a participating employer or sponsor of a SFX Welfare
Plan, the Delsener/Slater Group shall retain the portion of the premiums and
contributions with respect to such SFX Welfare Plans that would have otherwise
been paid by the participants employed by the Delsener/Slater Group and their
covered Beneficiaries for such month (or portion thereof) and pay to SFX as
soon as practicable after such month either the following amounts or such other
amounts mutually agreeable to SFX, Entertainment and SBI Holding Corporation:
(i) with respect to a fully insured SFX Welfare Plan (i.e., the life,
supplemental life and long term disability insurance plan), the employer and
participant portions of the premiums for the coverage of the participants in
the fully insured SFX Welfare Plan who are employed by the Delsener/Slater
Group and their covered Beneficiaries for such month (or portion thereof); and
(ii) with respect to a SFX Welfare Plan that is not fully insured (i.e., the
partially self-funded medical and dental plan): the sum of (A) the fixed cost
(i.e., the amount charged by New York Life or any other third party
administrator each month for all of the SFX Welfare Plan's costs other than
claims, including but not limited to, costs related to stop loss coverage,
claims administration, and state and local governmental levies and taxes) for
those participants in the SFX Welfare Plan who are employed by the
Delsener/Slater Group and their covered Beneficiaries for such month (or
portion thereof), and (B) the amount of claims for which New York Life or any
other third party administrator charges SFX for such month (or portion thereof)
with respect to the participants employed by the Delsener/Slater Group and
their covered Beneficiaries which are filed or submitted within the time period
required under the SFX Welfare Plan and are not in excess of the amounts
covered by the stop loss coverage of the SFX Welfare Plan. Until the later of
the Effective Time or June 1, 1998, SFX shall maintain under its SFX Welfare
Plans that are not fully insured the same stop loss coverages as existed prior
to the Distribution Date with respect to the participants employed by the
Delsener/Slater Group and their covered Beneficiaries. Additionally, with
respect to a SFX Welfare Plan that is not fully insured (i.e., the partially
self-funded medical and dental plan), Entertainment shall pay SFX the amount
charged by New York Life or any other third party administrator for the run-off
claims of those participants in the SFX Welfare Plan who are employed by the
Delsener/Slater Group and their covered Beneficiaries (i.e., claims incurred
prior to the later of the Distribution Date or the date these individuals cease
to participate in the relevant SFX Welfare Plan -- which date shall be no later
than the later of the Effective Time or June 1, 1998 -- that are not otherwise
paid by Entertainment provided such claims are filed or submitted

- 6 -
<PAGE>

within the time period required under the SFX Welfare Plan and are not in
excess of the stop loss coverage of the SFX Welfare Plan).

ARTICLE III.

GENERAL PROVISIONS

SECTION 3.1 EMPLOYMENT TRANSFERS. Subject to Section 4.3 of the
Distribution Agreement and Section 5.07 of the Merger Agreement, Entertainment
and SFX shall take all steps necessary and appropriate so that, on or
immediately after the Distribution Date, all Employees who are not Distribution
Employees are employed, or (where employment does not continue by operation of
law) are offered employment, by a member of the Delsener/Slater Group, and all
SFX Employees who are not former employees of the Pre-Distribution Group are
employed, or (where employment does not continue by operation of law) are
offered employment, by a member of the SFX Group. Such steps shall include,
where necessary or appropriate under local law, making employment offers and/or
transferring contracts of employment.

SECTION 3.2 COSTS AND EXPENSES. The Delsener/Slater Group and SFX
Group shall bear their own costs and expenses with respect to actions taken to
comply with this Agreement, except as otherwise provided in this Agreement.

ARTICLE IV.

MISCELLANEOUS

SECTION 4.1 GUARANTEE OF SUBSIDIARIES' OBLIGATIONS. Each of SFX and
Entertainment shall cause to be performed, and hereby guarantees the
performance and payment of, all actions, agreements, obligations and
Liabilities set forth herein to be performed or paid by any subsidiary of such
party which is contemplated by the Distribution Agreement to be a subsidiary of
such party on or after the Distribution Date.

SECTION 4.2 SHARING OF INFORMATION. Each of SFX and Entertainment
shall provide to the other all such information and copies of documents in its
possession as the other may reasonably request to enable it to administer its
employee benefit plans and programs, and to determine the scope of, and
fulfill, its obligations under this Agreement. Such information and copies of
documents shall, to the extent reasonably practicable, be provided in the
format and at the times and places requested, but in no event shall the party
providing such information be obligated to incur any direct expense not
reimbursed by the party making such request (but any such direct expense to be
reimbursed shall be reasonable in amount), nor to make such information
available outside its normal business hours and premises.

- 7 -
<PAGE>

SECTION 4.3 TERMINATION. This Agreement shall be terminated in the
event that the Distribution Agreement is terminated and the Distribution
abandoned prior to the Distribution Date. In the event of such termination,
neither party shall have any liability of any kind to the other party under
this Agreement.

SECTION 4.4 RIGHTS TO AMEND OR TERMINATE PLANS; NO THIRD PARTY
BENEFICIARIES. No provisions of this Agreement shall be construed (i) to limit
the right of SFX, any other member of the SFX Group, Entertainment or any other
member of the Delsener/Slater Group to amend any Plan or terminate any Plan, or
(ii) to create any right or entitlement whatsoever in any employee of the
Pre-Distribution Group, former employee of the Pre-Distribution Group or
Beneficiary, including a right to continued employment or to any benefit under
a Plan or any other compensation. This Agreement is solely for the benefit of
the parties hereto and their respective subsidiaries and should not be deemed
to confer upon third parties any remedy, claim, liability, reimbursement, claim
of action or other right in excess of those existing without reference to this
Agreement.

SECTION 4.5 COMPLETE AGREEMENT. This Agreement and the agreements and
other documents referred to herein (including, but not limited to, the
Distribution Agreement, Merger Agreement and Tax Sharing Agreement) shall
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter.

SECTION 4.6 GOVERNING LAW. Subject to applicable U.S. federal law,
this Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware (other than the laws that might otherwise govern under
applicable principles of conflicts law) as to all matters, including matters of
validity, construction, effect, performance and remedies.

SECTION 4.7 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be given in accordance with the provisions of
the Distribution Agreement.

SECTION 4.8 AMENDMENT AND MODIFICATION. Except as set forth in Section
4.3, no provision of this Agreement may be waived, amended, modified,
supplemented or terminated without the written agreement of SFX and
Entertainment and without the consent of the Parent, which consent shall not be
unreasonably withheld.

SECTION 4.9 SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests and obligations hereunder shall be
assigned by any party hereto without the prior written consent of the other
party.

- 8 -
<PAGE>

SECTION 4.10 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

SECTION 4.11 INTERPRETATION. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties hereto and shall not in any way affect the
meaning or interpretation of this Agreement.

SECTION 4.12 LEGAL ENFORCEABILITY. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Upon any such
determination that a provision of this Agreement is prohibited or unenforceable
in whole or in part, the court or arbitral panel making such determination
shall have the power to modify such invalidated provision so as to effect the
original intent of the parties as closely as possible.

SECTION 4.13 REFERENCES; CONSTRUCTION. References to any "Article" or
"Section," without more, are references to Articles or Sections of this
Agreement. Unless otherwise expressly stated, clauses beginning with the term
"including" set forth examples only and in no way limit the generality of the
matters thus exemplified.

SECTION 4.14 DISPUTES. If a dispute arises between SFX and
Entertainment as to the interpretation or the implementation of this Agreement,
the provisions of Article XI of the Distribution Agreement shall be used to
resolve the dispute.

- 9 -
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the day and year first above written.

SFX BROADCASTING, INC.

By: /s/ Thomas P. Benson
--------------------------------
Name: Thomas P. Benson
Title: Chief Financial Officer

SFX ENTERTAINMENT, INC.

By: /s/ Thomas P. Benson
--------------------------------
Name: Thomas P. Benson
Title: Chief Financial Officer

SBI HOLDING CORPORATION
(with respect to Section 4.8 only)

By: /s/ William Banowsky, Jr.
--------------------------------
Name: William Banowsky, Jr.
Title: Vice President

- 10 -

<PAGE>

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SFX ENTERTAINMENT, INC.

SFX ENTERTAINMENT, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:

1. This Restated Certificate of Incorporation amends and restates the
Corporation's original Certificate of Incorporation filed with the Secretary of
State on December 2, 1997, as amended on February 25, 1998.

2. This Restated Certificate of Incorporation was duly adopted by the
sole stockholder in accordance with the provisions of Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware.

3. The text of the Certificate of Incorporation is hereby restated and
amended to read as herein set forth in full:

ARTICLE ONE: NAME

The name of the Corporation is SFX ENTERTAINMENT, INC. (the
"Corporation").

ARTICLE TWO: REGISTERED OFFICE

The address of the registered office of the Corporation in the State
of Delaware is 1013 Centre Road, New Castle County, Wilmington, Delaware 19805,
and the name of the registered agent at such address is Corporation Service
Company.

ARTICLE THREE: PURPOSES

The purpose for which the Corporation is organized is to engage in any
and all lawful acts and activities for which corporations may be organized
under the General Corporation Law of the State of Delaware. The Corporation
will have perpetual existence.

ARTICLE FOUR: CAPITAL STRUCTURE

4.1 AUTHORIZED SHARES. The total number of shares of stock which the
Corporation shall have authority to issue is 135,000,000 shares, consisting of
the following:

(a) 100,000,000 shares of Class A Common Stock, par value $.01 per
share (the "Class A Common Stock");

<PAGE>

(b) 10,000,000 shares of Class B Common Stock, par value $.01 per
share (the "Class B Common Stock" and, together with the Class A Common Stock,
the "Common Stock"); and

4.2 DESIGNATIONS, PREFERENCES, ETC. The designations,
preferences, powers, qualifications, and special or relative rights, or
privileges of the capital stock of the Corporation shall be as set forth in
ARTICLE FIVE and ARTICLE SIX below.

ARTICLE FIVE: COMMON STOCK

5.1 IDENTICAL RIGHTS. Except as herein otherwise expressly provided in
this Restated Certificate of Incorporation, all shares of Common Stock shall be
identical and shall entitle the holders thereof to the same rights and
privileges.

5.2 DIVIDENDS.

(a) Subject to the prior rights and preferences, if any, applicable to
shares of the Preferred Stock or any series thereof, the holders of shares of
Common Stock shall be entitled to receive such dividends (payable in cash,
stock, or otherwise) as may be declared thereon by the Corporation's board of
directors (the "Board of Directors") at any time and from time to time out of
any funds of the Corporation legally available therefor, except that (i) if
dividends are declared that are payable in shares of Common Stock, then such
stock dividends shall be payable at the same rate on each class of Common Stock
and shall be payable only in shares of Class A Common Stock to holders of Class
A Common Stock and in shares of Class B Common Stock to holders of Class B
Common Stock and (ii) if dividends are declared that are payable in shares of
common stock of another corporation, then such shares may differ as to voting
rights to the extent that voting rights now differ among the Class A Common
Stock and the Class B Common Stock.

(b) Dividends payable under this Paragraph 5.2 shall be paid to the
holders of record of the outstanding shares of Common Stock as their names
shall appear on the stock register of the Corporation on the record date fixed
by the Board of Directors in advance of declaration and payment of each
dividend. Any shares of Common Stock issued as a dividend pursuant to this
Paragraph 5.2 shall, when so issued, be duly authorized, validly issued, fully
paid and non-assessable, and free of all liens and charges.

(c) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Common Stock shall be declared by the Board of Directors
or paid or set apart for payment by the Corporation at any time that such
declaration, payment, or setting apart is prohibited by applicable law.

5.3 STOCK SPLITS. The Corporation shall not in any manner subdivide
(by any stock split, reclassification, stock dividend, recapitalization, or
otherwise) or combine the outstanding shares of one class of Common Stock
unless the outstanding shares of both classes of Common Stock shall be
proportionately subdivided or combined. This paragraph shall not, however,
apply to the reclassification and change of stock occurring upon the filing of
this Restated Certificate of Incorporation with the Secretary of State of the
State of Delaware.

5.4 VOTING RIGHTS.

<PAGE>

(a) The holders of the Class A Common Stock and the Class B Common
Stock shall vote as a single class on all matters submitted to a vote of the
stockholders, with each share of Class A Common Stock being entitled to one
vote and each share of Class B Common Stock being entitled to ten votes,
except:

(i) for the election of directors, which shall be governed by
subparagraphs (b) and (c) below;

(ii) with respect to any Going Private Transaction (as such term
is defined below) between the Corporation and Robert F.X.
Sillerman or any Affiliate of Mr. Sillerman, which shall be
governed by subparagraph (e) below; and

(iii) as otherwise provided by law.

As used in this Certificate of Incorporation, the term "Affiliate"means, as to
any person, any (i) other person that, directly or indirectly, is in control
of, is controlled by or is under common control with such person, (ii)
corporation or organization (other than the Corporation or a majority-owned
subsidiary of the Corporation) of which such person is an officer or partner or
is, directly or indirectly, the beneficial owner of 10% or more of any class of
voting securities, or in which such person has a substantial beneficial
interest, (iii) trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as a trustee or in a
similar fiduciary capacity, or (iv) relative or spouse of such person who has
the same home as such person.

(b) In the election of directors, the holders of shares of Class A
Common Stock shall be entitled by class vote, exclusive of all other
stockholders, to elect that number of directors of the Corporation that equals
two sevenths (2/7) of the total number of duly authorized directorships of the
Corporation then constituting the Board of Directors (including vacant and
newly-created directorships) or, if such number of directors is not a whole
number, the next higher whole number with each share of Class A Common Stock
entitled to one vote; provided, however, that each director so elected must be
qualified at the time of such election to be an "Independent Director," which
is defined as a director of the Corporation who is not (i) an officer or
employee of the Corporation or a director, officer or employee of any of its
subsidiaries or any Affiliate of Mr. Sillerman or any individual who has been
employed in such capacity within the preceding three years, (ii) an Affiliate
of Mr. Sillerman, (iii) acting on a regular basis as an individual or
representative of an organization serving as a professional adviser, legal
counsel or consultant to management of the Corporation or its subsidiaries if,
in the opinion of the Board of Directors, such relationship is material to the
Corporation, the organization so represented, or such person, (iv) an
individual having a relationship which, in the opinion of the Board of
Directors, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director or (v) a member or a
representative of the immediate family of a person who, pursuant to clauses (i)
through (iv) above, is not qualified to serve as an Independent Director. The
holders of shares of Class A Common Stock shall be entitled by class vote,
exclusive of all other stockholders, to vote on the removal of any director so
elected, with each share of Class A Common Stock entitled to one vote.

(c) Except as otherwise provided in subparagraph (b) above, the
holders of shares of Class A Common Stock and Class B Common Stock, voting as a
single class, shall have the right to vote on the election or removal of all
directors of the Corporation (other than directors, if any, who may be elected
by the holders of Preferred Stock), with each share of Class A Common Stock
entitled to one vote and each

<PAGE>

share of Class B Common Stock entitled to ten votes. The holders of Class A
Common Stock and Class B Common Stock are not entitled to cumulative votes in
the election of any directors.

(d) In the event of the death, removal or resignation of a director
elected by the holders of Class A Common Stock (pursuant to subparagraph (b)
above) prior to the expiration of his term, the vacancy on the Board of
Directors created thereby may be filled by a majority of the directors then in
office, although less than a quorum, provided, however, that any person
appointed to fill a vacancy created by the death, removal or resignation of a
director elected by the holders of the Class A Common Stock (in accordance with
subparagraph (b) above) shall be an Independent Director. A director elected in
such manner to fill such vacancy shall hold office until his successor has been
duly elected and qualified at a meeting of the holders of Class A Common Stock
duly called for such purpose.

(e) With respect to any Going Private Transaction between the
Corporation and Mr. Sillerman or an Affiliate of Mr. Sillerman, the holders of
Class A Common Stock and Class B Common Stock shall vote as a single class,
with each share of Class A Common Stock and of Class B Common Stock entitled to
one vote. For purposes of this Paragraph 5.4, the term "Going Private
Transaction" shall mean any transaction that is a "Rule 13e-3 Transaction," as
such term is defined in Rule 13e-3(a)(3), as amended from time to time,
promulgated under the Securities Exchange Act of 1934, as amended, provided,
however, that (i) the term Goin Private Transaction shall not include any
transaction exempt under Rule 13e-3(g), and (ii) the term "affiliate" as used
in Rule 13e-3(a)(3)(i) shall be deemed to include an Affiliate, as defined in
Paragraph 5.4 hereof.

(f) No holder of Common Stock shall be entitled to preemptive or
subscription rights.

(g) As long as any of the shares of Class A Common Stock shall be
listed and quoted on an exchange or other trading system (including the
National Association of Securities Dealers, Inc. Automated Quotation System),
the Board of Directors shall ensure, and shall have all powers necessary to
ensure, that the membership of the Board of Directors shall at all times be
consistent with the applicable rules and regulations, if any, for the Class A
Common Stock to be eligible for listing and quotation on such exchange or other
trading system.

5.5 CONVERSION RIGHTS.

(a) Voluntary Conversion. Each share of Class B Common Stock shall be
convertible at any time, at the option of its holder, into one fully paid and
non-assessable share of Class A Common Stock.

(b) Voluntary Conversion Procedure. At the time of a voluntary
conversion, the holder of shares of Class B Common Stock shall deliver to the
office of the Corporation or any transfer agent for the Class A Common Stock
(i) the certificate or certificates representing the shares of Class B Common
Stock to be converted, duly endorsed in blank or accompanied by proper
instruments of transfer, and (ii) written notice to the Corporation stating
that such holder elects to convert such share or shares and stating the name
and addresses in which each certificate for shares of Class A Common Stock
issued upon such conversion is to be issued. Conversion shall be deemed to have
been effected at the close of business on the date when such delivery is made
to the Corporation of the shares to be converted, and the person exercising
such voluntary conversion shall be deemed to be the holder of record of the
number of shares of Class A Common Stock issuable upon such conversion at such
time. The Corporation shall be justified in relying upon the information and
the certification contained in such notice and shall not be liable for the
result of any

<PAGE>

inaccuracy with respect thereto. The Corporation shall promptly deliver
certificates evidencing the appropriate number of shares of Class A Common
Stock to such person.

(c) Automatic Conversion. Each share of Class B Common Stock shall
convert automatically into one fully paid and non-assessable share of Class A
Common Stock (i) upon its sale, gift, or other transfer, voluntary or
involuntary, to a party that is not an Affiliate of Mr. Sillerman or of the
Corporation or (ii) upon the death of Mr. Sillerman, in the case of any shares
of Class B Common Stock held by Mr. Sillerman or any Affiliate of Mr.
Sillerman. Each of the foregoing automatic conversion events shall be referred
to hereinafter as an "Event of Automatic Conversion."

(d) Automatic Conversion Procedure. Promptly upon the occurrence of an
Event of Automatic Conversion, the holder of such shares shall surrender the
certificate or certificates therefor, duly endorsed in blank or accompanied by
proper instruments of transfer, at the office of the Corporation, or of any
transfer agent for the Class A Common Stock, and shall give written notice to
the Corporation, at such office: (i) stating that the shares are being
converted pursuant to an Event of Automatic Conversion into Class A Common
Stock as provided in Paragraph 5.5(c) of this ARTICLE FIVE, (ii) specifying the
Event of Automatic Conversion (and, if the occurrence of such event is within
the control of the transferor, stating the transferor's intent to effect an
Event of Automatic Conversion), (iii) identifying the number of shares of Class
B Common Stock being converted, and (iv) setting out the name or names (with
addresses) and denominations in which the certificate or certificates for
shares of Class A Common Stock shall be issued and shall include instructions
for delivery thereof. Delivery of such notice together with the certificates
representing the Class B Common Stock shall obligate the Corporation to issue
certificates representing such Class A Common Stock and the Corporation shall
be justified in relying upon the information and the certification contained in
such notice. Thereupon the Corporation or its transfer agent shall promptly
issue and deliver at such stated address to such holder or to the transferee of
shares of Class B Common Stock a certificate or certificates for the number of
shares of Class A Common Stock to which such holder or transferee is entitled
registered in the name of such holder, the designee of such holder or
transferee as specified in such notice. To the extent permitted by law,
conversion pursuant to an Event of Automatic Conversion shall be deemed to have
been effected as of the date on which the Event of Automatic Conversion has
occurred (such time being the "Conversion Date"). The person entitled to
receive the shares of Class A Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder of such shares of Class A
Common Stock at and as of the Conversion Date, and the right of such person as
a holder of shares of Class B Common Stock shall cease and terminate at and as
of the Conversion Date, in each case without regard to any failure by the
holder to deliver the certificates or the notice required by this subparagraph
(d).

(e) Unconverted Shares. In the event of the conversion of less than
all of the shares of Class B Common Stock evidenced by a certificate
surrendered to the Corporation in accordance with the procedures of Paragraph
5.5(b) or (d), the Corporation shall execute and deliver to or upon the written
order of the holder of such certificate, without charge to such holder, a new
certificate evidencing the number of shares of Class B Common Stock not
converted.

(f) Reissue of Shares. Shares of Class B Common Stock that are
converted into Class A Common Stock as provided herein shall be retired and
canceled and shall not be reissued.

(g) Reservation. The Corporation hereby reserves and shall at all
times reserve and keep available, out of its authorized and unissued shares of
Class A Common Stock, for the purpose of effecting

<PAGE>

conversions, such number of duly authorized shares of Class A Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Class B Common Stock. The Corporation covenants that all
shares of Class A Common Stock so issuable shall, when so issued, be duly and
validly issued, fully paid and non-assessable, and free from liens and charges
with respect to the issue. The Corporation will take all such action as may be
necessary to assure that all such shares of Class A Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange or other trading system upon
which the Class A Common Stock may be traded.

5.6 LIQUIDATION RIGHTS. In the event of any voluntary or involuntary
liquidation, dissolution, or winding-up of the Corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders
of shares of the Preferred Stock or any series thereof, the holders of shares
of the Common Stock shall be entitled to receive all of the remaining assets of
the Corporation available for distribution to its stockholders, ratably in
proportion to the number of shares of the Common Stock held by them. A
liquidation, dissolution, or winding-up of the Corporation, as such terms are
used in this Paragraph 5.6, shall not be deemed to be occasioned by or to
include any consolidation or merger of the Corporation with or into any other
corporation or corporations or other entity or a sale, lease, exchange, or
conveyance of all or a part of the assets of the Corporation.

5.7 CONSIDERATION ON MERGER, CONSOLIDATION, ETC. In any merger,
consolidation, or business combination, the consideration to be received per
share by the holders of Class A Common Stock and Class B Common Stock must be
identical for each class of stock, except that in any such transaction in which
shares of common stock are to be distributed, such shares may differ as to
voting rights to the extent that voting rights now differ among the Class A
Common Stock and the Class B Common Stock.

ARTICLE SIX: PREFERRED STOCK

6.1 ISSUANCE. The Preferred Stock may be issued from time to time in
one or more classes or series, the shares of each class or series to have such
designations and powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and expressed herein and
in the resolution or resolutions providing for the issue of such class or
series adopted by the Board of Directors as hereafter prescribed.

6.2 AUTHORIZATION BY BOARD OF DIRECTORS. Authority is hereby expressly
granted to and vested in the Board of Directors to authorize the issuance of
the Preferred Stock from time to time in one or more classes or series, and
with respect to each class or series of the Preferred Stock, to fix and state
by the resolution or resolutions from time to time adopted providing for the
issuance thereof the following:

(a) whether or not the class or series is to have voting rights, full,
special, or limited, or is to be without voting rights, and whether or not such
class or series is to be entitled to vote as a separate class either alone or
together with the holders of one or more other classes or series of stock;

(b) the number of shares to constitute the class or series and the
designations thereof;

(c) the preferences, and relative, participating, optional, or other
special rights, if any, and the qualifications, limitations, or restrictions
thereof, if any, with respect to any class or series;

<PAGE>

(d) whether or not the shares of any class or series shall be
redeemable at the option of the Corporation or the holders thereof or upon the
happening of any specified event, and, if redeemable, the redemption price or
prices (which may be payable in the form of cash, notes, securities, or other
property), and the time or times at which, and the terms and conditions upon
which, such shares shall be redeemable and the manner of redemption;

(e) whether or not the shares of a class or series shall be subject to
the operation of retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement, and, if such retirement or sinking
fund or funds are to be established, the annual amount thereof, and the terms
and provisions relative to the operation thereof;

(f) the dividend rate, whether dividends are payable in cash, stock of
the Corporation, or other property, the conditions upon which and the times
when such dividends are payable, the preference to or the relation to the
payment of dividends payable on any other class or classes or series of stock,
whether or not such dividends shall be cumulative or noncumulative, and if
cumulative, the date or dates from which such dividends shall accumulate;

(g) the preferences, if any, and the amounts thereof which the holders
of any class or series thereof shall be entitled to receive upon the voluntary
or involuntary dissolution of, or upon any distribution of the assets of, the
Corporation;

(h) whether or not the shares of any class or series, at the option of
the Corporation or the holder thereof or upon the happening of any specified
event, shall be convertible into or exchangeable for, the shares of any other
class or classes or of any other series of the same or any other class or
classes of stock, securities, or other property of the Corporation and the
conversion price or prices or ratio or ratios or the rate or rates at which
such exchange may be made, with such adjustments, if any, as shall be stated
and expressed or provided for in such resolution or resolutions; and

(i) such other special rights and protective provisions with respect
to any class or series as may to the Board of Directors seem advisable.

6.3 SHARES IN CLASS OR SERIES. The shares of each class or series of
the Preferred Stock may vary from the shares of any other class or series
thereof in any or all of the foregoing respects. The Board of Directors may
increase the number of shares of the Preferred Stock designated for any
existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The Board of Directors may decrease the number of shares
of the Preferred Stock designated for any existing class or series by a
resolution subtracting from such class or series authorized and unissued shares
of the Preferred Stock designated for such existing class or series, and the
shares so subtracted shall become authorized, unissued, and undesignated shares
of the Preferred Stock.

ARTICLE SEVEN: LIMITATION OF LIABILITY OF DIRECTORS

A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the Delaware

<PAGE>

General Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit. This ARTICLE SEVEN may not be amended or
modified to increase the liability of a director, or repealed, except upon the
affirmative vote of the holders of at least 75% of the combined voting power of
the outstanding shares of Common Stock. No such amendment, modification, or
repeal shall apply to or have any effect on the liability or alleged liability
of any director of the Corporation for or with respect to any acts or omissions
of such director occurring prior to such amendment, modification, or repeal. In
addition to the circumstances in which a director of the Corporation is not
personally liable as set forth in the foregoing provisions of this ARTICLE
SEVEN, a director shall not be liable to the Corporation or its stockholders to
the fullest extent permitted by any law hereafter enacted, including without
limitation any subsequent amendment to the Delaware General Corporation Law.

ARTICLE EIGHT: INDEMNIFICATION

8.1 GENERAL. The Corporation shall indemnify any person who was, is,
or is threatened to be made a party to a proceeding (as hereinafter defined) by
reason of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the Delaware General Corporation Law, as the
same exists or may hereafter be amended. Such right shall be a contract right
and as such shall run to the benefit of any director or officer who is elected
and accepts the position of director or officer of the Corporation or elects to
continue to serve as a director or officer of the Corporation while this
ARTICLE EIGHT is in effect. Any repeal or amendment of this ARTICLE EIGHT shall
be prospective only and shall not limit the rights of any such director or
officer or the obligations of the Corporation with respect to any claim arising
from or related to the services of such director or officer in any of the
foregoing capacities prior to any such repeal or amendment to this ARTICLE
EIGHT. Such right shall include the right to be paid by the Corporation
expenses incurred in defending any such proceeding in advance of its final
disposition to the maximum extent permitted under the Delaware General
Corporation Law, as the same exists or may hereafter be amended. If a claim for
indemnification or advancement of expenses hereunder is not paid in full by the
Corporation within 60 days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corpora tion to recover the unpaid amount of the claim, and if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses
of prosecuting such claim. It shall be a defense to any such action that such
indemnification or advancement of costs of defense are not permitted under the
Delaware General Corporation Law, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors or any committee thereof, independent legal counsel, or
stockholders) to have made its determination prior to the commencement of such
action that indemnifica tion of, or advancement of costs of defense to, the
claimant is permissible in the circumstances nor an actual determination by the
Corporation (including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) that such indemnification or
advancement is not permissible shall be a defense to the action or create a
presumption that such indemnification or advancement is not permissible. In the
event of the death of any person having a right of indemnification under the
foregoing provisions, such right shall inure to the benefit of his or her
heirs, executors, administrators, and personal representatives. The rights
conferred above shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, by-law, resolution of stockholders
or directors, agreement, or otherwise.

<PAGE>

8.2 EMPLOYEES AND AGENTS. The Corporation may additionally indemnify
any employee or agent of the Corporation to the fullest extent permitted by
law.

8.3 PROCEEDINGS. As used in this ARTICLE EIGHT, the term "proceeding"
means any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, arbitrative, or investigative, any
appeal in such an action, suit, or proceeding, and any inquiry or investigation
that could lead to such an action, suit, or proceeding.

ARTICLE NINE: MANAGEMENT OF THE CORPORATION

The following provisions relate to the management of the business and
the conduct of the affairs of the Corporation and are inserted for the purpose
of creating, defining, limiting, and regulating the powers of the Corporation
and its directors and stockholders:

(a) The business and affairs of the Corporation shall be managed by
and under the direction of the Board of Directors.

(b) The number of directors which shall constitute the whole Board of
Directors shall be fixed in accordance with the by-laws of the Corporation (the
"By-Laws").

(c) The Board of Directors shall have the power to adopt, amend, and
repeal the By-Laws, except to the extent that the By-Laws otherwise provide.

(d) All corporate powers and authority of the Corporation (except as
at the time otherwise provided by statute, by this Certificate of
Incorporation, or by the By-Laws) shall be vested in and exercised by the Board
of Directors.

(e) The stockholders and directors shall have the power, if the
By-Laws so provide, to hold their respective meetings within or without the
State of Delaware and may (except as otherwise required by statute) keep the
Corporation's books outside the State of Delaware, at such places as from time
to time may be designated by the By-Laws or the Board of Directors.

(f) Directors of the Corporation need not be elected by written ballot
unless the By-Laws otherwise provide.

ARTICLE TEN: CERTAIN CONTRACTS OR TRANSACTIONS

No contract or transaction between the Corporation and one or more of
its directors, officers, or stockholders or between the Corporation and any
person (as used herein, "person" means other corporation, partnership,
association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers, or stockholders are directors, officers, or stockholders, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee which authorizes the contract or transaction, or solely
because his, her, or their votes are counted for such purpose, if:

<PAGE>

(i) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are
known to the Board of Directors or the committee, and the
Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the
disinterested directors be less than a quorum;

(ii) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are
known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good
faith by vote of the stockholders; or

(iii) the contract or transaction is fair as to the Corporation as
of the time it is authorized, approved, or ratified by the
Board of Directors, a committee thereof, or the stockholders.

Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.

* * *

4. Upon the filing of this Restated Certificate of Incorporation with
the Secretary of State, (i) each of the 1,000 shares of Class A Common Stock,
par value $.01 per share, of the Corporation issued and outstanding immediately
prior to such filing shall be reclassified as and subdivided into 13,579.024
shares of Class A Common Stock authorized to be issued pursuant to this
Restated Certificate of Incorporation and (ii) each of the 1,000 shares of
Class B Common Stock, par value $.01 per share, of the Corporation issued and
outstanding immediately prior to such filing shall be reclassified as and
subdivided into 1,047.037 shares of Class B Common Stock authorized to be
issued pursuant to this Restated Certificate of Incorporation.

<PAGE>

IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed by its Executive Vice President,
General Counsel and Secretary and attested by its Assistant Secretary this 24th
day of April, 1998.

SFX ENTERTAINMENT, INC.

By: /s/ Howard J. Tytel
-----------------------------------
Howard J. Tytel
Executive Vice President, General Counsel
and Secretary

<PAGE>

EXECUTION
COPY

STOCK PURCHASE AGREEMENT

DATED AS OF APRIL 29, 1998

AMONG

SFX SPORTS GROUP, INC.,

SFX ENTERTAINMENT, INC.

AND

DAVID FALK,

CURTIS POLK

AND

G. MICHAEL HIGGINS

<PAGE>

TABLE OF CONTENTS

PAGE

ARTICLE I
DEFINITIONS............................................................ 2
1.1 General................................................... 2
1.2 Definitions............................................... 2
1.3 Interpretation............................................ 9

ARTICLE II
TRANSACTIONS AT CLOSING................................................ 9
2.1 Sale and Purchase of Purchased Shares and Cancellation
of SARs................................................... 9
2.2 Payment of the Cash Purchase Price........................ 10
2.3 Stock Transfer Taxes...................................... 10
2.4 Agreement to Issue Securities............................. 10
2.5 Restrictive Legend........................................ 10
2.6 Registration Rights....................................... 11
2.6.1 Piggyback Registrations.......................... 11
2.6.2 Demand Registration.............................. 11
2.6.3 Listing of Securities; Expenses.................. 13
2.6.4 Information...................................... 13
2.6.5 Communication with Holders....................... 14
2.6.6 Indemnification by SFX........................... 15
2.6.7 Indemnification Procedures....................... 15
2.6.8 Other Remedies................................... 16
2.6.9 No Assignment of Registration Rights............. 17
2.7 Earn-out.................................................. 17

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS.............................. 22
3.1 Sellers' Status; Authority; Enforceability;
Conflicts; Consents....................................... 22
3.2 The Purchased Shares and the SARs......................... 22
3.3 Organization and Standing of the Companies................ 23
3.4 Capital Stock of the Companies............................ 23
3.5 Equity Interests.......................................... 24
3.6 Contracts................................................. 24
3.7 Compliance with Laws...................................... 24
3.8 Litigation................................................ 24
3.9 Personnel Identification and Compensation................. 24
3.10 Existing Employment Contracts............................. 25
3.11 Environmental............................................. 25

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<PAGE>

3.11.1 Definitions..................................... 25
3.11.2 Compliance with Environmental Laws.............. 25
3.12 ERISA..................................................... 26
3.13 Tax Matters............................................... 27
3.14 Title to Assets........................................... 29
3.15 Real Property............................................. 29
3.16 Licenses and Permits...................................... 29
3.17 Insurance................................................. 30
3.18 Financial Statements...................................... 30
3.19 Undisclosed Liabilities................................... 30
3.20 Conduct of Businesses Since Reference Balance Sheet Date.. 30
3.21 Broker's or Consultant's Fees............................. 31
3.22 Securities Laws Representations........................... 31
3.23 Consents.................................................. 32
3.24 Conduct of Business....................................... 32
3.25 Life Insurance Policies on Falk........................... 32
3.26 Investment in SFX, Marquee or Triathlon................... 33
3.27 Claims by Sellers Against Companies....................... 33

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER............................ 33
4.1 Corporate Status.......................................... 33
4.2 Authority of Purchaser.................................... 33
4.3 Due Authorization......................................... 34
4.4 Enforceability; Conflicts................................. 34
4.5 Consents.................................................. 34
4.6 Broker's or Consultant's Fees............................. 34
4.7 Securities................................................ 34
4.8 Disclosure................................................ 35
4.9 SEC Compliance............................................ 35
4.10 Undisclosed Liabilities................................... 35
4.11 Sufficient Funds.......................................... 35

ARTICLE V
PRE-CLOSING COVENANTS.................................................. 35
5.1 Antitrust Notification; Required Filings.................. 35
5.2 Conduct of the Business................................... 36
5.3 Right of Inspection; Access to Books and Personnel........ 37
5.4 Notification of Material Adverse Events................... 38
5.5 Schedules and Supplemental Disclosures.................... 38
5.6 Code Sections 897 and 1445 Withholding.................... 38
5.7 Exclusivity............................................... 38
5.8 Non-Transferrable Contracts............................... 38
5.9 Publicity................................................. 38

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<PAGE>

5.10 Best Efforts.............................................. 39
5.11 Resignations.............................................. 39

ARTICLE VI
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS........................ 39
6.1 Obligations to be Satisfied on or Prior to Closing Date... 39

ARTICLE VII
CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS........................... 41
7.1 Obligations to Be Satisfied on or Prior to Closing Date... 41

ARTICLE VIII
CLOSING................................................................ 42
8.1 Time and Place............................................ 42
8.2 Closing Transactions...................................... 42
8.3 Deliveries by Sellers to Purchaser........................ 42
8.4 Deliveries by Purchaser to Seller......................... 43

ARTICLE IX
OTHER AGREEMENTS....................................................... 44
9.1 Further Assurance......................................... 44
9.2 Confidentiality........................................... 45
9.3 SFX Guaranty.............................................. 46
9.4 Benefit Plans............................................. 47
9.5 S Corporation Status...................................... 47
9.6 Code Section 338(h)(10) Election.......................... 48
9.7 Indemnity for, and Payment of, Section 338 Taxes.......... 49
9.8 Additional Tax Matters.................................... 51
9.9 Tax Contests.............................................. 54

ARTICLE X
INDEMNIFICATION........................................................ 56
10.1 Indemnification by Sellers................................ 56
10.2 Limitation on Indemnification............................. 56
10.3 Indemnification by Purchaser and SFX...................... 56
10.4 Specific Breaches......................................... 57
10.5 Procedure for Indemnification............................. 57
10.6 Survivability of Indemnity................................ 58
10.7 Payment................................................... 58

ARTICLE XI
TERMINATION............................................................ 58
11.1 Rights to Terminate....................................... 58
11.2 Effects of Termination.................................... 59

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ARTICLE XII
MISCELLANEOUS PROVISIONS............................................... 59
12.1 Notices................................................... 59
12.2 Assignment................................................ 60
12.3 Benefit of the Agreement.................................. 60
12.4 Exhibits and Schedules.................................... 61
12.5 Headings.................................................. 61
12.6 Entire Agreement.......................................... 61
12.7 Modifications and Waivers................................. 61
12.8 Counterparts.............................................. 61
12.9 Severability.............................................. 61
12.10 Governing Law............................................. 61
12.11 Jurisdiction; Service of Process.......................... 61
12.12 Expenses.................................................. 62

EXHIBITS

EXHIBIT A Form of Falk Employment Agreement
EXHIBIT B Form of Polk Employment Agreement
EXHIBIT C Form of Higgins Employment Agreement
EXHIBIT D Form of Withholding Certificate
EXHIBIT E Estimated Closing Date Allocation, Gross-Up and Methodology

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<PAGE>

DISCLOSURE SCHEDULES
Schedule 2.2 Allocation of Cash Purchase Price among Sellers
Schedule 2.4(a) Initial Allocation of Securities among Sellers
Schedule 2.7(a) EBITDA Minimums for Earn-out Payments
Schedule 2.7(c)(iii) Excess Earn-out Payments
Schedule 3.5 Equity Interests of Companies
Schedule 3.6 Contracts
Schedule 3.8 Litigation
Schedule 3.9 Personnel Identification of Officers, Directors and
Employees
Schedule 3.10 Existing Employment Contracts
Schedule 3.11 Compliance with Environmental Laws
Schedule 3.12 Employee Benefit Matters
Schedule 3.13 Tax Matters
Schedule 3.14 Title to Assets
Schedule 3.15 Real Property
Schedule 3.16 Licenses and Permits
Schedule 3.17 Insurance Policies
Schedule 3.18 Financial Statements
Schedule 3.19 Undisclosed Liabilities
Schedule 3.20 Absence of Material Adverse Change
Schedule 3.23 Consents
Schedule 5.2 Conduct of Business
Schedule 5.2(iv) Adoption or Amendment of Collective Bargaining
Agreements/Employee Benefit Plans
Schedule 5.2(v) Changes to Compensation
Schedule 5.2(vi) Incurrence of Indebtedness
Schedule 5.2(vii) Pledge on Assets
Schedule 5.2(xi) Payments, Contributions or Awards under Employee
Benefit Plans/Employment Agreements
Schedule 5.11 Resignations
Schedule 10.2 Matter Not Subject to Indemnification by Sellers

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<PAGE>

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT is entered into as of the 29th day of
April, 1998, by and among DAVID FALK ("Falk"), CURTIS POLK ("Polk") and G.
MICHAEL HIGGINS ("Higgins") (collectively, "Sellers"), SFX SPORTS GROUP, INC.,
a Delaware corporation ("Purchaser"), and SFX ENTERTAINMENT, INC., a Delaware
corporation ("SFX").

W I T N E S S E T H:

WHEREAS:

A. Falk and Polk own beneficially and of record all of the issued and
outstanding shares (the "FAME Shares") of common stock, without par value, of
Falk Associates Management Enterprises, Inc., a Delaware corporation ("FAME"),
which is engaged primarily in the business of the representation of team sports
athletes (the "FAME Business");

B. Falk and Polk own beneficially and of record all of the issued and
outstanding shares (the "Financial Shares", and together with the FAME Shares,
the "Purchased Shares") of common stock, without par value, of Financial
Advisory Management Enterprises, Inc., a Delaware corporation ("Financial", and
together with FAME, the "Companies" and individually a "Company"), which is
engaged in the business of the provision of financial services and investment
advice (the "Financial Business", and together with the FAME Business, the
"Businesses");

C. Falk and Polk desire to sell and transfer all of the Purchased
Shares to Purchaser and Purchaser desires to purchase and acquire from Falk and
Polk all of the Purchased Shares on the terms and conditions set forth in this
Agreement;

D. Polk and Higgins hold SARs relating to the common stock of FAME and
are willing to agree to the cancellation of the SARs on the day prior to the
Closing, and subject to immediate return if the Closing does not occur on such
next day, in consideration for the payment by FAME of (i) cash and an amount in
cash equal to the value of shares of Class A Common Stock of SFX valued at the
closing market price of such shares on the day prior to the Closing to Higgins
as provided pursuant to the First Amendment to Stock Appreciation Rights
Agreement, dated as of the date hereof, among FAME, Falk and Higgins and (ii)
cash and an amount in cash equal to the value of shares of Class A Common Stock
of SFX valued at the closing market price of such shares on the day prior to
the Closing to Polk as provided pursuant to the First Amendment to Stock
Appreciation Rights Agreement, dated as of the date hereof, among FAME, Falk
and Polk (together, the "SAR Amendments") (in each case, subject to
withholding) and Falk and Polk will con-

<PAGE>

tribute such amounts in cash in a like aggregate amount pro rata based on their
ownership of the FAME Shares; and,

E. Purchaser is a wholly-owned subsidiary of SFX and SFX joins in this
Agreement solely for the purposes of (i) providing its unconditional guarantee
of the obligations of Purchaser to deliver the Cash Purchase Price and to
otherwise satisfy its obligations hereunder and to pay the Earn-out, if any,
and (ii) evidencing its obligations to deliver to Sellers the Securities (as
hereinafter defined) and to comply with its obligations in respect of the
registration rights granted to Sellers hereunder;

NOW, THEREFORE, in consideration of the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, Purchaser, SFX and
Sellers hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 General. Each term defined in the first paragraph of this
Agreement and in the Recitals shall have the meaning set forth above whenever
used herein, unless otherwise expressly provided or unless the context clearly
requires otherwise.

1.2 Definitions. As used herein, the following terms shall
have the meanings ascribed to them in this Section 1.2:

Adjustment Taxes. As defined in Section 9.8.

Affiliate. As set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.

Agreement. This Stock Purchase Agreement, together with all
Exhibits and Schedules referred to herein, as amended, modified or supplemented
from time to time in accordance with the terms hereof.

Authority. Any governmental, regulatory or administrative
body, agency or authority, any court or judicial authority, any arbitrator,
whether foreign, federal, state or local.

Blackout Period. As defined in Section 2.6.2.

Businesses. As defined in the Recitals hereto.

Business Day. Any day other than a Saturday, Sunday or a day
on which banks in New York are authorized or required by law to close.

Business Disposition. As defined in Section 2.7.

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Carry Back Amount. As defined in Section 2.7.

Carry Forward Amount. As defined in Section 2.7.

Cash Purchase Price. As defined in Section 2.2.

Class A Common Stock. The Class A common stock, par value
$0.01 per share, of SFX.

Closing. The actual sale, conveyance, transfer, assignment
and delivery of the Purchased Shares to Purchaser in exchange for the
consideration payable to Sellers pursuant to this Agreement.

Closing Date. The date which is five (5) days following the
date on which the closing conditions in Sections 6.1(g) and 7.1(e) have been
satisfied, or if all other closing conditions have not then been satisfied or
waived, as soon as is reasonably practicable when all closing conditions shall
be satisfied or waived (but, subject to such satisfaction or waiver, in no
event later than the date specified in Section 11.1(c)) or such other date as
Sellers and Purchaser may mutually agree in writing, in either case, upon which
the Closing shall occur; provided, however, that the Closing Date shall be no
earlier than June 15, 1998 unless Purchaser and Falk shall agree, each in their
sole discretion, to such earlier date.

Closing Date Allocation. As defined in Section 9.7.

Code. Internal Revenue Code of 1986, as amended.

Controlling Party. As defined in Section 9.8.

Companies. As defined in the Recitals hereto.

Company. As defined in the Recitals hereto.

Confidential Information. As defined in Section 9.2.

Confidentiality Agreement. As defined in Section 9.2.

Contracts. All contracts and agreements (whether written or
oral) providing for the representation of professional athletes.

Current Test Year. As defined in Section 2.7.

DC Funds. As defined in Section 9.6.

Disposition Profit. As defined in Section 2.7.

Earn-out. As defined in Section 2.7.

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Earn-out Notice. As defined in Section 2.7.

EBITDA. For any period, net income before interest, taxes,
depreciation and amortization, other non-cash charges, any premium payments on
key-man life insurance policies, any payments in connection with the Settlement
Agreement referred to in foonote 4 of the Financial Statements and any cash
payments made in connection with the cash out of any equity-based compensation
and before any payments required to be made pursuant to Section 2.7,
compensation to the Sellers pursuant to their employment agreements (or prior
to Closing, compensation and distributions not prohibited hereby) and before
any extraordinary expenses incurred in connection with the transactions
contemplated hereby, all as determined in accordance with generally accepted
accounting principles; provided, however, that for the purposes of this
Agreement, in determining such net income of the Companies for any period: (i)
there shall be excluded from expenses each expense otherwise included in the
determination thereof that consists of: (x) an allocation to either Company of
an item of corporate overhead or other expense incurred or accrued by SFX,
Purchaser or any other subsidiary or other affiliated entity of SFX; and (y)
all expenses that are not of types or are in excess of the inflation-adjusted
(based on changes in the Consumer Price Index for All Urban Consumers for the
Washington-Baltimore Consolidated Metropolitan Statistical Area as published by
the U.S. Bureau of Labor Statistics) amounts (including on an aggregate basis)
incurred by either Company in its Ordinary Course of Business during its full
fiscal year next preceding the Closing Date, to the extent Falk delivers a
written notice of his disagreement with the inclusion of such different or
excess expense to the Board of Directors of SFX within thirty (30) days after
he acquires actual knowledge thereof (provided that Falk shall be deemed to
have actual knowledge if he or an employee who reports directly to Falk shall
have approved such expense), but in no event later than the conclusion of the
resolution process pursuant to Section 2.7(d) (provided, further, however, that
if any such expense referred to in this clause (y) is in fact excluded in such
determination, then all revenues generated during such period that are
reasonably determined by Falk and SFX (subject to arbitration pursuant to
Section 2.7(d) hereof) to have been substantially related to the incurrence or
accrual of such expense (and would not have been generated absent such
expenses) shall likewise be excluded in the determination of net income for
such period); and (ii) there shall be included those revenues that otherwise
would be included in the revenues of SFX itself or one or more of its other
subsidiaries that Falk asserts, in writing, should reasonably be allocated or
attributable to one of the Companies or which the Companies or Sellers
generated (such as generating business for a subsidiary of SFX other than the
Companies) and which SFX agrees, in its reasonable determination (subject to
arbitration pursuant to Section 2.7(d) hereof), should be so allocated
(provided, however, that in such event there shall likewise be allocated to the
Companies an appropriate allocation of expenses incurred or accrued during such
period by SFX or such other subsidiary or subsidiaries that Falk and SFX
reasonably determine to have been substantially related to the generation of
such revenues (subject to arbitration pursuant to Section 2.7(d) hereof)).

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<PAGE>

Effective Period. As defined in Section 2.6.2.

Employee Benefit Plan. Any employee benefit plan within the
meaning of Section 3(3) of ERISA which is maintained, or to which contributions
are made, for current for former employees of either Company or their
subsidiaries.

Employee Welfare Benefit Plan. Any employee benefit plan
within the meaning of Section 3(1) of ERISA.

Environmental Law. As defined in Section 3.11.1.

ERISA. The Employee Retirement Income Security Act of 1974,
as amended.

ERISA Affiliate. With respect to each Company, any
corporation, person or trade or business which is a member of a group which is
under common control with such Company, who together with such Company, is
treated as a single employer within the meaning of Sections 414(b), (c) or (m)
of the Code and, if applicable, Sections 4001(a)(14) and (b) of ERISA.

Falk. As defined in the Recitals hereto.

Falk Employment Agreement. The Employment Agreement to be
entered into between Falk and SFX, substantially in the form attached hereto as
Exhibit A.

FAME. As defined in the Recitals hereto.

FAME Business. As defined in the Recitals hereto.

FAME Shares. As defined in the Recitals hereto.

Final Allocation. As defined in Section 9.7.

Financial. As defined in the Recitals hereto.

Financial Business. As defined in the Recitals hereto.

Financial Shares. As defined in the Recitals hereto.

Financial Statements. The audited combined balance sheets of
the Companies as of December 31, 1997 and 1996, and the related combined
statements of operations and stockholders' (deficit) equity and cash flows for
the years then ended, together with the notes thereto, as audited by Ernst &
Young, LLP, copies of which are attached hereto as Schedule 3.18.

Gross-Up. As defined in Section 9.7.

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<PAGE>

Guaranty. As defined in Section 9.3.

Hart-Scott-Rodino Act. The Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.

Hazardous Substance. As defined in Section 3.11.1.

hereof, herein, hereby. As defined in Section 1.3.

Higgins. As defined in the Recitals hereto.

Higgins Employment Agreement. The Employment Agreement to be
entered into between Higgins and SFX, substantially in the form attached hereto
as Exhibit C.

Incorporated Filing. As defined in Section 2.6.2.

Indemnified Party. As defined in Section 10.5.

Indemnifying Party. As defined in Section 10.5.

IRS. Internal Revenue Service.

January 1 Election. As defined in Section 9.6.

Law. Any law, statute, regulation, rule, ordinance,
requirement, announcement or other binding action or requirement of an
Authority, including, without limitation, any federal, state or local laws
regulating the rendition of marketing and management services by agents or
representatives or investment advisory or other fiduciary investment services.

Lien. Any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, capitalized lease or other title retention
agreement).

Material Adverse Change or Material Adverse Effect. Any
change, effect, event or occurrence that will or that could reasonably be
expected to be materially adverse to the business, properties, assets,
condition (financial or otherwise) or results of operations of an entity, other
than (i) seasonal variations in such entity's business or (ii) changes in
conditions generally affecting the industry in which such entity operates.

Modified aggregate deemed sale price. As defined in Section
9.6.

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<PAGE>

Multiemployer Plan. A "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which either Company or any ERISA Affiliate is
making, or is accruing an obligation to make, contributions or has made, or
been obligated to make, contributions within the preceding six (6) years.

Neutral Auditors. As defined in Section 2.7.

Noncontrolling Party. As defined in Section 9.8.

Order. Any decree, order, judgment, writ, award, injunction,
stipulation or consent of or by an Authority.

Ordinary Course of Business. The ordinary course of business
of each Company in accordance with past custom and practice.

PBGC. Pension Benefit Guaranty Corporation.

Pension Plan. Any employee pension benefit plan that is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is maintained either: (i) by either Company or any
ERISA Affiliate or (ii) pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions and,
with respect to either (i) or (ii), either Company or any ERISA Affiliate is
then making or accruing an obligation to make contributions.

Permits. As defined in Section 3.16.

Person. Any natural person, corporation, limited liability
company, partnership, firm, joint venture, joint-stock company, trust,
association, unincorporated entity or organization of any kind, Authority or
other entity of any kind.

Polk. As defined in the Recitals hereto.

Polk Employment Agreement. The Employment Agreement to be
entered into between Polk and SFX, substantially in the form attached hereto as
Exhibit B.

Pre-Closing Period. As defined in Section 9.8.

Pre-Closing Statement. As defined in Section 9.7.

Proceeding. As defined in Section 9.9.

Prospectus. As defined in Section 2.6.4.

Purchased Shares. As defined in the Recitals hereto.

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<PAGE>

Purchaser. As defined in the Recitals hereto.

Reference Balance Sheet. The audited combined balance sheet
of the Companies as of the Reference Balance Sheet Date.

Reference Balance Sheet Date. December 31, 1997.

Registration Statement. As defined in Section 2.6.2.

Reports. As defined in Section 4.9.

Resolution Period. As defined in Section 2.7.

S corporation. As defined in Section 3.13.

Straddle Period. As defined in Section 9.8.

SARs. The stock appreciation rights relating to the common
stock of FAME held by Polk and Higgins arising under the agreements each dated
December 18, 1996 between FAME, Falk and Polk and FAME, Falk and Higgins,
respectively, as amended by the SAR Amendments, respectively.

SEC. Securities and Exchange Commission.

Section 338(h)(10) Election. As defined in Section 9.6.

Section 1445 Withholding. As defined in Section 5.6.

Securities. As defined in Section 2.4.

Securities Act. As defined in Section 3.22.

Seller Permitted Transferees. As defined in Section 2.6.9.

Sellers. As defined in the Recitals hereto.

Seller's Knowledge. Such Seller's actual knowledge.

Shareholders' Agreement. The Amended and Restated
Shareholders Agreement dated December 18, 1996 among Falk, Polk and FAME.

SFX. As defined in the Recitals hereto.

Taxes. All net income, capital gains, gross income, gross
receipts, sales, use, transfer, ad valorem, franchise, profits, license,
capital, withholding, payroll, employment, excise, goods and services,
severance, stamp, occupation, premium, property, assessments, or other
governmental charges of any kind whatsoever, together with any interest, fines
and any penalties, additions to tax or addi-

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<PAGE>

tional amounts incurred or accrued with respect thereto under applicable
federal, state, local or foreign tax law or assessed, charged or imposed with
respect thereto by any governmental authority, domestic or foreign, provided
that any interest, penalties, additions to tax or additional amounts that
relate to Taxes for any taxable period (including any portion of any taxable
period ending on or before the Closing Date) shall be deemed to be Taxes for
such period, regardless of when such items are incurred, accrued, assessed or
charged. For the purposes of this definition, references to a Company shall be
deemed to include any predecessor to such Company or any Person from which such
Company incurs a liability for Taxes as a result of transferee liability.

Tax Arbitrator. As defined in Section 9.7.

Target EBITDA. As defined in Section 2.7.

Test Year. As defined in Section 2.7.

Third-Party Notice. As defined in Section 10.5.

1.3 Interpretation. Unless otherwise expressly provided or
unless the context requires otherwise: (a) all references in this Agreement to
Articles, Sections, Schedules and Exhibits shall mean and refer to Articles,
Sections, Schedules and Exhibits of this Agreement; (b) all references to
statutes and related regulations shall include all amendments of the same and
any successor or replacement statutes and regulations; (c) words using the
singular or plural number also shall include the plural and singular number,
respectively; (d) references to "hereof", "herein", "hereby" and similar terms
shall refer to this entire Agreement (including the Schedules and Exhibits
hereto); and (e) references to any Person shall be deemed to mean and include
the successors and permitted assigns of such Person (or, in the case of an
Authority, Persons succeeding to the relevant functions of such Person).

ARTICLE II

TRANSACTIONS AT CLOSING

2.1 Sale and Purchase of Purchased Shares and Cancellation of SARs.

Subject to the terms and conditions of this Agreement, and in
reliance upon the representations, warranties, covenants and agreements made in
this Agreement by Sellers, at the Closing Purchaser shall purchase from Falk
and Polk, and Falk and Polk shall sell, transfer and deliver to Purchaser, free
and clear of all Liens, claims, options, charges and restrictions of any kind,
other than restrictions on resale arising under applicable federal and state
securities laws, the Purchased Shares.

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<PAGE>

2.2 Payment of the Cash Purchase Price. In partial consideration of
the sale, conveyance, transfer, assignment and delivery of the Purchased
Shares, Purchaser will pay to Sellers at the Closing, the aggregate amount of
Seventy-Five Million Dollars ($74,341,200) (the "Cash Purchase Price") payable
in the respective amounts to the Sellers as specified on Schedule 2.2, and by
wire transfer of immediately available federal funds to the accounts to be
designated in writing by the respective Sellers to Purchaser at least one
business day prior to the Closing Date.

2.3 Stock Transfer Taxes. Purchaser shall pay any and all stock
transfer taxes which are due as a result of the sale of the Purchased Shares to
Purchaser.

2.4 Agreement to Issue Securities. (a) In partial consideration of
the sale, conveyance, transfer, assignment and delivery of the Purchased Shares
to Purchaser, SFX shall issue to Sellers an aggregate of One Million
(1,000,000) shares of Class A Common Stock of SFX (the "Securities"), allocated
to the respective Sellers as set forth on Schedule 2.4(a). Upon receipt
thereof, Falk shall sell, on and as of the Closing Date, to Polk and Higgins,
and Polk and Higgins shall purchase from Falk on and as of the Closing Date,
the number of Securities calculated in accordance with the SAR Amendments, at
the prior business day's closing price.

(b) An appropriate adjustment in the number of shares of the
Securities to be issued to Sellers shall be made to give effect to any increase
or decrease in the number of issued shares of Class A Common Stock occurring or
having a record date, as appropriate, on or after the date of execution of this
Agreement and on or prior to the Closing Date resulting from a subdivision or
consolidation of shares whether through reorganization, recapitalization, stock
split, reverse stock split, spin-off, split-off, spin-out or other distribution
of assets to stockholders, stock distributions or combinations of shares, or
other similar action.

2.5 Restrictive Legend. Each Seller acknowledges and agrees
that any certificates representing the Securities will bear a restrictive
legend in substantially the following form and a stop-transfer order may be
placed against their transfer:

The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under the Securities Act of 1933, as
amended, or an opinion of counsel reasonably acceptable to the issuer
of such securities to the effect that registration is not required
under said Act or unless sold pursuant to Rule 144.

The legend set forth above shall be removed and SFX shall issue a
certificate without such legend to the holder of Securities upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (i)
such Securities are included in an effective registration statement under the
Securities Act covering the

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<PAGE>

resale thereof, or (ii) such holder provides SFX with an opinion of legal
counsel, in form, substance and scope reasonably acceptable to SFX to the
effect that a public sale or transfer of such Securities may be made without
registration under the Securities Act and such Securities are being sold or
transferred in accordance with the method described therein as well as all
applicable state securities laws, or (iii) such holder provides SFX with
reasonable assurances that such Securities can be sold pursuant to Rule 144
under the Securities Act (or a successor rule thereto) without any restriction
as to the number of Securities acquired as of a particular date that can then
be immediately sold (such holder shall thereafter be entitled to receive
unlegended certificates evidencing the shares not subject to Rule 144). Each
Seller agrees to sell all of the Securities including those represented by a
certificate(s) from which the legend has been removed, in compliance with the
prospectus delivery requirements, if any, under applicable securities laws.

2.6 Registration Rights.

2.6.1 Piggyback Registrations. At any time after one year
from the date of the Closing, whenever SFX proposes to register any of its
securities under the Securities Act in any secondary or combined primary and
secondary offering in which any members of SFX's senior management participate
as selling shareholders, SFX will give timely written notice to Sellers of its
intention to effect such a registration and will include in such registration
all Securities with respect to which SFX has received written requests for
inclusion therein (including any Securities then beneficially owned by Seller
Permitted Transferees (as defined below)) within thirty (30) days after the
receipt of SFX's notice. Notwithstanding the foregoing, if the managing
underwriter or underwriters of a proposed combined primary and secondary
offering advise SFX that the inclusion of all of the Securities requested to be
included in such offering would adversely affect the amount or price of the
securities that could be sold by SFX in such offering to a level or levels that
would be unacceptable to SFX in its sole and absolute discretion, then the
Securities and the securities offered by senior management of SFX to be
included in such offering shall be reduced, to the aggregate extent necessary
to eliminate, on the advice of such underwriters, such adverse effect, pro
rata, on the basis of the total number of shares originally intended to be
included therein by the members of SFX's senior management, on the one hand,
and the Sellers, on the other hand.

2.6.2 Demand Registration. At any time after one year from
the Closing Date, the holders of not less than 51% of the Securities then held
by all of the Sellers and the Seller Permitted Transferees may make one request
for the registration under the Securities Act of the Securities held by them.
SFX will give prompt written notice to the remaining holders of the Securities,
if any, of the request to effect such a registration and will include in such
registration all Securities with respect to which SFX has received written
requests for inclusion therein within thirty (30) days after the receipt of
SFX's notice. SFX shall use its best efforts to cause a registration statement
on the appropriate form under the Securities

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<PAGE>

Act (the "Registration Statement") to be declared effective by the SEC as soon
as practicable after its filing with the SEC which it agrees to file within 60
days of the original request, and to remain effective and current until the
earlier of (x) such time as all of the Securities included in such Registration
Statement are sold pursuant to the Registration Statement or (y) 180 days after
the Registration Statement is declared effective by the SEC, subject to
extension for the total number of days included in Blackout Periods (as defined
below) (the "Effective Period"); provided, however, that (X) each Seller shall
provide written notice to SFX ten (10) days prior to any sale of Securities,
(Y) SFX shall have no obligation to cause the Registration Statement to remain
effective for the benefit of a particular Seller if such Seller is able to sell
all remaining Securities owned by such Seller in compliance with Rule 144 in a
single transaction to which the volume limitations of Rule 144(e) do not apply
or if such volume limitations are applicable without exceeding such limitations
and (Z) in the event that SFX determines in good faith that the Registration
Statement may contain a material misstatement or omission (including as a
result of SFX having under consideration a significant acquisition or
disposition or other material transaction that has not been publicly
disclosed), SFX may cause the Registration Statement not to be used by Sellers
until such time as the SEC has declared effective a post-effective amendment to
the Registration Statement or if the misstatement or omission can be corrected
by incorporation by reference in the Registration Statement of another SEC
filing of SFX, SFX has made another filing on Form 8-K or other appropriate
form ("Incorporated Filing") to correct such misstatement or omission, which
post-effective amendment or Incorporated Filing, as the case may be, SFX agrees
to file within the ten (10) day period referenced in (X) above, or in the case
of a significant acquisition, disposition or other material transaction, within
45 days of such notice, and use its best efforts to cause to become effective
as soon as practicable (such period when the Registration Statement is not
effective being a "Blackout Period"). Notwithstanding the foregoing provisions
of this Section 2.6.2 to the contrary, in the event that (i) in connection with
such registration of Securities, SFX is obligated to permit one or more other
Persons to have the sale of certain shares of Class A Common Stock held by them
to be registered under the same Registration Statement as that covering the
sale of the Securities in a so-called "piggy-back" registration; and (ii) as a
result of such "piggy-back" registration, the managing underwriters or
underwriters of the proposed combined offering of the Securities and such other
shares advise SFX that the inclusion of all of the securities requested to be
included in such offering would adversely affect the amount or price of the
securities that could be sold by the Seller or Sell-

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<PAGE>

ers (or his or their Seller Permitted Transferees) in such offering to a level
or levels that would be unacceptable to such Seller or Sellers (or his or their
Seller Permitted Transferees) in their sole and absolute discretion, then, in
such event, the securities to be included in such offering shall be reduced to
the aggregate extent necessary to eliminate, on the advice of such
underwriters, such adverse effect, pro rata (to the extent SFX is contractually
entitled to do so, provided that from and after the date hereof SFX will not
agree to any provision containing such a restriction), on the basis of the
total number of shares originally intended to be included therein by the Seller
or Sellers (or his or their Seller Permitted Transferees), on the one hand, and
the holders of such other shares, on the other hand. In the event any such
reduction occurs as set forth in the preceding sentence, then, notwithstanding
the first sentence of this Section 2.6.2 to the contrary, at any time after
ninety (90) days from the effective date of the Registration Statement covering
such reduced number of shares, the holders of not less than 51% of the
remaining outstanding Securities not covered by such Registration Statement may
make one additional request for the registration under the Securities Act of
such remaining outstanding Securities and, in such event, the terms and
provisions of this Section 2.6.2 shall apply to such request as if it were the
original request, including this sentence and the next preceding sentence.

2.6.3 Listing of Securities; Expenses. SFX shall use its
best efforts to cause the shares of Securities to be approved for quotation on
the New York Stock Exchange, the American Stock Exchange, the NASDAQ, or other
national securities exchange in which the securities of SFX are principally
traded, as soon as practicable after filing the Registration Statement. SFX
will also use its best efforts to register or qualify the Securities included
in the Registration Statement under such other securities or blue sky laws of
the United States and keep such registration or qualification in effect for the
Effective Period, and do any and all other acts and things which may be
reasonably necessary or advisable to enable Sellers to have the right to sell
or otherwise dispose of the Securities included in the Registration Statement
in such jurisdictions. SFX shall pay all expenses on any registration
hereunder, other than underwriting discounts and commissions and, subject to
Section 2.6.6, other than expenses incurred by the Seller or Sellers whose
Securities are being sold for legal, accounting, investment banking or other
similar services obtained by such Seller or Sellers in connection with such
registration and sale.

2.6.4 Information. In connection with any registration of
the Securities pursuant to this Agreement, each Seller shall furnish SFX with
such written information concerning such Seller as SFX may reasonably request
for use in the preparation of the Registration Statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto ("Prospectus") to the extent such information
is required by law to be included therein and shall cooperate fully in the
preparation and filing of any Registration Statement or any other documents
filed with the SEC in connection therewith. Each Seller shall individually
indemnify SFX, its officers and directors, and each Person, if any, who
controls SFX within the meaning of Section 15 of the Securities Act, against
any losses, claims, damages, expenses (including fees and expenses of counsel
and including amounts paid in settlement in accordance with the terms hereof)
and liabilities, joint or several, to which SFX or any such officer or director
or controlling Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, expenses (including fees and expenses
of counsel and including amounts paid in settlement in accordance with the
terms hereof) or liabilities (or actions or proceedings, whether commenced or

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<PAGE>

threatened, in respect thereof) arise out of or are based upon any untrue
statement of any material fact contained in, or any material fact omitted from
the Registration Statement or Prospectus covering the Securities, if such
statement or omission was made in reliance upon and in conformity with written
information furnished to SFX by such Seller expressly stating that such
information is for use therein; provided, that the aggregate amount which any
Seller (or any Seller Permitted Transferee) shall be obligated to pay pursuant
to this Section 2.6.4 shall be limited to the gross proceeds received by such
Seller (or Seller Permitted Transferee) upon the sale of the Securities
pursuant to the Registration Statement giving rise to such claim.

2.6.5 Communication with Holders. SFX will, prior to filing
the Registration Statement, furnish to each of the holders of the Securities
included in such Registration Statement a copy of the draft of such document
which is proposed to be filed and shall permit and assist the Sellers in their
conduct of any reasonable due diligence they deem appropriate. Upon the
effectiveness of the Registration Statement and the written request of any
Seller, SFX shall (i) cause to be provided to such Seller such number of copies
of the form of Prospectus included in the Registration Statement as such Seller
shall reasonably request and (ii) provide (A) an opinion dated such date of
counsel representing SFX, addressed to such Seller, to the effect that the
Registration Statement has become effective under the Securities Act and that
(1) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, and
(2) the Registration Statement and the related form of Prospectus comply as to
form with the requirements of the Securities Act and the applicable rules and
regulations thereunder (except that such counsel need not express an opinion as
to financial statements contained therein) and to such other effects as may
reasonably be requested by such Seller, and (B) a letter dated such date from
the independent public accountants retained by SFX, addressed to such Seller,
stating that they are independent public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements of SFX included in the Registration Statement and the Prospectus
comply as to form with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters in
respect of the Registration Statement and the Prospectus as such Seller may
reasonably request. SFX will promptly notify such holders of any stop order
issued or threatened by the SEC with respect to the Registration Statement and
will take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered. SFX will notify such holders during the
effectiveness of the Registration Statement, of the occurrence of an event that
would require the preparation of a supplement or amendment to the Prospectus in
order for such Prospectus to not (i) contain an untrue statement of a material
fact or (ii) omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. SFX will provide such
holders with a copy of any such supplement or amendment and of any written or
other material communications from or to any Authority regarding the
registration. Each Seller of

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<PAGE>

Securities included in such Registration Statement shall advise SFX of any
proposed change in the manner of such Seller's distribution.

2.6.6 Indemnification by SFX. SFX hereby indemnifies and
holds harmless each Seller who is a holder of Securities covered by any
Registration Statement filed under the terms of this Section 2.6, and each of
such holder's officers, directors, partners and each Person deemed to be an
"underwriter" under the Securities Act, if any, and each Person controlling any
such Seller within the meaning of Section 15 of the Securities Act, if any,
against any losses, claims, damages, expenses (including fees and expenses of
counsel and including amounts paid in settlement in accordance with the terms
hereof) and liabilities, joint or several, to which such Seller or any of the
foregoing Persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, expenses (including fees and expenses
of counsel and including amounts paid in settlement in accordance with the
terms hereof) or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement of any material fact contained in the Registration Statement or any
Prospectus covering the Securities, or any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, or
any violation of any law, rule or regulation by SFX in connection with any such
registration except insofar as such untrue statement or omission was made in
reliance upon and in conformity with written information furnished to SFX by
such Seller expressly for use in the Registration Statement or Prospectus in
connection with which such claim was made.

2.6.7 Indemnification Procedures. Notwithstanding anything
in this Article to the contrary, in the event that either SFX or any Seller
(the "indemnifying party") is required to indemnify any Seller or SFX (the
"indemnified party") pursuant to this Article, the indemnifying party shall be
entitled to assume the defense of such investigation or defense, with counsel
of nationally recognized standing selected by such indemnifying party, approved
by such indemnified party in its reasonable discretion, which approval shall
not be unreasonably withheld, upon the delivery to such indemnified party of
written notice of its election to do so. The indemnifying party shall pay all
charges of any such counsel selected by him or it. After delivery of such
notice, such indemnifying party shall not be liable to such indemnified party
under this subsection for any fees of counsel subsequently incurred by such
indemnified party with respect to the same investigation or defense unless such
indemnified party shall have been advised by counsel that representation of
such indemnified party by counsel provided by the indemnifying party would be
inappropriate due to actual or potential conflicting interests between such
indemnified party and the indemnifying party, including situations in which
there are one or more legal defenses available to such indemnified party that
are different or in addition to those available to the indemnifying party. The
indemnifying party shall not, without the prior written consent of such
indemnified party

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<PAGE>

settle, compromise or consent to the entry of judgment with respect to any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Article (whether or
not such indemnified party is a natural or potential party thereof), unless
such settlement, compromise or consent (A) is solely for money and (B) (i)
included an unconditional release of such indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii)
does not include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of such indemnified party.

2.6.8 Other Remedies. In circumstances in which any
indemnity provided by this Section 2.6 is unavailable or insufficient, for any
reason, to hold harmless an indemnified party in respect of any losses, claims,
damages, expenses (including fees and expenses of counsel and including amounts
paid in settlement in accordance with the terms hereof) or liabilities (or
actions or proceedings in respect thereof), then each indemnifying party, in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, expenses (including fees and expenses of counsel and including
amounts paid in settlement in accordance with the terms hereof) or liabilities
(or actions or proceedings in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other from the relevant
offering of securities, (ii) the relative fault of the indemnifying party or
parties on the one hand and the indemnified party or parties on the other hand
in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) and (iii) any other relevant
equitable considerations. The relevant fault of the parties shall be determined
by reference to, among other things, whether the statement or omission or
alleged statement or omission relates to information supplied by SFX or by any
Seller, the parties' relative intents, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section were to be determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the preceding sentences of this Section. Notwithstanding anything in this
Section 2.6 to the contrary, no Seller (or Seller Permitted Transferee) shall
be required pursuant to this Section 2.6 to contribute any amount in excess of
the gross proceeds received by such Seller (or Seller Permitted Transferee)
from the sale of such Securities in the offering to which the losses, claims,
damages, expenses (including fees and expenses of counsel and including amounts
paid in settlement in accordance with the terms hereof) or liabilities of the
indemnified parties relate, less the amount of all indemnification and
contribution payments made pursuant to this Section 2.6 in connection with such
offering.

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<PAGE>

2.6.9 No Assignment of Registration Rights. The registration
rights set forth in this Section 2.6 with respect to the Securities are not
assignable without the express written consent of SFX; provided, however, that
any Seller may assign the registration rights granted to him hereunder to any
immediate family member or any trust or other similar entity, the sole
beneficiary or beneficiaries of which is such Seller or a member of such
Seller's immediate family. The registration rights set forth in this Section
2.6 shall be binding in all respects upon the successors and permitted assigns
of SFX and shall inure to the benefit of the Sellers and their respective
permitted assignees, heirs, estates and legal representatives ("Seller
Permitted Transferees").

2.7 Earn-out.

(a) Subject to subparagraph (c) below, Purchaser shall pay Sellers an
amount in cash (the "Earn-out"), in the aggregate not to exceed $15,000,000
(unless required pursuant to Section 2.7(c)(iii)), payable in five (5) equal
installments of $3,000,000 each (unless required pursuant to Section
2.7(c)(iii)), over a five (5) year period, provided that the Companies' EBITDA
for each of the Companies' fiscal years ending in 1998, 1999, 2000, 2001 and
2002 (each, a "Test Year") equals or exceeds 105% of the projections for such
fiscal year, respectively (each, "Target EBITDA") as set forth on Schedule
2.7(a) (provided that in the case of payments pursuant to Section 2.7(c)(iii),
such payments shall be made as set forth in Schedule 2.7(c)(iii)); provided
that if in any Test Year the Companies' EBITDA equals or exceeds 75% of the
Target EBITDA for such Test Year but does not equal or exceed 105% of such
Target EBITDA, Purchaser shall pay Higgins the Earn-out that he would otherwise
be paid under this Section 2.7(a) if EBITDA did equal or exceed 105% of such
Target EBITDA.

(b) Within 90 days following the close of each fiscal year of the
Compa- nies ending in 1998, 1999, 2000, 2001 and 2002, Purchaser shall deliver
to Sellers an income statement of the Companies for such fiscal year,
accompanied by (A) a certification thereof by SFX's chief financial officer to
the effect that such income statement (i) has been prepared in conformity with
generally accepted accounting principles, applied on a basis consistent with
the application of such principles in the audit of the Financial Statements,
and (ii) fairly presents the results of the Companies' operations for such
fiscal year, and (B) a notice specifying the Companies' EBITDA for such fiscal
year (the "Earn-out Notice"), showing in reasonable detail the computation
thereof to be accompanied by a certification by SFX's chief financial officer
that such computation was performed in a manner consistent with the preparation
of the Financial Statements and based on the Companies' books and records. The
Earn-out, if any, payable for such fiscal year, shall be paid to Higgins or
Sellers as the case may be as set forth on Schedule 2.7(a) within 30 days
following the delivery required by the preceding sentence by wire transfer of
immediately available federal funds to an account designated by each Seller,
subject to Section 2.7(d) below.

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<PAGE>

(i) If in any Test Year (the "Current Test Year"), the
Companies' EBITDA (determined as set forth in subparagraph (b) above) is in an
amount equal to less than 105% of Target EBITDA for such Current Test Year,
then, at the direction of Falk, any portion of any excess of EBITDA from one or
more prior Test Years over 105% of the respective Target EBITDA for each of
such prior Test Years (the "Carry Forward Amount") may be added to the EBITDA
for the Current Test Year in such amounts as Falk may determine and the result
of the addition shall be deemed to be the EBITDA for such Current Test Year for
purposes of paying the Earn-out amount for such Current Test Year under
subparagraph (a) above; provided that if any payment was previously made with
respect to such Carry Forward Amount in a prior Test Year pursuant to clause
(c)(iii) below, the amount due pursuant to paragraph (a) with respect to the
Current Test Year shall be reduced by the payment made with respect to the
Carry Forward Amount pursuant to clause (c)(iii) in such prior Test Year and
the Sellers shall reimburse each other for prior overpayments received.

(ii) If in any Current Test Year, the Companies' EBITDA
(determined as set forth in subparagraph (b) above) is in an amount equal to
more than 105% of Target EBITDA for such Current Test Year, then, at the
direction of Falk, any portion of any excess of EBITDA from such Current Test
Year and any prior Test Years for which EBITDA exceeded 105% of the related
Test Year's Target EBITDA as the case may be (the "Carry Back Amount") may be
added to the EBITDA for any prior Test Year in such amounts as Falk may
determine and the result of the addition shall be deemed to be the EBITDA for
such prior Test Year for purposes of paying the Earn-out amount for such Test
Year under subparagraph (a) above and any Earn-out payment that was not
otherwise made with respect to such prior Test Year due to the failure of the
EBITDA in such prior Test Year to have been in an amount greater than 105% of
the Target EBITDA for such prior Test Year shall be due and payable as if such
Earn-out payment were due with respect to the Current Test Year and shall be in
addition to any amount due with respect to the Current Test Year.

(iii) If for any Current Test Year, the Companies' EBITDA for
such Current Test Year (increased by any Carry Forward Amount determined and
added in accordance with subparagraph (c)(ii) above and/or decreased by any
Carry Back Amount to the extent derived from the EBITDA for such Current Test
Year in accordance with subparagraph (c)(ii) above) exceeds 100% of the Target
EBITDA for such Current Test Year and the aggregate amount of such EBITDA
constitutes a percentage of Target EBITDA for such Current Test Year set forth
below, then the Earn-out amount for such Test Year shall be increased by an
amount equal to the percentage of the excess EBITDA over 100% of such Target
EBITDA set forth opposite the Total EBITDA below (which increase will be paid
as set forth on Schedule 2.7(c)(iii)):

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<PAGE>

Increase in Earn-out Equal to
Aggregate EBITDA Equals This this Percentage of the Excess of
Percentage of Target EBITDA EBITDA Over Target EBITDA
- --------------------------- -------------------------

Test Years Test Years
1998, 1999, 2000 2001, 2002
---------------- ----------
100% - 110% - 0 - - 0 -
More than 110% - 125% 10% - 0 -
More than 125% - 150% 15% 15%
More than 150% 20% 20%

Notwithstanding the foregoing, in the event EBITDA for any Test Year exceeds
105% of the Target EBITDA for such Test Year, such excess may be used as the
basis for a Carry Forward Amount under clause (i) above, or or a Carry Back
Amount under clause (ii) above, or a combination thereof, but no portion of
such excess may be so used under both clause (i) and clause (ii).

(iv) In the event of a Business Disposition prior to the
completion of the final Test Year:

(1) If such Business Disposition is consummated on or prior
to the first anniversary of the Closing Date, then SFX shall pay to the
Sellers, in the proportions set forth in Schedule 2.7(a), at the election of
Falk, in lieu of any payment under Section 2.7(a), on the date of such
consummation, an amount in cash equal to (A) one-third of the Disposition
Profit up to $45,000,000 of Disposition Profit (i.e., a payment of up to
$15,000,000) plus (B) 10% of any Disposition Profit in excess of $45,000,000;
which payment shall be made by wire transfer of immediately available federal
funds to an account designated by each Seller and no further payments under
this Section 2.7 shall be due.

(2) If such Business Disposition is consummated on a date
after the first anniversary of the Closing Date and prior to the end of the
final Test Year, SFX shall pay to the Sellers, in the proportions set forth in
Schedule 2.7(a), at the election of Falk, in lieu of any payment under Section
2.7(a), on the date of such consummation, an amount in cash equal to the amount
owed for any Test Years completed but not yet paid plus the greater of (A) the
product of (x) the result of (i) total prior payments made pursuant to Section
2.7(a) (including any for Test Years completed but not yet paid) divided by
(ii) the number of Test Years completed, multiplied by (y) the number of Test
Years not yet completed; and (B) 10% of any Disposition Profit; which payment
shall be made by wire transfer of immediately available federal funds to an
account designated by each Seller and no further payments under this Section
2.7 shall be due.

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<PAGE>

(3) For purposes of this Section 2.7(c)(v), "Business
Disposition" shall mean the transfer, in a transaction or series of related
transactions, of all or substantially all of the assets of FAME or 50% or more
of the voting power or equity of FAME by merger, stock sale, recapitalization,
reorganization, foreclosure on a pledge, voting agreement or other transfer
from Purchaser to any other Person that is not a wholly owned subsidiary of SFX
(including by transfer of interests in a direct or indirect parent of FAME).

(4) For purposes of this Section 2.7(c)(v), "Disposition
Profit" shall mean the excess of (A) (i) the fair market value of the aggregate
consideration, in cash, securities or other property, received, directly or
indirectly, by SFX in consideration for a Business Disposition divided by (ii)
the proportion of the Businesses transferred in a Business Disposition
(expressed as a decimal) over (B) the fair market value of the Securities as of
the Closing Date plus $74,341,200 plus amounts theretofore paid pursuant to
Section 2.7; provided, however, that in the case of any Business Disposition to
an Affiliate of SFX or Purchaser (or any holder of more than 10% of the equity
or voting power of SFX), the amount to be used in subclause (A)(i) of this
sentence shall be the fair market value of the Businesses transferred in such
Business Disposition as determined by an investment bank of national reputation
selected jointly by the Sellers and SFX, provided that such investment bank
shall not be engaged by any Person in connection with the Business Disposition,
and provided further that such investment bank shall be selected by a
representative of the American Arbitration Association in the event Sellers and
SFX are unable to agree upon a joint selection.

(5) In the case of the sale, transfer or disposition of any
assets (other than in the Ordinary Course of Business) or interests in the
Companies that does not constitute a Business Disposition, the EBIDTA Targets
shall be adjusted, as agreed between Falk and SFX, to appropriately reflect the
effect of such sale, transfer or disposition; provided that if such adjustment
is not so agreed, it shall be determined by an investment bank of national
reputation selected by a representative of the American Arbitration
Association.

(d) Review of EBITDA.

(i) During the preparation of the Earn-out Notice and the
period of any dispute within the contemplation of this Section, Purchaser and
SFX shall cause the Companies to (1) provide Sellers and Sellers' authorized
representatives, upon reasonable notice, full access during normal business
hours to the books, records, facilities and employees of the Companies and SFX
and its subsidiaries and their independent accountants and their respective
workpapers to review of preparation of the Earn-out Notice; and (2) cooperate
with Sellers and Sellers' authorized representatives, including the provision
on a timely basis of all information reasonably requested by Sellers or
Sellers' authorized representatives and necessary or useful in reviewing the
preparation of the Earn-out Notice.

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<PAGE>

(ii) After receipt of the Earn-out Notice, Sellers shall have
30 days to review the Earn-out Notice, together with the workpapers used in the
preparation thereof. Sellers and Sellers' authorized representatives shall have
full access during normal business hours to all relevant books and records and
employees of SFX, Purchaser and the Companies and their independent accountants
and their respective workpapers to complete their review of the Earn-out
Notice; and SFX and Purchaser will cause their independent auditors to provide
Sellers and their accountants full access to the workpapers of such independent
auditors in connection with the review of the Earn-out Notice and accompanying
certificate (as provided in Section 2.7(b)). Unless Sellers deliver written
notice to Purchaser on or prior to the 30th day after Sellers' receipt of the
Earn-out Notice specifying in reasonable detail all disputed items and the
basis therefor, Sellers shall be deemed to have accepted and agreed to the
Earn-out Notice (such 30-day period to be extended for any period of time
during which Sellers shall not have had full access to such books, records,
employees and workpapers as described in the preceding sentence). If Sellers so
notify Purchaser of their objection to the Earn-out Notice, Sellers and
Purchaser shall, within 30 days following such notice (the "Resolution
Period"), attempt to resolve their differences and any resolution by them as to
any disputed amounts shall be final, binding and conclusive.

(iii) If at the conclusion of the Resolution Period amounts
shall remain in dispute, then all amounts remaining in dispute and any dispute
as to exclusions of or additions to revenues and any allocations of expenses
contemplated by the definition of "EBITDA", shall be submitted to a firm of
nationally recognized independent public accountants (the "Neutral Auditors")
selected by Sellers and Purchaser within 10 days after the expiration of the
Resolution Period. If Sellers and Purchaser are unable to agree on the Neutral
Auditors, then Sellers and Purchaser shall each have the right to request the
American Arbitration Association to appoint the Neutral Auditors who shall not
have had a material business relationship with Sellers, Purchaser, SFX or any
of their respective Affiliates within the past two years. The parties hereto
agree to execute, if requested by the Neutral Auditors, a reasonable engagement
letter. All fees and expenses relating to the work, if any, to be performed by
the Neutral Auditors shall be borne by Purchaser. The Neutral Auditors shall
act as an arbitrator to determine only those issues still in dispute. The
Neutral Auditors' determination shall be made within 30 days of their
selection, shall be set forth in a written statement delivered to Sellers and
Purchaser and shall be final, binding and conclusive.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS

As an inducement to Purchaser to enter into and perform this
Agreement, and in consideration of the covenants of Purchaser contained herein,
Falk and Polk, jointly and severally with each other, and Higgins, severally
and not jointly, make

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<PAGE>

the representations and warranties set forth below to Purchaser and SFX (except
that the representations and warranties set forth in Sections 3.1, 3.2, and
3.22 are made by each Seller severally and not jointly with respect to any of
the other Sellers):

3.1 Sellers' Status; Authority; Enforceability; Conflicts; Consents.

(a) Such Seller is over 21 years of age and has not had a legal
representative appointed by a court of law.

(b) Such Seller has the legal capacity, power and authority necessary
to execute and deliver this Agreement and to perform his obligations hereunder.

(c) This Agreement is binding upon, and enforceable against, such
Seller in accordance with its terms, subject to bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally and by
general principles of equity (whether in a proceeding at law or in equity).

(d) Neither the execution or delivery of this Agreement by such Seller
nor the performance by any Seller of its obligations under this Agreement will
(assuming the receipt of all consents referred to in Section 3.23), conflict
with or result in a breach of any of the terms or provisions of, or constitute
a default under, any material contract, lease, license, franchise, permit,
indenture, mortgage, deed of trust, note agreement or other material agreement
or instrument to which such Seller is a party or is bound or any judgment,
order or decree, statute, law, ordinance, rule or regulation applicable to such
Seller or the property or assets of such Seller, the Articles of Incorporation
or By-laws of each Company or any applicable Law or Order to which such Seller
is a party or by which such Seller is bound, except, in any such case, as would
not have a Material Adverse Effect on FAME.

(e) No consent, approval, license, permit, order or authorization of,
or registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign, is required to be obtained or made by such Seller in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except, in any such case, under the Hart
Scott Rodino Act and as would not have a Material Adverse Effect on FAME.

3.2 The Purchased Shares and the SARs. Such Seller is the
owner of record of and has legal and valid title to such number of the FAME
Shares and the Financial Shares as set forth opposite Seller's name on the
signature pages hereto, free and clear of any claims, Liens, options, charges
and restrictions whatsoever. At the Closing, such Seller shall transfer to
Purchaser legal and valid title to the Purchased Shares, free and clear of any
claims, Liens, options, charges and restrictions whatsoever except resale
restrictions under applicable federal and state securities laws. The Purchased
Shares are not subject to any voting trust agreement or

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<PAGE>

other contract, agreement, arrangement, commitment or understanding, including,
without limitation, any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or disposition of the Purchased Shares other than the Shareholders' Agreement,
which will be canceled and terminated at the Closing. After giving effect to
the actions taken prior to the Closing to cancel and terminate the SARs,
neither Polk nor Higgins nor any other Person shall have any rights thereunder
or arising therefrom, and FAME shall have no surviving liability or obligation
thereunder whatsoever.

3.3 Organization and Standing of the Companies. Each Company is a
corporation duly organized and validly existing under the laws of its state of
incorporation. Each Company has full corporate power and authority and
possesses all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to use its corporate name and to own, lease or
otherwise hold its properties and assets and to carry on its business as
presently conducted other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in the
aggregate, would not have a Material Adverse Effect on FAME. Each Company is
duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership, leasing or holding of its
properties makes such qualification necessary, except where any such failure
would not have a Material Adverse Effect on FAME, individually or in the
aggregate. Sellers have delivered to Purchaser true and complete copies of the
Articles of Incorporation, as amended to date, and the By-laws, as in effect on
the date hereof, of each Company. The stock certificate and transfer books and
the minute books of each Company (which have been made available for inspection
by Purchaser and its representatives) are true and complete.

3.4 Capital Stock of the Companies. The authorized capital stock of
FAME consists of 1,000 shares of common stock, without par value, of which
1,000 shares are duly authorized and validly issued and outstanding, fully paid
and nonassessable. The authorized capital stock of Financial consists of 1,000
shares of common stock, without par value, of which 1,000 shares are duly
authorized and validly issued and outstanding, fully paid and nonassessable.
Falk and Polk are the sole registered and beneficial holders of the Purchased
Shares. The Purchased Shares have not been issued in violation of, and, are not
subject to, any preemptive or subscription rights. Except as set forth above,
there are no shares of capital stock or other equity securities of either
Company outstanding. Other than the SARs and the Shareholders' Agreement (each
of which will be cancelled and terminated at or prior to the Closing), there
are no outstanding warrants, options, agreements, convertible or exchangeable
securities or other commitments pursuant to which Sellers or either Company is
or may become obligated to issue, sell, purchase, return or redeem any shares
of capital stock or other securities of either Company and no equity securities
of either Company are reserved for issuance for any purpose.

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<PAGE>

3.5 Equity Interests. Except as set forth on Schedule 3.5, neither
Company owns, directly or indirectly, any capital stock of or other equity
interests in any corporation, partnership, joint venture or other entity.

3.6 Contracts. Schedule 3.6 to this Agreement contains a complete
list of all written Contracts entered into by each Company or by which each
Company is currently bound and copies of such written Contracts have been
provided or made available to Purchaser or its advisors. There are no oral
Contracts that, individually or in the aggregate, are material to FAME. All
such Contracts are valid and binding upon the Company which is a party thereto
and, to the Sellers' Knowledge, the other parties thereto, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally, except as would not have a Material Adverse Effect on
FAME. To each Seller's Knowledge, there is no default or event that with notice
or lapse of time, or both, would constitute a default by any party to any of
the Contracts, except for such defaults or events that would not have a
Material Adverse Effect on FAME. To each Seller's Knowledge, neither any Seller
nor either Company has received notice that any party to any of such Contracts
intends to cancel or terminate any of such agreements or to exercise or not
exercise any options under any of such agreements, including, without
limitation, any renewal options.

3.7 Compliance with Laws. Each Company has complied with all, and is
not in violation of any, applicable Laws and Orders affecting its properties or
the operation of its business, other than such noncompliance or violation,
individually or in the aggregate, that would not have a Material Adverse Effect
on FAME.

3.8 Litigation. Schedule 3.8 sets forth a list of all suits, actions,
arbitrations, and to each Seller's knowledge legal, administrative and other
proceedings and governmental investigations pending or, to each Seller's
Knowledge, threatened, against or affecting either Company or the Businesses
which, if adversely determined, would have a Material Adverse Effect on FAME.
Except as set forth in Schedule 3.8, neither Company is presently engaged as a
plaintiff or counterclaimant in any material legal action to recover moneys due
to it or damages sustained by it.

3.9 Personnel Identification and Compensation. Schedule 3.9 contains
a list of the names, addresses and titles of all current officers, directors
and employees of each Company as of April 24, 1998. Sellers have previously
delivered to Purchaser a true and correct schedule stating the rates of
compensation payable (or paid, as the case may be) to each such person as of
such date. No non-employee agents or representatives, individually, are
material to the business of either Company.

3.10 Existing Employment Contracts. Schedule 3.10 contains a list of
all employment contracts and collective bargaining agreements to which either
Com-

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<PAGE>

pany is a party or by which either Company is bound. To each Seller's
Knowledge, all these contracts and arrangements are in full force and effect,
and neither Company nor any other Person is in default under any such contract
or arrangement, except for such failures to be in full force and effect and for
defaults that would not have a Material Adverse Effect on FAME. To each
Seller's Knowledge, there is no pending or threatened labor dispute, strike, or
work stoppage by the employees of the Companies affecting either Company or the
Businesses, except for disputes, strikes or work stoppages that would not have
a Material Adverse Effect on FAME.

3.11 Environmental.

3.11.1 Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:

(a) The term "Environmental Law(s)" means each and every Law,
Order, Permit, or similar requirement of each and every Authority,
pertaining to (i) the protection of human health, safety, the
environment, natural resources and wildlife (ii) the protection or use
of surface water, groundwater, rivers, and other bodies of water,
(iii) the management, manufacture, possession, presence, use,
generation, transportation, treatment, storage, disposal, release,
threatened release, abatement, removal, remediation or handling of, or
exposure to, any Hazardous Substance or (iv) pollution, including
without limitation, as amended, CERCLA, the Solid Waste Disposal Act,
42 U.S.C.ss. 6901 et seq., the Clean Air Act, 42 U.S.C. 7401 et seq.
and the Federal Water Pollution Control Act, 33 U.S.C.ss. 1251, et
seq.

(b) The term "Hazardous Substance" means any substance which
is (i) defined as a hazardous substance, hazardous material, hazardous
waste, pollutant or contaminant under any Environmental Laws, (ii) a
petroleum hydrocarbon, including crude oil or any fraction thereof,
(iii) hazardous, toxic, corrosive, flammable, explosive, infectious,
radioactive or carcinogenic or (iv) regulated pursuant to any
Environmental Laws.

3.11.2 Compliance with Environmental Laws. Except as
described on Schedule 3.11 hereto and except as would not have a Material
Adverse Effect on FAME,

(i) each Company is, and has continuously been, in
compliance with all Environmental Laws;

(ii) all material notices, Permits, licenses or
similar authorizations, if any, required to be obtained or filed under any
Environmental Law in connection with the operation of the Businesses have been
obtained or filed;

(iii) there are no past, pending or, to each
Seller's Knowledge, threatened investigations, proceedings or claims against
either Company relating to

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<PAGE>

the presence, release or remediation of any Hazardous Substance or for
non-compliance with any Environmental Law; and

(iv) to each Seller's Knowledge, none of the
properties owned, leased or operated by either Company have been used as
landfill or waste disposal sites or contain any underground storage tanks.

3.12 ERISA.

(a) Except as disclosed on Schedule 3.12 hereto, no Employee Benefit
Plan, including, without limitation, any Multiemployer Plan, exists and neither
Company nor any ERISA Affiliate is a participating employer in any Employee
Benefit Plan in which more than one employer makes contributions as described
in Sections 4063 and 4064 of ERISA. Except as disclosed on Schedule 3.12,
neither Company nor any ERISA Affiliate has any material contingent liability
with respect to any post-retirement benefit under any Employee Welfare Benefit
Plan which is a welfare plan (as defined in Section 3(1) of ERISA), other than
liability for health plan continuation coverage described in Part 6 of Title I
of ERISA, or under state law, or liability disclosed on Schedule 3.12 the cost
of which is borne by the participant or beneficiary. Sellers have given or made
available to Purchaser or its advisors true and complete copies of all the
following: (i) each Employee Benefit Plan and related trust agreement
(including all amendments with respect to such Employee Benefit Plan or trust)
which either Company or any ERISA Affiliate maintains or is committed to
contribute to as of the date hereof and the most recent summary plan
description, actuarial report, determination letter issued by the IRS and Form
5500 filed in respect of each such Employee Benefit Plan; and (ii) a listing of
all of the Multiemployer Plans to which either Company or any ERISA Affiliate
contributes or is committed to contribute, together with any information which
has been provided in the past year to either Company or any ERISA Affiliate
regarding withdrawal liability under any Multiemployer Plan.

(b) Except as would not result in a Material Adverse Effect on FAME,
each Employee Benefit Plan complies, in both form and operation, in all
material respects, with its terms, ERISA and the Code including, without
limitation, Code Section 4980B, and no condition exists or event has occurred
with respect to any such plan which would result in the incurrence by either
Company or any ERISA Affiliate of any liability, fine or penalty. Each Employee
Benefit Plan, related trust agreement, arrangement and commitment of each
Company and any ERISA Affiliate is legally valid and binding and in full force
and effect. Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has been determined by the IRS to be so qualified,
and each trust related to such plan has been determined to be exempt under
Section 501(a) of the Code. To each Seller's Knowledge, no Employee Benefit
Plan is being audited or investigated by any government agency or subject to
any pending or threatened claim or suit. Neither Company nor any ERISA
Affiliate of either Company (i) maintains or is a partici-

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<PAGE>

pating employer in any Pension Plan or Multiemployer Plan or (ii) has incurred
any liability to any Person in respect of any Pension Plan which remains
unsatisfied on the date hereof.

(c) Neither Company nor any fiduciary of any Employee Benefit Plan has
engaged in a prohibited transaction under Section 406 of ERISA or Section 4975
of the Code that will have a Material Adverse Effect on FAME.

(d) There are no agreements which will provide payments to any
officer, employee, shareholder or highly compensated individual which will be
"parachute payments" under Section 280G of the Code that are nondeductible to
either Company and which will be subject to the tax under Section 4999 of the
Code for which such Company would have a material withholding liability.

3.13 Tax Matters. Except as would not result in a Material Adverse
Effect on FAME:

(a) Each Company has duly filed (and prior to the Closing Date will
duly file) all material tax returns, reports or estimates, which returns,
reports and estimates were complete in all material respects, all prepared in
accordance with applicable Laws, for all years and periods (and portions
thereof), for all jurisdictions (whether federal, state, local or foreign) in
which any such returns, reports or estimates were due and for all such returns,
reports and estimates which are required to be filed by any applicable Law on
or prior to the Closing Date, all of such returns, reports or estimates have
been filed (and prior to the Closing Date will be filed) on a timely basis. No
adjustments relating to such returns have been proposed formally or informally
by any taxing authority and, to the knowledge of the Company, no basis exists
for any such adjustment. All Taxes shown as due and payable on such returns,
reports and estimates have been paid (or will be paid prior to the Closing),
and there is no current liability for any Taxes due and payable in connection
with any such returns. Any charges, accruals and reserves for Taxes provided
for on the Financial Statements are adequate. There are no existing liens for
Taxes upon either of the Company's properties or assets except for liens for
property taxes not yet due and payable. All applicable sales and transfer taxes
with respect to the Purchased Shares, to the extent due, were paid when the
Purchased Shares were acquired by Sellers, respectively. Sellers have provided
to Purchaser copies of all federal, state and foreign tax returns filed by each
Company for the past three (3) years;

(b) Each Company has: (i) withheld all required amounts, based on the
withholding allowance certificates provided, from their employees, agents,
contractors and nonresidents and remitted such amounts to the proper
Authorities; (ii) paid all employer contributions and premiums; and (iii) filed
all federal, state, local and foreign returns and reports with respect to
employee income Tax withholding, and social security and unemployment Taxes and
premiums, all in compliance with the

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<PAGE>

withholding provisions of the Code, or any prior provision of the Code and
other applicable Laws;

(c) Except as disclosed on Schedule 3.13, neither Company has any (or
has previously had any) permanent establishment in any foreign country and
neither Company engages (or has previously engaged) in a trade or business
within the meaning of the Code relating to the creation of a permanent
establishment in any foreign country;

(d) Each of the Companies has in effect a valid election to be treated
as an "S corporation", as that term is defined in Section 1361(a) of the Code
and has had such valid elections in effect at all times since their formation.
Each of the Companies qualifies as, and will qualify as of the Closing Date as,
an "S corporation", as that term is defined in Section 1361(a) of the Code;

(e) There are no claims or investigations by the Internal Revenue
Service or any other taxing authority pending or threatened against the
Companies or the Sellers for any past due Taxes of the Company; there has been
no waiver granted or requested of any applicable statute of limitations or
extension of the time for the assessment of any Tax of the Companies for which
the Companies or the Sellers could be liable under any provision of federal,
state, local, or foreign law; there are no outstanding requests for information
made by a taxing authority to the Companies or the Sellers in respect of Taxes
of the Companies; and there are no outstanding requests by the Companies or the
Sellers to a taxing authority for a ruling, determination, permission, consent,
or similar item in respect of the Companies. No closing agreement (as defined
in section 7121 of the Code) or any similar provision of any state, local, or
foreign law has been entered into by or with respect to the Companies;

(f) Except for liens for real and personal property taxes that are not
yet due and payable, there are no liens or encumbrances for any Tax upon the
stock or upon any asset of the Companies;

(g) No power of attorney that is currently in force has been granted
to any person with respect to any matter relating to Taxes that could affect
the Companies;

(h) None of the Sellers is a foreign person within the meaning of
Section 1.1445-2(b) of the Treasury Regulations, and, to the knowledge of the
Companies or the Sellers, no amount of Tax is otherwise required to be withheld
pursuant to any provision of law as a result of any of the transactions
contemplated by this Agreement;

(i) The Companies do not have any item of income, gain, loss, or
deduction reportable in a taxable period ending after the date hereof but
attributable to a Code Section 481 adjustment resulting from any change in
method of accounting

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<PAGE>

made at the direction of Falk and Polk that occurred in a taxable period or
portion thereof ending on or before the date hereof;

(j) The Companies will not be liable for any Tax under Code Section
1374 in connection with the deemed sale of the Companies' assets caused by the
Section 338(h)(10) Election. The Companies have not in the past ten years, (A)
acquired assets from another corporation in a transaction in which the
Companies' tax basis for the acquired assets was determined, in whole or in
part, by reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor or (B) acquired the stock of any
corporation which is a qualified subchapter S subsidiary; and

(k) As of the date hereof, the Companies satisfy the conditions set
forth in section 4.02 of Revenue Procedure 97-37 for purposes of permitting the
Company to elect an automatic change of method of accounting to the accrual
method as specified thereunder. Notwithstanding any other provision hereof, the
inability to make a January 1 Election by reason of the failure of either
Company to satisfy such conditions as of the Closing Date shall not be
considered to have, or contribute to, a Material Adverse Effect on FAME.

3.14 Title to Assets. Except as would not have a Material Adverse
Effect on FAME, each Company has legal and valid title to, or with respect to
leased real property, a valid and binding leasehold interest in, all assets
reflected on the Reference Balance Sheet free and clear of all Liens except (a)
as set forth on Schedule 3.14, (b) liens for current taxes not yet due and
payable or for taxes the validity of which is being contested in good faith by
appropriate proceedings, and (c) assets sold, disposed of or dissipated in the
Ordinary Course of Business since such date.

3.15 Real Property. Neither Company owns any material real property.
Schedule 3.15 contains a complete and accurate list of all real property leases
to which each Company is a party. To each Seller's Knowledge, all of such real
property leases are valid and in full force, and there does not exist any
default or event that with notice or lapse of time, or both, would constitute a
default under any of such real property leases, except for defaults or events
that would not have a Material Adverse Effect on FAME.

3.16 Licenses and Permits. To each Seller's Knowledge, (i) Schedule
3.16 lists and describes all qualifications, registrations, filings,
privileges, franchises, immunities, licenses, permits, authorizations and
approvals with or of Authorities which are used or required in order for each
Company to own and/or operate its Business, except for those the absence of
which would not have a Material Adverse Effect on FAME (collectively, the
"Permits"), and (ii) each Permit, the absence of which would have a Material
Adverse Effect on FAME, is valid and subsisting, and in full force and effect
in accordance with its terms.

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<PAGE>

3.17 Insurance.

(a) Schedule 3.17 contains a list of the insurance policies that each
Company currently maintains with respect to its business, properties and
employees as of the date hereof, each of which is in full force and effect. No
insurance premiums with respect to such policies are in default, and, to each
Seller's Knowledge, neither Company is otherwise in default with respect to any
such policy, nor has either Company failed to give any notice or present any
claim under any such policy in a due and timely manner, except for such default
or failure to give notice as would not have a Material Adverse Effect on FAME.
To each Seller's Knowledge, neither Company has received notice of cancellation
or non-renewal of any such policy.

(b) Neither Company is, and has never been, a member of any protection
and indemnity clubs.

3.18 Financial Statements. The Financial Statements, copies of which
are attached hereto as Schedule 3.18, present fairly the combined financial
position and results of operations of the Companies at the dates and for the
periods indicated therein, in accordance with generally accepted accounting
principles.

3.19 Undisclosed Liabilities. On the Reference Balance Sheet Date, to
each Seller's Knowledge, neither Company had any liability of any nature
(whether accrued, absolute, contingent or otherwise) of the type which should
be reflected in balance sheets (including the notes thereto) prepared in
accordance with generally accepted accounting principles which was not fully
disclosed, reflected or reserved against in the Reference Balance Sheet, except
as disclosed on Schedule 3.19, or as would not have a Material Adverse Effect
on FAME.

3.20 Conduct of Businesses Since Reference Balance Sheet Date. Since
the Reference Balance Sheet Date except as set forth on Schedule 3.20:

(a) the business of each Company has been conducted only in
the Ordinary Course of Business;

(b) neither Company has purchased, sold, leased, mortgaged,
pledged or otherwise acquired or disposed of any material properties
or material assets other than in the Ordinary Course of Business;

(c) neither Company has sustained or incurred any loss or
damage (whether or not insured against) on account of fire, flood,
accident or other calamity which has interfered with or affected, or
may interfere with or affect, the operation of the business of such
Company or which is reasonably likely to result in any claim against
such Company for an amount in excess of $250,000 which is not covered
by insurance;

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<PAGE>

(d) neither Company has increased the rate of compensation of
any officer or other employee other than in the Ordinary Course of
Business or pursuant to existing agreements (including distributions
to the Sellers);

(e) there has been no Material Adverse Change in or with
respect to FAME;

(f) except as would not have a Material Adverse Effect,
neither Company has canceled any of its debts or claims owed to it;

(g) except as would not have a Material Adverse Effect,
neither Company has changed any accounting methods or practices
(including, without limitation, any change in depreciation or
amortization policies or rates) other than as set forth in the
Financial Statements; and

(h) neither any Seller nor either Company has agreed to take
any of the actions described in paragraphs (b), (d), (f) or (g) above.

3.21 Broker's or Consultant's Fees. Each Seller represents and
warrants that it has dealt with no broker, finder or consultant in connection
with any of the transactions contemplated by this Agreement other than Goldman,
Sachs & Co., and, to each Seller's Knowledge, no other Person is entitled to
any commission or finder's fee in connection with the sale of the Purchased
Shares to Purchaser. Sellers shall pay all fees or commissions due to Goldman,
Sachs & Co. and neither Purchaser nor either Company shall have any liability
therefor.

3.22 Securities Laws Representations.

(a) Such Seller is acquiring the Securities for his own
account and not for the account or benefit of any
other person;

(b) Such Seller is an "accredited investor" as defined
in Rule 501 of Regulation D under the Securities Act
of 1933 (the "Securities Act");

(c) Such Seller has knowledge and experience in
financial and business matters such that such Seller
is capable of evaluating the merits and risks of an
investment in the Securities;

(d) Such Seller (i) has been furnished with all such
information as such Seller has deemed necessary to
make an informed investment decision with respect to
the Securities and (ii) has been afforded an
opportunity to ask questions and receive answers
from authorized officers and other representatives
of SFX concerning SFX;

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<PAGE>

(e) Such Seller confirms that he had the opportunity to
obtain such independent legal and tax advice and
financial planning services as such Seller has
deemed appropriate prior to making a decision to
invest in the Securities;

(f) The Securities are being acquired by such Seller
solely for investment, and are not being purchased
with a view to a distribution or resale thereof
otherwise than in compliance with the Securities
Act; and

(g) Such Seller understands that the Securities have not
been registered under the Securities Act, or any
state securities laws, in reliance upon exemptions
from registration for non-public offerings. Such
Seller understands that neither such security nor
any interest therein may be, and agrees that neither
such security nor any interest therein will be,
resold or otherwise disposed of by such Seller
unless such security is subsequently registered
under the Securities Act and under appropriate state
securities laws or unless SFX receives an opinion of
counsel reasonably satisfactory to it that an
exemption from registration is applicable.

3.23 Consents. Except as disclosed on Schedule 3.23, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any Authority or any other Person is required to be obtained or made by
any Seller or either Company in connection with the execution and delivery of
this Agreement or the performance by any Seller of his obligations hereunder,
except for consents, approvals, orders, authorizations, registrations,
declarations or filings the failure of which to obtain or make would not have a
Material Adverse Effect on FAME.

3.24 Conduct of Business. The Companies are the only entities through
which any Seller, directly or indirectly, conducts any business which is the
same as or similar to the Businesses.

3.25 Life Insurance Policies on Falk. FAME is the owner and
beneficiary of two life insurance policies on the life of Falk in the aggregate
amount of $10 million, both issued by Massachusetts Mutual Life Insurance
Company, dated June 28, 1993 and October 28, 1996, a full and complete copy of
which, together with a statement in reasonable detail of the premium charges
payable thereunder, have been delivered to Purchaser. Such policies are in full
force and effect in accordance with their respective terms and all premiums and
other charges, if any, due and payable in respect thereof have been paid in
full.

3.26 Investment in SFX, Marquee or Triathlon. With respect to funds
over which Financial has investment discretion, Financial has not advised any
present or

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<PAGE>

former client to invest in the securities of SFX, The Marquee Group, Inc. or
Triathlon Broadcasting Company.

3.27 Claims by Sellers Against Companies. None of the Sellers has
asserted or has any reasonable grounds for the assertion of any claim by him
against either of the Companies for the payment of money or for the performance
by the Companies of any action for the benefit of such Seller, other than his
claim for payment and performance by one or both of the Companies of its or
their compensation and other liabilities to him in respect of his employment by
it or them, and there does not exist any default or failure to perform by
either Company in respect of any such liability.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

As an inducement to Sellers to enter into and perform this Agreement,
and in consideration of the covenants of Sellers contained herein, Purchaser
and SFX represent and warrant to Sellers as follows:

4.1 Corporate Status. Each of Purchaser and SFX is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of the Purchaser and SFX has full corporate power and authority
and possesses all governmental franchises, licenses, permits, authorizations
and approvals necessary to enable it to use its corporate name and to own,
lease or otherwise hold its properties and assets and to carry on its business
as presently conducted other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in the
aggregate, would not have a Material Adverse Effect on Purchaser or SFX. Each
of Purchaser and SFX is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership, leasing
or holding of its properties makes such qualification necessary, except where
any such failure would not have a Material Adverse Effect on Purchaser or SFX,
individually or in the aggregate. Purchaser and SFX have delivered to Sellers
true and complete copies of the Certificates of Incorporation, as amended to
date, and the By-laws, as in effect on the date hereof, of each of Purchaser
and SFX. Purchaser is, and has been since its formation, a wholly owned direct
subsidiary of SFX and has engaged in no business other than in connection with
the transactions contemplated hereby.

4.2 Authority of Purchaser. Each of Purchaser and SFX has full
corporate power and authority to execute and deliver this Agreement and to
perform its respective obligations hereunder. The execution, delivery and
performance of this Agreement by each of Purchaser and SFX will not conflict
with or result in a breach of any of the terms or provisions of, or constitute
a default under, any contract, lease, license, franchise, permit, indenture,
mortgage, deed of trust, note agreement or other agreement or instrument to
which Purchaser or SFX is a party or is

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bound, their Certificates of Incorporation, By-laws or any applicable Law or
Order to which Purchaser or SFX is a party or by which Purchaser or SFX is
bound.

4.3 Due Authorization. The execution and delivery of this Agreement
by each of Purchaser and SFX, and the performance by each of Purchaser and SFX
of its respective obligations hereunder, have been duly and validly authorized
and approved by all necessary corporate action on the part of each of Purchaser
and SFX.

4.4 Enforceability; Conflicts. This Agreement is binding upon, and
enforceable against, each of Purchaser and SFX in accordance with its terms,
subject to bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally and by principles of equity (whether in a
proceeding at law or in equity). Neither the execution or delivery of this
Agreement by Purchaser or SFX nor the performance by Purchaser or SFX of its
obligations under this Agreement will conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any material
contract, lease, license, franchise, permit, indenture, mortgage, deed of
trust, note agreement or other material agreement or instrument to which
Purchaser or SFX is a party or is bound or any judgment, order or decree,
statute, law, ordinance, rule or regulation applicable to Purchaser or SFX or
the property or assets of Purchaser or SFX, Purchaser's or SFX's Certificate of
Incorporation or By-laws or any applicable Law or Order to which Purchaser or
SFX is a party or by which is bound.

4.5 Consents. No consent, approval, Order or authorization of, or
registration, declaration or filing with, any Authority or any other Person is
required to be obtained or made by either Purchaser or SFX in connection with
its execution and delivery of this Agreement or the performance by it of its
respective obligations hereunder, except for filings under the
Hart-Scott-Rodino Act, if applicable.

4.6 Broker's or Consultant's Fees. Purchaser represents and warrants
that it has dealt with no broker, finder or consultant in connection with any
of the transactions contemplated by this Agreement and, to its knowledge, no
other Person is entitled to any commission or finder's fee in connection with
the sale of the Purchased Shares to Purchaser.

4.7 Securities. At the Closing, the issuance of the Securities will
have been duly authorized and, upon their issuance pursuant to the terms of
this Agreement, the Securities will be validly issued, fully paid and
non-assessable and will not be subject to any preemptive or similar right.

4.8 Disclosure. There is no fact known to Purchaser which materially
adversely affects or may affect (so far as can now reasonably be foreseen) the
ability of Purchaser to consummate the transactions contemplated hereby that
has not been set forth herein or heretofore communicated to Sellers in writing
pursuant hereto.

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4.9 SEC Compliance. Since January 1, 1998, SFX has filed with the SEC
each Annual Report on Form 10-K and each other document required to be filed
with the SEC under Section 13, 14 or 15 of the Securities Exchange Act of 1934,
as amended (collectively, the "Reports"). As of their respective dates, the
Reports conformed in all material respects with the applicable provisions of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
of the SEC promulgated thereunder. As of their respective dates, none of the
Reports contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

4.10 Undisclosed Liabilities. SFX does not have any material
liability of any nature (whether accrued, absolute, contingent or otherwise) of
the type which should be reflected in its balance sheets (including the notes
thereto) prepared in accordance with generally accepted accounting principles
which was not fully disclosed, reflected or reserved against in its latest
financial statements included in the Reports.

4.11 Sufficient Funds. At the Closing, Purchaser will have, and SFX
will assure that Purchaser has, sufficient funds to pay the Cash Purchase Price
and SFX will have available sufficient shares to deliver the Securities and
otherwise consummate the transactions contemplated by this Agreement.

ARTICLE V

PRE-CLOSING COVENANTS

Sellers and Purchaser and SFX covenant and agree that from the date
hereof through and including the Closing Date:

5. Antitrust Notification; Required Filings. Within five (5) Business
Days after the execution and delivery of this Agreement, SFX, Purchaser and
Falk shall file, and Sellers shall cause each Company to file, with the United
States Federal Trade Commission and the United States Department of Justice the
notification and report forms, if any, required for the transactions
contemplated hereby and shall thereafter file any supplemental information
requested in connection therewith pursuant to the Hart-Scott-Rodino Act. Any
such notification and report form and supplemental information will be in
substantial compliance with the requirements of the Hart-Scott-Rodino Act. SFX,
Purchaser and Falk shall use, and Sellers shall cause each Company to use,
their best efforts to obtain any clearance required under the Hart-Scott-Rodino
Act for the purchase and sale of the Purchased Shares. All fees payable in
respect of such notification and report form shall be paid by Purchaser.

5.2 Conduct of the Business. From the date hereof to the Closing
except as specifically required or contemplated by this Agreement or consented
to or ap-

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proved in writing by Purchaser or SFX making specific reference to this
Agreement, Sellers shall cause the business of each Company to be conducted in
the Ordinary Course of Business, except as set forth on Schedule 5.2. Sellers
shall cause each Company to use all commercially reasonable efforts to preserve
and protect such Company's goodwill, rights, properties, assets and business,
to keep available to it and Purchaser the services of such Company's present
employees, and to preserve such Company's relationships with its employees,
officers, advertisers, creditors and others having business relationships with
it. In addition, except as specifically provided in this Agreement, Sellers
shall not permit either Company to do any of the following without the prior
written consent of Purchaser:

(i) amend its Articles of Incorporation or By-laws;

(ii) declare or pay any dividend or make any distribution,
except for dividends, distributions made or compensation paid from
earnings of the Companies or from the proceeds of the repayments of
loans to stockholders made to Sellers (but, in any case, in amounts
that do not reduce the cash of the Companies below an amount equal to
$300,000 less any mandatory reductions of the Companies' indebtedness
under its six-month $200,000 Time Note and $100,000 one-year line of
credit below the full principal amount thereof);

(iii) redeem or otherwise acquire any shares of its capital
stock or issue any capital stock or any option, warrant or right
relating thereto, other than pursuant to the SARs and SAR Amendments;

(iv) except as set forth on Schedule 5.2(iv), adopt or amend
in any material respect any collective bargaining agreement or
employee benefit plan other than in the Ordinary Course of Business or
as required under applicable law or existing agreement;

(v) except as set forth on Schedule 5.2(v) or in Section
5.2(ii), increase or otherwise change the rate or nature of the
compensation (including wages, salaries, bonuses and benefits under
any Plan) which is paid or payable to any officer, employee or other
representative of such Company, except as may be required under
existing agreements or applicable law or in the Ordinary Course of
Business;

(vi) except as set forth on Schedule 5.2(vi), incur any
indebtedness for borrowed money or guarantee any such liabilities,
obligations or indebtedness, other than in the Ordinary Course of
Business;

(vii) except as set forth on Schedule 5.2(vii), other than in
the Ordinary Course of Business, grant, permit, allow or suffer any of
its assets to be subjected to any mortgage, pledge, lien or
encumbrance, except as would not have a Material Adverse Effect on
FAME;

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(viii) voluntarily cancel any material indebtedness
(individually or in the aggregate) or voluntarily waive any material
claims or material rights other than in the Ordinary Course of
Business, except as would not have a Material Adverse Effect on FAME;

(ix) except as otherwise provided for or contemplated by
Sections 9.6, 9.7, 9.8 and 9.9 hereof, make any change in any method
of accounting or accounting practice or policy (including, without
limitation, any change in depreciation or amortization methods,
policies or rates or income recognition methods) from the cash basis
methods, practices and policies previously in place, except as would
not have a Material Adverse Effect on FAME;

(x) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or,
other than in the Ordinary Course of Business, otherwise acquire or
agree to acquire any assets which are material, individually, or in
the aggregate, to the Companies;

(xi) except as set forth in Schedule 5.2(xi) make, or commit
to make, any material payment, contribution or award under or into any
bonus, pension, profit-sharing, deferred compensation or similar plan,
program or trust unless required under the terms of any Employee
Benefit Plan or any existing agreement or in the Ordinary Course of
Business; or

(xii) agree, whether in writing or otherwise, to do any of
the foregoing.

5.3 Right of Inspection; Access to Books and Personnel. Sellers shall
cause each Company and each Company's officers, directors, employees, auditors
and agents to afford to Purchaser and Purchaser's officers, employees,
auditors, agents and lenders the right at any time prior to the Closing, during
normal business hours, access to each Company's directors, officers, employees,
auditors, agents, facilities, books and records as Purchaser reasonably shall
deem necessary or desirable and shall furnish such financial and operating data
and other information with respect to each Company as Purchaser may reasonably
require (including to permit Purchaser to account for the Companies' financial
results on an accrual basis). No such access, examination or review shall in
any way affect, diminish or terminate any of the representations, warranties or
covenants of Sellers set forth herein.

5.4 Notification of Material Adverse Events. Each Seller agrees to
promptly notify Purchaser and Purchaser and SFX agree to promptly notify
Sellers in writing of any event following the date hereof of which such Seller,
on the one hand, or Purchaser or SFX, on the other hand, is or becomes aware
that will have a Material Adverse Effect either on FAME, on the one hand, or
Purchaser or SFX, on the other hand, or a material adverse effect on the
performance by such Seller, on

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the one hand, or Purchaser or SFX, on the other hand, of its or their
obligations under this Agreement.

5.5 Schedules and Supplemental Disclosures. Sellers shall deliver to
Purchaser the Schedules to this Agreement on the date of execution of this
Agreement.

5.6 Code Sections 897 and 1445 Withholding. In the event that any
Seller fails to provide to Purchaser, at or prior to the Closing, either (a) a
certification in the form attached hereto as Exhibit D, or (b) other evidence
reasonably satisfactory to Purchaser's counsel that the transaction
contemplated by this Agreement is exempt from any Taxes which may apply by
reason of Section 897 of the Code, Purchaser shall have the right to withhold
ten percent (10%) of the Cash Purchase Price from such Seller (the "Section
1445 Withholding"), and Purchaser shall pay over the Section 1445 Withholding
to the Internal Revenue Service. The amount of the Section 1445 Withholding
shall be credited against the Cash Purchase Price otherwise due and payable
hereunder by Purchaser to such Seller at the Closing.

5.7 Exclusivity. Unless this Agreement has been terminated in
accordance with its terms, (a) Sellers shall not, shall cause each Company to
not, and shall not permit any of Sellers' or either Company's Affiliates,
directors, officers, employees, agents or advisors to, initiate, pursue or
encourage (by way of furnishing information or otherwise) any inquiries or
proposals, or enter into any discussions, negotiations or agreements (whether
preliminary or definitive) with any Person, contemplating or providing for any
merger, acquisition, purchase or sale of stock or all or substantially all of
the assets or any business combination or change in control of either Company
or the Businesses, and (b) Sellers shall deal exclusively with Purchaser with
respect to the sale of the Companies and the Purchased Shares.

5.8 Non-Transferrable Contracts. Sellers and Purchaser shall use all
commercially reasonable efforts to obtain at or prior to the Closing such
consents as are required to allow the consummation of the transactions
contemplated hereby. Neither party shall be required to pay or commit to pay
any amount to (or incur any obligation inuring to the benefit of) a person from
whom a consent may be required.

5.9 Publicity. Sellers and Purchaser agree that no public release or
announcement concerning the transactions contemplated hereby shall be issued by
any party without the prior consent (which consent shall not be unreasonably
withheld) of the other parties, except as such release or announcement may be
required by Law, in which case the party required to make the release or
announcement shall allow the other parties reasonable time to comment on such
release or announcement in advance of such issuance.

5.10 Best Efforts. Each party shall use its reasonable best efforts
to cause the Closing to occur.

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5.11 Resignations. On the Closing Date, Sellers shall cause to be
delivered to Purchaser duly signed resignations, effective upon the Closing, of
the directors of each Company set forth on Schedule 5.11 or shall take such
other action as is necessary to accomplish the foregoing.

ARTICLE VI

CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS

6. Obligations to be Satisfied on or Prior to Closing Date. The
obligation of Purchaser to purchase the Purchased Shares under this Agreement
is subject to the satisfaction (or waiver by Purchaser), on or prior to the
Closing Date, of the following conditions:

(a) Accuracy of Representations and Warranties. The
representations and warranties made by each Seller in Sections 3.2,
3.4, 3.13 and 3.24 of this Agreement shall be true, correct and
complete as of the Closing, in each case, except as would not have a
Material Adverse Effect on FAME (but without giving effect to any
reference to Material Adverse Effect contained in any such
representation).

(b) Compliance with Agreement. Sellers shall have performed
or complied in all material respects with the covenants, agreements
and obligations contained in this Agreement to be performed or
complied with by them on or prior to the Closing Date.

(c) Consents. All consents, approvals, orders,
authorizations, registrations, declarations and filings described on
Schedule 3.23 shall have been obtained or made in form reasonably
satisfactory to Purchaser.

(d) No Adverse Proceedings. No order, decree or judgment of
any court, agency or other governmental authority shall have been
rendered against any party hereto that enjoins or otherwise restricts
or prohibits the consummation of the transactions contemplated by this
Agreement in accordance with its terms.

(e) No Material Changes. None of Falk, Polk or Higgins shall
have died or shall have become unable to perform his duties as an
officer and/or employee of either Company as a result of any physical
or mental disability, or shall have ceased, or shall have notified any
other party hereto that he would cease if the Closing were to occur,
to perform such duties; and the Contracts for the players listed or
referred to on Schedule 3.6, except as would not prevent this
condition from being satisfied as set forth on Schedule 3.6, shall not
have been terminated or cancelled and there shall not have occurred
any default or event that, with notice or lapse of time, or both,

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would constitute a default by any party to any of such Contracts, and
Sellers shall have delivered to Purchaser a certificate to such
effect.

(f) Closing Documents. Sellers shall have delivered all
reports, agreements, certificates, instruments, opinions and other
documents required to be delivered by Sellers on the Closing Date
pursuant to Section 8.3, and the form and substance of all such
reports, agreements, certificates, instruments, opinions and other
documents shall be reasonably satisfactory to Purchaser.

(g) Hart-Scott-Rodino Act. All filings required pursuant to
the Hart-Scott-Rodino Act shall have been made, and any approvals
required thereunder shall have been obtained, or the waiting period
required thereby shall have expired or have been terminated, as the
case may be.

(h) Withholding Certificate. Each Seller shall have executed
and delivered to Purchaser a withholding certificate in the form of
Exhibit D.

(i) Employment Agreements. Each of Falk, Polk and Higgins
shall have entered into employment agreements with SFX, substantially
in the form of Exhibits A, B and C attached hereto, respectively.

(j) SARS and Shareholders' Agreement. Purchaser shall have
received evidence reasonably satisfactory to it and its counsel that
the SARs and the Shareholders Agreement each shall have been canceled
and terminated, with no surviving liability or obligation on the part
of either Company.

Purchaser's obtaining of financing for the consummation of the transactions
contemplated herein is not a condition precedent to the obligations of
Purchaser hereunder.

ARTICLE VII

CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS

7. Obligations to Be Satisfied on or Prior to Closing Date. The
obligations of Sellers to sell the Purchased Shares under this Agreement are
subject to the satisfaction (or waiver by Sellers), on or prior to the Closing
Date, of the following conditions:

(a) Accuracy of Representations and Warranties. Each of the
representations and warranties made by SFX and Purchaser in this
Agreement that is qualified as to materiality shall be true, correct
and complete in all respects and those that are not so qualified shall
be true, correct and complete in all material respects as of the date
hereof and on the Closing Date as though made on such date.

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<PAGE>

(b) Compliance with Agreement. Purchaser shall have performed
or complied in all material respects with the covenants, agreements
and obligations contained in this Agreement to be performed or
complied with by it on or prior to the Closing Date.

(c) No Adverse Proceedings. No order, decree or judgment of
any court, agency or other governmental authority shall have been
rendered against any party hereto that enjoins or otherwise restrains
or prohibits the consummation of the transactions contemplated by this
Agreement in accordance with its terms.

(d) Closing Documents. Purchaser shall have delivered all
reports, agreements, certificates, instruments, opinions and other
documents required to be delivered by it on the Closing Date pursuant
to Section 8.4, and the form and substance of all such certificates,
instruments, opinions and other documents shall be reasonably
satisfactory to Sellers.

(e) Hart-Scott-Rodino Act. All filings required pursuant to
the Hart-Scott-Rodino Act shall have been made, and any approvals
required thereunder shall have been obtained, or the waiting period
required thereby shall have expired or have been terminated, as the
case may be.

(f) Employment Agreements. SFX shall have entered into each
of the Falk Employment Agreement, the Polk Employment Agreement and
the Higgins Employment Agreement, substantially in the form of
Exhibits A, B and C attached hereto.

(g) FAME shall have entered into employment arrangements
described in Section 5.2(iv) hereof pursuant to the forms of
employment agreement previously agreed to and SFX shall have granted
the employee stock options referred to therein.

ARTICLE VIII

CLOSING

8.1 Time and Place. The Closing shall take place at 10:00 a.m. on the
Closing Date at the offices of Winston & Strawn, 200 Park Avenue, New York, New
York 10166 or at such other time and place as Sellers and Purchaser may
mutually agree.

8.2 Closing Transactions. All documents and other instruments required
to be delivered at the Closing shall be regarded as having been delivered
simultaneously, and no document or other instrument shall be regarded as having
been delivered until all have been delivered.

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<PAGE>

8.3 Deliveries by Sellers to Purchaser. At the Closing, Sellers shall
deliver or cause to be delivered to Purchaser:

(a) Certificates representing the Purchased Shares, which
certificates shall be either duly endorsed in blank or accompanied by
stock powers duly executed in blank;

(b) Articles of Incorporation of each Company certified by
the Secretary of State of its state of incorporation;

(c) certificates of existence or good standing, as
applicable, dated as of a recent date, for each Company from its
jurisdiction of incorporation and any state where such Company's
failure to be qualified to transact business as a foreign corporation
would have a Material Adverse Effect on FAME, and bring down
certificates of good standing in each of such jurisdictions dated the
Closing Date;

(d) the legal opinion of David Bauman, Esq., general counsel
for Sellers, in form and substance reasonably acceptable to Purchaser
and its counsel;

(e) a certificate executed by each Seller, each dated as of
the Closing Date, certifying that all representations and warranties
of such Seller herein contained in Sections 3.1(c), 3.2, 3.4, 3.13,
3.22 and 3.24 are true, correct and complete, except as would not have
a Material Adverse Effect on FAME (but without giving effect to any
reference to Material Adverse Effect contained in any such
representation), and that such Seller has performed or complied in all
material respects with all of the covenants and obligations required
by this Agreement to be performed or complied with by such Seller on
or prior to the Closing Date;

(f) the Falk Employment Agreement executed by Falk;

(g) the Polk Employment Agreement executed by Polk;

(h) the Higgins Employment Agreement executed by Higgins;

(i) an executed original of each consent required to be
obtained pursuant to Section 6.1(c); and

(j) such other instruments and documents as are required by
any other provisions of this Agreement to be delivered on the Closing
Date by Sellers to Purchaser.

8.4 Deliveries by Purchaser to Seller. At the Closing, Purchaser
shall deliver or cause to be delivered to Sellers:

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(a) the Cash Purchase Price in accordance with Section 2.2
and the 338(h)(10) payment in accordance with Section 9.7(b);

(b) Certificates representing the Securities;

(d) the Polk Employment Agreement executed by SFX;

(e) the Higgins Employment Agreement executed by SFX;

(f) the legal opinion of Richard A. Liese, counsel for
Purchaser and SFX, in form and substance reasonably acceptable to
Sellers and their counsel;

(g) a certificate of the Secretary of Purchaser certifying
to: (i) the Certificate of Incorporation and By-laws of Purchaser;
(ii) resolutions of the Board of Directors of Purchaser approving the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby; and (iii)
incumbency and signatures of the officers of Purchaser executing this
Agreement and any other certificate or document delivered in
connection herewith;

(h) a certificate of the Secretary of SFX certifying to: (i)
the Certificate of Incorporation and By-laws of SFX; (ii) resolutions
of the Board of Directors of SFX approving the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby; and (iii) incumbency and signatures of the
officers of SFX executing this Agreement and any other certificate or
document delivered in connection herewith;

(i) a certificate executed by the President and a Vice
President of Purchaser, dated as of the Closing Date, certifying that
all representations and warranties of Purchaser herein contained that
are qualified as to materiality were true, correct and complete in all
respects when made and are true, correct and complete in all respects
as of the Closing Date as if made thereon and those not so qualified
were true, correct and complete in all material respects when made and
are true, correct and complete in all material respects as of the
Closing Date as if made thereon, and that Purchaser has performed or
complied in all material respects with all of the covenants and
obligations required by this Agreement to be performed or complied
with by Purchaser on or prior to the Closing Date;

(j) Certificate of Incorporation of Purchaser certified by
the Secretary of State of the State of Delaware and a good standing
certificate therefrom dated as of a recent date;

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(k) Certificate of Incorporation of SFX certified by the
Secretary of State of the State of Delaware and a good standing
certificate therefrom dated as of a recent date; and

(l) such other instruments and documents as are: (i) required
by any other provisions of this Agreement to be delivered on the
Closing Date by Purchaser to Sellers; or (ii) reasonably necessary, in
the opinion of Sellers or their counsel, in connection with the
consummation of the transactions contemplated hereby.

ARTICLE IX

OTHER AGREEMENTS

9.1 Further Assurance. At any time and from time to time from and
after the Closing, Sellers, Purchaser and SFX shall, at the request and expense
of the other parties hereto, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such instruments and other documents and
perform or cause to be performed such acts and provide such information, as may
reasonably be required to evidence or effectuate the sale, conveyance,
transfer, assignment and delivery to Purchaser of the Purchased Shares, to
Sellers of the Securities or for the performance by Sellers or Purchaser or SFX
of any of their other respective obligations under this Agreement.

9.2 Confidentiality.

(a) The parties hereto agree with respect to the terms and conditions
of this Agreement and all information that is furnished or disclosed by the
other parties (collectively, "Confidential Information"), that: (a) such
Confidential Information is confidential and/or proprietary to the
furnishing/disclosing party and entitled to and shall receive treatment as such
by the receiving party; (b) the receiving party shall hold in confidence and
not disclose nor use (except in respect of the transactions contemplated by
this Agreement) any such Confidential Information, treating such Confidential
Information with the same degree of care and confidentiality as it accords its
own confidential and proprietary information; provided, however, that the
receiving party shall not have any restrictive obligation with respect to any
Confidential Information which (i) is contained in a printed publication
available to the general public, (ii) is or becomes publicly known through no
wrongful act or omission of the receiving party, or (iii) is known by the
receiving party without any proprietary restrictions by the
furnishing/disclosing party at the time of receipt of such Confidential
Information; and (c) all such Confidential Information furnished to either
party by the other, unless otherwise specified in writing, shall remain the
property of the furnishing/disclosing party, and in the event this Agreement is
terminated, shall be returned to it, together with any and all copies made
thereof, upon request for such return by it (except for documents submitted to
a governmental agency with the consent of the furnishing/disclosing party or
upon subpoena and

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which cannot be retrieved with reasonable effort). In addition to and not in
limitation of the foregoing, any information provided to SFX pursuant to this
Agreement shall be held by SFX and its representatives in accordance with, and
shall be subject to the terms of, the confidentiality agreement contained in
the letter dated February 24, 1998 from FAME to SFX (the "Confidentiality
Agreement"), which is hereby incorporated in this Agreement as though fully set
forth herein. Notwithstanding the foregoing or any other term hereof, or the
terms of the Confidentiality Agreement, SFX shall, to the extent, but only to
the extent, required by applicable law and regulation, be entitled to disclose
this Agreement and the transactions contemplated hereby or consummated pursuant
hereto in any registration statement (or an amendment thereof) heretofore
filed, or that it may hereafter file, with the SEC, or any periodic report or
other document it is so required to file with the SEC, and, in each case, with
any other government Authority pursuant to applicable state securities law. SFX
shall, to the fullest extent possible, consult with Sellers as to the nature,
extent and precise wording of any such proposed disclosure, give them a
reasonable opportunity to comment thereon and give any such comments
appropriate consideration.

(b) Each party hereto acknowledges that the remedy at law for any
breach by either party of its obligations under Section 9.2(a) is inadequate
and that the other party shall be entitled to equitable remedies, including an
injunction, in the event of breach of any other party.

9.3 SFX Guaranty. SFX hereby irrevocably, absolutely and
unconditionally guarantees to Sellers the full and timely performance of all of
Purchaser's obligations, including the delivery of the Cash Purchase Price and
the Earn-out, if any, under this Agreement (the "Guaranty"). The obligations of
SFX contained in this Guaranty shall be absolute and unconditional without
regard to any defense that would not otherwise be available to SFX if it were
the Purchaser under this Agreement, and shall not be reduced or affected in any
way by any failure or omission to enforce any right against Purchaser, or by
any other action which may in any manner or to any extent vary the risks of
SFX, or which might otherwise constitute a legal or equitable discharge of SFX;
it being the purpose and intent of SFX and Sellers that (a) this Guaranty and
the obligations of SFX hereunder shall be absolute and unconditional under any
and all circumstances (except that SFX may assert the defense of performance by
Purchaser of its obligations under this Agreement and any right of set-off or
other similar right held by Purchaser against Sellers) and shall not be
discharged except by payment and performance as herein provided, (b) this
Guaranty be construed as a payment guaranty and not as a guaranty of collection
and (c) SFX's liability under this Guaranty shall be primary, and not
secondary. SFX agrees that, without the necessity of any reservation of rights
against SFX and without notice to or further assent by SFX, (1) any demand for
payment of any or all of the sums due under this Agreement may be rescinded by
the party making such demand, and Purchaser's obligations reinstated or
continued, and (2) this Agreement or any related agreements may, from time to
time, in whole or in part,

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<PAGE>

be renewed, extended, modified, rearranged, consolidated, compromised or
released, without notice to or further assent by SFX, who will remain bound
hereunder notwithstanding any such rescission, renewal, extension,
modification, rearrangement, consolidation, compromise or release.

SFX waives (i) any defense (other than performance of Purchaser's
obligations under the Agreement and any right of set-off or other similar right
held by Purchaser against Sellers, which may also be asserted by SFX) arising
by reason of any disability, insolvency, lack of authority or power, change in
composition or structure, dissolution or any other defense of Purchaser or SFX
(even though rendering same void, unenforceable or otherwise uncollectible);
and (ii) joinder of Purchaser in any suit or action to enforce this Guaranty,
in particular, and without in any way limiting the foregoing, SFX waives any
right to require Sellers to file suit against Purchaser or take any other
action against Purchaser as a prerequisite to Sellers taking any action or
bringing any suit against SFX under this Guaranty. No failure to exercise nor
any delay in exercising on the part of Sellers any right, power or privilege
hereunder or at law or in equity shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law or in equity. This Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time payment of any amounts due under this Agreement is rescinded or must
otherwise be restored or returned to Purchaser on account of any insolvency,
bankruptcy or reorganization of Purchaser, or on account of any preferential
transfer, all as though such payment had never been made. Subject to the
foregoing sentence, this Guaranty shall be released and of no further force and
effect upon the later to occur of the indefeasible (i) delivery of the Cash
Purchase Price and Securities to Sellers and (ii) delivery of the Earn-out, if
any, to Sellers in accordance with the provisions hereof.

9.4 Benefit Plans. (a) As soon as administratively practicable
following the Closing Date, employees of the Companies shall be entitled to
participate in the pension, benefit, welfare, incentive compensation, sick pay,
severance, vacation, fringe benefit and similar plans of SFX and Purchaser on
substantially the same terms and conditions applicable to similarly situated
employees of SFX and Purchaser, and until such time the employee benefit plans
of the Companies shall remain in effect without adverse amendment. For the
purpose of determining eligibility to participate, vesting and benefit accrual
under the plans of SFX and Purchaser, SFX and Purchaser shall credit years of
service with the Companies (and predecessor entities), as the case may be, as
if such service had been with SFX or its subsidiaries. No employee of the
Companies who elects coverage under a SFX or Purchaser health insurance plan
shall be excluded from coverage under such plan (for such employee or any other
covered person) on the basis of a pre-existing condition that did not exclude
such person from coverage under the Companies' health insurance plans. All
contributions made by employees of the Companies to health insur-

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ance plans of the Companies during the plan year in which the Closing Date
occurs shall be counted towards satisfying any deductibles or co-payments for
health insurance plans of SFX or the Purchaser during the same plan year.

(b) SFX and the Purchaser shall honor in accordance with
their terms all individual compensation contracts entered into by the Companies
with any employees or consultants.

(c) FAME shall be permitted to, on or prior to the Closing
Date, enter into employment agreements with the employees of the Companies set
forth on Schedule 5.2(iv) reflecting the terms set forth on such Schedule and
SFX will grant the employee stock options listed thereon.

9.5 S Corporation Status. None of the Companies, or any of their
shareholders, shall take any action prior to the Closing that would cause
either Company to be disqualified as an S corporation, as that term is defined
in Section 1361(a) of the Code. Neither SFX, the Purchaser, the Companies nor
any of their respective shareholders or Affiliates shall take any action
(including in connection with the filing of returns) inconsistent with the
treatment of the Companies for any period prior to Closing as an S corporation,
as that term is defined in Section 1361(a) of the Code.

9.6 Code Section 338(h)(10) Election

(a) Falk and Polk each agree that, if Purchaser notifies Falk and Polk
in writing of its intention to make an election under Section 338(g) or
338(h)(10) of the Code (or any similar election that may be available under
applicable state or local law)(each, a "Section 338(h)(10) Election") within
the time periods set forth in Section 9.7(c) with respect to the Companies,
Falk and Polk shall join with Purchaser in timely making such joint Section
338(h)(10) Election (and in taking all legally required steps to effectuate the
same).

(b) If a Section 338(h)(10) Election is made, the "modified aggregate
deemed sale price", as defined in Treasury Regulation Section 1.338(h)(10)-1,
shall be determined and allocated in accordance with Section 338 of the Code
and the applicable Treasury Regulations. Attached hereto as Exhibit E is (x) an
estimated Closing Date allocation assuming that the Closing Date is June 15,
1998, (y) an estimate of the Gross-Up, as defined below, and (z) a description
of the methodology used to derive such allocation and such estimate of the
Gross-Up. The parties agree that all allocations and calculations with respect
to any Section 338(h)(10) Election shall be made in the same manner as such
allocation and such estimate of the Gross-Up and shall be based upon such
methodology and the Final Allocation (as defined below) shall be binding upon
the parties, and no such party shall file, or cause to be filed, any Tax
return, or take a position with any taxing authority, that is inconsistent with
the Final Allocation, except, in each case, as otherwise required

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pursuant to law or a Proceeding, as defined below, or in connection with any
payment pursuant to Section 2.7.

(c) Purchaser may, at its discretion cause the Companies to file an
application to change the Companies' method of accounting for Federal income
tax purposes to the accrual method under Revenue Procedure 97-37 for the period
commencing on January 1, 1998, provided that such change is permitted by law
and Purchaser provides notification of such intention within the time period
specified in Section 9.7(c) below (the "January 1 Election"). If the January 1
Election is made, Falk and Polk will cooperate in making the January 1 Election
and if and only if a Section 338(h)(10) Election is made will cause all
relevant Tax returns relating to 1998 to be prepared consistent with the
January 1 Election. The Sellers agree to notify the Purchaser prior to 9:30
a.m. on the Business Day prior to the Closing Date whether the Company
continues to satisfy the conditions set forth in Section 4.02 of Revenue
Procedure 97-37.

(d) SFX and Purchaser may pay the Companies in immediately available
federal funds prior to 9:30 a.m. on the Business Day prior to the Closing Date
an amount (the "DC Funds") designated for payment of Taxes of the Companies to
Washington, D.C. In the event that SFX and Purchaser make such payment and
provide written notice with respect thereto to Falk and Polk five Business Days
prior to the Closing Date, then Falk and Polk shall use reasonable efforts to
cause the Companies to pay over the DC Funds to Washington, D.C. on the
Business Day prior to the Closing Date. The DC Funds shall not be used by the
Companies, Falk or Polk prior to Closing for any purpose other than to pay
Taxes of the Companies to Washington, D.C. If the Closing does not occur, the
Company shall not be obligated to return the DC Funds, except to the extent of
any refund thereof that would not have been obtained but for the payment of the
DC Funds to Washington, D.C. Whether or not a Section 338(h)(10) Election is
made, any income and deduction arising by reason of the payment of the DC Funds
shall be deemed to arise by reason of a Section 338(h)(10) Election.

9.7 Indemnity for, and Payment of, Section 338 Taxes. In the event that
a Section 338(h)(10) Election or the January 1 Election is made:

(a) Purchaser and SFX agree to indemnify, defend and hold harmless
each Seller from and against the excess of (i) the sum of (A) all Taxes (taking
into account any Tax benefits actually realized) of such Seller and the
Companies (including any Tax with respect to the deemed asset sale pursuant to
Section 338 of the Code or any similar provision of state or local law and any
Tax arising by reason of the January 1 Election, if any), (B) all additional
Taxes required to be paid by such Seller or the Companies as a result of any
payment (or obligation to make a payment) under this Section 9.7 (taking into
account any Tax benefit to such Seller and the Companies arising from the
payment under this Section 9.7) and (C) any other costs and expenses (including
reasonable attorney's or accountant's fees) of

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such Seller or the Companies incurred in connection with any Proceeding with
respect to a Section 338(h)(10) Election or the January 1 Election over (ii)
all Taxes of such Seller that would have been imposed if such Section
338(h)(10) Election and such January 1 Election, if any, had not been made;
provided, however, that Purchaser and SFX shall not be responsible for any
income Taxes of the Companies arising by reason of Section 1374 of the Code (or
any similar provision under state or local law) with respect to any assets held
by the Companies prior to the Closing;

(b) Purchaser and SFX agree to pay each Seller, in addition to any
other payment required to be made hereunder, the amount for which the Purchaser
and SFX are responsible under this Section 9.7, (A) in the case of any Tax
(including a Tax arising by reason of a redetermination) of a Seller, two
Business Days prior to the date such Tax is due (except in the case of any Tax
for which Purchaser and SFX are responsible under this Section 9.7 in
connection with a payment pursuant to Section 2.7, which Tax shall be paid to
each Seller on the date such payment pursuant to Section 2.7 is required to be
made) and (B) in the case of any other amount payable by a Seller, within three
Business Days of a written request from the Seller for payment of such amount.
Purchaser and SFX shall satisfy their indemnity obligations with respect to
Taxes of the Companies (as distinguished from Taxes of the Sellers), including
an obligation to make a Gross-Up payment, by paying, or causing to be paid,
such Tax to the applicable taxing authority. Falk and Polk shall pay SFX and
Purchaser the amount of state tax benefit realized by Falk and Polk that would
not have been realized by Falk and Polk but for the payment by SFX and
Purchaser of a state Tax of the Companies pursuant to this Section 9.7, such
that Falk and Polk are in the same economic position (pursuant to Section
9.7(a)) they would have been in had no Section 338(h)(10) Election or January 1
Election been made. SFX and Purchaser shall fund, and Falk and Polk shall have
no obligation to fund, any Tax of the Companies arising by reason of any
Section 338(h)(10) Election or January 1 Election.

(c) The parties agree that the calculation of the excess described in
Section 9.7(a) (the "Gross-Up") shall be made in the same manner as the
allocation, estimate of the Gross-Up and methodology contained in Exhibit E,
except to the extent that such Exhibit does not take into account actual Taxes,
costs and expenses. The Sellers shall deliver to SFX a written statement, in
reasonable detail, setting forth their calculation of the Closing Date
allocation and the Gross-Up (the "Pre-Closing Statement") at least ten days
prior to the Closing Date. In the event that SFX disagrees with the Pre-Closing
Statement, (I) the parties shall attempt in good faith to resolve their dispute
and (II) in the event that the parties have not resolved their dispute within
four days of receipt by SFX of the Pre-Closing Statement, the dispute shall be
resolved by a neutral arbitrator (who shall be a nationally recognized
accounting firm experienced in such tax matters) (the "Tax Arbitrator") within
nine days of receipt by SFX of the Pre-Closing Statement (the Pre-Closing
Statement or the Tax Arbitrator's determination, if any, the "Closing Date
Allocation"). The Tax Arbitrator shall be mutually selected by the parties;
provided, however,

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that if the parties do not mutually agree on such a selection, the Tax
Arbitrator shall be selected by the American Arbitration Association. Within 30
days after the Closing Date, Sellers shall provide to SFX any adjustments to
the Closing Date Allocation required by reason of differences between amounts
known as of the Closing Date and amounts known at the time such adjustments are
so provided. Falk, Polk, SFX and Purchaser shall agree in writing on any
adjustments to the Closing Date Allocation required by reason of differences
between amounts known as of the Closing Date and amounts known at the time of
such agreement. Any dispute with respect to the adjustment shall be resolved by
the Tax Arbitrator; provided, however, that the issues to be decided by the Tax
Arbitrator shall be limited to the adjustment. The Closing Date Allocation, as
so adjusted shall be the "Final Allocation." Within ten days of agreement in
writing on the Final Allocation, Purchaser and SFX shall notify Falk and Polk
whether Purchaser intends to make a Section 338(h)(10) Election and whether
Purchaser intends to make the January 1 Election. Within a reasonable period
prior to filing any Tax return, Falk and Polk shall advise SFX and Purchaser
whether the calculation of the Gross-Up in the Final Allocation is accurate
(and, if inaccurate, Falk's and Polk's revised calculation of the Gross-Up)
based on the facts and law known and existing at the time such return is to be
filed; provided, however, that, in the absence of a relevant change in law
after the date of the Final Allocation, Falk and Polk shall not be entitled to
provide any such revised calculation of the Gross-Up, which revision is based
on the grounds that the Final Allocation reflects a position of Tax law
different from the position that Falk and Polk would like to take on such Tax
return. SFX and Purchaser shall pay Falk and Polk the Gross-Up based on Falk's
and Polk's calculation within the time period specified in Section 9.7(b);
provided, however, that if SFX and Purchaser disagree with Falk's and Polk's
calculation of the Gross-Up at such time, the parties shall attempt in good
faith to resolve the dispute and, failing that, the dispute shall be resolved
by the Tax Arbitrator and any appropriate adjusting payment between the parties
shall be made upon resolution of such dispute; provided, further, however, that
notwithstanding any other provision, if such dispute has not been resolved
prior to the due date of such Tax return, SFX and Purchaser shall pay Falk and
Polk the Gross-Up reflected in the Final Allocation at the time specified in
Section 9.7(b). Any additional amounts owed pursuant to Section 9.7(a) shall be
paid pursuant to Section 9.7(b);

(d) The costs of any Tax Arbitrator shall be borne by the party losing
such arbitration. The Tax Arbitrator shall determine which party has lost such
arbitration; and

(e) SFX and Purchaser agree that their obligations pursuant to this
Section 9.7 are irrevocable, absolute, independent and unconditional and shall
not be affected by any circumstance which constitutes a legal or equitable
discharge of SFX or Purchaser other than a payment in full of their obligations
pursuant to this Section 9.7. In furtherance of the foregoing and without
limiting the generality thereof, SFX and Purchaser agree that Sellers may
enforce such obligations not-

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<PAGE>

withstanding the existence of any dispute among the parties hereunder and such
obligations of SFX and Purchaser shall be valid and enforceable and shall not
be subject to any reduction, limitation, impairment, discharge or termination
for any reason (other than payment in full of such obligations), including by
reason of the assertion of any defense, set-off or counterclaim.

9.8 Additional Tax Matters

(a) Indemnity by Falk and Polk. Subject to the limitation provided in
Section 10.2, Falk agrees to indemnify, defend and hold harmless the Purchaser,
SFX and the Companies from and against 85 percent of, and Polk agrees to
indemnify, defend and hold harmless the Purchaser, SFX and the Companies from
and against 15 percent of, the following Taxes:

(i) Adjustment Taxes with respect to Pre-Closing Periods, as
defined below, including Taxes arising by reason of the failure of the
Companies to qualify as S corporations for federal income Tax purposes for any
period prior to the Closing Date (provided that SFX, Purchaser and the
Companies comply with their respective covenants in the second sentence of
Section 9.5),

(ii) income Taxes of the Companies with respect to any
taxable period of the Companies ending the day before the Closing Date or the
portion ending the day before the Closing Date of a Straddle Period, and

(iii) income Taxes of the Companies with respect to a taxable
period beginning on or after the Closing Date (or the portion, beginning on or
after the Closing Date, of a Straddle Period) that would not have arisen but
for a Code Section 481 adjustment (or a similar adjustment under state or local
law) resulting from a change in method of accounting made prior to the Closing
by a Company at the direction of Falk and Polk (and not SFX and Purchaser)
other than any Section 481 adjustment resulting from the January 1 Election,
any Section 338(h)(10) Election or the acquisition of the Purchased Shares
hereunder;

provided, however, that Falk and Polk shall not so indemnify, defend or hold
harmless the Purchaser, SFX or the Companies with respect to

(i) any amounts for which the Purchaser and SFX are
responsible pursuant to Section 9.7 nor

(ii) any Taxes reflected as a liability or reserve on the
Reference Balance Sheet.

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<PAGE>

(b) Indemnification by SFX and Purchaser. SFX and Purchaser agree to
hold the Sellers harmless from and against the following Taxes:

(i) any Taxes of the Companies with respect to any taxable
period of the Companies beginning on the Closing Date and the portion beginning
on the Closing Date of a Straddle Period, and

(ii) any Tax on any Section 481 adjustment resulting from the
acquisition of the Purchased Shares hereunder (including any such adjustment
resulting from the conversion of the Companies from S corporations to
corporations taxable under Subchapter C of the Code or any comparable provision
of state or local law, any change by the Companies from the cash to the accrual
method of accounting in connection with such acquisition or any Section
338(h)(10) Election or the January 1 Election) and any Section 481 adjustment
of the Companies resulting from a change in method of accounting made at the
direction of SFX or Purchaser.

(i) "Adjustment Taxes" shall mean the excess of (i) any Taxes
of the Companies payable after the Closing Date with respect to a Pre-Closing
Period (including income Taxes of the Companies arising by reason of Section
1374 of the Code with respect to any assets held by the Companies prior to the
Closing) that would not have arisen but for an audit or other adjustment by the
IRS or other taxing authority over (ii) any Tax benefits to the Companies, SFX,
the Purchaser or any of their Affiliates resulting from an adjustment giving
rise to such Taxes.

(ii) "Controlling Party" shall mean (A) Falk and Polk for any
Proceeding relating to a taxable period that ends prior to the Closing Date,
including any such taxable period with respect to which a Section 338(h)(10)
Election has been made; provided, however, that in the event that Falk and Polk
so elect with respect to such a taxable period, Purchaser and SFX shall be the
Controlling Party with respect to such a taxable period and (B) Purchaser and
SFX for any Proceeding relating to a taxable period that includes but does not
end on the day prior to the Closing Date with respect to the Companies or any
taxable period that begins on the Closing Date with respect to the Companies.

(iii) "Noncontrolling Party" shall mean (A) Falk and Polk in
the case of Proceedings with respect to which Purchaser and SFX are the
Controlling Party and (B) Purchaser and SFX in the case of Proceedings with
respect to which Falk and Polk are the Controlling Party.

(iv) "Pre-Closing Period" shall mean a taxable period ending
prior to the Closing Date and the portion, ending on the day prior to the
Closing Date, of a Straddle Period.

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(v) "Straddle Period" shall mean a taxable period that
includes the day prior to the Closing Date and does not end prior to the
Closing Date.

(d) Allocation of Taxes. In the case of a Straddle Period, (i) Taxes
other than income or franchise Taxes shall be allocated on a per diem basis and
(ii) income or franchise Taxes shall be allocated based on an interim closing
of the books. Tax items with respect to the S termination year of each Company,
within the meaning of Section 1362(e) of the Code, shall be allocated based on
an interim closing of the books. The parties agree to make the election
provided in Section 1362(e)(3) of the Code, if necessary, to avoid the
application of Section 1362(e)(2) of the Code.

(e) Right to Refunds. Sellers shall be entitled to any credits or
refunds of Taxes of either Company relating to any Pre-Closing Period (other
than Taxes which are excluded from the indemnification hereunder). The amount
of any credit or refund to which Sellers are entitled hereunder but which at
any time subsequent to the Closing Date is received by or credited to
Purchaser, or any Affiliate of Purchaser, shall be promptly paid over to
Sellers following such receipt or the utilization by Purchaser or Affiliate of
such credit, as the case may be.

(f) Termination of Falk and Polk Tax Indemnity. The obligation of Falk
and Polk, respectively, to indemnify, defend and hold harmless pursuant to this
Section 9.8 shall terminate on the earlier of the sixth anniversary of the
Closing Date and the expiration of the applicable statute of limitations;
provided, however, that such indemnity obligation shall survive with respect to
any Tax which the applicable taxing authority has identified in writing
pursuant to a Proceeding as potentially subject to adjustment.

(g) Preparation of Tax Returns.

(i) Sellers shall prepare, or cause to be prepared, and shall
file or cause to be filed, with the reasonable assistance and cooperation of
the Companies, Purchaser and SFX, any income Tax return of, or which includes,
a Company for any Pre-Closing Period (including a Straddle Period and any
period with respect to which any Section 338(h)(10) Election is made). Such Tax
returns shall be prepared and filed consistent with the past practice of the
Companies.

(ii) Purchaser shall prepare, or cause to be prepared, and
shall file or cause to be filed, any other Tax return of the Companies (except
for any return filed in connection with a Proceeding, as defined below,
controlled by Falk and Polk). Any such Tax return that includes a Pre-Closing
Period shall be prepared and filed consistent with the past practice of the
Companies, except to the extent that such past practice does not have
substantial authority.

(h) Cooperation. Sellers, on the one hand, and the Companies,
SFX and the Purchaser, on the other hand, shall provide each other with
reasonable coopera-

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<PAGE>

tion and assistance in connection with the preparation of any Tax return, audit
or other examination by any taxing authority, any judicial or administrative
proceedings relating to liability for Taxes (including refunds) and shall each
provide to the other any records or information relevant to such return, audit
or examination, proceedings or determination as are in their possession or
subject to their control; provided, however, that notwithstanding any other
provision hereunder, none of the Companies, the Purchaser, SFX or any other
Person (other than the Tax Arbitrator) shall have any right to receive or
obtain any information relating to, or have any rights with respect to, any
Taxes or Tax returns of any of the Sellers, and the Sellers shall not have the
right to Tax returns of Purchaser or SFX.

9.9 Tax Contests.

(a) Purchaser and SFX shall promptly notify Falk and Polk upon receipt
of notice of any Tax audit or any proposed assessment relating to a Company if
such audit or proposed assessment could give rise to a claim against Falk and
Polk for indemnification pursuant to Section 9.8 and shall thereafter promptly
forward to Falk and Polk copies of any communications received from or sent to
any taxing authority by Purchaser and SFX or either Company in connection with
any such audit or proceeding (a "Proceeding"); provided, however, that the
failure of Purchaser and SFX to give Falk and Polk such prompt notice or to
forward such communications as required herein shall not relieve Falk and Polk
of any obligations under Section 9.8, except to the extent that Falk and Polk
are actually prejudiced thereby.

(b) In the case of any Proceeding with respect to a Company, the
Controlling Party shall be entitled to appoint as lead counsel any legal
counsel of its choice and shall control, at its expense, the conduct of the
Proceeding; provided, however, that in the case of any such Proceeding, (i) the
Controlling Party shall provide the Noncontrolling Party with a timely and
reasonably detailed account of each stage of such Proceeding and a copy of the
portions of all documents relating to such Proceeding which are relevant to any
Tax for which the Noncontrolling Party may be required to indemnify or may
otherwise be liable, (ii) the Controlling Party shall consult with the
Noncontrolling Party before taking any significant action in connection with
such Proceeding that might adversely affect the Noncontrolling Party, (iii) the
Controlling Party shall consult with the Noncontrolling Party and offer the
Noncontrolling Party an opportunity to comment before submitting any written
materials prepared or furnished in connection with such Proceeding (including,
to the extent practicable, any documents furnished to the applicable taxing
authority in connection with any discovery request) to the extent such
materials concern matters in such Proceeding that could adversely affect the
Noncontrolling Party, (iv) the Controlling Party shall defend such Proceeding
diligently and in good faith as if the Controlling Party were the only party in
interest in connection with such Proceeding and the Noncontrolling Party shall
reasonably facilitate to the extent requested by the Controlling Party, and
shall not impede, such Proceeding, (v) the Controlling Party

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shall not (except in the case of any Proceeding with respect to a Pre-Closing
Period that ends prior to the Closing Date if Falk and Polk are the Controlling
Party) settle, compromise or abandon any such Proceeding without obtaining the
prior written consent, which consent shall not be unreasonably withheld, of the
Noncontrolling Party if such settlement, compromise or abandonment might have
an adverse impact on the Noncontrolling Party; (vi) in the event that Falk and
Polk have elected to appoint SFX and Purchaser as the Controlling Party
pursuant to the proviso in Section 9.8(c)(ii)(A) and if SFX and Purchaser lose
such Proceeding, Falk and Polk shall reimburse SFX and Purchaser for 90 percent
of the out-of-pocket costs incurred by SFX and Purchaser in connection with
such Proceeding (to the extent such costs are properly attributable to the Tax
in connection with such Proceeding for which Falk and Polk are responsible
hereunder) but not in excess of 20 percent of the amount of the Tax for which
Falk and Polk are responsible in connection with such Proceeding; (vii)
notwithstanding any other provision, SFX and Purchaser shall bear any cost in
connection with a Proceeding to the extent such cost is properly attributable
to the Tax in connection with such Proceeding for which SFX and Purchaser are
responsible pursuant to Section 9.7 and (viii) in the event Falk and Polk are
acting as the Controlling Party, they shall promptly notify Purchaser and SFX
of any issue raised in connection with an audit for which Falk and Polk will
not be liable if the contest shall prove unsuccessful and shall offer SFX and
Purchaser the opportunity to participate fully in the Proceeding to the extent
the Proceeding relates to the issues for which Sellers will not be liable. In
the event that the Noncontrolling Party reasonably withholds consent pursuant
to clause (v) above, the Noncontrolling Party may assume the defense of the
Proceeding at its expense and the Controlling Party's liability with respect
thereto shall not exceed the amount of liability that the Controlling Party
would have had under the proposed settlement.

ARTICLE X

INDEMNIFICATION

10.1 Indemnification by Sellers. Each Seller, severally and not
jointly agrees with respect to Sections 3.2 and 3.22 and Falk and Polk jointly
and severally with each other, agree, and Higgins, individually, agrees, with
respect to Section 3.4 and Section 10.1(b), to indemnify, defend and hold
harmless Purchaser and SFX and all their respective officers, directors,
shareholders, employees and agents after the Closing Date from and against any
liability, obligation, loss, Lien, cost, damage and expense (including
reasonable legal and accounting fees incurred in defending or prosecuting any
claim for any such liability, loss or damage) arising out of or resulting from:

(a) any inaccuracy in or breach of any representation or
warranty contained in Section 3.2, 3.4, or 3.22 of this Agreement or
the Schedules related thereto; or

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(b) any brokers' commissions, finders' fees or other like
payments incurred or alleged to have been incurred by such Seller in
connection with the sale of any of the Purchased Shares or the
consummation of the transactions contemplated by this Agreement.

10.2 Limitation on Indemnification. The amount of liability of Sellers
arising out of the indemnifications provided for in Section 10.1 and Section
9.8 shall be subject to the limitation that no Seller shall have any liability
under any provisions of Section 10.1 and Section 9.8 until the aggregate of all
losses, liabilities, obligations, Liens, damages, costs and expenses relating
thereto for which Sellers would but for this Section 10.2 be liable exceeds
$100,000 (other than for breach of a representation and warranty contained in
Section 3.2 as to which there shall be no such threshold) in which event
Sellers shall be liable for all of such losses, liabilities, costs and
expenses; provided that in no event shall the aggregate amount of the liability
of Sellers arising out of the indemnifications provided for in Section 10.1 and
Section 9.8 exceed $12,500,000. In addition, no claims for indemnification
under Section 10.1 may be made on the basis of the matter referred to on
Schedule 10.2.

10.3 Indemnification by Purchaser and SFX. Purchaser and SFX agree to
indemnify, defend and hold harmless each Seller after the Closing Date from and
against any liability, obligation, loss, Lien, cost, damage and expense
(including reasonable legal and accounting fees incurred in defending or
prosecuting any claim for any such liability, loss or damage) arising out of or
resulting from:

(a) any inaccuracy in or breach of any representation or warranty of
Purchaser or SFX contained in this Agreement (or in any document, writing or
certificate delivered by Purchaser under this Agreement), or the failure by
Purchaser or SFX to perform any of its respective covenants or obligations
hereunder; or

(b) any brokers' commissions, finders' fees or other like payments
incurred or alleged to have been incurred by Purchaser in connection with the
purchase of the Purchased Shares or the consummation of the transactions
contemplated by this Agreement;

10.4 Specific Breaches. The breach of a specific representation,
warranty, or agreement by Sellers or Purchaser or SFX, as applicable, shall be
determined whether or not, apart from such specific representation, warranty or
agreement, the transactions provided for in this Agreement prove to be more
favorable to SFX or Purchaser or Sellers, as applicable, and whether or not the
facts and circumstances covered by any one or more of the other
representations, warranties or agreements made by Sellers or Purchaser prove to
be more favorable than so represented and warranted.

10.5 Procedure for Indemnification. If any Person shall claim
indemnification (the "Indemnified Party") hereunder for any claim other than a
third party claim,

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<PAGE>

the Indemnified Party shall promptly give written notice to the other party
from whom indemnification is sought (the "Indemnifying Party") of the nature
and amount of the claim. If an Indemnified Party shall claim indemnification
hereunder arising from any claim or demand of a third party, the Indemnified
Party shall promptly give written notice (a "Third-Party Notice") to the
Indemnifying Party of the basis for such claim or demand, setting forth the
nature of the claim or demand in detail. With respect to any notice, no delay
on the part of the Indemnified Party in notifying the Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder except to the
extent that the Indemnifying Party thereby is prejudiced. The Indemnifying
Party shall have the right to compromise or, if appropriate, defend at its own
cost and through counsel of its own choosing reasonably satisfactory to the
Indemnified Party, any claim or demand giving rise to any such claim for
indemnification. In the event the Indemnifying Party undertakes to compromise
or defend any such claim or demand, it shall promptly (and in any event, no
later than fifteen (15) days after receipt of a Third-Party Notice) notify the
Indemnified Party in writing of its intention to do so and shall give the
Indemnifying Party such security in that regard as the Indemnified Party
reasonably may request. The Indemnified Party shall fully cooperate with the
Indemnifying Party and its counsel in the defense or compromise of such claim
or demand. After the assumption of the defense by the Indemnifying Party, the
Indemnifying Party shall not be liable for any legal or other expenses
subsequently incurred by the Indemnified Party, in connection with such
defense, but the Indemnified Party may participate in such defense at its own
expense; provided, however, that if such Indemnified Party shall have been
advised by counsel that representation of such Indemnified Party by counsel
provided by the Indemnifying Party would be inappropriate due to actual or
potential conflicting interests between such Indemnified Party and the
Indemnifying Party, including situations in which there are one or more legal
defenses available to such Indemnified Party that are different or in addition
to those available to the Indemnifying Party, then such Indemnifying Party
shall remain liable for such expenses. No settlement of a third party claim or
demand defended by the Indemnifying Party shall be made without the prior
written consent of the Indemnified Party, such consent not to be unreasonably
withheld. The Indemnifying Party shall not, except with the prior written
consent of the Indemnified Party, consent to the entry of a judgment or
settlement which (i) is for other than solely money damages or (ii) does not
include as an unconditional term thereof, the giving by the claimant or
plaintiff to the Indemnified Party of an unconditional release from all
liability in respect of such third party claim or demand.

10.6 Survivability of Indemnity. The indemnities contained in Section
10.1 shall expire on that date which is six months after the Closing Date,
except with respect to claims under Section 3.2 as to which the indemnification
obligation shall survive until thirty (30) days after the expiration of any
applicable statute of limitations; provided, that if at the stated expiration
of any indemnification obligation there shall then be pending any
indemnification claim by a Person, such Person shall

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<PAGE>

continue to have the right to such indemnification with respect to such claim
notwithstanding such expiration.

10.7 Payment. Except for third-party claims being defended in good
faith by the Indemnifying Party in accordance with Section 10.5, the
Indemnifying Party shall satisfy its obligations hereunder within fifteen (15)
days after receipt of notice of a claim. Any amount not paid to the Indemnified
Party by such date shall bear interest at a rate equal to nine percent (9%) per
annum from the date due until the date paid.

ARTICLE XI

TERMINATION

11.1 Rights to Terminate. This Agreement may be terminated at any
time prior to the Closing only as follows:

(a) by mutual written consent of Sellers and Purchaser;

(b) by Falk or by Purchaser if, at or before July 15, 1998,
any condition set forth herein (other than the conditions set forth in
Sections 6.1(g) and 7.1(e)) for the benefit of Sellers or Purchaser,
respectively, shall not have been timely met and shall have become
incapable of fulfillment on or before July 15, 1998 and shall not have
been waived; or

(c) by Purchaser or Falk if the Closing shall not have
occurred on or before July 15, 1998; provided, however, that if the
sole reason or reasons for the failure of the Closing to have occurred
on or before July 15, 1998 is the failure of the waiting period
required by the Hart-Scott-Rodino Act in respect of the transactions
contemplated hereby to have expired or been terminated, or any other
approvals required thereunder to have been obtained, or the failure to
have obtained any other approval or consent of any governmental
Authority that is required in respect thereof, then, in any such
event, this Agreement may not be terminated by Purchaser or Falk as at
July 15, 1998, but either may do so if the Closing shall not have
occurred on or before September 15, 1998.

Each party's right of termination hereunder is in addition to
any of the rights it may have hereunder or otherwise.

11.2 Effects of Termination. Notwithstanding any other
provision of this Agreement, no termination of this Agreement shall
release (i) any party of any liabilities or obligations arising
hereunder for any willful breaches of any covenants made herein or
(ii) any party from its obligations under Section 12.12.

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ARTICLE XII

MISCELLANEOUS PROVISIONS

12.1 Notices. All notices or other communications required or
permitted by this Agreement shall be in writing and shall be deemed to have
been duly received (a) if given by telecopier, when transmitted and the
appropriate telephonic confirmation received if transmitted on a business day
and during normal business hours of the recipient, and otherwise on the next
business day following transmission, (b) if given by certified or registered
mail, return receipt requested, postage prepaid, three business days after
being deposited in the U.S. mails and (c) if given by courier or other means,
when received or personally delivered, and, in any such case, addressed as
follows:

(i) if to Purchaser:

SFX Sports Group, Inc.
650 Madison Avenue
New York, New York 10022
Attention: Howard J. Tytel
Telephone: (212) 838-3100
Facsimile: (212) 753-3188

with a copy to:

Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: Jonathan Goldstein
Telephone: (212) 294-6714
Facsimile: (212) 294-4700

(ii) if to SFX:

SFX Entertainment, Inc.
650 Madison Avenue
New York, New York 10022
Attention: Howard J. Tytel
Telephone: (212) 838-3100
Facsimile: (212) 753-3188

with a copy to:

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<PAGE>

Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: Jonathan Goldstein
Telephone: (212) 294-6714
Facsimile: (212) 294-4700

(iii) if to any Seller:

c/o Falk Associates
Management Enterprises, Inc.
5335 Wisconsin Avenue, N.W.
Washington, D.C. 20015
Telephone: (202) 686-2000
Facsimile: (202) 686-5050

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Mitchell Presser
Telephone: (212) 403-1000
Facsimile: (212) 403-2000

or to such other addresses as may be specified by any such Persons to the other
Persons, pursuant to notice given by such Person in accordance with the
provisions of this Section 12.1.

12.2 Assignment. Except as provided in Section 2.6, no party may
assign or transfer any or all of its rights or obligations under this Agreement
without the prior written approval of all the other parties.

12.3 Benefit of the Agreement. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement shall not be construed so as to confer
any right or benefit upon any Person, other than the parties hereto and their
respective successors and permitted assigns.

12.4 Exhibits and Schedules. The Exhibits and Schedules hereto shall
be construed with and as an integral part of this Agreement to the same effect
as if the contents thereof had been set forth verbatim herein.

12.5 Headings. The headings used in this Agreement are for convenience
of reference only and shall not be deemed to limit, characterize or in any way
affect the interpretation of any provision of this Agreement.

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<PAGE>

12.6 Entire Agreement. Except with respect to the Confidentiality
Agreement, this Agreement contains the entire agreement and understanding of
the parties with respect to the subject matter hereof, and no other
representations, promises, agreements or understandings regarding the subject
matter hereof shall be of any force or effect unless in writing, executed by
the party to be bound thereby and dated on or after the date hereof.

12.7 Modifications and Waivers. No change, modification or waiver of
any provision of this Agreement shall be valid or binding unless it is in
writing, dated subsequent to the date hereof and signed by Purchaser and
Sellers. No waiver of any breach, term or condition of this Agreement by any
party shall constitute a subsequent waiver of the same or any other breach,
term or condition.

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

12.9 Severability. In case any one or more of the provisions contained
herein for any reason shall be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision or provisions had never
been contained herein.

12.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.

12.11 JURISDICTION; SERVICE OF PROCESS. EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING ARISING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT OR
PROCEEDING SHALL BE BROUGHT ONLY IN SUCH COURT (AND WAIVES ANY OBJECTION BASED
ON FORUM NONCONVENIENS OR ANY OTHER OBJECTION TO VENUE THEREIN).

12.12 Expenses. Except as otherwise expressly provided herein, each
party hereto shall pay all of its own costs and expenses incurred or to be
incurred in negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated by this Agreement.

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement as of the date first written above.

SFX SPORTS GROUP, INC.

By: /s/ Howard J. Tytel
---------------------------------------------------

Title: Executive Vice President
-------------------------------------------------

SFX ENTERTAINMENT, INC.

By: /s/ Howard J. Tytel
---------------------------------------------------

Title: Executive Vice President
-------------------------------------------------

SELLERS: FAME SHARES: FINANCIAL SHARES:

/s/ David Falk 850 850
- ----------------------------------- ------------- ------------------
DAVID FALK

150 150
/s/ Curtis Polk
- ----------------------------------- ------------- ------------------
CURTIS POLK

/s/ G. Michael Higgins
- ----------------------------------- 0 0
G. MICHAEL HIGGINS

TOTAL: 1,000 1,000
============= ==================

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<PAGE>

ASSET PURCHASE AGREEMENT
------------------------

THIS ASSET PURCHASE AGREEMENT (this "Agreement") is dated as of the
29th day of April, 1998, by and among BLACKSTONE ENTERTAINMENT, LLC, a
Massachusetts limited liability company (the "Seller"), the members of the
Seller listed on Schedule A hereto (the "Members"), for the specific limited
purposes set forth in this Agreement, DLC ACQUISITION CORP., a Delaware
corporation (the "Buyer"), and SFX ENTERTAINMENT, INC., a Delaware corporation
and corporate parent of the Buyer ("SFX").

WITNESSETH:

WHEREAS, the Seller is in the ticketing and concert production and
promotion business (the "Business"), which Business includes the operation of
the Great Woods concert facility ("Great Woods"), and the Harborlights concert
facility ("Harborlights");

WHEREAS, the Members own one hundred percent (100%) of the outstanding
membership interests in the Seller, in the respective percentages set forth
opposite each Member's name on Schedule B hereto; and

WHEREAS, the Buyer desires to purchase from the Seller, and the Seller
desires to sell to the Buyer, substantially all of the assets of the Seller,
upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties hereto hereby agree as follows:

1. PURCHASE AND SALE.

1.1. Acquired Assets. Subject to the terms and conditions set forth in
this Agreement, at the Closing (as defined in Section 4.1 hereof), the Seller
shall sell, convey, assign, transfer and deliver to the Buyer, and the Buyer
shall purchase, acquire and take assignment and delivery of, all of the assets
of the Seller (other than the Excluded Assets specified in Section 1.2 hereof)
(all of which assets are hereinafter referred to collectively as the "Acquired
Assets").

1.2. Excluded Assets. Notwithstanding anything to the contrary set
forth in this Agreement, the Seller is not selling and the Buyer is not
purchasing pursuant to this Agreement, and the term "Acquired Assets" shall not
include, any of the following assets (collectively, the "Excluded Assets"):

<PAGE>

-2-

(a) any of the Seller's right, title and interest under that
certain lease of the office building located at 36 Bay State Road,
Cambridge, Massachusetts 02138 (the "Cambridge Office Building"),
presently occupied by the Seller (the "Existing Cambridge Office
Lease"), which Existing Cambridge Office Lease will be terminated as
provided in Section 5.5 hereof;

(b) the Seller's beneficial interests in those certain nightclubs
located in Boston, Massachusetts and listed on Schedule 1.2(b) hereto;
provided, that the Buyer is satisfied at Closing that such nightclubs
will not compete in any material respect with the Buyer's efforts to
attract performing artists;

(d) the name "Don Law Company" following the termination of the
Employment/Management Agreement (as defined in Section 5.1 hereof);

(e) the land and improvements located in Mansfield, Massachusetts
and more particularly described and denoted on Schedule 1.2(e) hereto,
which land and improvements have been designated for the so-called
"Great Waves" water park facility (the "Water Park");

(f) any Permits (as defined in Section 6.11 hereof) not
transferable by the Seller to the Buyer;

(g) any contracts or agreements designated on Schedule 6.16
hereto as not being material to the Business which the Seller is
unable to transfer to the Buyer at Closing (the "Excluded Contracts");

(h) if elected by the Buyer pursuant to Section 5.9 hereof, the
Seller's right, title and interest under that certain lease of the
Harborlights facility located in Boston, Massachusetts (the
"Harborlights Lease"), together with any and all other assets of the
Seller utilized exclusively with respect to the Harborlights Lease
(collectively, the "Harborlights Assets"); and

(i) the name "Great Waves."

2. ASSUMPTION OF OBLIGATIONS. At the Closing, the Buyer shall assume,
and agree to pay, perform, fulfill and discharge, all of the obligations and
liabilities of the Seller of any nature, fixed or contingent, known or unknown,
including, without limitation, all obligations and liabilities of the Seller
under the Employee Benefit Plans (as defined in Section 6.17 hereof), and under
all of the Seller's contracts and agreements which are not Excluded Contracts
(collectively, the "Assumed Obligations"), but which Assumed Obligations shall
specifically exclude

<PAGE>

-3-

any of the foregoing related to the Excluded Assets (it being agreed, however,
that such exclusion shall not apply to any of the foregoing obligations and
liabilities which shall exist as of the Closing Date related to the Excluded
Assets under Sections 1.2(a) and (g) hereof, and under Section 1.2(h) in the
event the Harborlights Assets are Excluded Assets, which obligations and
liabilities shall be included in the Assumed Obligations).

3. PURCHASE PRICE.

3.1. Purchase Price. The aggregate purchase price for the Acquired
Assets shall equal $80,000,000, subject to adjustment in accordance with
Section 3.3 hereof, plus the amount of the Assumed Obligations (the "Purchase
Price"). SFX shall cause the Purchase Price (other than the Assumed
Obligations) to be paid by the Buyer as follows: (a) $100,000 has been paid by
the Buyer as a non-refundable deposit ("Deposit") upon the execution of this
Agreement (which Deposit is non-refundable under all circumstances); (b) a
portion of the balance of the Purchase Price, in an amount not less than
$64,000,000 (plus the amount of any positive Net Working Capital Amount (as
defined in Section 3.3(b) hereof)), as determined by the Buyer within ten (10)
days prior to the Closing, shall be paid at the Closing by certified or bank
check or wire transfer pursuant to wire transfer instructions furnished by the
Seller (such portion being referred to herein as the "Cash Portion"); and (c)
in the event that the Buyer elects not to pay the entire Purchase Price in cash
as provided in clause (b) above (such portion not so paid being referred to
herein as the "Non-Cash Portion"), the Non-Cash Portion shall be paid by SFX's
delivering to the Seller, at the Closing, such number of unregistered shares of
SFX's Class A Common Stock, $.01 par value per share (the "Class A Stock") (the
certificates for which shall bear a usual and customary legend restricting
transfer under securities laws, and a legend denoting restrictions under the
Registration Rights Agreement (as defined in Section 5.4 hereof)), determined
as hereinafter provided. The number of shares of Class A Stock (the "Stock
Portion") shall equal the quotient obtained by dividing (i) the Non-Cash
Portion, by (ii) $30.0875 (the "Per Share Price"). Notwithstanding the
foregoing, the Purchase Price and the Cash Portion may be reduced in accordance
with Section 5.9 hereof.

3.2. Allocation of Purchase Price. The Purchase Price shall be
allocated among the Acquired Assets in the manner mutually determined by the
Seller and the Buyer prior to the Closing; provided, that in all events, the
allocation of the Purchase Price shall be consistent (in a manner reasonably
acceptable to Mugar MLW LLC) with the valuations used to adjust the bases of
property under Sections 743(b) and 754 of the Internal Revenue Code of 1986, as
amended (the "Code"), upon the transfer of membership interests in the Seller
to Mugar MLW LLC in October 1997. At the Closing, the Buyer and the Seller
shall duly execute and deliver certificate setting forth the foregoing
allocation (the "Allocation Certificate"). The Buyer and the Seller shall
report the purchase and sale of the Acquired Assets, including,

<PAGE>
-4-

without limitation, in all federal, foreign, state, local and other tax returns
prepared and filed by or for either of the Buyer or the Seller, in accordance
with the basis set forth in the Allocation Certificate.

3.3. Adjustment to Purchase Price.

(a) If (i) the Net Working Capital Amount (as determined in
accordance with Section 3.3(b) hereof) is a negative number, the
Purchase Price payable at the Closing shall be reduced by the amount
thereof, and (ii) the Net Working Capital Amount is a positive number,
the Purchase Price payable at the Closing shall be increased by the
amount thereof. Any increase or decrease in the Purchase Price in
accordance with this Section 3.3 shall be made to the Cash Portion.

(b) Within ten (10) days prior to the Closing, the Seller shall
cause to be prepared and delivered to the Buyer (i) a pro forma
balance sheet of the Seller (the "Closing Balance Sheet") as of the
close of business on the Closing Date (referred to herein as the
"Calculation Date"), prepared in accordance with GAAP (as defined in
Section 11 hereof), and (ii) a certificate of the chief financial
officer of the Seller, certifying (A) that the Closing Balance Sheet
was prepared on the basis described in clause (i) above, and (B) the
amount of Net Working Capital (as defined in Section 11 hereof) of the
Seller as of the Calculation Date (the "Net Working Capital Amount").
The Buyer shall have five (5) days after its receipt of the Closing
Balance Sheet (the "Review Period") to review same and the Seller's
calculation of the Net Working Capital Amount, and to notify the
Seller of its agreement or disagreement with Seller's calculation of
the Net Working Capital Amount. If the Buyer does not notify the
Seller within the Review Period that it disagrees with all or any part
of the Seller's calculation of the Net Working Capital Amount, then
the Net Working Capital Amount so determined by the Seller shall be
deemed conclusive and binding upon the parties for all purposes of
this Agreement. If, however, the Buyer objects in a timely manner as
aforesaid, then the parties shall promptly endeavor to agree, within
the five (5) day period prior to the Closing (the "Resolution
Period"), on the disputed portion of the Net Working Capital Amount
(the "Disputed Amount"). If the Buyer and the Seller are unable during
the Resolution Period to agree on the Disputed Amount, then an amount
of cash equal to the Disputed Amount shall be deposited into escrow by
the Buyer pursuant to a mutually agreeable escrow agreement pending
resolution of the Disputed Amount as follows. Within ten (10) days
after the Closing, the Seller and the Buyer shall select a nationally
recognized independent accounting firm (other than the Seller's
independent accountants and the Buyer's independent accountants) to
resolve the Disputed Amount, which firm shall conclusively resolve the
Disputed Amount within thirty (30) days thereafter. Upon resolution of
the Disputed Amount by such accounting

<PAGE>
-5-

firm, the Disputed Amount shall either be retained by the Buyer or
remitted to the Seller, as appropriate. The fees and expenses of such
accounting firm shall be paid jointly by the Buyer and the Seller.

4. CLOSING.

4.1. Time and Place. The closing of the purchase and sale of the
Acquired Assets (the "Closing") shall be held at the offices of Bingham Dana
LLP, 150 Federal Street, Boston, Massachusetts, at 10:00 a.m. on July 1, 1998,
or at such other time and place as the Buyer and the Seller may mutually agree,
subject to the provisions of Section 16 hereof; provided, however, that if as
of July 1, 1998 the Seller shall not have entered into a new lease for
Harborlights on terms and conditions acceptable to the Buyer, then, at the
Buyer's option, so long as all of the respective conditions to Closing of the
parties have been satisfied as of such date, the Closing may be extended to
August 1, 1998, in which case the Buyer shall make an election in accordance
with Section 5.9 hereof. The Closing shall be deemed to be effective for
purposes of this Agreement as of the close of business on the day immediately
preceding the date on which the Closing is actually held hereunder, which for
all purposes of this Agreement shall be deemed the "Closing Date."

4.2. Transactions at Closing. At the Closing:

(a) The Seller shall duly execute and deliver to the Buyer or its
nominee such deeds, certificates of title and other instruments of
assignment and transfer with respect to the Acquired Assets as the
Buyer may reasonably request and as may be necessary to vest in the
Buyer all of the Sellers' right, title and interest in and to the
Acquired Assets, free and clear of all liens and encumbrances except
for Permitted Encumbrances (as defined in Section 6.12 hereof).

(b) The Buyer shall, and SFX shall cause the Buyer to, deliver to
the Seller the Purchase Price (Cash Portion and, if applicable, Stock
Portion).

(c) The Buyer shall duly execute and deliver to the Seller such
instruments of assumption with respect to the Assumed Obligations as
the Seller may reasonably request.

(d) The Buyer and Donald F. Law, Jr. ("Law") shall duly execute
and deliver the Employment/Management Agreement (as defined in Section
5.1 hereof).

(e) SFX shall have granted Law the initial Option (as defined in
Section 5.2 hereof) pursuant to the Employment/Management Agreement.

<PAGE>
-6-

(f) SFX and Law shall duly execute and deliver the
Non-Competition Agreement (as defined in Section 5.3 hereof).

(g) If applicable, the Seller, the Members and SFX shall duly
execute and deliver the Registration Rights Agreement (as contemplated
by Section 5.4 hereof).

(h) The Buyer and the Cambridge Office Building Owner (as defined
in Section 5.5 hereof) shall duly execute and deliver the New
Cambridge Office Lease (as defined in Section 5.5 hereof).

(i) The Buyer and the Members shall duly execute and deliver the
Repurchase Agreement (as defined in Section 5.6 hereof).

(j) The Buyer and the Members shall duly execute and deliver the
Access Agreement (as defined in Section 5.8 hereof).

5. ANCILLARY MATTERS. At the Closing, the parties shall take (or cause
to be taken) the following actions:

5.1. Employment/Management Agreement. The Buyer, SFX and Law shall
enter into an employment/management agreement upon mutually agreeable terms and
conditions (the "Employment/Management Agreement"), but which shall
specifically include the terms and conditions set forth on Exhibit A hereto.

5.2. Stock Option. The Buyer shall grant to Law options (the
"Options") pursuant to the Employment/Management Agreement as set forth on
Exhibit A hereto.

5.3. Non-Competition Agreement. SFX and Law shall duly execute and
deliver a non-competition agreement upon mutually agreeable terms and
conditions (the "Non-Competition Agreement"), but which shall specifically
provide that (a) SFX shall restrict any of its and its Affiliates' employees
who are presently responsible for the day-to-day operation and/or day-to-day
management of the concert promotion business in the New York metropolitan area
(the "Key SFX Employees") from participating in the management of any Acquired
Assets utilized by the Buyer or SFX; (b) SFX and its Affiliates shall not sell
or transfer (whether by stock sale, merger or consolidation, sale of assets, or
otherwise) any of its assets in the states of Maine, Massachusetts and Rhode
Island (including the Acquired Assets) to any Key SFX Employees; and (c) in the
event that SFX or any of its Affiliates shall sell or transfer (whether by
stock sale, merger or consolidation sale of assets or otherwise) any of its
assets in the states of Maine, Massachusetts and Rhode Island (including the
Acquired Assets) to any third Person other than a Key SFX Employee, SFX shall
require, as a condition to any such sale or transfer, that the terms and

<PAGE>
-7-

conditions of such sale or transfer shall include a restriction prohibiting the
particular buyer (or any subsequent buyer) from selling or transferring any of
the purchased assets to any Key SFX Employee.

5.4. Registration Rights Agreement. In the event that there is a Stock
Portion comprising part of the Purchase Price, the Seller, the Members and SFX
shall duly execute and deliver a registration rights agreement with respect to
the shares of Class A Stock comprising the Stock Portion, upon mutually
agreeable terms and conditions (the "Registration Rights Agreement"), but which
shall specifically include the following: (a) a twelve (12) month lock-up
period (provided that nothing shall prohibit the Seller and the Members from
engaging in hedging and other derivative transactions or the like, or in other
transactions with Affiliates); (b) a single demand registration right; (c)
unlimited piggyback registration rights (which shall not be exercisable in the
event disposition of the Members' Class A Stock is available under Rule 144 and
145 of the 1933 Act (as defined in Section 7.7 hereof)); and (d) usual and
customary underwriting restrictions with respect to the foregoing demand and
piggyback registration rights.

5.5. New Cambridge Office Lease. The Buyer and the owner of the
Cambridge Office Building (the "Cambridge Office Building Owner") shall duly
execute and deliver a new lease for the Cambridge Office Building (the "New
Cambridge Office Lease") upon mutually agreeable terms and conditions
consistent in all material respects with those set forth in the Existing
Cambridge Office Lease, but which shall specifically include an initial five
(5) year term with rent in accordance with the Existing Cambridge Office Lease,
and a five (5) year renewal option with rent at the then fair market value. In
connection therewith, the Existing Cambridge Office Lease shall be terminated
effective as of the Closing Date.

5.6. Rights of First Offer and Refusal. The Buyer and the Members
shall duly execute and deliver an agreement granting the Members rights of
first offer and refusal ("Repurchase Rights"), for a period of two (2) years
after the Closing Date, with respect to any sale by the Buyer of any Acquired
Assets (whether by stock sale, merger or consolidation, sale of assets, or
otherwise), upon mutually agreeable terms and conditions (the "Repurchase
Agreement"), but which shall specifically include the following: (a) the right
of the Buyer to transfer Acquired Assets to its Affiliates; provided the
Acquired Assets so transferred remain subject to the Repurchase Rights; (b) the
right of the Buyer to transfer Acquired Assets to any Affiliate as part of an
initial public offering of the common stock of such Affiliate; and (c) if the
Members shall fail to execute their Repurchase Rights with respect to any
transfer of Acquired Assets, such Repurchase Rights with respect to such
transferred Acquired Assets shall terminate.

5.7. Access to Owners' Boxes and Tickets. From and after the Closing
Date, each of David Mugar ("Mugar") and Sherman Wolf ("Wolf") shall have the

<PAGE>
-8-

continued rights, during the 1998, 1999 and 2000 Great Woods and (so long as
the Harborlight Assets are not Excluded Assets) Harborlights concert seasons
(the "Seasons"), to utilize at no cost one (1) luxury box with eight (8) seats,
plus (subject to there being no objection by the particular performing artist)
eight (8) Section 2 row seats, during the Seasons for each concert or event (it
being agreed that Mugar shall receive luxury box #1 during the Seasons.) With
respect to Wolf, in the event a luxury box is not available, eight (8) Section
2 row seats may be substituted. In addition, each of Mugar and Wolf shall have
the right to purchase such number of additional tickets as shall be agreed by
the Buyer or SFX at the same sale price as to the public.

5.8. Access Agreement. The Buyer acknowledges and agrees that the
Seller has informed the Buyer of the intention of the Seller (or the Seller's
nominee or lessee) to construct the Water Park adjacent to Great Woods. In
connection with such construction and as a condition to Closing, the Seller and
the Buyer shall execute and deliver an irrevocable reciprocal easement
agreement that is in form and substance reasonably satisfactory to the parties
hereto (the "Access Agreement") which (a) grants the Buyer parking and access
to the Water Park for no additional consideration (including, without
limitation, the parking presently existing on Lot 1 of the Plan), and the right
to modify or amend the zoning for Great Woods provided such modification or
amendment does not materially adversely impact the use, operation and
maintenance (and necessary replacements) of the Water Park, (b) grants the
Seller (in consideration of the Seller's agreeing to consummate the
transactions contemplated under this Agreement) the right to draw water from a
well located on Great Woods at "safe yield" rate, the right to pass utilities
reasonably required for the operation of the Water Park in a manner that would
not materially adversely impact the use, operation and maintenance (and
necessary replacements) of the Great Woods amphitheater and related
improvements (as currently conducted), and (in consideration of an annual
payment of $200,000), provided the Seller as a condition thereto shall provide
the Buyer with an opinion of counsel that the Seller has obtained a final
special permit under applicable zoning allowing same, ingress and egress
through Great Woods and parking and access to Great Woods (subject to the
agreements set forth below), and (c) containing restrictive covenants relating
to the Water Park which shall provide (i) the use for which the Water Park
shall be used or occupied will be in material compliance with all applicable
laws and in a manner that will not materially adversely impact (or compete
with) the use, operation and maintenance (and necessary replacements) of the
Great Woods amphitheater and related improvements (as currently conducted),
(ii) the hours of operation of the Water Park shall end at the later of (A)
4:00 p.m. (Boston time), and (B) one hour prior to the time that event parking
at Great Woods is permitted under applicable laws, rules and regulations, and
(iii) the Seller will construct the Water Park in material compliance with all
applicable laws and in a manner that would not materially adversely impact the
use, operation and maintenance (and necessary replacements) of the Great Woods
amphitheater and related improvements as

<PAGE>
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currently conducted, and the Seller will use the well as co-permitee to the
extent a permit is necessary.

5.9. Harborlights Assets. At the Closing, the Buyer shall have the
option to either acquire and take assignment of the Harborlights Assets as the
same may exist on the Closing Date, in which event the Harborlights Assets
shall be included in the Acquired Assets, or (b) not acquire and take
assignment of the Harborlights assets as the same may exist on the Closing
Date, in which event the Harborlights Assets shall be deemed Excluded Assets,
the Purchase Price and the Cash Portion shall be reduced by $8,000,000, and the
Schedules and Exhibits hereto shall be deemed amended to delete any and all
references to the Harborlights Assets.

6. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to the Buyer as follows (which representations and warranties
shall be true and correct in all material respects as of the date of this
Agreement and at and as of the Closing Date):

6.1. Organization; Authority. The Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts. The Seller has the full power and authority
to own and hold the Acquired Assets owned or held by it, to conduct the
Business as such business is now conducted, and to execute and deliver this
Agreement and the other documents, instruments and agreements contemplated
hereby (collectively, the "Transaction Documents") to which it is a party, and
to consummate the transactions contemplated thereby. The Seller has delivered
to the Buyer a complete and correct copy of the Seller's operating agreement,
as amended to date (the "Operating Agreement").

6.2. Subsidiaries. Except as set forth on Schedule 6.2 hereto, the
Seller does not own or hold, of record and/or beneficially, any shares of any
class of the capital stock of any corporation or any legal and/or beneficial
interests in any partnerships, limited liability companies, business trusts or
joint ventures or in any unincorporated trade or business enterprises.

6.3. Corporate Approval; Binding Effect. The Seller has obtained (or
will have obtained as of the Closing) all necessary authorizations and
approvals from its governing body in accordance with the terms of the Operating
Agreement required for the execution and delivery by the Seller of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated thereby. Each of the Transaction Documents to which
the Seller is a party has been duly executed and delivered by the Seller and
constitutes the legal, valid and binding obligation of the Seller, enforceable
against it in accordance with its terms, except to the extent such
enforceability may be limited by any applicable bankruptcy, reorganization,

<PAGE>
-10-

insolvency or other laws affecting or relating to creditors' rights generally
or by general principles of equity.

6.4. Non-Contravention. Neither the execution and delivery by the
Seller of the Transaction Documents to which the Seller is a party, nor the
consummation by the Seller of the transactions contemplated thereby, will
constitute a violation of, or be in conflict with, or constitute or create a
default under, or result in the creation or imposition of any lien, claim or
encumbrance upon any property of the Seller which would have a Material Adverse
Effect pursuant to, (a) the Operating Agreement, (b) except as disclosed on
Schedule 6.5 hereto, any material agreement or commitment to which the Seller
is a party or by which the Seller or any of its properties is bound or any of
such properties is subject or (c) subject to any required consents, approvals,
authorizations, registrations, qualifications or filings disclosed in Section
6.5 hereof, any statute or any judgment, decree, order, regulation or rule of
any court or governmental authority or third Person applicable to the Seller.

6.5. Consents and Approvals. Subject to the expiration of any waiting
period under the HSR Act, and except as disclosed on Schedule 6.5 hereto, no
consent, approval or authorization of, or registration, designation,
declaration, qualification or filing with, any governmental agency or authority
or third Person, is required for the execution and delivery by the Seller of
the Transaction Documents to which the Seller is a party, or for the
consummation by the Seller of the transactions contemplated thereby.

6.6. Financial Statements. The Seller has delivered to the Buyer the
Seller's unaudited financial statements for its fiscal year ended December 31,
1997 (the "Financial Statements"), copies of which are attached hereto as
Schedule 6.6. The Financial Statements have been prepared and reviewed in
accordance with GAAP; the balance sheet contained in the Financial Statements
fairly presents the financial condition of the Seller as of December 31, 1997;
and the statement of income and retained earnings contained in the Financial
Statements fairly presents the results of operations of the Seller for the
3-month period ended December 31, 1997.

6.7. Taxes. The Seller has duly filed with the appropriate government
agencies (including the timely filing of extensions) all of the income, sales,
use, employment and other tax returns and reports required to be filed by it.
No waiver of any statute of limitations relating to taxes has been executed or
given by the Seller. All taxes, assessments, fees and other governmental
charges upon the Seller or upon any of the properties, assets, revenues, income
and franchises which are currently owed by the Seller with respect to any
periods ending on or before the date hereof have been paid, other than those
currently payable without penalty or interest. To the Seller's knowledge, the
Seller has withheld and paid all taxes required to be withheld or paid in
connection with amounts paid or owing to any employee, creditor, independent
contractor or third party. No federal tax return of the Seller is currently

<PAGE>
-11-

under audit by the IRS (as defined in Section 11 hereof), and no other tax
return of the Seller is currently under audit by any other taxing authority.
Neither the IRS nor any other taxing authority is now asserting or, to the
Seller's knowledge, threatening to assert, against the Seller any deficiency or
claim for additional taxes or interest thereon or penalties in connection
therewith.

6.8. Recent Changes. Except as set forth on Schedule 6.8 hereto, since
December 31, 1997, there has not been:

(a) any Material Adverse Effect, whether or not arising in the
ordinary course of business;

(b) any event, occurrence, development, state or circumstances
which could reasonably be expected to materially adversely affect the
Buyer's ability to operate the Business with the Acquired Assets after
the Closing;

(c) any transactions, commitments, contracts or agreements
entered into by the Seller or any relinquishment by the Seller of any
contract or other right (other than contracts with respect to the
booking of performing artists in the ordinary course of business)
having a value of or involving annual payments in excess of $100,000
in the aggregate, or having a term of more than five (5) years;

(d) any increase in the compensation, bonus or other benefits
payable or to become payable by the Seller to any of its Members,
managers, officers or employees in excess of $25,000 per person;

(e) any entering into or granting by the Seller of any new
employment contracts (other than extensions of existing employment
contracts in the ordinary course of business), any new employee
benefit, deferred compensation or other similar employee benefit
arrangements, or any new consulting agreements, or any grant of any
severance or termination pay to any manager, officer or employee of
the Seller (other than in the ordinary course of business), or any
material increase in benefits payable under existing severance or
termination pay policies or employment contracts;

(f) any entering into material amendment or termination of any
agreements listed in the Schedules hereto, required to be listed in
such Schedules or any amendment of, or change in, the Operating
Agreement;

(g) any incurrence of any indebtedness, commitment to borrow
money or assumption or guarantee of any indebtedness for borrowed
money entered into by the Seller other than under existing lines of
credit as set forth on Schedule 6.16 hereto;

<PAGE>
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(h) any change in any accounting method or practice followed by
the Seller;

(i) any granting or imposition of any lien or other encumbrance
on any of the Acquired Assets;

(j) any making of any loan, advance or capital contributions to
or investments in any Person by the Seller;

(k) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the Business or Acquired Assets
which, individually or in the aggregate, has had or could reasonably
be expected to have a Material Adverse Effect; or

(l) any dispute or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Seller or
threats thereof by or with respect to any employees of the Seller.

6.9. Litigation. Except as set forth on Schedule 6.9 hereto, no
action, suit, proceeding or investigation is pending or, to the knowledge of
the Seller, threatened, against the Seller or relating to the Acquired Assets,
or which might have a Material Adverse Effect on the ability of the Seller to
enter into the Transaction Documents to which it is a party and consummate the
transactions contemplated thereby.

6.10. Conformity to Law. The Seller has complied with, and is in
compliance with, all laws, statutes and governmental regulations and all
judicial or administrative tribunal orders, judgments, writs, injunctions or
decrees applicable to the Business and the Acquired Assets (including, without
limitation, with respect to the Seller's ticket sales practices), except where
any or all failures of such compliance, either individually or in the
aggregate, would not have a Material Adverse Effect. Except as set forth on
Schedule 6.10 hereto, the Seller has not been charged with any violation of any
provision of any federal, state or local law or administrative regulation in
respect of the Business.

6.11. Licenses. Set forth on Schedule 6.11 hereto are all of the
licenses, authorizations, franchises, orders, approvals and permits
(collectively, "Permits") of any federal, state, local or foreign governmental
or regulatory body, including, but not limited to, licenses issued by OSHA or
otherwise relating to employment and environmental matters, that are material
to the conduct of the Business, or would, if not obtained by the Buyer, result
in a material liability to the Buyer. The Seller holds all Permits necessary to
operate the Business with the Acquired Assets as presently conducted and as
currently contemplated to be conducted, except where the failure to hold such
Permit would not have a Material Adverse Effect, and such Permits are in

<PAGE>
-13-

full force and effect. No material violations are or have been recorded with
any governmental or regulatory body in respect of any Permit, and no proceeding
is pending or, to the knowledge of the Seller, threatened, to revoke or limit
any Permit. Except as set forth on said Schedule 6.11, all of the Permits are
transferable to the Buyer.

6.12. Title to Acquired Assets. The Seller is the lawful owner of, and
has good and valid record and marketable title to, all of the Acquired Assets,
and has the full right to sell, convey, transfer, assign and deliver the
Acquired Assets, without the need to obtain the consent or approval of any
third party, except as disclosed on Schedule 6.12 hereto. Except for liens and
security interests described on said Schedule 6.12 (the "Permitted
Encumbrances," which term shall specifically be deemed to include any liens and
encumbrances disclosed in the title insurance policy (the "Title Policy")
relating to the Seller's real property, specifically the First American Title
Insurance Company Policy No. 20287494 dated October 1, 1997, Schedule B-1,
Items 2 through 6, and 8 through 23 (provided the Buyer shall be reasonably
satisfied with said liens and encumbrances after its due diligence
investigation pursuant to Section 9.8 hereof), and liens and encumbrances for
real estate taxes not yet due and payable), all of the Acquired Assets are free
and clear of any liens, encumbrances and security interests of any kind, or
restrictions against the transfer or assignment thereof. At and as of the
Closing, the Seller will convey the Acquired Assets to the Buyer by deeds,
bills of sale, certificates of title and other instruments of assignment and
transfer effective in each case to vest in the Buyer, and the Buyer will have,
good and clear title to all of the Acquired Assets, free and clear of all liens
and encumbrances of any nature, except the Permitted Encumbrances.

6.13. Hazardous Materials. Except in accordance in all material
respects with applicable law or except as set forth on Schedule 6.13 hereto,
the Seller has not used, treated, stored, disposed of, handled, discharged,
released or emitted into the environment any Hazardous Materials (as
hereinafter defined), nor contracted or otherwise arranged for any of the
foregoing, which has or may form the basis for any claim, demand, action or
liability, or which has or may give rise to any obligation to engage in or
compensate any party for, any investigation, cleanup, removal, remediation or
abatement of such substances on or in any property, structure, building,
equipment, soil, surface water, groundwater, sediments, ambient air or other
medium. To the Seller's knowledge, there are no and have been no underground
storage tanks at any property currently or formerly owned, leased, occupied or
used by the Seller, except as set forth in Schedule 6.13 hereto. For purposes
of this Agreement, the term "Hazardous Materials" shall mean and include any
(a) "hazardous waste" as defined in either the United States Resource
Conservation and Recovery Act or regulations adopted pursuant to said Act, (b)
"hazardous substances" or "hazardous materials" as defined in the United States
Comprehensive Environmental Response, Compensation and Liability Act, (c)
"hazardous material" or "oil" as defined in M.G.L. c. 21E, Sec. 2 and (d) any
waste, material or substance

<PAGE>
-14-

which is or contains asbestos, asbestos-containing materials, flammable
explosives, radioactive materials, ureaformaldehyde, polychlorinated
bi-phenyls, lead or petroleum products.

6.14. Condition of Real and Personal Property.

(a) The machinery, equipment, furniture, leasehold improvements,
fixtures, vehicles, structures, any related capitalized items and
other tangible property included in the Acquired Assets ("Tangible
Property"), are in good operating condition and repair, ordinary wear
and tear excepted, and are adequate, fit and suitable for the
particular purposes for which they are presently used, are performing
satisfactorily, and are available for immediate use in the conduct of
the Business. All such Tangible Property and the state of maintenance
thereof are in compliance in all material respects with all applicable
federal, state and local statutes, ordinances, rules and regulations.

(b) The real property owned by the Seller, and to the Seller's
knowledge, the real property leased by the Seller, is in compliance in
all material respects with all applicable federal, state and local
statutes, ordinances, rules and regulations; all buildings and
structures and, except for immaterial deviations, other improvements,
are located completely within the boundary lines of the real property;
and to the Seller's knowledge, no buildings, structures or other
improvements owned by others encroach onto or under such real
property. All improvements constructed on such real property and
building systems incorporated in such improvements, are structurally
sound and in good operating condition and repair, ordinary wear and
tear excepted.

6.15. Insurance. All insurance policies held by the Seller with
respect to the Acquired Assets and the Business are listed on Schedule 6.15
hereto (the "Insurance Policies") and are in full force and effect. Except as
set forth on said Schedule 6.15, there are no pending claims against the
Insurance Policies by the Seller as to which the insurers have denied liability
and, to the Seller's knowledge, with respect to which there is a reasonable
likelihood of a settlement or determination adverse to the Seller. Except as
set forth on said Schedule 6.15, (a) there exist no material claims under the
Insurance Policies that have not been properly filed by the Seller; (b) no
insurance company has refused to renew any material insurance policy of the
Seller during the past twelve (12) months; and (c) there have been no material
rate or premium increases or written notice of prospective changes therein on
general liability, property or directors and officers liability Insurance
Policies during the past twelve (12) months. Schedule 6.15 hereto also includes
a list of all agents utilized by the Seller with respect to each Insurance
Policy.

<PAGE>
-15-

6.16. Contracts. Schedule 6.16 hereto lists the following contracts
and other agreements to which the Seller is a party or to which the Seller is
subject:

(a) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect;

(b) any employment contract, oral or written, with any employee
or with any agent or consultant involving annual payments of over
$100,000;

(c) any plan, contract, practice, policy or arrangement, oral or
written, formal or informal, providing for bonuses, pensions, options,
deferred compensation, retirement payments, insurance, legal services
or medical or dental or hospitalization or disability benefits,
profit-sharing or the like involving annual payments of over or having
a value in excess of $100,000, or any non-competition agreement
requiring payment or performance by the Seller;

(d) any contract or agreement with or binding commitment to any
labor union;

(e) any lease of machinery, equipment or other personal property
involving payment by the Seller of annual rentals in excess of
$100,000 or any lease of real property involving payments by the
Seller of annual rentals in excess of $50,000;

(f) any contract relating to concessions, merchandise or
sponsorships involving payment by or to the Seller, individually or in
the aggregate, of more than $50,000;

(g) any contract for the purchase of equipment or other assets or
other contract or agreement not in the ordinary course of business or
involving any capital expenditure by the Seller of more than $50,000;

(h) any agreement or instrument evidencing or related to
indebtedness for borrowed money or to a leasing transaction required
to be capitalized in an amount in excess of $50,000 or pursuant to
which the Seller is obligated or entitled to borrow money or to enter
into such a leasing transaction;

(i) any license, franchise agreement or agreement in respect of
similar rights with third parties relating to any trade name,
trademark, copyright, patent or other intellectual property, either as
licensor or licensee or as franchisor or franchisee, which is material
to the conduct of the Business;

<PAGE>
-16-

(j) any joint venture contract or arrangement or any other
agreement involving a sharing of efforts or profits;

(k) any advertising, marketing, promotion, endorsement, sales
agency, bartering arrangement, brokerage or distribution contract
involving annual payments or having a value in excess of $100,000;

(l) any contract, arrangement or other agreement containing
provisions limiting the freedom of the Seller or Law to compete in any
line of business or with any Person;

(m) any contract or commitment regarding charitable
contributions;

(n) any guarantee of the obligations of any other Person
involving an absolute or contingent liability in excess of $100,000;
or

(o) any lease, option, occupancy agreement or arrangement or
other agreement granting any interests in, or any rights with respect
to, real property of the Seller.

The Seller has delivered to the Buyer a correct and complete copy of
each written agreement listed on Schedule 6.16 hereto (as amended to date), and
disclosed the terms and conditions of each oral agreement referred to on said
Schedule 6.16. Except as disclosed on said Schedule 6.16, to the knowledge of
the Seller, with respect to each such agreement: (i) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (ii) subject to
obtaining the necessary consents disclosed in Schedule 6.5 hereto, the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical material terms following the consummation of the
transactions contemplated hereby; (iii) no party is in material breach or
default, and no event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination, material
modification or acceleration under the agreement; (iv) no party has repudiated
any material provisions of the agreement and (v) such agreement is not, when
considered singly or in the aggregate with others, unduly burdensome, onerous
or will have a Material Adverse Effect.

6.17. Employee Benefit Plans. Schedule 6.17 hereto sets forth a
complete list of all pension plans, deferred compensation arrangements,
supplemental income arrangements, vacation plans, severance pay policies and
other employee plans or arrangements (the "Employee Benefit Plans") of the
Seller. Except as set forth on said Schedule 6.17, each such Employee Benefit
Plan is in material compliance with the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and the Code. The Seller is not subject to any
liability under ERISA or the Code relating

<PAGE>
-17-

to any of the Employee Benefit Plans, except such liability that would not have
a Material Adverse Effect.

6.18. Trademarks, Patents, Etc. Schedule 6.18 hereto sets forth a list
of (a) all patents, trademarks, trade names and copyrights registered in the
name of the Seller and all applications therefor, and (b) all material written
agreements relating to technology, know-how and processes which the Seller has
licensed or authorized to use by others, or which the Seller has licensed or
authorized for use by others. Except to the extent set forth on said Schedule
6.18 the Seller owns or has permission to use all patents, trademarks, trade
names and copyrights material to, and used in the ordinary course of, the
operation of the Seller's Business as presently conducted. No claims are
pending against the Seller by any Person regarding the use of any such
trademarks, trade names, copyrights, technology, know-how or processes, or
challenging or questioning the validity or effectiveness of any such license or
agreement, which either individually or in the aggregate, would have a Material
Adverse Effect.

6.19. Absence of Undisclosed Liabilities. The Seller has no liability
required to be disclosed under GAAP (and, to the Seller's knowledge, there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against any of them giving
rise to any liability), except for (a) liabilities disclosed in the Financial
Statements or for which adequate reserves have been set aside, (b) operating
costs and expenses and general and administrative expenses which have arisen
after December 31, 1997 in the ordinary course of business and consistent with
past practices, (c) additional borrowings under lines of credit existing at
December 31, 1997 and other contracts and claims as disclosed on Schedule 6.16
hereto, and (d) liabilities disclosed on the Seller's Schedules to this
Agreement.

6.20. Labor Relations. The Seller is in compliance in all material
respects with all federal and state laws respecting employment and employment
practices, terms and conditions of employment, wages and hours and
nondiscrimination in employment, except where any or all failures of such
compliance, either individually or in the aggregate, would not have a Material
Adverse Effect, and is not engaged in any unfair labor practice which would
have a Material Adverse Effect. There is no charge pending or, to the knowledge
of the Seller, threatened, against the Seller, alleging unlawful discrimination
in employment practices before any court or agency, and there is no charge of
or proceeding with regard to any unfair labor practice against the Seller
pending before the National Labor Relations Board. There is no labor strike,
dispute, slow-down or work stoppage actually pending or, to the knowledge of
the Seller, threatened, against or involving the Seller, other than disputes
with individual employees or as otherwise described on Schedule 6.20 hereto.
Except as set forth on said Schedule 6.20, none of the employees of the

<PAGE>
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Seller is covered by any collective bargaining agreement, and no collective
bargaining agreement is currently being negotiated by the Seller.

6.21. Brokers. The Seller has not retained, utilized or been
represented by any broker or finder in connection with the transactions
contemplated by this Agreement.

6.22. Affiliated Transactions. Except as set forth on Schedule 6.22
hereto, the Seller is not a party to or bound by any contract, commitment or
understanding with any of the Members, managers or officers of the Seller, or
any member of any such individual's family, and none of the Members, managers
or officers of the Seller, or any member of any such individual's family, owns
or otherwise has any rights to or interests in any Acquired Asset.

6.23. Accounts Receivable. The accounts receivable reflected on the
balance sheet contained in the Financial Statements (except those collected
since such date), and such additional accounts receivable as are reflected on
the books of the Seller as of date hereof, net of applicable reserves therefor,
represent obligations due to the Seller arising in the ordinary course of
business.

6.24. All Assets Necessary to Conduct Business. The Acquired Assets,
when utilized with a labor force substantially similar to that currently
utilized by the Seller, constitute all of the assets of the Seller which are
necessary to the conduct of Business (excluding the Excluded Assets).

6.25. Illegal Payments. None of the Seller and the Members who
previously owned the Acquired Assets has at any time during the past five (5)
years (a) made any unlawful contribution to any candidate for foreign office,
or failed to disclose fully any contribution in violation of law, or (b) made
any payment to any federal or state governmental officer or official, or other
person charged with similar public or quasipublic duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.

6.26. Distributors, Customers, etc. The Seller's relations with each
of its distributors, customers, vendors, venues and suppliers, including,
without limitation, suppliers of concessions and merchandise, are good and no
material dispute with any such Person exists. To the knowledge of the Seller,
the Seller has not been threatened or notified, orally or in writing, by one or
more distributors, customers, vendors, venues or suppliers, that any such
Person intends to terminate or is considering terminating its business
relationship with the Seller. To the knowledge of the Seller, none of such
Persons is modifying its business relationship with the Seller in a manner
which is less favorable in any material respect to the Seller or the Business,
or has agreed not to or will agree not to do business with the Seller on and
after the Closing on such terms and subject to conditions at least as favorable
as

<PAGE>
-19-

provided to the Seller prior to the Closing, and the Seller has no knowledge
of any facts which would form the basis therefor.

6.27. Real and Leased Property.

(a) Set forth on Schedule 6.27(a) is a true complete and correct
list of all leases, subleases, licenses and/or other occupancy
agreements entered into by the Seller as lessee (individually, a
"Lease" and collectively, the "Leases") affecting the real property
described in such Schedule (all such property subject to a Lease is
referred to as the "Leased Real Property");

(b) Set forth on Schedule 6.27(b) is a true, complete and correct
list of all real property in which the Seller has an ownership
interest in fee title (collectively, the "Owned Real Property") (the
Owned Real Property and the Leased Real Property is sometimes
collectively referred to as the "Real Property");

(c) The Seller has not received any written notice of a pending
or contemplated annexation or condemnation or similar proceedings
affecting, or which may affect, all or any portion of the Owned Real
Property;

(d) All utilities reasonably required for the existing operation
of the Owned Real Property either enter the Owned Real Property
through adjoining public streets or, if they pass through adjoining
private land, do so in material compliance with valid public easements
or private easements; all of said public utilities are installed and
operating; and all installation and connection charges that are
currently due as payable have been or will be paid in full prior to
the Closing Date;

(e) The Seller has received no written notices of default from
any third party who shall be benefited by any covenant, restriction,
condition or agreement contained in any instrument affecting in any
material respect the Owned Real Property, and, to the Seller's
knowledge, there is no material violation of any such covenant,
restriction, condition or agreement;

(f) The Seller has not received any written notice from any
insurance company which has issued a policy with respect to the Real
Property or from any landlord of the Real Property requesting
performance of any structural or other material repairs or alterations
to the Real Property;

(g) The Seller is not a foreign person within the meaning of
Section 1445 of the Code. At the Closing, the parties shall deliver an
executed certificate in the applicable form set forth in Treasury
Regulation Section 1.1445-2(b)(2); and

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(h) The Seller has not received any written notice of any
pending, threatened or contemplated changes to any zoning, building or
similar law, ordinance, order or regulation which may materially
affect the maintenance, operation or use of the Real Property.

6.28. Accredited Investor. The Seller is an "accredited investor"
under Rule 501(a) of the 1933 Act.

6.29. Disclosure. Neither this Agreement, nor anything in writing
furnished to the Buyer by or on behalf of the Seller in connection with this
Agreement and the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading. There
is no fact within the knowledge of the Seller which has not been disclosed
herein or in writing by it to the Buyer and which may, insofar as the Seller
can now foresee, have a Material Adverse Effect.

7. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND SFX. The Buyer and
SFX, jointly and severally, represent and warrant to the Seller as follows
(which representations and warranties shall be true and correct in all material
respects as of the date of this Agreement and at and as of the Closing Date,
and as to representations and warranties applying to SFX, shall also apply to
its predecessor-in-interest):

7.1. Organization and Standing of Buyer. Each of the Buyer and SFX is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Buyer and SFX has the full power and
authority under its respective charter documents and By-laws and applicable
laws to own and hold all of its respective assets and properties, to conduct
its respective business as such business is now conducted, and to execute and
deliver the Transaction Documents to which it is a party and to consummate the
transactions contemplated thereby.

7.2. Corporate Approval; Binding Effect. Each of the Buyer and SFX has
obtained all necessary authorizations and approval from its respective Board of
Directors and stockholders required for the execution and delivery by each of
the Buyer and SFX, as the case may be, of the Transaction Documents to which
each is a party and the consummation of the transactions contemplated thereby.
Each of the Transaction Documents to which the Buyer and SFX , as the case may
be, is a party has been duly executed and delivered by such party and
constitutes the legal, valid and binding obligation of such party, enforceable
against it in accordance with its terms, except to the extent such
enforceability may be limited by any applicable bankruptcy, reorganization,
insolvency, or other laws affecting or relating to creditor's rights generally
or by general principles of equity.

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7.3. Non-Contravention. Neither the execution and delivery by the
Buyer and SFX of the Transaction Documents to which each is a party, nor the
consummation by the Buyer and SFX of the transactions contemplated thereby,
will constitute a violation of, or be in conflict with, or constitute or create
a default under, or result in the creation or imposition of any liens, claim or
encumbrances upon any of the respective property of the Buyer or SFX which
would have a Buyer Material Adverse Effect pursuant to (a) the respective
charter documents or By-laws of the Buyer and SFX, each as amended to date; (b)
any material agreement or commitment to which either of the Buyer or SFX is a
party or by which the Buyer or SFX or any of their respective properties is
bound or any of such properties is subject; or (c) subject to any required
consents, approvals, authorizations, registrations, qualifications of filings
disclosed in Section 7.5 hereof, any statute or any judgment, decree, order,
regulation or rule of any court or governmental authority applicable to the
Buyer or SFX.

7.4. Consents and Approvals. Subject to the expiration of any waiting
period under the HSR Act, and except as disclosed on Schedule 7.5 hereto, no
consent, approval or authorization of, or registration, designation,
declaration, qualification or filing with, any governmental agency or authority
or third Person, is required for the execution and delivery by the Buyer and
SFX of the Transaction Documents to which each is a party, or for the
consummation by the Buyer and SFX of the transactions contemplated thereby.

7.5. Class A Stock. The shares of Class A Stock to be issued to the
Seller, if and when issued to the Seller in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable, and not subject to any options, warrants, preemptive rights of
other statutory or contract rights of any Person.

7.6. Litigation. No action, suit, proceeding or investigation is
pending or, to the knowledge of the Buyer and SFX, threatened, against the
Buyer or SFX, which might materially and adversely affect the ability of the
Buyer or SFX to enter into the Transaction Documents to which each is a party
and consummate the transactions contemplated thereby.

7.7. SEC Filings. SFX has made all filings (collectively, the "Public
Reports") with the Securities and Exchange Commission (the "SEC") that it has
been required to make under the Securities Act of 1933, as amended (the "1933
Act"), and the Securities Exchange Act of 1934 (the "1934 Act"). Each of the
Public Reports has complied with the 1933 Act and the 1934 Act, as applicable,
in all material respects. All registration statements ("Registration
Statements") filed, and presently intended to be filed, by SFX with the SEC,
have complied and will comply with the 1933 Act in all material respects. None
of the Public Reports or the Registration

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Statements, as the case may be, as of their respective dates, contained or will
contain any untrue statement of a material fact, or omitted or will omit to
state a material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were or are to be made, not
misleading.

7.8. Brokers. The Buyer has not retained, utilized or been represented
by any broker or finder in connection with the transactions contemplated by
this Agreement, except for Richard Foreman as to whom the Buyer shall be solely
responsible for the payment of any brokerage fees owing on account of the
consummation of said transactions.

7.9. Disclosure. Neither this Agreement, nor anything in writing
furnished to the Seller by or on behalf of the Buyer or SFX in connection with
this Agreement and the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading. There
is no fact within the knowledge of the Buyer or SFX which has not been
disclosed herein or in writing by them to the Seller and which may, insofar as
they can now foresee, materially adversely affect the business, assets,
prospects or financial condition of SFX.

8. CONDUCT OF BUSINESS PENDING CLOSING. The Seller covenants and
agrees that, from and after the date of this Agreement and until the Closing,
except as otherwise specifically consented to or approved by the Buyer in
writing:

8.1. Access. The Seller shall afford to the Buyer and its authorized
representatives access during normal business hours to all properties, books,
records, contracts and documents of the Seller, and an opportunity to make such
investigations as they shall reasonably desire to make of the Seller (provided
that such investigations shall be conducted so as to minimize any disruption to
the Business), and the Seller shall furnish or cause to be furnished to the
Buyer and its authorized representatives all such information with respect to
the Business and the Acquired Assets as the Buyer may reasonably request.

8.2. Carry on in Regular Course. The Seller shall maintain the
Acquired Assets in accordance with its historical maintenance practices and
conduct the Business only in the ordinary course and substantially in the same
manner as heretofore conducted.

8.3. Contracts and Commitments. The Seller shall not enter into any
contract or commitment, including, without limitation any employment contracts
(other than extensions of existing contracts in the ordinary course of
business), or engage in any transaction not contemplated by this Agreement or
not in the usual and ordinary course of business and consistent with its normal
business practices.

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8.4. Preservation of Organization. The Seller shall use its
commercially reasonable efforts to preserve its business organization intact
and to preserve for the Buyer the Seller's present relationships with its
suppliers and customers and others having business relations with the Seller.

8.5. Consents of Third Parties. The Seller shall use its commercially
reasonable efforts to obtain the consent to the assignment to the Buyer of all
contracts and agreements set forth on Schedule 6.16 hereto, and all leases of
real property utilized by the Seller.

8.6. Pay-Off Letters. The Seller shall use its commercially reasonable
efforts to obtain from any Persons having any liens or encumbrances on the
Acquired Assets payoff letters setting forth the total amount of indebtedness
of the Seller to be owing to such Persons as of the Closing Date, and
containing agreements from such Persons to release without liability Law and
Wolf from the Personal Guaranties (as defined in Section 17 hereof).

8.7. Water Park Operation. On or before May 15, 1998, the Seller shall
provide the Buyer with a general scheme of operation and maintenance of the
Water Park in reasonable detail to allow the Buyer to conduct its due diligence
review of same.

8.8. Registration of Land. The Seller shall use its commercially
reasonable efforts to cause its engineer or surveyor to complete a land court
level subdivision plan with respect to the division of the registered land
shown on the Plan, approval thereof by the land court engineer and the
subsequent filing thereof.

9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligation of the
Buyer to consummate the Closing shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions (to the extent
noncompliance thereof is not waived in writing by the Buyer):

9.1. Representations and Warranties True at Closing. The
representations and warranties made by the Seller in or pursuant to this
Agreement shall be true and correct in all material respects at and as of the
Closing Date with the same effect as though such representations and warranties
had been made or given at and as of the Closing Date.

9.2. Compliance With Agreement. The Seller shall have performed and
complied with all of its obligations under this Agreement to be performed or
complied with by it on or prior to the Closing Date.

<PAGE>
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9.3. Closing Certificate. The Seller shall have delivered to the Buyer
in writing, at and as of the Closing, a certificate from its chief executive
officer, in form and substance satisfactory to the Buyer, certifying that the
conditions in each of Sections 9.1 and 9.2 hereof have been satisfied.

9.4. No Material Adverse Change. There shall have been no change as of
the Closing Date, since December 31, 1997, in the Business or the Acquired
Assets which either individually or in the aggregate would have a Material
Adverse Effect.

9.5. No Restraining Order. No restraining order or injunction shall
prohibit the consummation of the transactions contemplated by this Agreement.

9.6. Opinion of Counsel. Bingham Dana LLP, special counsel to the
Seller, shall have delivered to the Buyer a written opinion, addressed to the
Buyer and dated the Closing Date, in form and substance satisfactory to the
Buyer.

9.7. Regulatory and Other Consents. Any applicable waiting period
under the HSR Act, including any extension, shall have expired, or shall have
been earlier terminated, and the Seller shall have obtained all necessary
governmental and other third party consents and approvals required with respect
to the Seller's consummation of the transaction contemplated under this
Agreement, in order to so consummate said transactions (including, without
limitation, with respect to the assignment to the Buyer of all contracts and
agreements set forth on Schedule 6.16 hereto, and all leases of real property
utilized by the Seller (which consents from Fine Host Corporation and Windsum
Limited Partnership shall contain usual and customary estoppel
representations), as the Buyer in its reasonable discretion deems material to
the Buyer's operation of the Business with the Acquired Assets).

9.8. Due Diligence. The Buyer shall have completed a due diligence
investigation, reasonably satisfactory to the Buyer, of the Acquired Assets and
the Business, including, without limitation, an environmental investigation by
outside consultants of the real property owned or leased by the Seller;
provided, however, that the condition set forth in this Section 9.8 shall be
deemed to be waived by the Buyer if the Buyer shall have not completed said due
diligence investigation on or before June 15, 1998.

9.9. Audited Financial Statements. The Buyer shall have received the
financial statements of the Seller for its 1997 fiscal year, audited by Ernst &
Young.

9.10. Opinion of Counsel Relating to Zoning. The Buyer shall have
received an opinion of the Seller's real estate counsel (a) that the existing
improvements on the Owned Real Property and the current use, operation and
maintenance thereof is in material compliance with all applicable zoning laws;
(b) the creation of the subdivision shown on the Plan does not adversely affect
any existing, legally

<PAGE>
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established non-conformity of the Great Woods amphitheater and related
improvements, or create any new non-conformity or otherwise cause the Owned
Real Property to fail to comply with applicable zoning; (c) upon the filing of
the subdivision plan and the conveyance of the Water Park parcel, Great Woods
and the Water Park will constitute two (2) separate zoning lots; and (d) the
use of the existing parking on the Water Park parcel by the Buyer pursuant to
the easement granted under the Access Agreement will comply with applicable
zoning.

9.11. Title Insurance. At the Buyer's option, the Buyer at Closing
shall have received a title insurance policy for all Owned Real Property issued
in its favor containing exceptions only for Permitted Encumbrances.

9.12. Tax Apportionment and Subdivision Agreement. The Buyer and the
Seller shall have executed and delivered a Tax Apportionment and Subdivision
Agreement with respect to the allocation of real estate taxes and the
subdivision of Lot 1 and Lot 2 shown on the Plan as soon as reasonably
practicable, and other mutually agreeable terms and conditions which shall
provide, among other things, that the Seller shall pay all costs, fees and
expenses relating to the necessary tax lot subdivision.

10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. The obligation of
the Seller to consummate the Closing shall be subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (to the extent
noncompliance thereof is not waived in writing by the Seller):

10.1. Representations and Warranties True at Closing. The
representations and warranties made by the Buyer and SFX in or pursuant to this
Agreement shall be true and correct in all material respects at and as of the
Closing Date with the same effect as though such representations and warranties
had been made or given at and as of the Closing Date.

10.2. Compliance with Agreement. The Buyer and SFX shall have
performed and complied with all of their respective obligations under this
Agreement to be performed or complied with by them on or prior to the Closing
Date.

10.3. Officer's Certificates. Each of the Buyer and SFX shall have
delivered to the Seller in writing, at and as of the Closing, a certificate
from its chief executive officer, in form and substance satisfactory to the
Seller, to the effect that the conditions in each of Sections 10.1 and 10.2
hereof have been satisfied.

10.4. No Material Adverse Change. There shall have been no change as
of the Closing Date, since December 31, 1997, in the business or assets of SFX
which either individually or in the aggregate would have a Buyer Material
Adverse Effect.

<PAGE>
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10.5. No Restraining Order. No restraining order or injunction shall
prohibit the consummation of the transactions contemplated by this Agreement.

10.6. Opinion of Counsel. General Counsel of SFX and the Buyer shall
have delivered to the Seller a written opinion, addressed to the Seller and
dated the Closing Date, in form and substance satisfactory to the Seller.

10.7. Regulatory and Other Consents. Any applicable waiting period
under the HSR Act, including any extension, shall have expired, or shall have
been earlier terminated, and the Buyer and SFX shall have obtained all
necessary governmental and other third party consents and approvals required
with respect to the Buyer's and SFX's consummation of the transaction
contemplated under this Agreement, in order to so consummate said transactions.

11. CERTAIN DEFINITIONS. As used herein the following terms not
otherwise defined have the following respective meanings:

"Affiliate": As applied to any specified Person, any other Person
controlling, controlled by or under common control with, such specified Person.

"Affiliate Debt": All indebtedness of the Seller to Law and Wolf
evidenced by those certain promissory notes, each dated September 30, 1997 and
each in the original principal amount of $750,000.

"Buyer Material Adverse Effect": A material adverse effect on, or
change in, the business, operations, assets or financial condition of the Buyer
or SFX, as the case may be.

"GAAP": Generally accepted accounting principles applied on a basis
consistent with the applicable Person's past practice over preceding periods.

"HSR Act": The Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.

"IRS": The United States Internal Revenue Service.

"Material Adverse Effect": A material adverse effect on, or change in,
the business, operations, assets or financial condition of the Seller.

"Net Working Capital": As of any date, (a) the sum of (i) cash, (ii)
accounts receivable, (iii) prepaid expenses and (iv) any other current assets,
minus (b) the sum of (i) indebtedness for borrowed money (whether current or
funded, or secured or unsecured), including (A) any prepayment provisions
actually incurred on account of the sale of the Acquired Assets, (B)
obligations under capital leases in respect of

<PAGE>
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which the Seller is liable as lessee, and (C) all Affiliate Debt, in excess of
$10,000,000 (ii) trade payables, (iii) accrued expenses and (iv) deferred
revenue from advanced ticket sales, all as determined in accordance with GAAP.

"Person": A corporation, a limited liability company, an association,
a partnership, an organization, a trust, a joint venture, a business or an
individual.

"Plan": That certain "Compiled" Plan of Land in Mansfield, Mass. dated
February 4, 1998, prepared by Norwood Engineers Co., Inc., a copy of which is
attached as Exhibit B hereto.

12. CERTAIN COVENANTS.

12.1. Confidential Information. The Seller and each of the Members on
the one hand, and the Buyer on the other hand, agrees that any and all
information disclosed by the Buyer to the Seller or the Members regarding the
Buyer, or by the Seller or the Members to the Buyer regarding the Seller and
the Members, as the case may be, as a result of the negotiations leading to the
execution of this Agreement, or in furtherance thereof, or disclosed by either
party(ies) in connection with any of the transactions contemplated hereby,
which information is of a proprietary nature, or was not already know, to the
foregoing parties, as the case may be ("Confidential Information"), shall
remain confidential by the Seller, the Members and the Buyer and their
respective employees, directors, officers, agents and representatives
(collectively, "Related Parties"). The Seller, the Members and the Buyer
further agree that each such Person will not, and will cause each of their
respective Related Parties to not, (a) use, or permit the use of, any
Confidential Information for any purpose other than to evaluate the
transactions contemplated hereby, or (b) disclose, or permit the disclosure of,
any Confidential Information (regarding the fact that discussions and
negotiations relating to the transactions contemplated hereby have been, or are
in the process of being, completed) to any Person, unless (i) in the opinion of
the Sellers or the Buyer, as the case may be, disclosure is required to be made
under the 1933 Act or the 1934 Act, and (ii) the nondisclosing party has been
consulted and been provided with prior written notice thereof. If the Closing
does not take place for any reason, each of the Seller, the Members and the
Buyer agrees not to further divulge or disclose or use for its benefit or
purposes any Confidential Information at any time in the future to be protected
hereby and shall include, but not be public. The information intended to be
protected hereby shall include, but not be limited to financial information,
customers, sales representatives, and anything else having an economic or
pecuniary benefit to the Buyer, the Seller or the Members, respectively.
Notwithstanding anything to the contrary set forth on this Section 12.1,
nothing herein shall prohibit any disclosure under Section 18.11 hereof in
strict accordance with the terms thereof.

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12.2. Non-Competition and Non-Solicitation. Each of the Seller and
each Member agrees that for a period from the Closing Date until the first
anniversary of the Closing Date, the Seller, each Member and such Member's
Affiliates shall not, without the prior written consent of the Buyer, (a)
engage anywhere in the United States, directly or indirectly, alone or as a
shareholder (other than as a holder of SFX capital stock or less than 5% of the
capital stock of any publicly-traded corporation), member, partner, manager,
officer, director, employee or consultant, in any business organization that is
engaged or become engaged in the Business, except for Law pursuant to and to
the extent set forth in the Employment/Management Agreement, (b) divert to any
competitor of the Seller or any Affiliate of any such competitor any customer
or sponsor of the Seller, or (c) solicit or encourage any employee of the
Seller to leave its employ for employment by or with any Member or any
competitor of the Seller or any of their Affiliates. If at any time the
provisions of this Section 12.2 shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 12.2 shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court
or other body having jurisdiction over the matter; and the Seller and the
Members agree that this Section 12.2 as so amended shall be valid and binding
as though any invalid or unenforceable provisions had not been included
therein. Notwithstanding anything to the contrary under this Section 12, the
non-competition covenants imposed upon the Seller and the Members under this
Section 12 (i) shall terminate and be no longer applicable with respect to any
Acquired Assets repurchased by the Members under the Repurchase Agreement, and
(ii) shall not prohibit in any manner the Seller's (or its nominee's or
assignee's) operation of Harborlights and use and enjoyment of the Harborlights
Assets in the event the Harborlights Assets are Excluded Assets hereunder.

12.3. Equitable Remedies. It is recognized by the parties hereto that
damages for breaches of covenants of the nature contained in this Section 12
are difficult, if not impossible, to ascertain. Accordingly, it is agreed that
the covenants set forth in this Section 12 may be enforceable by any party
hereto by injunction, specific performance and/or equitable relief, in addition
to any other remedies available to such party at law or in equity.

13. HSR ACT. As promptly as practical, and in any event within ten
(10) business days following the date hereof, the Buyer (or SFX) and the Seller
will prepare and file, if required by law, with the United States Department of
Justice and the United States Federal Trade Commission, the Notification and
Report Form required to be filed by them under the HSR Act concerning the
transactions contemplated hereby, and hereby agree that they will promptly
comply with any request by the Department of Justice or the Federal Trade
Commission for additional documents or information so that the waiting period
specified in the HSR Act shall expire as soon as practicable after the
execution and delivery of this Agreement.

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14. EXCLUSIVE DEALING. The Seller and the Members hereby agree that
during the Exclusivity Period (as hereinafter defined), neither the Seller, the
Members nor any of their Related Parties or Affiliates, shall engage in any
negotiations with any Person, other than the Buyer and SFX, concerning the
purchase of all or any substantial portion of the membership interests in, or
assets of, the Seller. The "Exclusivity Period" shall be the period commencing
on the date hereof and ending on the earlier of the Closing Date or the date on
which this Agreement is terminated in accordance with the provisions hereof. In
addition, the Seller and the Members shall promptly notify SFX if the Seller
receives any written proposal, offer or other communication from any Person
with respect to any purchase of the Seller as aforesaid.

15. INDEMNIFICATION.

15.1. Indemnity by the Seller and the Members. Subject to the overall
limitations, the minimum amounts and the time limitations set forth in Section
15 hereof, the Seller and each Member agrees severally, and not jointly, to
indemnify and hold the Buyer harmless from and with respect to any and all
claims, liabilities, losses, damages, costs and expenses, including without
limitation, the fees and disbursements of counsel (collectively, "Damages"),
related to or arising directly or indirectly out of or with respect to (a) any
breach of any representation or warranty, covenant or obligation made by the
Seller or the Members in or pursuant to this Agreement (including the Schedules
and Exhibits hereto), and (b) the Excluded Assets. The amount of any Damages
recoverable under this Section 15.1 shall be calculated net of any insurance
proceeds, tax benefits or other third party recoveries received by the Buyer or
its Affiliates with respect thereto.

15.2. Indemnity by the Buyer and SFX. Subject to the overall
limitations, minimum amounts and time limitations set forth in Section 15
hereof, the Buyer and SFX, jointly and severally, agree to indemnify and hold
the Seller and the Members harmless from and with respect to any and all
Damages related to or arising directly or indirectly out of or with respect to
(a) any breach of any representation or warranty, covenant or obligation made
by the Buyer or SFX in or pursuant to this Agreement (including the Schedules
and Exhibits hereto), (b) the conduct of the Business or use of the Acquired
Assets from and after the Closing Date, and (c) the Assumed Obligations. The
amount of any Damage recoverable under this Section 15.2 shall be calculated
net of any insurance proceeds, tax benefits or other third party recoveries
received by the Seller or the Members with respect thereto.

15.3. Third Party Claims. In the event that any party seeking
indemnification hereunder (an "Indemnified Party") desires to make a claim
against the other party(ies) hereto (an "Indemnifying Party") under Section 15
hereof in connection with any action, suit, proceeding or demand at any time
instituted against or made

<PAGE>
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upon the Indemnified Party by any third party for which the Indemnified Party
may seek indemnification hereunder (a "Third Party Claim"), the Indemnified
Party shall promptly notify the Indemnifying Party of such Third Party Claim
and of the Indemnified Party's claim of indemnification with respect thereto.
The Indemnifying Party shall have thirty (30) days after receipt of such notice
to notify the Indemnified Party if the Indemnifying Party has elected to assume
the defense of such Third Party Claim. If the Indemnifying Party elects to
assume the defense of such Third Party Claim, the Indemnifying Party shall be
entitled at its own expense to conduct and control the defense and settlement
of such Third Party Claim through counsel of its own choosing; provided, that
the Indemnified Party may participate in the defense of such Third Party Claim
with its own counsel at its own expense; and provided, further, that the
Indemnifying Party, if it shall have so assumed such defense, shall concede, as
between the Indemnifying Party and the Indemnified Party, liability to the
Indemnified Party with respect to such Third Party Claim. If the Indemnifying
Party fails to notify the Indemnified Party within thirty (30) days after
receipt of the Indemnified Party's notice of a Third Party Claim, the
Indemnified Party shall be entitled to assume the defense of such Third Party
Claim at the expense of the Indemnifying Party (so long as the Third Party
Claim is one with respect to which the Indemnifying Party is responsible under
this Section 15), provided that the Indemnified Party may not settle any Third
Party Claim without the Indemnifying Party's consent, which consent shall not
be unreasonably withheld or delayed.

15.4. Limitations on Indemnification.

(a) No Indemnifying Party shall be required to indemnify an
Indemnified Party hereunder except to the extent that the aggregate
amount of Damages for which the Indemnified Party is otherwise
entitled to indemnification pursuant to Section 15 hereof exceeds
$100,000 (the "Minimum Amount") (it being understood and agreed that
the Minimum Amount is intended as an aggregate deductible, and the
Seller and the Members collectively on the one hand, and the Buyer and
SFX collectively on the other hand, shall not be liable collectively
for the Minimum Amount of Damages for which the others are otherwise
entitled to indemnification). Notwithstanding the foregoing, (i) any
Damages suffered by the Buyer arising from any breach by the Seller of
the representation and warranty contained in Section 6.12 hereof, and
(ii) any Damages suffered by an Indemnified Party arising from any
breach by an Indemnifying Party of any covenant or obligation under
this Agreement (including, without limitation, the obligations of the
Buyer and SFX under Sections 15.2(b), 15.2(c) and 17 hereof, and the
obligations of the Seller and the Members under Section 15.1(b)
hereof), shall be indemnified in their entirety and shall not be
subject to the Minimum Amount deductible.

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(b) Subject to paragraphs (c) and (d) below, notwithstanding
anything to the contrary set forth in this Section 15, the aggregate
amount of Damages payable by the Seller and the Members pursuant to
Section 15 hereof with respect to all claims for indemnification shall
not exceed five percent (5%) of the entire Purchase Price paid to the
Seller, except with respect to claims relating to (i) any breach of
the representation and warranty contained in Section 6.12 hereof, and
(ii) the Excluded Assets, which shall be limited to the entire
Purchase Price paid to the Seller (as the same may be reduced by the
amount of any Damages paid by the Seller and the Members to the Buyer
under this Section 15), and shall not be subject to the limitations
set forth in this Section 15.4(b).

(c) Notwithstanding anything to the contrary set forth in this
Section 15, the maximum liability of any Member with respect to any
claim by the Buyer for Damages shall be such Member's Pro Rata Share
(as hereinafter defined) of the aggregate liability of the Seller and
all of the Members, as specifically provided in Section 15.4(b)
hereof, with respect to such claim. For purposes hereof, a Member's
"Pro Rata Share" shall be the percentage set forth opposite such
Member's name on Schedule B hereto.

(d) Notwithstanding anything to the contrary set forth in this
Section 15, no action or claim for Damages pursuant to this Section 15
shall be brought or asserted by an Indemnified Party against an
Indemnifying Party after the first anniversary of the Closing Date,
except for (i) any action or claim for Damages brought by the Buyer
against the Seller or the Members arising from or with respect to (A)
any breach of the representation and warranty contained in Section
6.12 hereof, and (B) the Excluded Assets, or (ii) any action or claim
for Damages brought by the Seller and/or the Members against the Buyer
or SFX arising from or with respect to (A) the Buyer's conduct of the
Business or use of the Acquired Assets from and after the Closing
Date, (B) the Assumed Obligations or (C) SFX's and the Buyer's
obligations under Section 17 hereof, all of which actions or claims
set forth in clauses (i) and (ii) above may be brought until the
expiration of the applicable statutes of limitation.

(e) All Damages paid by the Seller and the Members to the Buyer
under this Section 15 shall be payable, at the option of the Seller
and the Members, in cash and shares of Class A Stock pro rata in
accordance with the relative proportion of the Cash Portion to the
Stock Portion. For purposes hereof, each share of Class A Stock paid
to the Buyer by the Seller and the Members as aforesaid shall be
valued at the fair market value thereof as of the time the payment
thereof is finally determined to be owing to the Buyer under this
Section 15.

<PAGE>
-32-

15.5. Expiration of Representations and Warranties; Scope of Seller's
and Members' Liability. Each of the representations and warranties of the
parties contained in this Agreement shall survive until the last day on which
any action or claim for breach of such representation or warranty may be
brought or asserted pursuant to Section 15.4(d) hereof (the "Expiration Date").
The Buyer and SFX acknowledge and agree that the Buyer's and SFX's sole remedy
against the Seller and the Members for any matter arising out of the
transactions contemplated by this Agreement is set forth in Section 15.1 hereof
and that, except to the extent the Buyer has asserted a claim for
indemnification prior to the applicable Expiration Date, the Buyer and SFX
shall have not remedy against the Seller or the Members for any breach of a
representation or warranty, covenant or obligation made by them in this
Agreement. The Seller, the Members, the Buyer and SFX agree that the purpose of
this Section 15.5 is to make it clear that the Seller and the Members are to
have no liability whatsoever to the Buyer or SFX, except as set forth in
Section 15.1 hereof, and accordingly agree that this Section 15.5 is to be
construed broadly. The Buyer and SFX acknowledge that this Section 15.5 has
been negotiated fully by the Buyer, SFX, the Seller and the Members, and that
the Seller and the Members would not have entered into this Agreement but for
the inclusion of this Section 15.5.

16. RIGHT TO TERMINATE. In the event that the Closing does not occur
on or before July 1, 1998 (or August 1, 1998 in the event the Closing is
extended by the Buyer pursuant to Section 4.1 hereof), either the Seller on the
one hand, or the Buyer (or SFX) on the other hand, may terminate this Agreement
at any time after the close of business on such date by delivering written
notice to the other party, so long as such failure to close is not a result of
a breach by the terminating party of any of its obligations hereunder.
Notwithstanding the foregoing, in the event that all of the respective
conditions to Closing of the parties have been satisfied by July 1, 1998, but
the waiting period under the HSR Act (the "HSR Waiting Period") shall not have
expired or been earlier terminated, then the parties shall execute and deliver
all agreements, documents and instruments required to be executed and delivered
under this Agreement (which shall be undated and thereafter dated the actual
Closing Date), and shall hold all of such agreements, documents and instruments
in escrow under mutually agreeable terms and conditions, pending the expiration
of the HSR Waiting Period; provided, that if the HSR Waiting Period shall not
have expired as of September 15, 1998, the Seller and the Buyer shall
thereafter have the right to terminate this Agreement as hereinabove provided.

17. RELEASE OF PERSONAL GUARANTIES. SFX and the Buyer agree that they
will use their commercially reasonable efforts to cause, within sixty (60) days
after the Closing Date, each of Law and Wolf to be released with no liability
from any and all personal guaranties of the obligations of the Seller to which
they are parties (the "Personal Guaranties"). SFX and the Buyer, jointly and
severally, shall indemnify and hold harmless each of Law and Wolf from and
against any Damages suffered by Law and Wolf under or in respect of the
Personal Guaranties in the event

<PAGE>
-33-

that SFX and the Buyer are unable to cause Law and Wolf to be released from the
Personal Guaranties as aforesaid.

18. GENERAL

18.1. Expenses. All expenses of the preparation, execution and
consummation of this Agreement and of the transactions contemplated hereby,
including without limitation attorneys', accountants' and outside advisers'
fees and disbursements, shall be borne by (a) SFX if incurred for the account
of SFX or the Buyer, or (b) the Seller if incurred for the account of the
Seller or the Members. Notwithstanding the foregoing, the parties agree that
(i) SFX shall be responsible or all brokerage commissions owing to Richard
Foreman, all real estate title costs and expenses, and all fees and expenses of
Ernst & Young, (ii) the Seller shall be responsible for all real estate
transfer taxes, and (iii) SFX and the Seller shall share equally all HSR Act
filing fees.

18.2. Notices. All notices, demands and other communications hereunder
shall be in writing or by written telecommunication, and shall be deemed to
have been duly given if delivered personally or if mailed by certified mail,
return receipt requested, postage prepaid, or if sent by overnight courier, or
sent by written telecommunication, as follows:

If to the Seller or the Members:

c/o Mugar Enterprises, Inc.
222 Boylston Street
Boston, Massachusetts 02116
Fax: (617) 267-3535
Attention: David T. Ting

with copies sent contemporaneously to:

Victor J. Paci, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Fax: (617) 951-8736

Hemmie Chang, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Fax: (617) 951-7050

<PAGE>
-34-

If to SFX or the Buyer, to:

SFX Entertainment, Inc.
650 Madison Avenue
New York, New York 10022
Fax: (212) 486-4840

Attention: Legal Department

with a copy sent contemporaneously to:

Michael Burroughs, Esq.
Baker & McKenzie
805 Third Avenue
New York, New York 10022
Fax: (212) 759-9133

18.3. Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof, and shall not be amended
except by a written instrument hereafter signed by all of the parties hereto.

18.4. Governing Law. The validity and construction of this Agreement
shall be governed by the internal laws (and not the choice-of-law rules) of the
Commonwealth of Massachusetts.

18.5. Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Neither this Agreement nor the obligations of any party
hereunder shall be assignable or transferable by such party without the prior
written consent of the other parties hereto.

18.6. Further Assurances. The Seller, the Buyer and SFX shall execute
and deliver to all appropriate other parties such other instruments as may be
reasonable required in connection with the performance of this Agreement and
each shall take all such further actions as may be reasonable required to carry
out the transactions contemplated by this Agreement.

18.7. No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any Person, other than the Seller, the
Members and the Buyer and SFX, and their respective equity holders, any rights
or remedies under or by reason of this Agreement.

<PAGE>
-35-

18.8. Knowledge. Whenever the phrase "to the knowledge of the Seller,"
"to the knowledge of the Buyer," or another similar qualification, is used
herein, the relevant knowledge is limited solely to the actual knowledge of the
Seller or the Buyer, as the case may be.

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

18.10. Satisfaction of Conditions Precedent. The Seller, the Buyer and
SFX will use their reasonable efforts in good faith to cause the satisfaction
of the conditions precedent contained in this Agreement; provided, however,
that nothing contained in this Section 18.10 shall obligate either party hereto
to waive any right or condition under this Agreement.

18.11. Public Statements or Releases. Except as other required by
applicable law, the parties hereto each agree that no party to this Agreement
will make, issue or release any public announcement, statement or
acknowledgment of the existence of, or reveal the status of, this Agreement or
the transactions contemplated hereby or any negotiations or discussions related
thereto or hereto, provided without first obtaining the consent of the other
parties hereto, which consent shall not be unreasonably withheld or delayed.
Each of the parties hereto further agrees to provide written notice to the
other parties to this Agreement, immediately upon the knowledge thereof, of any
obligation under applicable law to make, issue or release any such public
announcement, statement or acknowledgment.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

Schedule A

MEMBERS OF SELLER

1. MUGAR MLW LLC, a Massachusetts limited liability company

2. TIME TRUST ASSOCIATES JOINT VENTURE, a Massachusetts general partnership

3. NEXT TRUST, a Massachusetts business trust with transferable shares

4. HARBORLIGHTS PAVILION TRUST, a Massachusetts business trust with
transferable shares

5. DLC BUSINESS TRUST, a Massachusetts business trust with transferable
shares

6. ANDREW TRUST LLC, a Massachusetts limited liability company

7. SHERMAN WOLF, individually

8. ORPHEUM MANAGEMENT TRUST, a Massachusetts business trust with
transferable shares

9. BLACK & COPPER TRUST, a Massachusetts business trust with transferable
shares

10. DONALD F. LAW, JR., individually

11. GREAT WOODS TRUST, a Massachusetts business trust with transferable
shares

<PAGE>

Schedule B

OWNERSHIP OF SELLER MEMBERSHIP INTERESTS

<TABLE>
<CAPTION>
MEMBER PERCENTAGE OWNERSHIP PRO RATA SHARE
------ -------------------- --------------
<S> <C> <C>
1. MUGAR MLW LLC 50.0% Class A Interest 50.0%

2. TIME TRUST ASSOCIATES JOINT VENTURE 24.495% Class B Interest 24.495%

3. NEXT TRUST 16.465% Class B Interest 16.465%

4. HARBORLIGHTS PAVILION TRUST 5.38% Class B Interest 5.38%

5. DLC BUSINESS TRUST 2.485% Class B Interest 2.485%

6. ANDREW TRUST LLC .385% Class B Interest .385%

7. SHERMAN WOLF, individually .385% Class B Interest .385%

8. ORPHEUM MANAGEMENT TRUST .25% Class B Interest .25%

9. BLACK AND COPPER TRUST .11% Class B Interest .11%

10. DONALD F. LAW, JR., individually .04% Class B Interest .04%

11. GREAT WOODS TRUST .005% Class B Interest .005%

TOTAL: 100.00% 100.00%
</TABLE>

<PAGE>

IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed and delivered by
their respective duly authorized officers as of the date first above written.

SELLER:

BLACKSTONE ENTERTAINMENT, LLC

By: /s/ Donald F. Law, Jr.
-------------------------------
Name: Donald F. Law, Jr.
-----------------------------
Title: Manager and C.E.O.
----------------------------

BUYER:

DLC ACQUISITION CORP.

By: /s/ Robert F.X. Sillerman
-------------------------------
Name: Robert F.X. Sillerman
-----------------------------
Title:
----------------------------

SFX:

SFX ENTERTAINMENT, INC.

By: /s/ Robert F.X. Sillerman
-------------------------------
Name: Robert F.X. Sillerman
-----------------------------
Title: Executive Chairman
----------------------------

MEMBERS (for the limited purposes
set forth in this Agreement):

MUGAR MLW LLC

By: /s/ David G. Mugar
-------------------------------
Name: David G. Mugar
-----------------------------
Title: Member
----------------------------

<PAGE>

-2-

TIME TRUST ASSOCIATES JOINT
VENTURE

By: /s/ Sherman M. Wolf
-------------------------------
Name: Sherman M. Wolf
-----------------------------
Title: Trustee/Partner
----------------------------

NEXT TRUST

By: /s/ Sherman M. Wolf
-------------------------------
Name: Sherman M. Wolf
-----------------------------
Title: Trustee
----------------------------

HARBORLIGHTS PAVILION TRUST

By: /s/ Sherman M. Wolf
-------------------------------
Name: Sherman M. Wolf
-----------------------------
Title: Trustee
----------------------------

DLC BUSINESS TRUST

By: /s/ Donald F. Law, Jr.
-------------------------------
Name: Donald F. Law, Jr.
-----------------------------
Title: Trustee
----------------------------

ANDREW TRUST LLC

By: /s/ Donald F. Law, Jr.
-------------------------------
Name: Donald F. Law, Jr.
-----------------------------
Title: Trustee
----------------------------

/s/ Sherman M. Wolf
----------------------------------
Sherman Wolf, individually

<PAGE>

-3-

ORPHEUM MANAGEMENT TRUST

By: /s/ Donald F. Law, Jr.
-------------------------------
Name: Donald F. Law, Jr.
-----------------------------
Title: Trustee
----------------------------

BLACK AND COPPER TRUST

By: /s/ Donald F. Law, Jr.
-------------------------------
Name: Donald F. Law, Jr.
-----------------------------
Title: Trustee
----------------------------

By: /s/ Donald F. Law, Jr.
-------------------------------
Donald F. Law, Jr., individually

GREAT WOODS TRUST

By: /s/ Sherman M. Wolf
-------------------------------
Name: Sherman M. Wolf
-----------------------------
Title: Trustee
----------------------------

<PAGE>

PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered
into this 22 day of April, 1998, by and among OAKDALE CONCERTS, LLC
("Oakdale"), a Connecticut Limited Liability Company with an office for the
transaction of business at 95 South Turnpike Road, Wallingford, Connecticut
06492; OAKDALE DEVELOPMENT LIMITED PARTNERSHIP, a Connecticut limited
partnership with an office for the transaction of business at 95 South Turnpike
Road, Wallingford, Connecticut 06492 (the "Partnership"; and together with
Oakdale, the "Sellers"); and OAKDALE THEATER CONCERTS, INC. (the "Buyer"), a
Delaware corporation having an office for the conduct of its business at 650
Madison Avenue, 16th Floor, New York, New York 10022.

WHEREAS, Oakdale is engaged in the concert promotion, event production,
ticket distribution, corporate sponsorship, venue operation, concessionaire
licensing, parking, security and all similar businesses (the "Business")
relating to the operation and management of the Oakdale Music Theater located
in Wallingford, Connecticut (the "Theater"); and

WHEREAS, the Partnership owns certain parcels of real estate which it
leases to Oakdale to enable Oakdale to engage in the Business and to operate
and manage the Theater; and

WHEREAS, the Sellers desire to sell, and the Buyer desires to purchase,
all of the Sale Assets (as defined in Section 1.2 hereof) on the terms and
subject to the conditions set forth in this Agreement; and

WHEREAS, the Sale Assets constitute substantially all of the assets
which are used in and necessary for the operation of the Theater;

NOW THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, and upon the terms and
subject to the conditions hereinafter set forth, the parties hereby agree as
follows:

ARTICLE I
PURCHASE AND SALE

1.1 Purchase and Sale of Assets. On the Closing Date, Oakdale shall
sell, assign, transfer and convey to the Buyer, and the Buyer shall purchase
and assume from Oakdale, all of the assets, properties, interests and rights of
Oakdale of whatsoever kind and nature, real and personal, tangible and
intangible, owned or leased by Oakdale as the case may be, which are used or
held for use exclusively by or relate exclusively to the Business and to the
management and operation of the Theater (the "Sale Assets"), including but not
limited to the Sale Assets described in paragraph 1 of Exhibit A hereto but
excluding the assets described in paragraph 2 thereof. The Sale Assets shall be
transferred to the Buyer free and clear of all debts, security interest,
mortgages, trusts, adverse claims, pledges, conditional sales agreements or
other liens, liabilities and encumbrances whatsoever

<PAGE>

("Encumbrances"), other than informational filings made by equipment lessors
under the Uniform Commercial Code, and subject to the rights and restrictions
of the Connecticut Development Authority (the "CDA") set forth in the CDA
documents listed on Schedule 1.1 of the Disclosure Schedule.

1.2 Assumption of Obligations. Subject to the provisions of this Section
1.2, Section 1.3 and Section 2.3, on the Closing Date, the Buyer shall assume
and undertake to pay, satisfy or discharge when due the liabilities,
obligations and commitments of the Sellers relating to the management and
operation of the Theater arising under (i) the Real Estate Contracts and the
Contracts described in Sections 5.7 and 5.9 (without regard to the threshold
amounts set forth in Section 5.9); (ii) all other contracts of the Sellers
arising in the ordinary course of business and consistent with past practices
between the date hereof and the Closing Date; and (iii) any other contracts
entered into between the date hereof and the Closing Date which the Buyer
expressly agrees in writing to assume. All of the foregoing liabilities and
obligations shall be referred to herein collectively as the "Assumed
Obligations".

1.3 Limitation. Except as set forth in Section 1.2 hereof, the Buyer
expressly does not, and shall not, assume or be deemed to assume, under this
Agreement or otherwise by reason of the transactions contemplated hereby, any
liabilities, obligations or commitments of the Sellers of any nature
whatsoever. Without limiting the generality of the foregoing, except as set
forth in Section 1.2, the Buyer shall not assume or be liable for any liability
or obligation of the Sellers arising out of any contract of employment,
collective bargaining agreement, insurance, pension, retirement, deferred
compensation, incentive bonus or profit sharing or employee benefit plan or
trust, or any judgment, litigation, proceeding or claim by any person or entity
relating to the Business or the management and operation of the Theater prior
to the Closing Date, whether or not such judgment, litigation, proceeding or
claim is pending, threatened or asserted before, on or after the Closing Date.

ARTICLE 2
CONSIDERATION

2.1 Base Purchase Price. The aggregate consideration (the "Base Purchase
Price") for the acquisition of the Sale Assets shall be an amount equal to
Eleven Million Nine Hundred Thousand Dollars ($ 11,900,000). The Base Purchase
Price shall be payable in cash at the Closing by wire transfer of immediately
available funds to a bank or banks designated in writing by the Sellers.

2.2 Contingent Payment. In addition to the Base Purchase Price, and
subject to the proviso set forth below, in the event that EBITDA (defined as
earnings before interest, taxes, depreciation and amortization) from the
combined operation of the Theater and the Meadows Music Theater in Hartford,
Connecticut (the "Meadows"), including outside activities as agreed to in
advance by Oakdale and the Buyer, for fiscal year 1999 exceeds Five Million
Five Hundred Thousand Dollars ($5,500,000), the Buyer shall pay to Oakdale or
its designees within ninety (90) days of such fiscal year end, as additional
consideration for the acquisition of the Sale Assets (the "Contingent
Payment"), an amount determined as follows:

<PAGE>

(i) if 1999 EBITDA is greater than Five Million Five Hundred Thousand
Dollars ($5,500,000), but less than Six Million Dollars ($6,000,000), the Buyer
shall pay to Oakdale or its designees an amount equal to 5 times the amount by
which EBITDA exceeds Five Million Five Hundred Thousand Dollars ($5,500,000);

(ii) if 1999 EBITDA is equal to or greater than Six Million
($6,000,000), but less than or equal to Six Million Five Hundred Thousand
Dollars ($6,500,000), the Buyer shall pay to Oakdale or its designees an amount
equal to 5.2 times the amount by which EBITDA exceeds Five Million Five Hundred
Thousand Dollars ($5,500,000);

(iii) if 1999 EBITDA is greater than Six Million Five Hundred Thousand
Dollars ($6,500,000), but less than or equal to Seven Million Dollars
($7,000,000), the Buyer shall pay to Oakdale or its designees an amount equal
to 5.4 times the amount by which EBITDA exceeds Five Million Five Hundred
Thousand Dollars ($5,500,000);

(iv) if 1999 EBITDA is greater than Seven Million Dollars ($7,000,000),
but less than or equal to Seven Million Five Hundred Thousand Dollars
($7,500,000), the Buyer shall pay to Oakdale or its designees an amount equal
to 5.6 times the amount by which EBITDA exceeds Five Million Five Hundred
Thousand Dollars ($5,500,000); and

(v) if 1999 EBITDA is greater than Seven Million Five Hundred Thousand
Dollars ($7,500,000), the Buyer shall pay to Oakdale or its designees an amount
equal to 5.8 times the amount by which EBITDA exceeds Five Million Five Hundred
Thousand Dollars ($5,500,000);

provided, however, that in the event the operating expenses of the Theater for
fiscal year ending December 31, 1998 exceed the revenues derived solely from
ticket sales (specifically excluding all Net Ancillary Revenues) at the Theater
for fiscal year ending December 31,1998 by more than Two Hundred Thousand
Dollars ($200,000) (such excess, the "Operating Deficit"), each of the
threshold amounts set forth in subsections (i), (ii), (iii), (iv) and (v) of
this Section 2.2 shall be increased by the amount of the Operating Deficit for
the purposes of determining whether Oakdale is entitled to a Contingent Payment
under this Agreement. For the purposes of this Agreement, "Net Ancillary
Revenues" shall be defined as that portion of cash, trade and barter revenues
of the Theater generated in and attributable to fiscal year ending December 31,
1997 from the usual and customary sale of services or products to third
parties, consistent with industry practice (other than receipts from ticket
sales, net of ticket expenses) including, but not limited to, income from sales
of suites, platinum club memberships, corporate gold and silver memberships,
theater, dome and function room rentals, suite rentals for "extended runs",
platinum rentals for "extended runs", advance mail club, sponsorships, parking,
facility fees, handling charges, net concessions and merchandise.

2.3 Proration of Revenue and Expenses.

2.3.1 Except as otherwise provided herein, all expenses and all
revenue earned arising from the conduct of the Business and the management and
operation of the Theater shall be

<PAGE>

prorated between the Buyer and the Sellers in accordance with generally
accepted accounting principles as of 11:59 p.m., local time, on the date
immediately preceding the Closing Date. Such prorations shall include, without
limitation, all ad valorem, real estate and other property taxes (but excluding
taxes arising by reason of the transfer of the Sale Assets as contemplated
hereby, which shall be paid as set forth in Article 11 of this Agreement),
business and license fees (including any retroactive adjustments thereof),
wages and salaries of employees, including accruals up to the Closing Date for
bonuses, commissions, vacations and sick pay, and related payroll taxes,
utility expenses, rents and similar prepaid and deferred items attributable to
the ownership and operation of the Theater. Real estate taxes shall be
apportioned on the basis of taxes assessed for the preceding year, with a
reapportionment as soon as the new tax rate and valuation can be ascertained.

2.3.2 The prorations and adjustments contemplated by this Section,
to the extent practicable, shall be made on the Closing Date. As to those
prorations and adjustments not capable of being ascertained on the Closing
Date, an adjustment and proration shall be made within ninety (90) calendar
days of the Closing Date.

2.3.3 In the event of any disputes between the parties as to such
adjustments, the amounts not in dispute shall nonetheless be paid at the time
provided in Section 2.3.2 and such disputes shall be determined by an
independent certified public accountant mutually acceptable to the parties, and
the fees and expenses of such accountant shall be paid one-half by the Sellers
and one-half by the Buyer.

ARTICLE 3
CLOSING

3.1 Closing. Except as otherwise mutually agreed upon by the Sellers and
the Buyer, the consummation of the acquisition of the Sale Assets (the
"Closing") shall occur simultaneously on the later to occur of five (5)
business days following (i) the date of expiration or termination of all
waiting periods, including any extensions thereof, which are or may be
applicable to the transactions contemplated by this Agreement pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the rules and regulations promulgated thereunder, and (ii) the
Sellers' obtaining the CDA Consent (as defined in Section 8.4 of this
Agreement). The Closing shall, at Buyer's discretion, be held at the Buyer's
offices in New York City or at the offices of Sellers' counsel in Connecticut.

3.2 Loan. At the Closing, the Buyer shall cause SFX Entertainment, Inc.
("SFX"), a Delaware corporation, to make a loan to the Partnership in the
principal amount of Eleven Million Three Hundred Fifty Thousand Dollars
($11,350,000) (the "Loan"), a portion of which proceeds shall be used by the
Partnership to repay in full all senior mortgage indebtedness outstanding on
all real estate owned by the Partnership. The Loan shall bear interest at the
rate of 5.7489% per annum, which shall require annual interest payments of
$652,500 per year and shall be repaid as follows: monthly payments of interest
only shall be paid in arrears during the term of the Loan, with a final payment
of principal and accrued interest (if any), and all other sums outstanding
under the Loan, due and payable on the fifteenth (15th) anniversary of the
Closing. The Loan shall be evidenced by a non-recourse secured promissory note
(the "Note") in the form of Exhibit B, and shall be secured

<PAGE>

by a first priority non-recourse mortgage (the "Mortgage") in the form of
Exhibit C covering those certain parcels of land used in the operations of the
Theater and described in Section 5.8 of the Disclosure Schedule (the "Real
Estate"). The Partnership shall at its sole cost and expense provide SFX with
mortgagee title insurance in the amount of the lien of the Mortgage, subject
only to the exceptions contained in Section 1.1 of the Lease referred to in
Section 3.3 of this Agreement and the lien of the Lease (the "Title Policy").
Contemporaneously with the execution and delivery of the Note and the Mortgage,
the Partnership shall also execute and deliver to SFX an environmental
indemnification agreement (the "Environmental Agreement") in the form of
Exhibit D, and Oakdale shall execute and deliver to SFX an environmental
guaranty agreement (the "Environmental Guaranty") in the form of Exhibit E. The
Note, the Mortgage, the Environmental Agreement and the Environmental Guaranty
are collectively referred to as the "Loan Documents". The Partnership shall, at
its sole cost and expense, provide SFX with mortgage title insurance at the
closing in the full amount of the Loan.

3.3 Lease and Purchase. At the Closing, the Buyer and the Partnership
shall enter into (i) a master lease agreement (the "Lease") in the form of
Exhibit F providing for the lease by the Buyer of the Real Estate for a period
of fifteen (15) years (ii) a purchase agreement (the "Purchase Agreement") in
the form of Exhibit G providing for the Buyer's purchase of the Real Estate and
the termination of the Lease upon the payment in full of the Loan, and (iii) a
Memorandum of Lease in the form of Exhibit H describing the Buyer's rights
under the Lease and the Purchase Agreement, which the Buyer shall be entitled
to record. The Lease, the Purchase Agreement and the Memorandum of Lease are
collectively referred to as the "Lease-Purchase Documents".

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer hereby makes the following representations and warranties to
the Sellers, each of which is true and correct on the date hereof, shall remain
true and correct to and including the Closing Date, shall be unaffected by any
notice to the Sellers and shall survive the Closing to the extent provided in
Section 14.4 of this Agreement.

4.1 Organization and Standing. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and authority to own the Sale Assets and
to carry on the business of the Sellers as now being conducted and as proposed
to be conducted by the Sellers between the date hereof and the Closing Date.

4.2 Authorization and Binding Obligation. The Buyer has all necessary
power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and to own the Sale Assets and to carry on
the business and operations of the Sellers as they are now being conducted, and
the Buyer's execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
necessary action on its part. This Agreement has been duly executed and
delivered by the Buyer, and this Agreement constitutes, and the other
agreements to be executed in connection herewith will constitute, the valid and
binding obligation of the Buyer, enforceable in accordance with their terms,
except as limited

<PAGE>

by laws affecting the enforcement of creditors' rights or equitable principles
generally.

4.3 Litigation and Compliance with Law. There is no litigation,
administrative proceeding, arbitration or other proceeding, or petition,
complaint or, to the best of the Buyer's knowledge, investigation, before any
court or governmental body pending against the Buyer or any of its principals
that would adversely affect the Buyer's ability to perform its obligations
pursuant to this Agreement or the agreements to be executed in connection
herewith. To the best of the Buyer's knowledge, there is no violation of any
law, regulation or ordinance or any other requirement of any governmental body
or court which would have a material adverse effect on the Buyer or its ability
to perform its obligations pursuant to this Agreement or the agreements to be
executed in connection herewith.

4.4 Accuracy of Information. No written statement made by the Buyer
herein and no information provided by the Buyer herein or in the documents,
instruments or other written communications made or delivered directly by the
Buyer to the Sellers in connection with the negotiations covering the purchase
and sale of the Sale Assets contains any untrue statement of a material fact
necessary to make the statements contained therein or herein not misleading,
and there is no fact known to the Buyer which relates to any information
contained in any such written document, instrument or communications which the
Buyer has not disclosed to the Sellers in writing which could materially affect
adversely the Sellers. To the extent that a representation or other information
is made to the Buyer's knowledge or is otherwise qualified by its terms, this
representation shall not be interpreted to expand such limitations or
qualifications.

4.5 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Section 4.5 of the Disclosure Schedule, the execution, delivery
and performance of this Agreement by the Buyer: (a) does not require the
consent of any third party; (b)will not violate any applicable law, judgment,
order, injunction, decree, rule, regulation or ruling of any governmental
authority to which the Buyer is a party or by which it may be bound; and (c)
will not, either alone or with the giving of notice or the passage of time, or
both, conflict with, constitute grounds for termination of or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, any contract, agreement, instrument, license or permit to which the
Buyer is now subject.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE SELLERS

The Sellers hereby make the following representations and warranties to
the Buyer, each of which is true and correct on the date hereof, shall remain
true and correct to and including the Closing Date, and shall survive the
Closing to the extent provided in Section 14.4 of this Agreement. Such
representations and warranties are subject to, and qualified by, any fact or
facts disclosed in the separate Disclosure Schedule which is annexed hereto
(the "Disclosure Schedule"). A disclosure in one part or section of the
Disclosure Schedule shall, to the extent relevant, be deemed a disclosure in
each other part of the Disclosure Schedule.

5.1 Organization and Standing. Oakdale is a limited liability company,
duly organized and validly existing under the laws of the State of Connecticut,
and has the power and authority to

<PAGE>

own, lease and operate its respective assets and to carry on its business and
operations as now being conducted and as proposed to be conducted by Oakdale
between the date hereof and the Closing Date, including but not limited to the
management and operation of the Theater. The Partnership is a limited
partnership duly organized and validly existing under the laws of the State of
Connecticut, and has the power and authority to own, lease and operate its
respective assets and to carry on its business and operations as now being
conducted and as proposed to be conducted by the Partnership between the date
hereof and the Closing Date.

5.2 Authorization and Binding Obligation. Each of the Sellers has the
power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and the Sellers' execution, delivery and
performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all necessary action on their part. This
Agreement has been duly executed and delivered by each of the Sellers, and this
Agreement constitutes, and the other agreements to be executed in connection
herewith will constitute, the valid and binding obligation of each of the
Sellers, enforceable in accordance with their terms, except as limited by laws
affecting the enforcement of creditor's rights or equitable principles
generally.

5.3 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Section 5.3 of the Disclosure Schedule, the execution, delivery
and performance of this Agreement by each of the Sellers: (a) does not require
the consent of any third party; (b) to the Seller's knowledge, will not violate
any applicable law, judgment, order, injunction, decree, rule, regulation or
ruling of any governmental authority to which each of the Sellers is a party or
by which they or the Sale Assets are bound, except to the extent that any such
violation will not adversely or materially affect the transaction contemplated
hereby; (c) will not, either alone or with the giving of notice or the passage
of time, or both, conflict with, constitute grounds for termination of or
result in a material breach of the terms, conditions or provisions of, or
constitute a default under, any contract, agreement, instrument, license or
permit to which any of the Sellers or the Sale Assets is now subject; and (d)
will not result in the creation of any lien, charge or Encumbrance on any of
the Sale Assets, except as contemplated by this Agreement.

5.4 Government Authorizations. Section 5.4 of the Disclosure Schedule
contains a true and complete list of the material licenses, permits or other
authorizations from governmental and regulatory authorities which are required
for the lawful conduct of the Business and the management and operation of the
Theater in the manner and to the full extent they are presently conducted. Each
of the Sellers is the authorized legal holder of the licenses, permits and
authorizations listed in Section 5.4 of the Disclosure Schedule, none of which
is subject to any restrictions or condition which would limit in any material
respect the full operation of the Theater as now operated.

5.5 Intentionally Deleted

5.6 Taxes. Each of the Sellers has filed all federal, state, local and
foreign income, franchise, sales, use, property, excise, payroll and other tax
returns required by law (or has obtained an extension thereof, which extension
has not lapsed or expired by its terms) and has paid in full all taxes,
estimated taxes, interest, assessments, and penalties shown on said returns as
being due and payable. There are no present disputes as to taxes of any nature
payable by any of the Sellers.

<PAGE>

5.7 Personal Property. Section 5.7 of the Disclosure Schedule contains a
list of all material tangible personal property and assets owned or held by
each of the Sellers and used primarily or exclusively in the conduct of the
Business and the management and operation of the Theater (the "Personal
Property"). Except as disclosed in Section 5.7 of the Disclosure Schedule, and
except as may be subject to lease agreements of the Sellers specifically
identified in Section 5.7 of the Disclosure Schedule, each of the Sellers owns
and has, and will on the Closing Date have, good and marketable title to all
such property (and to all other tangible and intangible personal property and
assets to be transferred to the Buyer hereunder), and none of such property is,
or at the Closing will be, subject to any security interest, mortgage, pledge,
conditional sales agreement or other lien or encumbrance other than as set
forth in Section 5.7 of the Disclosure Schedule. All of the items of tangible
personal property and assets included in Section 5.9 of the Disclosure Schedule
are in all respects in good operating condition (ordinary wear and tear
excepted) and are available for immediate use in the conduct of the Business
and the management and operation of the Theater.

5.8 Real Property. Section 5.8 of the Disclosure Schedule contains a
complete and accurate list of all real property (i) leased by any of the
Sellers and used by any of them in the Business and in the management and
operation of the Theater, together with a summary of the applicable leases
(collectively the "Real Estate Contracts"); and (ii) owned by any of the
Sellers. The Real Estate Contracts listed in Section 5.8 of the Disclosure
Schedule (a) constitute valid and binding obligations of the Sellers and, to
the Sellers' knowledge, of all other persons purported to be parties thereto,
except as limited by laws affecting the enforcement of creditor's rights or
equitable principles generally, and are in full force and effect as of the date
hereof, and (b)will on the Closing Date constitute valid and binding
obligations of the Sellers and, to the best of the Sellers' knowledge, of all
other persons purported to be parties thereto and shall be in full force and
effect, except as limited by laws affecting the enforcement of creditor's
rights or equitable principles generally. Except as set forth in Section 5.8 of
the Disclosure Schedule, none of the Sellers is in material default under any
of such Real Estate Contracts, none has received or given written notice of any
default thereunder from or to any of the other parties thereto and none will
have received any such notice at or prior to the Closing. The real property
owned by the Partnership which is listed in Section 5.8 of the Disclosure
Schedule constitutes all of the real property necessary to operate the Theater
as currently operated, including all surrounding grounds and parking areas.

5.9 Contracts. Section 5.9 of the Disclosure Schedule lists and
summarizes the terms of all written and oral contracts (the "Contracts") as of
the date of this Agreement for which the Sellers shall continue to be liable as
of the Closing Date, except contracts entered into in the ordinary course of
business (i) of less than three (3) months duration and which impose monetary
obligations of not more than Ten Thousand Dollars ($10,000) in the aggregate,
or (ii) which are currently scheduled to expire prior to the Closing Date and
for which the Sellers will no longer be liable. Those contracts which the
Sellers and the Buyer agree are critical to the operation of the Business and
the Theater are identified in Section 5.9 of the Disclosure Schedule as
"Material Contracts". Notwithstanding the foregoing, if it is discovered
before the Closing that the Sellers failed to list any contract in Section 5.9
of the Disclosure Schedule which was required to be listed, the failure by the
Sellers to disclose such contract shall not permit the Buyer to refuse to close
under this Agreement or to bring an action for damages against the Sellers if
the absence of such contract would not have a material adverse effect on the
Buyer or the management and operation of the Theater.

<PAGE>

5.10 Status of Contracts. Except as noted in Section 5.10 of the
Disclosure Schedule, the Sellers have delivered to the Buyer true and complete
copies of all written Material Contracts, including any and all amendments and
other modifications to such Material Contracts. All Material Contracts are
valid, binding and enforceable by the Sellers in accordance with their
respective terms, except as limited by laws affecting creditors' rights or
equitable principles generally. To the best of the Sellers' knowledge, the
Sellers have complied in all material respects with all Material Contracts and
are not in default beyond any applicable grace periods under any of the
Material Contracts, and no other contracting party is in default under any of
the Material Contracts.

5.11 Environmental Matters. None of the Sellers has unlawfully disposed
of any hazardous waste or hazardous substance in a manner which has caused, or
could cause, the Buyer to incur a material liability under applicable law in
connection therewith. To the Sellers' knowledge, each of the Sellers has
complied in all material respects with all federal, state and local
environmental laws, rules and regulations applicable to the Sellers and the
management and operation of the Theater. To the Sellers' knowledge, no
hazardous waste has been disposed of by any other person on the real estate
owned or leased by the Sellers. As used herein, the term "hazardous waste"
shall mean as defined in the Resource Conservation and Recovery Act (RCRA) as
amended and in the equivalent state statute under Connecticut state law. The
Buyer may at its expense conduct a Phase I environmental study of the real
property owned or leased by the Sellers. If the Buyer learns between the date
of this Agreement and the Closing Date that the Sellers are in breach of the
representation and warranty set forth in this Section 5.11, the Sellers shall
begin remedial action promptly and use reasonable efforts to complete such
remedial action before the Closing, and if such remedial measures are not
materially completed prior to Closing, the Buyer shall have the sole discretion
to consummate this Agreement or terminate this Agreement; provided, however,
that if such remedial action is likely to cost the Sellers in excess of One
Hundred Thousand Dollars ($100,000) in the aggregate, the Sellers may in the
alternative in their sole discretion terminate this Agreement prior to Closing
and the Sellers shall have no liability to the Buyer as a result of such
termination.

5.12 Copyrights, Trademarks and Similar Rights. Section 5.12 of the
Disclosure Schedule lists, in all material respects, all copyrights,
trademarks, trade names, licenses, patents, permits, and other similar
intangible property rights and interests applied for, issued to or owned by the
Sellers or under which the Sellers are a licensee or franchisee and which are
used in the conduct of the Business and in the management and operation of the
Theater. Except as set forth in Section 5.12 of the Disclosure Schedule, all of
such rights and interests are issued to or owned by the Sellers, or if licensed
or franchised to the Sellers, to the Sellers' knowledge, are valid and in good
standing and uncontested. The Sellers have delivered or made available to the
Buyer copies of all material documents, if any, establishing such rights,
licenses or other authority. None of the Sellers has received any written
notice nor has any knowledge of any infringements or unlawful use of such
property.

5.13 Personnel Information. Section 5.13 of the Disclosure Schedule
contains a true and complete list of all persons employed by the Sellers,
including a description of material compensation arrangements and employee
benefit plans and a list of other terms of any and all agreements affecting
such persons. Except as set forth in Section 5.13 of the Disclosure Schedule,

<PAGE>

none of the Sellers has received notification that any of its employees who are
listed in Section 5.13 of the Disclosure Schedule presently plan to terminate
their employment, whether by reason of the transactions contemplated hereby or
otherwise.

5.13.1 Except as disclosed in Section 5.13 of the Disclosure
Schedule, none of the Sellers is a party to any contract with any labor
organization, nor have any of the Sellers agreed to recognize any union or
other collective bargaining unit, nor has any union or other collective
bargaining unit been certified as representing any of the Sellers' employees.
None of the Sellers has any knowledge of any organizational effort currently
being made or threatened by or on behalf of any labor union with respect to
employees of any of the Sellers. Except as disclosed in Section 5.13 of the
Disclosure Schedule, during the past three (3) years, none of the Sellers has
experienced any strikes, work stoppages, grievance proceedings, claims of
unfair labor practices filed or other significant labor difficulties of any
nature.

5.13.2 Except as disclosed in Section 5.13 of the Disclosure
Schedule, each of the Sellers has complied in all material respects with all
laws relating to the employment of labor, including, without limitation, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
those laws relating to wages, hours, collective bargaining, unemployment
insurance, workers' compensation, equal employment opportunity, sexual
harassment and payment and withholding of taxes. More specifically, each of the
Sellers has substantially complied with and is not in default in any material
respect under any laws, rules and regulations relating to employment of labor,
including those relating to wages, hours, equal employment opportunities,
sexual harassment, employment of protected minorities (including women and
persons over 40 years of age), collective bargaining and the withholding and
payment of taxes and contributions and has withheld all amounts required or
agreed to be withheld from wages and salaries of its employees, and is not
liable for any arrearage of wages or for any tax or penalty or failure to
comply with the foregoing. Except as disclosed in Schedule 5.13 of the
Disclosure Schedule, there are no claims or complaints pending or, to the
knowledge of the Sellers, threatened against any of the Sellers before any
court or governmental agency and involving any alleged unlawful employment
practices, whether or not relating to the laws described above. None of the
Sellers has consented to any decree involving any claim of unfair labor
practice nor been held in any judicial proceeding to have committed any unfair
labor practice, and there are no material controversies pending or threatened
between any of the Sellers and any of their employees.

5.14 Financial Statements. Oakdale has delivered to the Buyer complete
copies of its unaudited balance sheet and unaudited statements of income and
retained earnings and changes in financial position for the twelve (12) month
period ending December 31, 1997 (the "Financial Statements"). Except as noted
therein, the Financial Statements fairly present the consolidated financial
position of Oakdale and its results of operations as of those dates.

5.15 Liabilities. Except as set forth in Section 5.15 of the Disclosure
Schedule and the Financial Statements, the Sellers have no material debts,
obligations or liabilities of a nature customarily reflected in financial
statements.

5.16 Absence of Certain Changes or Events. Except as set forth in
Section 5.16 of the

<PAGE>

Disclosure Schedule or except as otherwise contemplated by this Agreement,
since December 31, 1997, there has not been (a) any damage, destruction or
casualty loss to the physical properties of the Sellers (whether covered by
insurance or not); (b) any material change in the Business, operations or
financial condition of the Sellers; (c) any entry into any transaction,
commitment or agreement (including without limitation any borrowing or capital
expenditure) material to the Business and to the management and operation of
the Theater; (d) any material increase in the rate or terms of compensation
payable or to become payable by any of the Sellers to their directors, officers
or employees or any increase in the rate or terms of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement made to, for
or with any such directors, officers or key employees; (e) any change in or
acceleration of sales, or reduction of aggregate administrative, marketing,
advertising and promotional expenses or research expenditures other than in the
ordinary course of business; (f) any sale, transfer or other disposition of any
material asset of the Sellers to any party, except for payment of third-party
obligations incurred in the ordinary course of business in accordance with the
Sellers' regular payment practices; (g) any termination or waiver of any rights
of value to the Business of Oakdale; or (h) any failure by the Sellers to pay
their accounts payable or other obligations in the ordinary course of business
consistent with past practices.

5.17 Title to Properties. Except as set forth in Section 5.17 of the
Disclosure Schedule, Oakdale has good and marketable title to all of the assets
and properties which it purports to own and which are reflected on the
Financial Statements, free and clear of all Encumbrances, except for (a) liens
for current taxes not yet due and payable or for taxes the validity of which is
being contested in good faith by appropriate proceedings, and (b) Encumbrances
which individually or in the aggregate do not materially and adversely affect
the Business, the management and operation of the Theater or the financial
condition of the Sellers.

5.18 Litigation. Except as set forth in Section 5.18 of the Disclosure
Schedule, none of the Sellers is subject to a judgment, award, order, writ,
injunction, arbitration decision or decree materially adversely affecting the
conduct of the Business of the Sellers or the Theater, and there is no
litigation, arbitration, administration or other proceeding or, to the best of
the Sellers' knowledge, investigation pending or any basis for any person to
assert a claim or, to the best of the Sellers' knowledge, threatened against
any of the Sellers or the Theater in any federal, state or local court, or
before any administrative agency or arbitrator, or before any other tribunal
duly authorized to resolve disputes, which would reasonably be expected to have
any material adverse effect upon the Business, property, assets or condition
(financial or otherwise) of the Sellers or which seeks to enjoin or prohibit,
or otherwise questions the validity of, any action taken or to be taken
pursuant to or in connection with this Agreement.

5.19 Compliance With Laws. Except as set forth in Section 5.19 of the
Disclosure Schedule, (a) none of the Sellers has received any notice asserting
any non-compliance by it in connection with the Business or the management and
operation of the Theater with any applicable statute, rule or regulation,
whether federal, state or local; (b) none of the Sellers is in default with
respect to any judgment, order, injunction or decree of any court,
administrative agency or other governmental authority or any other tribunal
duly authorized to resolve disputes in any respect material to the transactions
contemplated hereby; and (c) to Sellers' knowledge, each of the Sellers is in
compliance with all material laws, regulations and governmental orders
applicable to the

<PAGE>

conduct of the Business and to the management and operation of the Theater, the
failure to comply with which would have a material adverse effect on the
Business, operations or financial condition of the Sellers, and their present
use of the Sale Assets does not violate any of such laws, regulations or
orders, violation of which would have a material adverse effect on the Sellers'
operations.

5.20 Insurance. All insurance policies with respect to the properties,
assets, operations and Business of the Sellers (the "Insurance Policies") are
in full force and effect. Except as set forth in Section 5.20 of the Disclosure
Schedule, there are no pending claims against the Insurance Policies by the
Sellers as to which the insurers have denied liability and with respect to
which there is a reasonable likelihood of a settlement or determination adverse
to the Sellers. To the Sellers' knowledge, there are no circumstances existing
which would enable the insurers to avoid liability under the Insurance
Policies, nor are there any other parties having an interest under the
Insurance Policies. Except as set forth in Section 5.20 of the Disclosure
Schedule, (i) there exist no material claims under the Insurance Policies that
have not been properly filed by the Sellers; (ii) no insurance company has
refused to renew any material insurance policy of the Sellers during the past
eighteen (18) months; and (iii) there have been no material rate or premium
increases or written notice of prospective changes therein on general
liability, property or directors and officers liability Insurance Policies
during the past eighteen (18) months. The Disclosure Schedule lists all
Insurance Policies of the Sellers.

5.21 Accuracy of Information. To the Sellers' knowledge, no written
statement made by the Sellers herein and no information provided by the Sellers
herein or in the documents, instruments or other written communications made or
delivered directly by the Sellers to the Buyer in connection with the
negotiations covering the purchase and sale of the Sale Assets contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained therein or herein not misleading and there is no fact
known to the Sellers which relates to any information contained in any such
written document, instrument or communications which the Sellers have not
disclosed to the Buyer in writing which materially and adversely affects the
Sellers. To the extent that a representation or other information is made to
any of the Sellers' knowledge or is otherwise qualified by its terms, this
representation shall not be interpreted to expand such limitations or
qualifications.

5.22 Payola/Plugola. None of the Sellers has paid or agreed to pay any
money, service or any valuable consideration, as defined in, and other than any
such payments or agreements to pay made in accordance with, Sections 317 and
507 of the Communications Act of 1934, as amended, for the radio broadcast of
any matter whatsoever.

ARTICLE 6
COVENANTS OF THE BUYER

6.1 Closing. On the Closing Date, the Buyer shall purchase the Sale
Assets from the Sellers as provided in Article 1 hereof and shall deliver or
cause to be delivered to the Sellers the Base Purchase Price as provided in
Article 2 hereof.

6.2 Notification. The Buyer shall notify the Sellers of any litigation,
arbitration or

<PAGE>

administrative proceeding pending or, to its knowledge, threatened against the
Buyer which challenges the transactions contemplated hereby.

6.3 No Inconsistent Action. The Buyer shall not take any other action
which is materially inconsistent with its obligations under this Agreement.

6.4 Required Consents. On the Closing Date, the Buyer shall deliver any
and all necessary third party consents to the execution, delivery and
performance of this Agreement by the Buyer.

6.5 Accounts Receivable. The Buyer acknowledges that all accounts
receivable in connection with the operation of the Sellers for services
performed prior to the Closing Date shall remain the property of the Sellers
and that the Buyer shall not acquire any beneficial right or interest therein
or responsibility therefor, with the following limited exception: for a period
of ninety (90) days following the Closing Date, the Buyer agrees to use
reasonable efforts to collect such accounts receivable in the normal and
ordinary course of business and will apply all such amounts collected to the
account debtor's oldest account receivable first, except that any such accounts
collected by the Buyer from persons who are also indebted to the Buyer may be
applied to the Buyer's account where (i) there is a pre-existing bona fide
dispute between the Sellers and such account debtor with respect to such
account or where the account debtor specifically designates that payment is to
be applied to the Buyer's account; (ii) the Buyer has notified the Sellers of
such dispute or specific designation of payment by the account debtor; and
(iii) thirty (30) days have elapsed since the date notice was given by the
Buyer to the Sellers and such account remains subject to dispute or such
account debtor has not rescinded its specific designation of payment. Such
obligation and authority shall not extend to the institution of litigation,
employment of counsel or a collection agency or any other extraordinary means
of collection unless authorized in writing by the Sellers. The Sellers agree to
transfer to the Buyer all bank accounts, postal boxes or drop or lock boxes
normally utilized by the Sellers in the collection of their accounts receivable
to facilitate the Buyer's collection of their accounts receivable during this
period. The Buyer agrees to cooperate with the Sellers as to any litigation or
other collection efforts instituted by the Sellers to collect delinquent
accounts receivable. On the 30th, 60th and 90th days following the Closing
Date, the Buyer shall deliver to the Sellers a statement or report showing all
such collections effected since the Closing Date, together with a check or
draft for the amount of such collections net of commissions. If at any time the
Buyer determines that any such accounts are uncollectible, the Buyer shall
notify the Sellers of such determination; and upon the Sellers' written
request, and in any event on the 90th day following the Closing Date, the Buyer
shall furnish or make available to the Sellers all records, files and data
relating to the collection efforts of the Buyer with respect to such accounts.

ARTICLE 7
COVENANTS OF THE SELLERS

7.1 Pre-Closing Covenants. The Sellers covenant and agree that between
the date hereof and the Closing Date, except as expressly permitted by this
Agreement or with the prior written consent of the Buyer, they shall act in
accordance with the following:

<PAGE>

7.1.1 The Sellers shall conduct the Business and the management and
operation of the Theater in accordance with its past practices and with the
intent of preserving the ongoing operations and assets of the Sellers,
including, but not limited to, using their reasonable efforts to retain the
services of their employees and keeping in good standing all licenses, permits
and authorizations.

7.1.2 The Sellers shall use reasonable efforts to preserve the
Business of the Sellers intact and to preserve the Sellers' customers,
suppliers and others having business relations with the Sellers and continue to
conduct the financial operations of the Sellers, including their credit and
collection policies, in accordance with its past practices with substantially
the same effort, and to substantially the same extent and in the same manner,
as in the prior conduct of the business of the Sellers.

7.1.3 The Sellers shall operate the Business in accordance with all
material laws, regulations, rules and orders.

7.1.4 The Sellers shall not other than in the ordinary course of
business or in accordance with a pre-existing plan or arrangement listed in
Section 7.1 of the Disclosure Schedule (i) sell or dispose of or commit to sell
or dispose of any of their material assets; (ii) grant or agree to grant any
material increases in the rates of salaries or compensation payable to
employees of any of the Sellers; (iii) grant or agree to grant any specific
bonus or increase to any executive or management employee of any of the
Sellers; (iv) provide for any new pension, retirement or other employment
benefits for employees of any of the Sellers or any increases in any existing
benefits, other than as required by law; or (v) incur any material liability
not currently reflected on the Financial Statements.

7.1.5 The Sellers shall provide the Buyer with prompt written notice
of any material change in any of the information contained in the
representations and warranties made in Article 5 hereof or any Exhibits or the
Disclosure Schedule herein or attached hereto.

7.1.6 Between the date of this Agreement and the Closing Date, the
Sellers will (i) give the Buyer and its authorized representatives reasonable
access to all books, records, offices and other facilities and properties of
the Sellers; (ii) permit the Buyer to make such inspections thereof, during
regular business hours, as the Buyer may reasonably request; and (iii) cause
their officers to furnish the Buyer with such financial and operating data,
including tax returns and supporting work papers and schedules, and other
information with respect to the business and properties of the Sellers as the
Buyer may from time to time reasonably request. The Sellers shall cause their
officers and managerial employees, counsel and auditors to be available on
reasonable notice and during normal working hours for such questions of the
Buyer and its authorized representatives concerning the Business and the
affairs and operations of the Sellers as the Buyer shall reasonably request.

7.1.7 Without the prior written consent of the Buyer, the Sellers
shall not enter into or renew or modify in any material respect any
agreements, commitments or contracts, including the Contracts listed in Section
5.9 of the Disclosure Schedule, except consistent with the past practices of
the Sellers.

<PAGE>

7.1.8 The Sellers shall not permit any of their Insurance Policies
to be canceled or terminated, or any of the coverage thereunder to lapse,
unless simultaneously with such termination, cancellation or lapse, replacement
insurance policies providing coverage equal to or greater than coverage
remaining under those canceled, terminate or lapsed policies are in full force
and effect.

7.1.9 The Sellers shall give the Buyer prior written notice of any
amendments to their articles of organization, partnership agreements, or
operating agreements, provided that any such amendments do not materially or
adversely affect the transactions contemplated by this Agreement.

7.2 Notification. The Sellers shall notify the Buyer of any material
litigation, arbitration or administrative proceeding pending or, to their
knowledge, threatened against the Sellers or any of them which challenges the
transactions contemplated hereby.

7.3 No Inconsistent Action. The Sellers shall take no action which is
materially inconsistent with their obligations under this Agreement.

7.4 Closing Covenant. On the Closing Date, the Sellers shall sell and
deliver the Sale Assets to the Buyer as provided in Article 1 of this
Agreement.

7.5 No Shopping. From and after the date hereof until the termination of
this Agreement in accordance with its terms, none of the Sellers or any
representative or agent thereof, nor any member, officer, director, employee or
partner of any of the Sellers, shall directly or indirectly solicit or
knowingly encourage, including by way of furnishing information, the initiation
of any inquiries or proposals regarding, or engaging in any discussions or
entering into any agreements regarding, any merger, sale of shares of capital
stock, sale of partnership interests, sale of membership interests, sale of all
or substantially all of the assets or similar business combination or
transaction involving any of the Sellers.

ARTICLE 8
JOINT COVENANTS

The Buyer and the Sellers covenant and agree that between the date
hereof and the Closing Date, they shall act in accordance with the following:

8.1 Conditions. Except as otherwise provided in this Agreement, if any
event should occur, either within or without the control of any party hereto,
which would prevent fulfillment of the conditions upon the obligations of any
party hereto to consummate the transactions contemplated by this Agreement, the
parties hereto shall use their reasonable best efforts to cure the event as
expeditiously as possible.

8.2 Confidentiality. The Buyer and the Sellers shall each keep
confidential all information obtained by it or them with respect to the other
during the course of due diligence or in connection with this Agreement and the
negotiations preceding this Agreement, and will use such information solely in
connection with the transactions contemplated by this Agreement, and if the

<PAGE>

transactions contemplated hereby are not consummated for any reason, each shall
return to the other, without retaining a copy thereof, any schedules, documents
or other written information obtained from the other in connection with this
Agreement and the transactions contemplated hereby. Notwithstanding the
foregoing, no party shall be required to keep confidential or return any
information which (i) is known or available through other lawful sources, not
bound by a confidentiality agreement with the disclosing party, (ii) is or
becomes publicly known through no fault of the receiving party or its agents,
(iii) is required to be disclosed pursuant to an order or request of a judicial
or governmental authority or because of the rules and regulations of the
Securities and Exchange Agreement (the "SEC") (provided the other parties are
given reasonable prior notice), or (iv) is developed by the receiving party
independently of the disclosure by the disclosing party. The Sellers hereby
acknowledge that the Buyer is a reporting person under the rules and
regulations of the SEC and may be required, upon the execution of this
Agreement, to disclose and file this Agreement (not including the Disclosure
Schedules and the Exhibits hereto) with its regularly required SEC reports,
provided, that the Buyer shall afford the Sellers reasonable time to review and
comment on the text accompanying any such disclosure prior to such filing.

8.3 Cooperation. Subject to the Buyer's primary obligation under
Section 8.4, the Buyer and the Sellers shall cooperate fully with each other in
taking any actions, including actions to obtain the required consent of any
governmental instrumentality or any third party necessary or helpful to
accomplish the transactions contemplated by this Agreement; provided, however,
that no party shall be required to take any action which would have a material
adverse effect upon it or any affiliated entity.

8.4 Governmental Consents. Promptly following the execution of this
Agreement, the parties shall proceed to prepare and file with the appropriate
governmental entities such requests, reports, or notifications as may be
required in connection with this Agreement and shall diligently and
expeditiously prosecute, and shall cooperate fully with each other in the
prosecution of, such matters. Without limiting the foregoing, promptly
following the execution of this Agreement, (i) if required, the Buyer shall,
with the Sellers cooperation, file with the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "DOJ") the
notifications and other information required to be filed under the HSR Act with
respect to the transactions contemplated hereby and shall use their
commercially reasonable efforts to cause all applicable waiting periods under
the HSR Act to expire or be terminated as of the earliest possible date; (ii)
the Sellers shall, with the Buyer's cooperation, file and prosecute an
application with the CDA for its consent to the sale of the Sellers' Business
to the Buyer (the "CDA Consent"); and (iii) the Buyer and the Sellers shall
make all necessary filings and, thereafter, make any other required submissions
with respect to the transactions contemplated hereby that may be required under
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder and any other applicable federal or state securities
laws. The CDA Consent shall, at a minimum, contain the following terms and
provisions in form reasonably satisfactory to the Buyer: (a) a certification
that (1) the Financial Assistance Agreement dated December 21, 1995 (the "FAA")
is in full force and effect without modification, amendment or termination, (2)
no default exists under the FAA or the bonds issued thereunder, and the last
payment made under the bonds was made on _________, 199__, in the amount of
$_____________, (3) the entire net proceeds of the bonds have been disbursed
($9,557,890.12), (4) to the best knowledge of the CDA, the Project which was
funded in part by the

<PAGE>

bond proceeds has been completed in accordance with the terms of the FAA, and
(5) there exists no Operating Shortfall under the FAA; (ii) a consent with
regard to the transactions contemplated hereby, including, without limitation,
the sale, transfer and assignment of all or substantially all of the assets
used or usable in connection with the operation of the Theater, the lease of
the Project by Oakdale, the execution and delivery of the Note and the Mortgage
to encumber the Theater premises, and the execution and delivery of the
Purchase Agreement (and the future conveyance pursuant thereto); and (iii) an
amendment: (aa) to paragraphs 36 and 46 of the FAA to the extent necessary if
the Sellers change their form of ownership or that of their constituent owners,
(bb) to all provisions of the FAA and the Use Agreement among the Sellers and
affiliates, Fleet National Bank and the CDA executed in December 1995 relating
to the rights of Fleet National Bank as the holder of a $7,000,000 mortgage
loan so that SFX, as the holder of the Note and the Mortgage (or its successors
and assigns) shall be recognized as having such rights, including without
limitation, control of proceeds in the event of casualty or condemnation,(cc)
to paragraph 49 of the FAA so that the Buyer's involvement in matters described
therein shall be sufficient, and (dd) to include an acknowledgment that the
Buyer shall be entitled to use the sums deposited in the Renewal and
Replacement Account and that such sums shall be held for the benefit of the
Buyer.

ARTICLE 9
CONDITIONS OF CLOSING BY THE BUYER

The obligations of the Buyer hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:

9.1 Representations, Warranties and Covenants.

9.1.1 All representations and warranties of each of the Sellers made
in this Agreement shall be true and complete in all material respects as of the
date hereof and on and as of the Closing Date as if made on and as of that
date, subject to any updates made to the Disclosure Schedule prior to the
Closing Date.

9.1.2 All of the terms, covenants and conditions to be complied with
and performed by each of the Sellers on or prior to Closing Date shall have
been complied with or performed in all material respects.

9.1.3 The Buyer shall have received a certificate, dated as of the
Closing Date, executed by a duly qualified representative of each of the
Sellers, to the effect that their respective representations and warranties
contained in this Agreement are true and complete in all material respects on
and as of the Closing Date as if made on and as of that date, and that each has
complied with or performed all terms, covenants and conditions to be complied
with or performed by it in all material respects on or prior to the Closing
Date.

9.2 Governmental Consents. To the extent required, the Sellers
shall have cooperated with the Buyer in filing the requisite forms with the DOJ
and the FTC pursuant to the HSR Act, and all applicable waiting periods with
respect to each such filing (including any extensions thereof) shall have
expired or been terminated.

<PAGE>

9.3 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, and no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered against,
any party hereto which would render it unlawful, as of the Closing Date, to
effect the transactions contemplated by this Agreement in accordance with its
terms.

9.4 Legal Opinion. The Sellers shall have delivered to the Buyer a
written opinion of their counsel, dated as of the Closing Date, substantially
in the form attached hereto as Exhibit I.

9.5 Third Party Consents. The Sellers shall have obtained and shall have
delivered to the Buyer all third-party consents to the Material Contracts
(including, but not limited to, the CDA Consent) and to all other Contracts
assigned or transferred hereunder, except those the absence of which will not
have a material adverse effect on the Business and the Operation of the
Theater.

9.6 Escrow Relating to Roof. The parties shall have established an
escrow to be held by Chicago Title Insurance Company, as escrowee, pursuant to
an escrow agreement reasonably acceptable to the Sellers and the Buyer,
relating to the mechanic's lien and related litigation filed by C.R. Klewin,
Inc. and the repairs necessary for the Theater roof in order to both remove the
exception relating thereto from the Buyer's title insurance policy, and to make
not less than $400,000 of such funds available for the repair and/or
replacement of the roof(which escrow amount shall not exceed $ 1,875,000);
provided, however, that should such lien be removed or reduced pursuant to a
final order or final settlement, such escrow amount shall be the amount of the
reduced lien, but not less than the amount necessary to repair and/or replace
the roof (as evidenced by an estimate by a contractor reasonably acceptable to
the Buyer).

9.7 Closing Documents. The Sellers shall have delivered or caused to be
delivered to the Buyer on the Closing Date all deeds, bills of sale,
endorsements, assignments and other instruments of conveyance and transfer
reasonably satisfactory in form and substance to the Buyer, effecting the sale,
transfer, assignment and conveyance of the Sale Assets to the Buyer, including
without limitation the documents required to be delivered pursuant to Article
13.

9.8 Other Documents and Title Insurance. The Sellers shall have
executed and delivered, or caused to be executed and delivered, to the Buyer on
the Closing Date the Loan Documents and the Lease-Purchase Documents and shall
have delivered or caused to be delivered to SFX the Title Policy. Additionally,
the Buyer shall have obtained leasehold owner's title insurance subject only to
the exceptions referred to in Section 1.1 of the Lease.

ARTICLE 10
CONDITIONS OF CLOSING BY THE SELLERS

The obligations of the Sellers hereunder are, at their option, subject
to satisfaction, at or prior to the Closing Date, of each of the following
conditions:

10.1 Representations, Warranties and Covenants.

<PAGE>

10.1.1 All representations and warranties of the Buyer shall be
true and complete in all material respects as of the date hereof and on and as
of the Closing Date as if made on and as of that date.

10.1.2 All the terms, covenants and conditions to be complied with
and performed by the Buyer on or prior to the Closing Date shall have been
complied with or performed in all material respects.

10.1.3 The Sellers shall have received a certificate, dated as of
the Closing Date, executed by a duly qualified officer of the Buyer, to the
effect that the representations and warranties of the Buyer contained in this
Agreement are true and complete in all material respects on and as of the
Closing Date as if made on and as of that date, and that the Buyer has complied
with or performed all terms, covenants and conditions to be complied with or
performed by it in all material respects on or prior to the Closing Date.

10.2 Governmental Consents. To the extent required, the Buyer with the
Seller's cooperation shall have filed the requisite forms with the DOJ and the
FTC pursuant to the HSR Act, and all applicable waiting periods with respect to
each such filing (including any extensions thereof) shall have expired or been
terminated.

10.3 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, and no other, decree or judgment of any
court, agency or other governmental authority shall have been rendered against
any party hereto which would render it unlawful, as of the Closing Date, to
effect the transactions contemplated by this Agreement in accordance with its
terms.

10.4 Legal Opinion. The Buyer shall have delivered to the Sellers an
opinion of its corporate counsel, dated as of the Closing Date, substantially
in the form attached hereto as Exhibit J.

10.5 CDA Consent. The Sellers shall have received the CDA Consent.

10.6 Miscellaneous Agreements. The Buyer shall have entered into (i)
employment agreements with each of Robert M. Errato and Beau Segal (the
"Employment Agreements") in the forms of Exhibit K and Exhibit L,
respectively; and (ii) a promoter's agreement with Oakdale (the "Promoter's
Agreement") in the form of Exhibit M.

10.7 Payment of Purchase Price. The Buyer shall have delivered or caused
to be delivered to the Sellers the Base Purchase Price in accordance with the
terms of Article 2 hereof.

10.8 Loan and Guaranty. SFX shall have made the Loan to the Partnership
on the Closing Date and shall have executed and delivered to the Partnership a
guaranty (the "Guaranty") in the form of Exhibit N.

ARTICLE 11
TRANSFER TAXES: FEES AND EXPENSES

<PAGE>

11.1 Expenses. Except as set forth in Sections 11.2 and 11.3 hereof,
each party hereto shall be solely responsible for all costs and expenses
incurred by it in connection with the negotiation, preparation and performance
of and compliance with the terms of this Agreement.

11.2 Transfer Taxes and Similar Charges. All costs of transferring the
Sale Assets in accordance with this Agreement, including recordation, transfer
and documentary taxes and fees, and any excise, sales or use taxes, shall be
borne by the Sellers.

11.3 Governmental Filing or Grant Fees. Any filing fees imposed by any
governmental authority the consent of which is required to the transactions
contemplated hereby, other than the fees for filings required under the HSR Act
which shall be the sole responsibility of the Buyer, shall be borne equally by
the Buyer and the Sellers.

ARTICLE 12
COMMISSIONS OR FINDER'S FEE

12.1 The Buyer's Representation and Agreement to Indemnify. The Buyer
represents and warrants to the Sellers that neither it nor any person or entity
acting on its behalf has agreed to pay a commission, finder's fee or similar
payment in connection with this Agreement or any matter related hereto to any
person or entity. The Buyer further agrees to indemnify, defend and hold the
Sellers harmless from and against any and all claims, losses, liabilities and
expenses (including reasonable attorney's fees) arising out of a claim by any
person or entity based on any such arrangement or agreement made or alleged to
have been made by the Buyer.

12.2 The Sellers' Representation and Agreement to Indemnify. The Sellers
represent and warrant to the Buyer that neither they nor any person or entity
acting on their behalf has agreed to pay a commission, finder's fee or similar
payment in connection with this Agreement or any matter related hereto to any
person or entity. The Sellers further agree to indemnify, defend and hold the
Buyer harmless from and against any and all claims, losses, liabilities and
expenses (including reasonable attorney's fees) arising out of a claim by any
person or entity based on any such arrangement or agreement made or alleged to
have been made by the Sellers.

ARTICLE 13
DOCUMENTS TO BE DELIVERED AT CLOSING

13.1 The Sellers' Documents. At the Closing, the Sellers shall deliver
or cause to be delivered to the Buyer the following:

13.1.1 Certified resolutions of the authorized managers of Oakdale
and of the general partner of the Partnership approving the execution and
delivery of this Agreement and of each of the other documents and agreements
referred to herein and authorizing the consummation of the transactions
contemplated hereby and thereby;

13.1.2 Certificates, dated the Closing Date, by each of the Sellers
in the form described in Section 9.1.3 above;

<PAGE>

13.1.3 Governmental certificates showing that the Partnership is
duly organized as a partnership in the State of Connecticut, and that Oakdale
is duly organized as a limited liability company in the State of Connecticut,
dated not more than forty-five (45) calendar days before the Closing Date;

13.1.4 Articles of Organization and Operating Agreement of Oakdale
certified by the Managing Member as of the Closing Date, and Certificate of
Limited Partnership and Limited Partnership Agreement of the Partnership
certified by the general partner as of the Closing Date;

13.1.5 Bills of sale, deeds, assignments and other good and
sufficient instruments of conveyance, transfer and assignment, all in form and
substance reasonably satisfactory to counsel for the Buyer, as shall be
effective to vest in the Buyer or its permitted assignees good and marketable
title in and to the Sale Assets transferred in accordance with this Agreement;

13.1.6 The opinion letter, dated the Closing Date, referenced in
Section 9.4 above; and

13.1.7 The Loan Documents and the Lease-Purchase Documents,
referenced in Sections 3.2 and 3.3 of this Agreement; and

13.1.8 Such additional information and material as the Buyer shall
have requested in a timely manner in writing and which is reasonably necessary
for the Closing.

13.2 The Buyer's Documents. At the Closing, The Buyer shall deliver or
cause to be delivered to the Sellers the following:

13.2.1 The Base Purchase Price in accordance with Section 2.2
hereof.

13.2.2 A certificate, dated the Closing Date, by the Buyer in the
form described in Section 10.1.3 above.

13.2.3 The opinion of the Buyer's corporate counsel, dated the
Closing Date, to the effect set forth in Section 10.4;

13.2.4 Governmental certificates showing that the Buyer is duly
incorporated and in good standing in the State of Delaware and that the Buyer
is qualified as a foreign corporation in the State of Connecticut, dated not
more than forty-five (45) calendar days before the Closing Date;

13.2.5 Certified resolutions of the Board of Directors of the
Buyer approving the execution and delivery of this Agreement and each of the
other documents and agreements referred to herein and authorizing the
consummation of the transactions contemplated hereby and thereby;

13.2.6 Articles of Incorporation and Bylaws of the Buyer certified
by the Buyer's corporate secretary or assistant secretary as of the Closing
Date;

<PAGE>

13.2.7 An assignment and assumption agreement or agreements
reasonably satisfactory in form and substance to counsel for the Sellers
effecting the assumption of the Assumed Liabilities;

13.2.8 The Employment Agreements and the Promoter's Agreement;

13.2.9 The Loan Documents, the Lease-Purchase Documents and the
Guaranty; and

13.2.10 Such additional information and material as the Sellers
shall have requested in a timely manner in writing and which is reasonably
necessary for the Closing.

ARTICLE 14
INDEMNIFICATION

14.1 The Sellers' Indemnities. The Sellers hereby agree to indemnify,
defend and hold the Buyer harmless with respect to any and all demands, claims,
actions, suits, proceedings, assessments, judgments, costs, losses, damages,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees) asserted against, resulting from, imposed upon or incurred by the Buyer
directly or indirectly relating to or arising out of the inaccuracy of any
representation or warranty, or the breach of any covenant or agreement,
contained herein or in any instrument or certificate delivered pursuant hereto.

14.2 The Buyer's Indemnities. The Buyer hereby agrees to indemnity,
defend and hold the Sellers harmless with respect to any and all demands,
claims, actions, suits, proceedings, assessments, judgments, costs, losses,
damages, liabilities and expenses (including, without limitation, reasonable
attorneys' fees) asserted against, resulting from, imposed upon or incurred by
the Sellers directly or indirectly relating to or arising out of the inaccuracy
of any representation or warranty, or the breach of any covenant or agreement,
contained herein or in any instrument or certificate delivered pursuant hereto.

14.3 Rights. The Buyer and the Sellers agree that the rights of
indemnification provided in this Article 14 are exclusive of and in addition to
any and all other such rights of the Buyer and the Sellers hereunder.

14.4 Survival of Representations and Warranties. The representations and
warranties contained herein shall survive the Closing for a period of
twenty-four (24) months following the Closing Date (the "Claims Period"), and
upon the expiration of the Claims Period shall lapse and be of no further
effect, other than tax, environmental and employment-related representations
which shall survive to the fullest extent of the applicable statute of
limitations, and representations with respect to real estate which shall not
survive the Closing but which instead shall be governed by the Lease and the
Lease-Purchase Documents.

14.5 Limitations on Indemnity. Notwithstanding anything to the contrary
contained in this Agreement, and subject to the proviso set forth in this
Section 14.5, neither the Buyer nor the Sellers shall have any liability or
obligation to the other for breach of any representation, warranty, covenant

<PAGE>

or agreement of such other party made in this Agreement except to the extent
that the aggregate of all claims by such other party for such breaches exceed
One Hundred Thousand Dollars ($100,000) in the aggregate (the "Threshold
Amount"), in which event the party so liable shall then be liable for all
claims for any such breaches, including the sums constituting the Threshold
Amount; provided, however, that (i) any claim for indemnification must be made
within the Claims Period; (ii) each of the Sellers shall be severally liable to
the Buyer only to the extent of the amount of the Purchase Price paid to them,
and none of the general partners of the Partnership shall have any personal
liability hereunder for claims against the Partnership; and (iii) should the
Closing occur, no claim for indemnification may be asserted hereunder with
respect to any matter known or discovered by the Buyer on or before the Closing
Date.

14.6 Procedures.

14.6.1 Promptly after the receipt by any party (the "Indemnified
Party") of notice of (A) any claim or (B) the commencement of any action or
proceeding which may entitle such party to indemnification under this Section,
such party shall give the other party (the "Indemnifying Party") written
notice of such claim or the commencement of such action or proceeding and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting from such claim. The failure to give the Indemnifying
Party timely notice under this clause shall not preclude the Indemnified Party
from seeking indemnification from the Indemnifying Party unless such failure
has materially prejudiced the Indemnifying Party's ability to defend the claim
or litigation.

14.6.2 If Indemnifying Party assumes the defense of any such claim
or litigation resulting therefrom with counsel reasonably acceptable to
Indemnified Party, the obligations of the Indemnifying Party as to such claim
shall be limited to taking all steps necessary in the defense or settlement of
such claim or litigation resulting therefrom and to holding the Indemnified
Party harmless from and against any losses, damages and liabilities caused by
or arising out of any settlement approved by the Indemnifying Party or any
judgment in connection with such claim or litigation resulting therefrom;
however, the Indemnified Party may participate, at its or his expense, in the
defense of such claim or litigation provided that the Indemnifying Party shall
direct and control the defense of such claim or litigation. The Indemnified
Party shall cooperate and make available all books and records reasonably
necessary and useful in connection with the defense. The Indemnifying Party
shall not, in the defense of such claim or any litigation resulting therefrom,
consent to entry of any judgment, except with the written consent of the
Indemnified Party, or enter into any settlement, except with the written
consent of the Indemnified Party, which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Party of a release from all liability in respect of such claim or litigation.

14.6.3 If the Indemnifying Party shall not assume the defense of
any such claim or litigation resulting therefrom, the Indemnified Party may,
but shall have no obligation to, defend against such claim or litigation in
such manner as it may deem appropriate, and the Indemnified Party may
compromise or settle such claim or litigation without the Indemnifying Party's
consent. The Indemnifying Party shall promptly reimburse the Indemnified Party
for the amount of all expenses, legal or otherwise, incurred by the Indemnified
Party in connection with the defense

<PAGE>

against or settlement of such claim or litigation. If no settlement of the
claim or litigation is made, the Indemnifying Party shall promptly reimburse
the Indemnified Party for the amount of any judgment rendered with respect to
such claim or in such litigation and of all expenses, legal or otherwise,
incurred by the Indemnified Party in the defense against such claim or
litigation.

ARTICLE 15
TERMINATION RIGHTS

15.1 Termination. This Agreement may be terminated by either the Buyer
or the Sellers, if the party seeking to terminate is not then in material
default or breach of this Agreement, upon written notice to the other upon the
occurrence of any of the following:

(a) if; on or prior to the Closing Date, a party defaults in any
material respect in the observance or in the due and timely performance of
any of its covenants or agreements herein contained and such material default
shall not be cured within thirty (30) calendar days of the date of written
notice of default served by the party claiming such material default; or

(b) if the Closing has not occurred by May 11, 1998; or

(c) if there shall be in effect any judgment, final decree or
order that would prevent or make unlawful the Closing of this Agreement; or

(d) by the mutual written consent of the Buyer and the Sellers; or

(e) by the Buyer, if the conditions set forth in Sections 9.2 or
9.3 shall have become incapable of fulfillment and shall not have been waived
by the Buyer; or

(f) by the Sellers, if the conditions set forth in Sections 10.2
or 10.3 shall have become incapable of fulfillment and shall not have been
waived by the Sellers; or

(g) as provided in Sections 5.11 and 16.2 or any other Section of
this Agreement which specifically provides for termination.

15.2 Right to Cure. A defaulting Party under Section 15.1(a) of this
Agreement shall only be entitled to invoke the cure provisions thereof once
during the term of this Agreement.

15.3 Liability. The termination of this Agreement under Section 15.1
shall not relieve any party of any liability for breach of this Agreement prior
to the date of termination.

ARTICLE 16
OTHER PROVISIONS

16.1 Liquidated Damages. If the parties hereto shall fail to consummate
this Agreement on the Closing Date due to the Buyer's breach of any material
representation, warranty, covenant or condition hereunder, and the Sellers are
not at that time in breach of any material representation,

<PAGE>

warranty, covenant or condition hereunder, then the Sellers would suffer direct
and substantial damages, which damages cannot be determined within reasonable
certainty. Therefore, because of the expense and delay which would be incurred
in such event by the Sellers, the Buyer shall pay to the Sellers the amount of
One Million Six Hundred Thousand Dollars ($1,600,000) within ten (10) days of
demand therefor, which amount shall constitute liquidated damages. It is
understood and agreed that such liquidated damage amount represents the Buyer's
and the Sellers' reasonable estimate of actual damages and does not constitute
a penalty. Recovery of liquidated damages shall be the sole and exclusive
remedy of the Sellers against the Buyer for failing to consummate this
Agreement on the Closing Date and shall be applicable regardless of the actual
amount of damages sustained; provided, however, that the in the event the
Buyer, without just cause, contests, protests or delays the payment of said
liquidated damage amount, Sellers shall be entitled to recover interest from
the date such payment was due together with all expenses, including attorney's
fees, reasonably incurred by the Sellers in enforcing this Section 16.1.

16.2 Risk of Loss. The risk of loss or damage to the Sale Assets prior
to the Closing Date shall be upon the Sellers. The Sellers shall repair,
replace and restore any such damaged or lost asset to its prior condition, as
soon as possible and in no event later than the Closing Date. Except as
provided below, if the Sellers fail to restore or replace any such asset having
a value exceeding One Hundred Fifty Thousand Dollars ($150,000), the Buyer may
elect either to terminate this Agreement pursuant to Article 15 hereof or to
consummate the Closing on the Closing Date. If the Sellers fail to restore or
replace such asset and the Buyer does not elect to terminate this Agreement,
the Sellers shall assign or cause to be assigned to the Buyer at Closing its
rights under any insurance policy or pay over to the Buyer all proceeds of
insurance covering such asset's damage, destruction or loss. If the restoration
and replacement of any damaged or destroyed property has not been completed at
the time the Closing would otherwise be held, then unless the Sellers and the
Buyer otherwise agree, the Closing Date shall be delayed and shall take place
within fifteen (15) calendar days after the Sellers give written notice to the
Buyer of completion of the restoration or replacement of such asset. Time is of
the essence in the Sellers' restoration or replacement of the assets.

16.3 Specific Performance. In the event of a material breach by the
Sellers of their representations and obligations hereunder, not cured within
thirty (30) calendar days after written notice to that effect from the Buyer,
the Buyer shall have the right to bring an action to enforce the terms of this
Agreement by decree of specific performance, it being agreed that the property
to be transferred hereunder is unique and not readily available in the open
market, and the Sellers hereby further agree to waive any and all defenses
against any such action for specific performance based on the grounds that
there is an adequate remedy for money damages available.

16.4 Further Assurances. After the Closing, the Sellers shall from time
to time, at the request of and without further cost or expense to the Buyer,
execute and deliver such other instruments of conveyance and transfer and take
such other actions as may reasonably be requested in order to more effectively
consummate the transactions contemplated hereby to vest in the Buyer good and
marketable title to the assets being transferred hereunder, and the Buyer shall
from time to time, at the request of and without further cost or expense to the
Sellers, execute and deliver such other instruments and take such other actions
as may reasonably be requested in order to more effectively relieve the Sellers
of any obligations being assumed by the Buyer hereunder.

<PAGE>

16.5 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party may voluntarily or involuntarily
assign its interest under this Agreement without the prior written consent of
the other party, except for any assignment by the Buyer to an affiliate of the
Buyer in which case the Buyer shall remain fully obligated under this Agreement
as an assignor.

16.6 Entire Agreement. This Agreement, the Disclosure Schedule and the
Exhibits hereto embody the entire agreement and understanding of the parties
hereto and supersede any and all prior agreements, arrangements and
understandings relating to the matters provided for herein. In the event of a
conflict between the terms of this Agreement and any other agreement executed
in connection herewith, the terms of this Agreement shall prevail. No
amendment, waiver of compliance with any provision or condition hereof or
consent pursuant to this Agreement shall be effective unless evidenced by an
instrument in writing signed by the party against whom enforcement of any
waiver, amendment, change, extension or discharge is sought.

16.7 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.

16.8 Governing Law. The construction and performance of this Agreement
shall be governed by the laws of the State of New York without giving effect to
the choice of law provisions thereof. Notwithstanding the foregoing, the
parties consent to the exclusive jurisdiction of the state and federal courts
of the State of Connecticut for the resolution of any dispute or controversy
arising under this Agreement.

16.9 Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing and shall be
deemed to have been duly delivered and received on the date of personal
delivery or on the date of receipt, if mailed by registered or certified mail,
postage prepaid and return receipt requested, or on the date of a stamped
receipt, if sent by an overnight delivery service, or on the date of written
confirmation of delivery by facsimile or telecopy transmission, and shall be
addressed to the following addresses, or to such other address as any party may
request, in the case of the Sellers, by notifying the Buyer, and in the case of
the Buyer, by notifying the Sellers:

To the Sellers: Oakdale Concerts, LLC
Oakdale Development Limited Partnership, L.P.
95 South Turnpike Road
Wallingford, Connecticut 06492
Attention: Robert M. Errato
Telecopy #: (203) 949-7719

With a Copy to: Donald S. Hendel, Esq.
Bergman, Horowitz & Reynolds, P.C.
157 Church Street
New Haven, Connecticut 06502
Telecopy #: (203) 785-8127

<PAGE>

April 22, 1998

Oakdale Theater Concerts, Inc.
650 Madison Avenue, 16th Floor
New York, NY 10022

Gentlemen:

We refer to a certain Purchase and Sale Agreement (the "Agreement") dated April
22, 1998. You and we agree.that Section 15.1(b) of the Agreement shall be
amended to read as follows:

"(b) if the Closing has not occurred by May 11, 1998; provided that the
Buyer shall have the option to extend the Closing to a date that is no
later than June 11, 1998. The Buyer shall exercise this option by
delivering a written notice of extension to the Sellers prior to May 11,
1998."

In addition, you and we agree that the Agreement shall be amended by adding a
new Section 15.1(h), as follows:

"(h) by the Sellers, in the event the CDA requires the payment by the
Sellers of an amount in excess of One Hundred Fifty Thousand Dollars
($150,000.00), exclusive of attorneys' fees (which attorneys' fees, if
any, shall be the Sellers' responsibility to pay) for the CDA Consent."

If the foregoing accurately reflects our understanding, please so indicate by
your signature at the end hereof.

Very truly yours,

Oakdale Concerts, LLC

By /s/ Robert M. Errato
Accepted and agreed to: ----------------------------------
Robert M. Errato

Oakdale Theater Concerts, Inc. Oakdale Development Limited Partnership

By /s/ Richard A. Liese By /s/ Robert M. Errato
------------------------------- ----------------------------------
Richard A. Liese Robert M. Errato
Vice President

<PAGE>

April 22, 1998

Oakdale Theater Concerts, Inc.
650 Madison Avenue, 16th floor
New York, NY 10022

Gentlemen:

We refer to a certain Purchase and Sale Agreement executed today among you and
us (the "Agreement"). The Agreement was executed notwithstanding the fact that
some or all of the Schedules and/or Annexes (collectively the "Schedules") were
not completed and attached to the Agreement at the time of execution. You and
we agree that we shall supply you with the Schedules no later than May 4, 1998.
You will review the Schedules and will have the right to terminate the
Agreement if the Schedules disclose matters that are unsatisfactory to you, or
if the Schedules are not timely delivered to you, provided such right must be
exercised by your delivering a written notice of such termination to us within
three (3) business days after our delivery of the Schedules to you. If you do
not deliver such notice to us within such three (3) business day period, your
right to terminate the Agreement pursuant to this letter shall terminate and
the Agreement shall remain in full force and effect as of April 22, 1998. Time
shall be of the essence with respect to the dates specified above. If the
Agreement is terminated pursuant to this letter, neither you nor we shall have
any obligations or liabilities to the other.

Very truly yours,

Oakdale Concerts, LLC

By /s/ Robert M. Errato
Accepted and agreed to: ----------------------------------
Robert M. Errato

Oakdale Theater Concerts, Inc. Oakdale Development Limited Partnership

By /s/ Richard A. Liese By /s/ Robert M. Errato
------------------------------- ----------------------------------
Richard A. Liese Robert M. Errato
Vice President

<PAGE>

STOCK PURCHASE AND REDEMPTION AGREEMENT

STOCK PURCHASE AND REDEMPTION AGREEMENT dated as of May 1,
1998 among EVENT MERCHANDISING, INC., a California corporation (the "Company"),
the persons listed as Sellers on the signature pages of this Agreement (the
"Sellers"), as the holders of all the shares of capital stock of the Company,
and EMI ACQUISITION SUB, INC., a Delaware corporation (the "Buyer").

WHEREAS, the Sellers desire to sell to the Buyer certain of
the shares of common stock, without par value, of the Company, and the Buyer
desires to purchase such shares from the Sellers, on the terms set forth in
this Agreement;

WHEREAS, the Sellers desire to sell to the Company certain of
the shares of common stock, without par value, of the Company, and the Company
desires to purchase and redeem such shares from the Sellers, on the terms set
forth in this Agreement; and

WHEREAS, in order to fund its purchase and redemption of
shares of common stock from the Sellers, the Company desires to issue and sell
to the Buyer certain shares of its Series A Preferred Stock, without par value,
and the Buyer desires to purchase such shares from the Company, on the terms
set forth in this Agreement;

NOW, THEREFORE, in consideration of the premises and the
mutual promises herein set forth, the parties agree as follows:

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

"Action": any charge, claim, lawsuit, complaint, request for
investigation, report of alleged violation of Law or regulation, or
legal proceeding of any nature filed with or made to any court,
Governmental Authority or organization having jurisdiction or
authority over the Company, its assets, the Business, its property or
the operations occurring thereon.

"Affiliate": with respect to any Person means (i) any
Person directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such Person;
or (ii) any officer, director, partner or direct or indirect
beneficial or legal owner of any 10% or greater equity or

<PAGE>

voting interest of such Person.

"Agent": Howard Kaufman, in his capacity as agent for the
Sellers.

this "Agreement": this Stock Purchase Agreement and all
Schedules and Exhibits hereto, as the same may be amended,
supplemented or otherwise modified from time to time.

"Business": the businesses now carried on by the Company,
consisting of providing merchandising operations for live
entertainment venues throughout the United States.

"Closing": the closing of the transactions contemplated by
this Agreement.

"Closing Date": the date of the Closing.

"Code": the Internal Revenue Code of 1986, as amended.

"Consent": any consent, waiver, approval or authorization
of, notice to, or designation, registration, declaration or filing
with, any Person.

"Contract": any written or oral contract, agreement,
understanding, lease, license, note, plan, instrument, commitment,
restriction, arrangement, obligation or undertaking of any kind or
character or other document to which a Person is a party, or that is
binding on such Person or its securities, assets or business.

"Default": (i) a breach of or default under or with respect
to any Contract, (ii) the occurrence of an event that with the passage
of time or the giving of notice or both would constitute a breach of
or default under or with respect to any Contract, or (iii) the
occurrence of an event that with or without the passage of time or the
giving of notice or both would give rise to a right to terminate,
change the terms of or renegotiate any Contract or to accelerate,
increase, or impose any material Liability under any Contract.

"ERISA": the Employee Retirement Income Security Act of 1974
(and any sections of the Code amended by it) and all regulations
promulgated thereunder, as amended.

<PAGE>

"Financial Statements": the unaudited financial statements of
the Company for the fiscal years ended December 31, 1996 and December
31, 1997, the unaudited interim financial statements of the Company
for the three month period ended March 31, 1998, and the unaudited
interim financial statements of the Company for the three - month
period ended March 31, 1997, copies of which are attached hereto as a
part of Schedule 4.4.

"GAAP": generally accepted accounting principles.

"Governmental Authority" means any federal, state, county,
local, foreign or other governmental or public agency,
instrumentality, commission, authority, board or body.

"Hazardous Substance": (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance or toxic substance (as
those terms are defined by any applicable Environmental Laws) and
(ii) any chemicals, pollutants, contaminants, petroleum, petroleum
products, or oil.

"Improvements": all buildings, structures, fixtures and other
improvements located on or included in any real property.

"Intellectual Property": The Company's (i) Patents and
Trademarks, (ii) trade secrets, know-how, inventions, formulas and
processes, whether trade secrets or not, (iii) copyrights and any
registrations and applications therefor, (iv) technology rights and
licenses, and (v) computer software and other intellectual property,
to the extent proprietary in nature and not in the public domain.

"knowledge" or "known": with respect to the Sellers means
the current actual knowledge of Howard Kaufman, without having made
any investigation for purposes of this Agreement.

"Laws": (i) all Federal, state, local or foreign laws, rules
and regulations; (ii) all Orders; (iii) all Permits; and (iv) all
agreements with Federal, state, local or foreign regulatory
authorities.

"Leased Real Property": the real property identified on
Schedule 4.9.

"Liability": any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, expense (including,
without limitation, costs of investigation, collection and defense),
claim, deficiency, guaranty or endorsement of or by any Person (other
than endorsements of notes, bills and

<PAGE>

checks presented to banks for collection or deposit in the ordinary
course of business) of any type, whether known, unknown, accrued,
absolute, contingent, liquidated, unliquidated, matured, unmatured
or otherwise.

"Lien": any mortgage, pledge, deed of trust, transfer
restriction, option, escrow, hypothecation, lien, security interest,
financing statement, lease, charge, encumbrance, easement, conditional
sale or other title retention or security agreement or any other
similar restriction, claim or right of others whether arising by
Contract, operation of Law or otherwise.

"Litigation Expense": any reasonable expense incurred in
connection with investigating, defending or asserting any Action
incident to any matter indemnified against hereunder (including
without limitation rights to indemnification hereunder), including,
without limitation, court filing fees, court costs, arbitration fees
or costs, witness fees, and reasonable fees and disbursements of legal
counsel, investigators, expert witnesses, accountants and other
professionals.

"Litigation": any action, administrative or other proceeding,
arbitration, cause of action, claim, complaint, criminal prosecution,
hearing, governmental or regulatory investigation, governmental or
regulatory charge or litigation, by any Person alleging potential
Liability relating to or affecting the Company, its assets (including,
without limitation, Contracts relating to the Company, the Business or
the transactions contemplated by this Agreement.

"Loss": any and all direct or indirect demands, claims,
payments, obligations, recoveries, deficiencies, fines, penalties,
interest, assessments, actions, causes of action, suits, losses, and
Liabilities, and interest on any amount payable to a Third Party as a
result of the foregoing, other than Litigation Expense.

"Material Adverse Effect": as to any Person, any material
adverse change in or effect on (i) the business, operations, assets,
Liabilities, condition (financial or otherwise), results of operations
or prospects of such Person, (ii) the ability of such Person to
consummate the transactions contemplated by this Agreement or any of
the other Transaction Documents to which it is or will be a party, or
(iii) the ability of such Person to perform any of its obligations
under this Agreement or any of the other Transaction Documents to
which it is or will be a party.

"Order": any decree, injunction, judgment, order, ruling,
writ, quasi-judicial decision or award or administrative decision or
award of any federal,

<PAGE>

state, local, foreign or other court, arbitrator, tribunal,
administrative agency or Governmental Authority to which any Person
is a party or that is or may be binding on any Person or its
securities, assets or business.

"Patents and Trademarks": the Company's U.S. and foreign (i)
patents and pending patent applications together with any and all
continuations, continuations in part, divisions, reissues,
reexaminations, extensions and renewals thereof, and (ii) trade names,
trademarks, service marks, logos, assumed names, brand names and all
registrations and applications therefor together with the goodwill of
the Business symbolized thereby.

"Permits": all Federal, state, local or foreign permits,
licenses, approvals, franchises, notices, authorizations,
registrations, certifications and similar filings.

"Permitted Liens": (i) carriers', warehousemen's, workers',
materialmen's, brokers' or customs' or other like Liens arising in
the ordinary course of business with respect to obligations which
are not due; and (ii) liens and other title exceptions set forth on
Schedule 4.8.

"Person": a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a business
association, corporation, general partnership, joint venture,
limited partnership, limited liability company, trust,
or any person acting in a representative capacity.

"Related Person": with regard to any natural Person, his or
her spouse, parent, sibling, child, aunt, uncle, niece, nephew,
in-law, grandparent and grandchild (including by adoption) and any
trustees or other fiduciaries for the benefit of such relatives.

"SFX": SFX Entertainment, Inc., a Delaware corporation.

"Shares": shares of the Company's common stock, without par
value.

"Subsidiary": with respect to any Person, (i) any corporation
of which more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of
directors of such corporation is at the time, directly or indirectly
owned by such Person, or (ii) any partnership, limited liability
company or joint venture or other entity of which more than fifty
percent (50%) of the outstanding equity interests are at the time,
directly or indirectly, owned by such Person.

<PAGE>

"Taxes": all taxes, charges, duties, fees, levies, penalties
or other assessments imposed by any taxing authority, including, but
not limited to, income, withholding, payroll, franchise, excise,
property, sales or transfer taxes, and including any interest,
penalties or additions attributable thereto.

"Tax Returns": all returns, reports, filings, declarations
and statements relating to Taxes that are required to be filed,
recorded, or deposited with any Governmental Authority, including any
attachment thereto or amendment thereof.

"Third Party": any Person that is not the Buyer, the Company
or a Seller or an Affiliate of the Buyer, the Company or a Seller.

"Transaction Documents": this Agreement, the Non-Competition
and Confidentiality Agreement referred to in Section 10.2(h), the
Management Services Agreement referred to in Section 10.2(i), the
Shareholders Agreement referred to in Section 10.2(j), and the Tax
Sharing Agreement referred to in Section 10.2(k) .

2. Purchase and Redemption of Sellers' Common Stock.

2.1 Purchase by the Buyer. At the Closing, each Seller shall
sell, transfer, assign, convey and deliver to the Buyer the number of Shares
owned by such Seller indicated below, and the Buyer will purchase, accept and
acquire such Shares from such Seller:

Seller Number of Shares
------ ----------------
Howard Kaufman 600
Howard Rose 300
Peter Schivarelli 300
Jimmy Buffett 133-1/3

The purchase price payable by the Buyer to the Sellers for the Shares shall be
an aggregate of $4,250,000 (the "Base Purchase Price"). The Base Purchase Price
shall be allocated pro rata among the Shares being purchased and sold.

2.2 Redemption by the Company. At the Closing, each Seller
shall sell, transfer, assign, convey and deliver to the Company the number of
Shares owned by such Seller indicated below, and the Company will purchase,
accept and acquire such Shares from such Seller:

<PAGE>

Seller Number of Shares
------ ----------------
Howard Kaufman 747
Howard Rose 373-1/2
Peter Schivarelli 373-1/2
Jimmy Buffett 166

The purchase price payable by the Company to the Sellers for the Shares (the
"Redemption Price") shall be an aggregate of $4,250,000. The Redemption Price
shall be allocated pro rata among the Shares being purchased and redeemed.

2.3 Issuance and Sale of Preferred Stock. At the Closing, the
Company shall issue and sell to the Buyer, and the Buyer shall purchase from
the Company, at a price of $100 per share, 42,500 shares of the Company's
Preferred Stock, without par value per share (the "Preferred Stock"). The
Preferred Stock shall be issued pursuant to a certificate of designations or
restated certificate of incorporation duly authorized and filed by the Company
with the Secretary of State of the State of California, which shall be in
effect on the Closing Date, containing terms substantially as set forth in
Exhibit A attached hereto and otherwise satisfactory to the Buyer in all
respects.

2.4 Closing Date. Subject to Section 11 hereof, the Closing
shall occur on June 30, 1998. The Closing will take place at the offices of
Winston & Strawn, 200 Park Avenue, New York, New York 10166 The time and place
of the Closing may be changed as the parties shall mutually agree in writing.

2.5 Deliveries at Closing. At the Closing:

(a) Each Seller shall cause the Shares held by such Seller
that are being sold to the Buyer to be transferred to the Buyer, or its
assignee, by delivering to the Buyer certificates representing such Shares,
duly endorsed for transfer or accompanied by duly executed forms of assignment.

(b) Each Seller shall cause the Shares held by such Seller
that are being sold to the Company to be transferred to the Company by
delivering to the Company certificates representing such Shares, duly endorsed
for transfer or accompanied by duly executed forms of assignment.

(c) The Company shall deliver to the Buyer certificates
representing the shares of Preferred Stock being issued and sold pursuant to
Section 2.3.

7
<PAGE>

(d) The Buyer shall pay to the Sellers the Base Purchase
Price, by wire transfer of immediately available funds in accordance with the
written instructions of the Agent.

(e) The Buyer shall pay to the Company the purchase price
for the Preferred Stock being issued and sold pursuant to Section 2.3, by
wire transfer of immediately available funds in accordance with the written
instructions of the Company.

(f) The Company shall pay to the Sellers the Redemption
Price, by wire transfer of immediately available funds in accordance with the
written instructions of the Agent.

2.6 Section 338(h)(10) Election. If the Buyer determines to
make such election, the Buyer will prepare and the Sellers shall join in the
timely filing of a Section 338(h)(10) election, providing for a deemed sale of
Company's assets, to be made under the Code in connection with the transactions
contemplated by this Agreement, and any comparable election required or
permitted under state or local Law. The Company will not be liable for any Tax
under Code ss.1374 in connection with such deemed sale of Company's assets
(including the assets of any qualified subchapter S subsidiary) caused by such
Section 338(h)(10) election. Subject to Sections 2.7 and 2.8 below, all such
Tax shall be paid by the Sellers. The allocation of the Base Purchase Price and
the Redemption Price to be used by the Company in its federal income tax return
for the period ending on the Closing Date shall be determined by the Buyer.

2.7 Tax Loan. The Buyer shall make loans to the Sellers,
bearing annual interest at 10%, to cover twenty percent (20%) of the federal,
state and local income taxes payable by the Sellers, calculated at lowest
applicable capital gains rates, on income resulting from any Section 338(h)(10)
election. Each such loan shall be repayable upon any disposition of the
remaining Common Stock of the Company held by the Sellers, and then only to the
extent of any taxes saved as a result of the increase in the tax basis of such
Common Stock resulting from the income recognized by the Sellers as a result of
the Section 338(h)(10) election.

2.8 Tax Indemnification.

(a) Corporate Taxes. The Buyer shall indemnify the Company
and contribute to the Company cash, as paid in capital and not as a loan, for
any corporate Taxes that result from a Section 338(h)(10) election (and any
corresponding state or local elections), including without limitation the 1.5%
corporate tax imposed by California Revenue and Taxation Sections 23151, 23501,
and 23802.

<PAGE>

(b) Sellers' Taxes. The Buyer shall indemnify each Seller for
certain Transaction Taxes (as hereinafter defined) paid or payable by each
Seller. The Buyer agrees to pay such amounts including a tax gross-up
calculated to put the Sellers in the same position on an after-tax basis as
they would have been in had they sold stock and no Section 338(h)(10) election
were made, taking into account any taxes payable by the Sellers attributable
to payments made pursuant to this Section 2.8

(c) Definition. "Transaction Taxes" as used herein shall mean
all federal, state, and local income taxes, including related interest and
penalties, payable by the Sellers, irrespective of when assessed and payable,
as a result of the Sellers' disposition of 80% of their common stock in the
event of any elections under Section 338(h)(10) (and corresponding state tax
law provisions) contemplated herein, to the extent such Taxes exceed the sum
of:

(i) the portion of the Sellers' Taxes above that are
advanced to the Sellers pursuant to the loan provisions of Section 2.7, and

(ii) the amount of federal, state and local income taxes that
would have been payable by the Sellers on the disposition of 80% of their
shares had the Section 338(h)(10) election not been made.

(d) Computation and Payment. The Sellers shall submit to the
Buyer a calculation of any amounts due for Transaction Taxes, including the tax
gross-up referred to above. Unless the Buyer objects to such calculation, the
Buyer shall pay such amounts to the Sellers on or before the date such Taxes
become due and payable. Where practicable, the Sellers shall provide the Buyer
with ten business days to review such calculations. In the event the Buyer
disputes the Sellers' calculation, the undisputed portion shall be timely paid
and the disputed portion shall be submitted to a mutually acceptable "Big Six"
firm of certified public accountants for binding resolution. The cost of such
services shall be borne by the party whose determination of the amount in
question was further from the result determined by the accounting firm
selected. Any additional amount determined to be due to the Sellers shall
include interest at an annually compounded rate of 10% from the date such taxes
were due and payable.

3. Representations and Warranties of the Sellers to the
Buyer and the Company. Each of the Sellers, severally, represents and
warrants to the Buyer and to the Company as follows:

3.1 Authorization; Validity. Such Seller has the full power
and capacity necessary to enter into and perform his obligations under this
Agreement and

<PAGE>

the other Transactions Documents to which he is a party and to consummate the
transactions contemplated hereby and thereby. This Agreement has been and the
other Transaction Documents to which the Seller is a party will be
when executed and delivered, duly executed and delivered by the Sellers and
each such agreement constitutes, or will constitute when executed and
delivered, a legal, valid and binding obligation of the Seller, except as
enforceability thereof may be limited by bankruptcy, insolvency, moratorium or
other similar laws of general application affecting the enforceability of
creditors' rights generally or by general principles of equity.

3.2 Title to Shares; Other Rights. Such Seller is the owner
of all right, title and interest (record and beneficial) in and to the numbers
of shares of Common Stock set forth next to his name in Sections 2.1 and 2.2,
free and clear of all Liens, except as disclosed on Schedule 3.2. Except for
the agreements described in Schedule 3.2 which are to be terminated at or
before Closing, no Person has any Contract or any right or privilege (whether
preemptive or contractual) capable of becoming a Contract for the purchase from
such Seller of any Shares. Except for agreements effectively terminated at or
before Closing, the Seller is not a party to, or bound by, any other agreement,
instrument or understanding restricting the transfer of his Shares.

3.3 No Conflict. Subject to obtaining the Consents and
Permits listed on Schedule 3.3, neither the execution nor the delivery of the
Transaction Documents by the Seller nor the consummation of the transactions
contemplated hereby will (a) conflict with or result in any violation of or
constitute a breach of or default under any terms, conditions or provisions of
(i) the organizational documents or by-laws of the Company, or (ii) any
applicable Laws, or (iii) any Contract listed on Schedule 4.15, or (b) result
in the creation of any Lien on any of the Shares or any of the assets of the
Company.

4. Representations and Warranties of the Sellers to the
Buyer. The Sellers represent and warrant to the Buyer as follows:

4.1 Organization; Good Standing. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and has all requisite
corporate power and authority to own, operate and lease its properties, and to
carry on its business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified or licensed to transact business as a foreign
corporation in good standing in the jurisdictions listed on Schedule 4.1.

4.2 Capitalization; Subsidiaries. All of the authorized,
issued and

<PAGE>

outstanding shares of capital stock of the Company, and the record
and beneficial holders thereof, are as set forth in Schedule 4.2 attached
hereto. All of the Shares are duly authorized, validly issued, fully paid and
non-assessable, and were issued pursuant to a valid exemption from registration
under the Securities Act of 1933, as amended (the "Securities Act"), and all
applicable state securities laws. Except as set forth in Schedule 4.2, there
are no outstanding rights of subscription, pre-emptive rights, warrants, calls,
options, conversion or exchange rights or other Contracts with respect to any
securities of the Company or any of its Subsidiaries or pursuant to which
any Person has an interest in its capital or profits, and there are no
Contracts as to the voting of the Company's or any Subsidiary's securities.
Except as set forth in Schedule 4.2, there are no outstanding rights to either
demand registration of any Shares under the Securities Act or to sell any
Shares in connection with such registration of shares. Except as set forth in
Schedule 4.2, (i) the Company does not own, beneficially or of record, any
capital stock or other equity securities of any corporation or other entity or
have any direct or indirect equity, ownership or voting interest in any other
Person, and (ii) the Company has no Subsidiaries. References to Subsidiaries in
this Agreement shall be deemed to mean any Subsidiaries that exist, and shall
not be deemed to imply that any exist if in fact there are none.

4.3 Due Authorization and Execution, etc. (a) The Company has
the full corporate power and authority necessary to enter into and perform its
obligations under this Agreement and the other Transactions Documents to which
it is a party and to consummate the transactions contemplated hereby and
thereby.

(b) The execution, delivery and performance of this Agreement
and the Transactions Documents by the Company have been approved by all
necessary action of the Board of Directors and stockholders of the Company.

(c) This Agreement has been and the other Transaction
Documents to which the Company is a party when executed and delivered will be,
duly executed and delivered by the Company and each such agreement constitutes,
or will constitute when executed and delivered, a legal, valid and binding
obligation of the Company, except as enforceability thereof may be limited by
bankruptcy, insolvency, moratorium or other similar laws of general application
affecting the enforceability of creditors' rights generally or by general
principles of equity.

(d) Subject to obtaining the Consents and Permits listed on
Schedule 3.3, neither the execution nor the delivery of the Transaction
Documents by the Company nor the consummation of the transactions contemplated
hereby will (i) conflict with or result in any violation of or constitute a
breach of or default under any terms, conditions or provisions of (i) the
organizational documents or by-laws of the Company, or (ii) any applicable
Laws, subject only to compliance with Section 500 of

<PAGE>

the California General Corporation Law, or (iii) any Contract listed on
Schedule 4.15, or (b) result in the creation of any Lien on any of the Shares
or any of the assets of the Company.

4.4 Financial Statements; Receivables and Inventory.
(a) The Financial Statements are attached to Schedule 4.4. All of the
Financial Statements were prepared from the books and records of the Company
and its Subsidiaries, which are correct and complete in all material respects
and have been maintained in accordance with good business practices. Except as
disclosed on Schedule 4.4, the Financial Statements have been prepared in
accordance with standard accounting principles consistently applied during
each period and from period to period covered by the Financial Statements,
and fairly present the consolidated financial position and results of
operations of the Company and its Subsidiaries as of the dates thereof and for
the periods then ended, subject, in the case of any interim financial
statements, to normal year-end adjustments which will not, individually or
collectively, be material in amount.

(b) The accounts receivable reflected on the December 31,
1997 balance sheet included in the Financial Statements, or thereafter acquired
by the Company and its Subsidiaries through the date hereof and reflected on
the Closing Balance Sheet, are or will be valid, arose or will arise from sales
of products or services in the ordinary course of the Company's or its
Subsidiaries' business, and have been collected, or are collectible, at the
aggregate gross recorded amounts thereof less the allowances for doubtful
accounts reflected therein.

(c) As of the close of business on December 31, 1997, the
Company had positive Net Working Capital. As used in this Agreement, "Net
Working Capital" of the Company means the current assets of the Company less
the current liabilities of the Company, determined in accordance with GAAP
consistently applied.

4.5 Absence of Undisclosed Liabilities. The Company and its
Subsidiaries have no Liabilities or obligations, that would be material in the
aggregate, of a kind that in accordance with GAAP would be required to be
included on the consolidated balance sheet of the Company or disclosed in the
footnotes thereto, whether accrued, absolute or contingent, and whether due or
to become due, except (i) Liabilities reflected or reserved against on the
December 31, 1997 balance sheet included in the Financial Statements, (ii)
Liabilities arising in the ordinary course of business since the date of such
balance sheet, and (iii) any other Liabilities and obligations disclosed on
Schedule 4.5.

4.6 No Material Adverse Change. Since December 31, 1997,
there has not been (i) any change which has had or can reasonably be expected
to have a

<PAGE>

Material Adverse Effect on the financial condition, operations, business,
prospects, properties, assets or Liabilities of the Company or any Subsidiary,
or (ii) any damage, destruction or loss to any of the properties or
assets of the Company or any Subsidiary, whether or not covered by insurance,
which has had or can reasonably be expected to have a Material Adverse Effect
on the Company or any Subsidiary or its ability to conduct the Business, or (v)
except as otherwise expressly permitted by this Agreement, any declaration or
payment of any dividends, repurchase of any of the Company's capital stock, or
any distribution to its stockholders.

4.7 Taxes. Except as provided in Schedule 4.7:

(a) The Company has been an S Corporation, as defined in the
Code, for its tax years ending in 1990 through 1998. There has been no action
or omission on the part of the Company or any of the Sellers that would cause
the termination of its status as an S Corporation for any of such years. Each
of the Company and its Subsidiaries has timely filed or caused to be filed all
Tax Returns required to be filed by it. All such Tax Returns are true, complete
and correct in all material respects, and all Taxes shown thereon and all
deficiencies or other assessments of tax, interest or penalties and all
estimated taxes due by the Company or with respect to its Business have been
paid. The charges, accruals and reserves, if any, in respect of Taxes
(including import duties) set forth in the Financial Statements are adequate.
Except with respect to returns for the 1997 tax year, no extensions of time
with respect to any date on which any Tax Return was or is to be filed by the
Company are in force.

(b) The Company's Tax Returns have never been audited by the
IRS or any other Governmental Authority and the Company has not waived any
statute of limitations in respect of Taxes nor agreed to a Tax assessment or
deficiency. The Company has not filed any consent under Section 341(f) of the
Code relating to collapsible corporations. No Tax is required to be withheld
pursuant to Section l445 of the Code as a result of any of the transfers
contemplated by this Agreement and the Company will provide any certificate
requested by Buyer at Closing with respect thereto.

(c) Neither the Company nor any qualified subchapter S
subsidiary of the Company has, in the past 10 years, (i) acquired assets from
another corporation in a transaction in which the Company's Tax basis for the
acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of the
transferor or (ii) acquired the stock of any corporation which is a qualified
subchapter S subsidiary.

4.8 Good Title; No Liens. Except as set forth on Schedule
4.8, each of the Company and its Subsidiaries has good and marketable title to
all the properties

<PAGE>

and assets, real and personal, tangible and intangible, purported to be owned
by it (including all property and assets reflected in the Financial
Statements, except as disposed of after the date thereof in the ordinary
course of business), subject to no Liens other than Permitted Liens. Except
as set forth on Schedule 4.8, no material item of the property used in
the Company's or any Subsidiary's operations or in the Business is owned by an
Affiliate of the Company.

4.9 Leases and Comparable Arrangements. Schedule 4.9 sets
forth a list of all leases of (or other arrangements for the use of) real
property or any material item of personal property, to which the Company or
any Subsidiary is a party, either as lessor or lessee or otherwise. Except as
indicated on Schedule 4.9, neither the Company nor any of its Subsidiaries
is in breach, violation or default of any lease or other agreement with
respect to or as a result of which the other party thereto has the right to
terminate the same, and neither the Company nor any Subsidiary has received
any notice of any claim that it is in breach, violation or default with
respect to any such lease or other agreement.

4.10 Insurance. All of the assets and the operations of the
Company and its Subsidiaries of an insurable nature are insured by the Company
in such amounts and against such losses, casualties or risks as is (i) required
by any Law applicable to the Company, any Subsidiary or the Business, or (ii)
required by any Contract. Schedule 4.10 contains a complete and accurate list
of all insurance policies held or owned by the Company and its Subsidiaries and
now in force and such Schedule indicates the name of the insurer, the type of
policy, the risks covered thereby, the amount of the premiums, the term of each
policy, the policy number and the amounts of coverage and deductible in each
case and all outstanding claims thereunder. Correct and complete copies of all
such policies have been delivered to Buyer by the Company on or before the date
of this Agreement. All such policies are in full force and effect. Neither the
Company nor any Subsidiary is in Default regarding the provisions of any such
policy, including, without limitation, failure to make timely payment of all
premiums due thereon, and neither has failed to give any notice or present any
claim thereunder in due and timely fashion. The Company has not been refused or
denied renewal of any insurance coverage.

4.11 Patents, Trademarks, etc. (a) Schedule 4.11 sets forth a
list of all Patents and Trademarks owned, licensed or used by the Company or
any Subsidiary during the past five (5) years and any applications or
registrations therefor which are currently either pending or issued and not
expired.

(b) Except as set forth on Schedule 4.11,

(i) the Company and its Subsidiaries own the entire
unencumbered right,

<PAGE>

title and interest in and to all such Patents and Trademarks free of all
Liens other than Permitted Liens, and no rights or licenses to or from others
have been granted with respect to such Patents and Trademarks;

(ii) the Company and its Subsidiaries have taken all action
reasonably necessary to protect their rights with respect to the Patents and
Trademarks;

(iii) all of the Patents and registrations of Trademarks
are valid, subsisting and in full force and effect;

(iv) the Company and each of its Subsidiaries owns or
possesses the right to use all the Intellectual Property necessary for the
conduct of its business as now conducted, without any known infringement on,
violation of or conflict with the rights of others;

(v) to the Sellers' knowledge, no Third Party is using any of
the Intellectual Property or engaging in any activity that infringes on,
violates or conflicts with the rights of any of the Company or any Subsidiary
with respect to the Intellectual Property; and

(vi) no Affiliate of the Company or any Subsidiary owns or
possesses any rights in or to any Intellectual Property used by the Company or
any Subsidiary or in the Business.

4.12 Litigation, etc.

(a) Except as set forth on Schedule 4.12, there is no pending
or, to the Sellers' knowledge, threatened Action or governmental investigation
or inquiry against or involving the Company or any of its Subsidiaries or their
assets or operations, and to the Sellers' knowledge no event has occurred which
could reasonably be expected to result in an Action or governmental
investigation or inquiry against or involving the Shares, the Company, any of
its Subsidiaries or their assets or operations, and (ii) there are no
outstanding Orders binding upon the Shares, the Company, any of its
Subsidiaries, any of their assets, or the Business.

(b) Except as disclosed on Schedule 4.12, neither the Company
nor any of its Subsidiaries has been advised by any attorney representing it
that there are any "loss contingencies" (as defined in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board
in March 1975 ("FASB No. 5")), which would be required by FASB No. 5 to be
disclosed or accrued in consolidated financial statements of the Company, were
such financial statements prepared as of the date hereof.

<PAGE>

4.13 Permits. Each of the Company and its Subsidiaries has
all Permits necessary for the conduct of the Business as presently conducted,
except to the extent the failure to have any Permit could not reasonably be
expected to have a Material Adverse Effect, and all such Permits are listed on
Schedule 4.13.

4.14 Compliance with Laws. Except as set forth on Schedule
4.14, neither the Company nor any of its Subsidiaries has received any notice
that it or the plants or properties where the Business is conducted are in
violation of, or have any material liability under, any Laws, Orders or
Permits. Except as set forth on Schedule 4.14, the Company and its Subsidiaries
are in compliance with all Laws, Orders and Permits, except for non-compliance
which could not reasonably be expected to have a Material Adverse Effect.

4.15 Contracts, etc. Set forth on Schedule 4.15 are
complete and accurate lists of the following:

(a) all bonus, incentive compensation, profit-sharing,
retirement, group insurance, death benefit or other fringe benefit plans,
deferred compensation and post-termination obligations or trust agreements of
the Company or any of its Subsidiaries in effect or under which any amounts
remain unpaid on the date hereof or which are to become effective after the
date hereof;

(b) each Contract defining the terms on which indebtedness
for borrowed money, or other indebtedness evidenced by bonds, notes or similar
instruments, of the Company or any of its Subsidiaries or guarantees thereof
have been or may be issued;

(c) all Contracts, oral or written, to which the Company or
any of its Subsidiaries is a party and in which any Affiliate of the Company
has any interest, direct or indirect;

(d) all bank accounts, safe deposit boxes, money market
funds, certificates of deposit, stocks, bonds, notes and other securities in
the name of or owned or controlled by the Company or any of its Subsidiaries,
and the names of the persons having access thereto;

(e) all powers of attorney granted by the Company or any
of its Subsidiaries to others;

(f) all other Contracts to which the Company or any of its
Subsidiaries is a party, except ones that are terminable on less than 60 days'
notice, or do not involve aggregate remaining payments or unpaid obligations of
$25,000 or more, and except

16
<PAGE>

purchase orders for inventory and sales orders for products and services of
the Company or any of its Subsidiaries entered into in the ordinary course
of business.

Except as set forth on Schedule 4.15, none of the Company's or any of its
Subsidiaries' rights under any Contract listed on Schedule 4.15 will be
affected by the transactions contemplated hereby in any way that will have a
Material Adverse Effect. Except as set forth on Schedule 4.15, neither the
Company nor any of its Subsidiaries has given or received notice of and there
is no default or claimed or purported or alleged default on the part of the
Company or any of its Subsidiaries or, to the Sellers' knowledge, any other
party in the performance or payment of any obligation to be performed or paid
under any Contract listed on Schedule 4.15.

4.16 Governmental and other Consents, etc. No Consent or
Permit of any Person is required to be obtained by the Company or any of its
Subsidiaries or the Sellers in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby, or
to carry on the Company's or any of its Subsidiaries' business as now being
conducted, other than (a) under Contracts being terminated at or before Closing
which are identified on Schedule 4.16, and (b) the Consents and Permits
specified in Schedule 4.16.

4.17 Employee Benefits; ERISA. (a) The Company has no
Employee Benefit Plans.

(b) As used in this Agreement, "Employee Benefit Plan" means
any "employee benefit plan," as that term is defined in Section 3(3) of ERISA,
currently or previously adopted, maintained by, sponsored in whole or in part
by, or contributed to by the Company or any of its Subsidiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors or
other beneficiaries are eligible to participate.

4.18 Labor and Employment Matters.

(a) Schedule 4.18 contains a correct and complete list of (i)
all employees whose direct annual compensation exceeds $50,000 and (ii) a list
of all other employees in each job classification employed by the Company or
any of its Subsidiaries in the Business. Except as disclosed in Schedule 4.18,
the employment of all employees is terminable at will by the Company or a
Subsidiary without any penalty or severance obligation of any kind on the part
of the Company or such Subsidiary.

(b) Except as set forth in Schedule 4.18, neither the Company
nor any of its Subsidiaries has encountered any labor union organizing activity
with respect to non-union workers, or had any actual or, to the knowledge of
the Sellers, threatened employee strikes, work stoppages, slowdown or lock-outs
related to any labor union

<PAGE>

organizing activity.

(c) Except as set forth in Schedule 4.18, the Company has not
received any notice prior to the date of this Agreement that any of the
officers or other senior level personnel of the Company or any of its
Subsidiaries will terminate or contemplates terminating his or her employment
currently or at any time before or within 60 days after the Closing Date or
will otherwise not be available to the Buyer, or not agree to employment by the
Buyer, on the same terms and conditions as his or her current employment on the
date hereof.

(d) Within the twelve (12) months prior to the date of this
Agreement, neither the Company nor any of its Subsidiaries has with respect to
the Business effectuated (i) a "plant closing," as defined in the Worker
Adjustment and Retraining Notification Act (the "WARN Act"); or (ii) a "mass
layoff" (as defined in the WARN Act); and neither the Company nor any of its
Subsidiaries has engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local Law.

4.19 Environmental Matters. Except as set forth in Schedule
4.19, to the best of the Sellers' knowledge, neither the Company nor its
predecessors nor its former Subsidiaries is in violation of or has any
Liability under any Environmental Laws. As used in this Agreement,
"Environmental Laws" means all Laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata), including,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and
other Laws relating to emissions, discharges, releases or threatened releases
of any Hazardous Substance, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any Hazardous Substance.

4.20 Prospective Changes. Except as described in Schedule
4.20, there has been no present or proposed change, or other event or
occurrence relating to the Company or any of its Subsidiaries, the Business,
relations with employees, relations with suppliers or lessors, governmental
actions or Laws applicable to the Business, which can reasonably be expected to
have a Material Adverse Effect.

4.21 Interested Transactions. Except as set forth in Schedule
4.21, neither the Company nor any of its Subsidiaries is a party to any
Contract or other transaction with any Affiliate of the Company, or any Related
Person of any Affiliate of the Company (other than as a shareholder or employee
of the Company). Except as

<PAGE>

described in Schedule 4.21, none of the Persons described in the first
sentence of this Section 4.21 owns, or during the last three years has owned,
directly or indirectly, beneficially or legally, (individually or in the
aggregate) five percent (5%) or more of the equity or voting interests of
any Person that competes with the Company or the Business.

4.22 Absence of Certain Developments. (a) Except as set
forth on Schedule 4.22 or as contemplated by this Agreement, since
December 31, 1997 neither the Company nor any of its Subsidiaries has
conducted the Business other than in the ordinary course, or has:

(i) made or committed to make any capital expenditures or
capital additions or betterments in excess of an aggregate of $25,000;

(ii) instituted any litigation, action or proceeding before
any court, governmental body or arbitration tribunal relating to it or
its property, except for litigation, actions or proceedings instituted
in the ordinary course of business and consistent with prior practice;

(iii) acquired, or agreed to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof;

(iv) increased, or agreed or promised to increase, the
compensation of any officer, employee or agent of the Company or any
Subsidiary, directly or indirectly, including by means of any bonus,
pension plan, profit sharing, deferred compensation, savings,
insurance, retirement, or any other employee benefit plan, except in
the ordinary courses of business and consistent with prior practice;

(v) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except
Liabilities or obligations incurred in the ordinary course of business
and consistent with prior practice;

(vi) declared or paid any dividends or made any other
distributions to its stockholders as such; or made any redemption or
repurchase of the Company's capital stock;

(vii) paid, discharged or settled any Liabilities of the
Company or any of its Subsidiaries for Taxes, other than payments
required for the current year that are not in dispute;

19
<PAGE>

(viii) prepaid any principal of its long-term debt;

(ix) amended its Articles or Certificate of Incorporation
or by-laws;

(x) canceled or compromised any debt or claim or waived or
released any right, except for adjustments or settlements made in the
ordinary course of business consistent with past practice; or

(xi) made a loan to any person other than with respect to
accounts receivable created by unaffiliated third parties in the
ordinary course of business.

4.23 Condition of Property. Except as set forth on Schedule
4.23, all plants, structures and equipment owned or leased by the Company or
any of its Subsidiaries, and all utilities, heating, ventilating, air
conditioning, electrical and plumbing systems used in the operation of the
Company's or any of its Subsidiaries' business, are in good operating condition
and repair (except for routine immaterial maintenance to be done in the
ordinary course of business) and are sufficient to meet the operational needs
of such business, and to the knowledge of the Sellers, all improvements
(including, without limitation, the roofs and basements thereof) are free from
leakage and seepage. None of the property used in any of the Company's or any
of its Subsidiaries' operations or business is owned by an Affiliate.

4.24 Absence of Questionable Payments. Neither the Company
nor any of its Subsidiaries nor any predecessor thereof, nor any director,
officer, agent, employee or other Person acting on behalf of the Company or any
of its Subsidiaries or any predecessor thereof, has used, or authorized the use
of, any corporate or other funds for unlawful contributions, payments, gifts,
or entertainment, or made any unlawful expenditures relating to political
activity to government officials or others or established or maintained any
unlawful or unrecorded funds in violation of any applicable laws, rules or
regulations relating to foreign trade practices. Neither the Company nor any of
its Subsidiaries or to the knowledge of the Sellers any predecessor or former
Subsidiary, or any current director, officer, agent, employee or other Person
acting on behalf of any of such Persons, has accepted or received any unlawful
contributions, payments, gifts or expenditures.

4.25 Disclosure. The Company has made available or caused to
be made available to Buyer complete and correct copies of all agreements,
instruments and documents set forth in the Schedules hereto or underlying a
disclosure set forth in the Schedules hereto.

<PAGE>

5. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers and to the Company as follows:

5.1 Organization. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power to own, operate and lease its properties
and assets, to carry on its Business as now being conducted and to enter into
this Agreement and perform its obligations hereunder.

5.2 Authorization. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Buyer have been duly
authorized by all requisite corporate action and no other corporate proceedings
on the part of the Buyer are necessary to approve the consummation of the
transactions contemplated hereby. This Agreement has been and the other
Transaction Documents when executed and delivered will be duly executed and
delivered by the Buyer. This Agreement constitutes and the other Transaction
Documents when executed and delivered will constitute the valid and binding
obligations of the Buyer, enforceable in accordance with the terms hereof and
thereof, except as enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or other similar laws of general application affecting
the enforceability of creditors' rights generally or by general principles
of equity.

5.3 No Conflict. Neither the execution nor the delivery of
this Agreement and the other Transaction Documents by the Buyer nor the
consummation of the transactions contemplated hereby and thereby will conflict
with or result in any violation of or constitute a breach of or default under
any terms, conditions or provisions of its organizational documents or by-laws
or any Law or Contract by which it is bound or to which it or its assets are
subject.

5.4 Investment Intent. The Buyer is aware that the Shares of
Common Stock it is purchasing from the Sellers and the shares of Preferred
Stock it is purchasing from the Company hereunder are not registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities Law. The Buyer is acquiring all such securities for investment
purposes only, for its own account not with a view to, or in connection with,
the public distribution thereof in violation of the Securities Act.

5.5 Governmental and other Consents, etc. No Consent or
Permit of any Person is required to be obtained by the Buyer in connection with
the execution and delivery of this Agreement or the other Transaction Documents
or the consummation of the transactions contemplated hereby or thereby.

<PAGE>

5.6 Litigation, etc. There is no pending or, to the Buyer's
knowledge, threatened Action or governmental investigation against or involving
the Buyer that would, if adversely determined, have a Material Adverse Effect.

6. Covenants

6.1 Covenants of the Buyer. The Buyer hereby covenants and
agrees with the Sellers that:

(a) Cooperation. Prior to the Closing or the earlier
termination of this Agreement, the Buyer shall use its best efforts to cause
the sale contemplated by this Agreement to be consummated and, without limiting
the generality of the foregoing, to obtain all Consents and Permits which may
be necessary or reasonably required for the Buyer to effect the transactions
contemplated hereby.

(b) SFX to be Primary Obligor. SFX Entertainment, Inc. shall
become a primary obligor with respect to the obligations of the Buyer under this
Agreement, pursuant to a Joinder Agreement being executed and delivered to the
Sellers simultaneously with the execution and delivery of this Agreement.

6.2 Covenants of the Sellers. The Sellers hereby severally
covenant and agree with the Buyer that:

(a) Cooperation. The Sellers shall use their best efforts to
cause the sale contemplated by this Agreement to be consummated and, without
limiting the generality of the foregoing, to obtain all Consents and Permits
which may be necessary or reasonably required in order to effect the
transactions contemplated hereby.

(b) Maintenance of Business and Assets. From the date hereof
through the Closing Date, the Sellers shall cause the Company and its
Subsidiaries:

(i) Conduct of Business. To conduct the Business of the
Company and its Subsidiaries only in the ordinary course of business.

(ii) Preserve Organization. To preserve intact the current
business organization of the Company and each of its Subsidiaries,
keep available the services of the current officers, employees and
agents of the Company and each of its Subsidiaries and maintain the
relations and good will with suppliers, customers, landlords,
creditors, employees, agents and others having business relationships
with the Company and each of its Subsidiaries.

<PAGE>

(iii) Reporting. To report periodically to the Buyer
concerning the status of the Business, operations and finances of the
Company.

(iv) Maintenance of Properties, etc. To maintain all of its
assets and properties in customary repair, order and condition (taking
into consideration the age and condition thereof), reasonable wear and
tear excepted, and maintain insurance covering such assets and
properties in such amounts and of such kinds comparable to that in
effect on the date of this Agreement.

(v) Compliance with Laws. To comply with all Laws applicable
to it and to the conduct of the Business (subject to exceptions in the
ordinary course of business described in Schedule 4.14).

(vi) Access to Properties, etc. To provide the Buyer and
its counsel, accountants, investment advisors, lenders, and their
respective other representatives full and free access during normal
business hours (upon reasonable prior notice) to all of its
properties (including subsurface testing), Organizational Documents,
books, tax returns, other financial data, Contracts, Permits, and
records, and to furnish to the Buyer all such documents and
information with respect to the affairs of the Company as the Buyer
may from time to time reasonably request.

(vii) Notification of Material Adverse Change. To notify the
Buyer promptly of any change having a Material Adverse Effect on the
financial condition of the Company and each of its Subsidiaries or in
the operations, business, prospects, properties, assets or Liabilities
of the Company on a consolidated basis from that of the Company set
forth in the Financial Statements dated December 31, 1997.

(viii) Administration of Working Capital. To administer its
cash, accounts receivable, inventory and accounts payable in the
ordinary course in accordance with past practices.

(c) Certain Prohibited Transactions. From the date hereof
through the Closing Date, except with the prior written consent of the Buyer or
as otherwise expressly contemplated by this Agreement, the Sellers will not
cause or permit the Company or any of its Subsidiaries to:

(i) enter into any transaction or make any payments out of
the ordinary course of business;

<PAGE>

(ii) purchase or lease any real property, or sell, transfer
or otherwise dispose of any of its properties or assets other than
inventory in the ordinary course of business;

(iii) create or permit to exist any new Lien on the assets
of the Company or any of its Subsidiaries or any part thereof;

(iv) violate any Law;

(v) declare or pay any dividends, repurchase any of its
capital stock, or make any distributions to its shareholders as such,
other than dividends to fund federal, state and local income taxes
payable by the shareholders with respect to the Company's income for
1998 up to the Closing Date; or pay any management or consulting fees
or other compensation for services to any of the Sellers; or

(iv) amend its Articles or Certificate of Incorporation or
by-laws.

(d) Further Assurances. Following the Closing, at the request
of the Buyer, each Seller shall execute and deliver such further documents, and
take such other action, as may be necessary or appropriate to give full effect
to the transactions contemplated by this Agreement, including without
limitation to confirm the sale, transfer, assignment and conveyance of the
Securities to be sold by such Seller hereunder and to vest in the Buyer all
such Seller's right, title and interest in and to such Securities.

(e) Corporate Records. At the Closing, all originals of the
minute books and stock transfer registers of the Company and each of its
Subsidiaries shall be delivered to the Buyer and all records not already
situated at the Company's principal place of business, including without
limitation those in possession of any counsel of the Company and the
Accountants, shall be placed in the Buyer's control at such principal place of
business.

7. Indemnification.

7.1 Obligation of the Sellers. Subject to the limitations set
forth in Section 7.3, the Sellers shall indemnify and save harmless the Buyer
and its successors and assigns from, against, for and in respect of:

(a) any Loss incurred or required to be paid which arises out
of or relates to (i) a state of facts as a result of which any representation
or warranty made

<PAGE>

by the Sellers to the Buyer or the Company in this Agreement is untrue,
inaccurate or misleading in any respect, or (ii) the breach of any covenant
or agreement made by the Sellers in this Agreement;

(b) any Loss incurred or required to be paid which arises out
of or relates to any deficiency in Taxes, and penalties and interest relating
thereto, owing by the Company or any of its Subsidiaries with respect to any
period prior to the Closing, except to the extent the responsibility therefor
is the Buyer's under other provisions of this Agreement; and

(c) any Litigation Expense incurred or required to be paid in
connection with any Action incident to any matter indemnified against in
paragraph (a) or (b).

7.2 Obligation of the Buyer. Subject to the limitations set
forth in Section 7.3, the Buyer shall indemnify and save harmless the Sellers
from, against, for and in respect of:

(a) any Loss incurred or required to be paid which arises out
of or relates to (i) a state of facts as a result of which any representation
or warranty made by the Buyer in this Agreement is untrue, inaccurate or
misleading in any respect, provided that the Sellers did not know that such
representation or warranty was untrue, inaccurate or misleading in any respect
on the Closing Date, or (ii) the breach of any covenant or agreement made by
the Buyer in this Agreement or in any Transaction Document; and

(b) any Litigation Expense incurred or required to be paid in
connection with any Action incident to any matter indemnified against in
Section 7.2 (a) above.

7.3 Limitation on Indemnity. The indemnification
obligations of the parties under Sections 7.1 and 7.2 shall be subject to the
following:

(a) Time Bar.

(i) The Buyer shall not be entitled to make any claim against
the Sellers for any Loss or Litigation Expense unless a notice of such claim
shall have been given to the Agent in accordance with Section 13.1 hereof

(A) on or before the first (1st) anniversary of the Closing
Date, in the case of any claim for Loss arising under Section
7.1(a)(i) hereof (and any Litigation Expense under Section 7.1(c)
hereof related to such Loss), other than a claim relating to the
untruth, inaccuracy or misleading nature of a representation or the
breach of a warranty, covenant or agreement made by the

<PAGE>

Sellers with respect to the matters set forth in Sections 3.1, 3.2,
4.7, 4.17, 4.18 or 4.19 of this Agreement; and

(B) on or before the expiration of the applicable statute of
limitations, in the case of (1) any claim for Loss arising under
Section 7.1(a)(i) hereof (and any Litigation Expense under Section
7.1(c) hereof related to such Loss) because of the untruth, inaccuracy
or misleading nature of a representation or the breach of a warranty,
covenant or agreement made by any Seller in Sections 3.1, 3.2, 4.7,
4.17, 4.18 or 4.19 of this Agreement, and (2) any claim for Loss
arising under Section 7.1(a)(ii) or 7.1(b) hereof (and any Litigation
Expense under Section 7.1(c) hereof related to such Loss).

(ii) The Sellers shall not be entitled to make a claim
against the Buyer for any Loss or Litigation Expense relating thereto unless a
notice of such claim shall have been given to the Buyer in accordance with
Section 13.1 hereof

(A) on or before the first (1st) anniversary of the Closing
Date, in the case of any claim for Loss arising under Section
7.2(a)(i) hereof (and any Litigation Expense under Section 7.2(b)
hereof related to such Loss), or

(B) prior to the expiration of the applicable statute of
limitations, in the case of any claim for Loss arising under Section
7.2(a)(ii) hereof (and any Litigation Expense under Section 7.2(b)
hereof related to such Loss).

(b) Deductible. The Buyer shall be entitled to indemnity for
Losses with respect to any claim arising under Section 7.1(a)(i) or Section
7.1(b) and Litigation Expenses under Section 7.1(c) related to such Losses only
if the aggregate amount of its Losses and Litigation Expenses with respect to
all claims arising under such Sections (in excess of the threshold provided in
(i) preceding) exceeds $100,000 (and if such condition is met indemnity shall
be required for all Losses and Litigation Expenses), provided that the
limitations of this Section 7.3(b) shall not apply to indemnity with respect to
Losses arising out of or relating to a state of facts as a result of which a
representation or warranty set forth in Sections 3.1 or 3.2 is untrue or
inaccurate.

(c) Several Liability of the Sellers. Notwithstanding
anything to the contrary herein, the representations and warranties made in
Section 3.1, 3.2 and 3.3 of this Agreement shall be deemed made by each Seller
severally, not jointly, and no Seller shall have any liability under this
Section 7 with respect to any inaccuracy in such representations or breach of
such warranties that relates to the title, ownership, capacity, rights,
obligations or any action or inaction of any other Seller. Nothing herein shall
require the Buyer to proceed against all of the Sellers or any of them in

<PAGE>

connection with any claim for indemnification; all such claims may be asserted
independently, subject to the limitations on any Seller's liability set forth
herein.

(d) Maximum Liability. The aggregate liability of the Sellers
in connection with all claims for Losses arising under Section 7.1(a)(i)
hereof, (and any Litigation Expense under Section 7.1(c) hereof related to such
Loss), to the extent in excess of the deductible provided for in Section
7.3(b), shall not exceed $4,250,000. The aggregate liability of each Seller in
connection with all claims for Losses arising under Section 7.1(a)(i) hereof
(and any Litigation Expense under Section 7.1(c) hereof related to such Loss),
to the extent in excess of the deductible provided for in Section 7.3(b), shall
not exceed such Seller's share of the Base Purchase Price. The aggregate
liability of the Sellers in connection with all claims for Losses arising
Section 7.1(a)(i) hereof and under Section 7.1(b) hereof (and any Litigation
Expense under Section 7.1(c) hereof related to such Loss), to the extent in
excess of the deductible provided for in Section 7.3(b), cumulatively, shall
not exceed $8,500,000.

(e) Insurance Proceeds. An indemnified party's indemnifiable
Loss hereunder shall be deemed reduced by the amount of any insurance proceeds
or indemnities recoverable by such indemnified party with respect to such Loss.

(f) Exclusivity. The sole and exclusive remedy of the parties
hereto for any claim resulting from a breach by any of the parties hereto of
its respective representations or warranties made herein shall be a claim under
this Section 7. The parties hereby waive any provision of law to the extent
that it would limit or restrict the agreement contained in this Section 7.3(f).

7.4 Set-Offs. The Buyer, its successors, assigns and
designees shall have the right to set off any amounts owed by the Sellers under
this Section 7 against any amounts owed by the Buyer to the Sellers under this
Agreement. This set-off right is not exclusive, and shall not be deemed to
restrict in any way the exercise of any other right or remedy the Buyer may
have under this Agreement, under applicable Law or otherwise to enforce a claim
for indemnification.

7.5 Notice and Defense of Claims. The obligations and
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by another party or third parties
shall be subject to the following terms and conditions:

(a) Notice. The indemnified party shall give prompt written
notice to the indemnifying party of any claim or event known to it which does
or may give rise to a claim by the indemnified party against the indemnifying
party based on this Agreement, stating the nature and basis of said claims or
events and the amounts thereof, to the extent known, and in the case of any
Action brought by any third party,

<PAGE>

a copy of any documentation with respect thereto promptly after any such
documentation is received by the indemnified party. The claims notice may be
amended on one or more occasions with respect to the amount or description of
the asserted liability or the Loss at any time prior to final resolution of the
obligation to indemnify relating to the asserted liability or the Loss. If a
claims notice is not provided promptly as required by this Section 7.5(a), the
indemnified party nonetheless shall be entitled to indemnification by the
indemnifying party to the extent that the indemnifying party has not
established that it has been prejudiced by such late receipt of the claims
notice.

(b) Third Party Claims or Actions.

(i) In the event any Action is brought by any third party
against an indemnified party, with respect to which an indemnifying party may
have liability under this Agreement, the indemnifying party shall be entitled
to participate in, and, to the extent that it shall wish, to assume the defense
thereof, with independent counsel reasonably satisfactory to such indemnified
party, provided that in assuming the defense of any such third party Action,
the indemnifying party acknowledges in writing to the indemnified party that
the indemnifying party shall thereafter be liable, to the extent herein
provided, for any Loss and any Litigation Expense with respect to
such Action.

(ii) If the indemnifying parties elect to assume the defense
of any such third-party Action, the indemnifying parties shall have the right
to contest, pay, settle or compromise any such Action on such terms and
conditions as the indemnifying parties may determine; provided, however, that
(A) the indemnifying parties shall not settle or compromise any Action or
consent to the entry of any judgment that does not include an unconditional
term releasing the indemnified party from all liability in respect of such
asserted liability, and (B) no settlement that imposes any liability or
obligation on the indemnified party (other than the payment of money damages
that will be paid entirely by the indemnifying party), shall be made without
the indemnified party's written consent (which shall not be unreasonably
withheld). After notice from the indemnifying parties to such indemnified party
of the indemnifying parties' election so to assume the defense thereof, the
indemnifying parties shall not be liable to such indemnified party for any
Litigation Expense or other expenses incurred after the date of receipt of such
notice by the indemnified party. The indemnified party shall have the right to
employ its own counsel and such counsel may participate in such Action, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party, when and as incurred.

(iii) If the indemnifying parties do not elect to assume the
defense of any such Action, the indemnified party may engage counsel selected
by the indemnified

<PAGE>

party to assume the defense and may contest and pay or may settle or compromise
any such claim. The fees and disbursements of such counsel shall constitute
Litigation Expense hereunder. Notwithstanding the foregoing, (A) if the
indemnifying parties acknowledge in writing to the indemnified party that the
indemnifying parties shall thereafter be liable, to the extent herein provided,
for any Loss and any Litigation Expense with respect to such Action, then the
selection of such counsel shall require the prior written consent of the
indemnifying parties (such consent not to be unreasonably withheld), and (B)
any settlement or compromise of such Action shall require the prior written
consent of the indemnifying parties (such consent not to be unreasonably
withheld).

(iv) The indemnified party and the indemnifying parties, as
the case may be, shall be kept fully informed of such Action at all stages
thereof whether or not such party is represented by its own counsel.

7.6 Cooperation. The parties hereto agree to render to each
other such assistance as they may reasonably require of each other and to
cooperate in good faith with each other in order to ensure the proper and
adequate defense of any Action brought by any third party.

7.7 Confidentiality. The parties agree to make
reasonable efforts to preserve in full the confidentiality of all proprietary
or confidential business records and the attorney-client and work product
privileges. In connection therewith, each party agrees that: (a) it will make
reasonable efforts, in any Action in which it has assumed or participated in
the defense, to avoid production of confidential business records; and (b) all
communications between any party hereto and counsel responsible for or
participating in the defense of any Action shall, to the extent possible, be
made so as to preserve any applicable attorney-client or work-product
privilege.

7.8 Survival of Representations and Warranties. All
covenants, representations and warranties and agreements made in this Agreement
or in any Exhibit, Schedule, certificate or document delivered herewith or at
the Closing shall survive the execution and delivery thereof and the Closing
hereunder; provided, however, that any claim for the breach of any such
covenant, representation, warranty or agreement shall be subject to the
applicable limitations set forth in this Section 7.

8. Other Agreements of the Parties.

8.1 Brokers. Each party represents and warrants that all
actions by it relative to this Agreement and the transactions contemplated
hereby were carried out in such manner as not to give rise to any valid claim
for finders fees, brokerage

<PAGE>

commissions or similar payments.

8.2 Post-Closing Cooperation. After the Closing Date, the
Sellers and the Buyer shall provide each other timely access to information and
reasonable assistance and cooperation, during normal business hours, necessary
for the preparation of any tax returns or other filings or conducting or
responding to tax audit or other proceedings. All pertinent books of account,
papers, and records shall be retained by the parties until either the statute
of limitations to which they relate has expired, by lapse of time or by the
terms of any agreement for extension of the period of limitations.

8.3 Tax Returns. The Buyer will cause the Company and each of
its Subsidiaries to prepare and file appropriate federal and state income tax
returns for the Company and each of its Subsidiaries including the period from
January 1, 1998 through the Closing Date. Any Taxes payable pursuant to such
returns shall, however, be the responsibility of the Sellers. The Agent shall
have the right to consult with the Buyer on the preparation of such returns.
The Buyer will submit a draft return to the Agent for his review and comment at
least 10 business days prior to filing.

8.4 Other Tax Matters. (a) The parties agree to elect the
Section 1362(e)(3) closing of the books method, and not the pro-rata method,
for the computation of the Company's S Corporation taxable income for the
1998 termination year.

(b) The Agent shall have the right, including the right to
appoint a representative, to participate in any inquiry or exam by federal,
state or local taxing authorities that pertains to any tax period of the
Company up through the date of closing.

8.5 Guaranty by Company. The Company, as a Subsidiary of SFX
, shall provide guaranties of SFX's indebtedness comparable to those required
of other Subsidiaries of SFX. If the market capitalization of SFX's common
stock falls below $100 million, then SFX will take all steps necessary to have
all such guaranties terminated. If the market capitalization of SFX's common
stock falls below $125 million, then SFX will make reasonable efforts to have
all such guaranties terminated.

8.6 Shareholder Loans. At the Closing, the Company will
repay the outstanding loans from its shareholders (currently in the aggregate
amount of approximately $950,000), plus accrued unpaid interest thereon.

9. Exclusivity; No Solicitation. From and after the date
hereof and until the Closing, the Sellers shall not, and shall not permit the
Company to, solicit, discuss, negotiate, accept, approve, provide any Third
Party information in connection

<PAGE>

with, or enter into any agreement with a Third Party relating to any offer or
proposal from anyone other than the Buyer relating to the acquisition of the
assets or Business of the Company, the acquisition of any of its capital stock
or other securities, or any merger, consolidation or other business combination
relating to the Company, and will promptly notify the Buyer of any offer or
proposal received by them or by the Company with respect to any such proposed
transaction.

10. Conditions Precedent.

10.1 Conditions to Obligations of the Sellers. All
obligations of the Sellers under this Agreement are subject to the fulfillment,
unless waived in writing at the sole option of the Sellers, at or prior to the
Closing Date, of each of the following conditions precedent:

(a) Buyer's Representations and Warranties. The
representations and warranties of the Buyer herein contained shall be true in
all material respects on and as of the Closing Date with the same force and
effect as though made on and as of said date, except as affected by the
transactions contemplated or permitted by this Agreement

(b) Buyer's Covenants. The Buyer shall in all material
respects have performed all its obligations and agreements and complied with
all its covenants contained in this Agreement to be performed and complied
with by the Buyer at or prior to the Closing Date.

(c) Buyer's Closing Certificate. The Sellers shall have
received a certificate of the Buyer, executed on behalf of the Buyer by any
duly authorized representative of the Buyer, dated the Closing Date, in form
and substance reasonably satisfactory to the Agent, certifying as to the
fulfillment of the matters mentioned in paragraphs (a) and (b) of this Section
10.1.

(d) Buyer's Counsel's Opinion. Messrs. Winston & Strawn,
counsel to the Buyer, shall have delivered to the Sellers an opinion, dated the
Closing Date, in form and substance reasonably satisfactory to the Sellers. In
giving such opinion such counsel may rely, as to matters of fact, upon
certificates of duly authorized representatives of the Buyer and, as to matters
of Law, upon the opinions of other counsel reasonably satisfactory to the
Sellers; provided that copies thereof are delivered to the Sellers at or prior
to the Closing.

(e) Consents and Approvals. The Sellers and the Company shall
have received all approvals, consents, authorizations and waivers listed on
Schedule 4.16, including without limitation consents required from Subsidiaries
or Affiliates of SFX

<PAGE>

under Contracts with the Company.

(f) Other Documents. The Sellers shall have received all
certificates, corporate documents, evidence of authorization, and other
agreements, instruments and documents in respect of any aspect or consequence
of the transactions contemplated by this Agreement as the Agent may reasonably
request, all of which shall be in form and substance reasonably satisfactory to
the Agent.

(g) No Litigation. No Action before any court or any
governmental or regulatory authority shall have been commenced and still be
pending, no investigation by any governmental or regulatory authority shall
have been commenced and still be pending, and no Action by any governmental or
regulatory authority shall have been threatened against the Sellers or the
Buyer seeking to restrain, prevent or change the transactions contemplated
hereby or questioning the validity or legality of any of such transactions.

(h) Management Services Agreement. The Company shall have
entered into a five-year Management Services Agreement with a corporation or
other entity controlled by the Sellers, automatically renewable for successive
five-year periods unless the Sellers' remaining common stock of the Company has
been redeemed or sold, in which event it shall be terminable by the Company,
and otherwise in form and substance reasonably satisfactory to the Sellers.

(i) Shareholders Agreement. The Company, the Buyer and the
Sellers shall have entered into a Shareholders Agreement, in form and substance
reasonably satisfactory to the Sellers.

(j) Tax Sharing Agreement. The Company shall have entered
into a Tax Sharing Agreement with SFX, in form and substance reasonably
satisfactory to the Sellers. The Tax Sharing Agreement shall provide that while
the Management Services Agreement is in effect SFX will bear the economic
burden of Taxes imposed on EMI's net income after the fees or other
compensation (to the extent deductible for income Tax purposes) payable under
the Management Service Agreement.

<PAGE>

10.2 Conditions to the Obligations of the Buyer. All
obligations of the Buyer under this Agreement are subject to the fulfillment,
unless waived in writing at the sole option of the Buyer, at or prior to the
Closing Date, of each of the following conditions precedent:

(a) Sellers' Representations and Warranties. The
representations and warranties of the Sellers herein contained shall be true in
all material respects on and as of the Closing Date with the same force and
effect as though made on and as of said date, except as affected by
transactions contemplated or permitted by this Agreement.

(b) Sellers' Covenants. The Sellers shall in all material
respects have performed all of the obligations and agreements and complied with
all of the covenants contained in this Agreement to be performed and complied
with by the Sellers on or prior to the Closing Date.

(c) Sellers' Closing Certificate. The Buyer shall have
received one or more certificates of the Sellers, dated the Closing Date, in
form and substance reasonably satisfactory to the Buyer, certifying as to the
fulfillment of the matters mentioned in paragraphs (a) and (b) of this Section
10.2.

(d) Consents. The Buyer shall have received evidence,
satisfactory to the Buyer and its counsel, that all of the Consents required to
be obtained by the Buyer or the Seller in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby have been duly obtained, including without limitation the Consents
listed on Schedule 4.16, and the Consents required under Contracts listed on
Schedule 4.15.

(e) Sellers' Counsel's Opinion. Dennis A. Roach, Esq.,
counsel for the Sellers, shall have delivered to the Buyer opinions, dated the
Closing Date, in form and substance reasonably satisfactory to the Buyer.
In giving such opinions such counsel may rely, as to matters of fact, upon
certificates of the Sellers, and, as to matters of Law, upon the opinion of
other counsel reasonably satisfactory to the Buyer, provided that copies
thereof are delivered to the Buyer prior to the Closing.

(f) Other Documents. The Buyer shall have received all
certificates, corporate documents, evidence of authorization, and other
agreements, instruments and documents in respect of any aspect or consequence
of the transactions contemplated by this Agreement as the Buyer may reasonably
request, all of which shall be in form and substance reasonably satisfactory to
the Buyer.

(g) No Litigation. No Action before any court or any
governmental or regulatory authority shall have been commenced and still be
pending, no investigation

<PAGE>

by any governmental or regulatory authority shall have been commenced and
still be pending, and no Action by any governmental or regulatory authority
shall have been threatened against the Sellers or the Buyer seeking to
restrain, prevent or change the transactions contemplated hereby or
questioning the validity or legality of any of such transactions.

(h) Non-Competition and Confidentiality. The Sellers, other
than Jimmy Buffett, shall have executed and delivered a five-year
Non-Competition and Confidentiality Agreement in favor of the Buyer and the
Company, restricting competition with the Buyer and the Company, and requiring
confidentiality of non-public business information, in form and substance
reasonably satisfactory to the Buyer.

(i) Management Services Agreement. The Company shall have
entered into a five-year Management Services Agreement with a corporation or
other entity controlled by the Sellers, automatically renewable for successive
five-year periods unless the Sellers' remaining common stock of the Company has
been redeemed or sold, in which event it shall be terminable by the Company,
and otherwise in form and substance reasonably satisfactory to the Buyer.

(j) Shareholders Agreement. The Company, the Buyer and the
Sellers shall have entered into a Shareholders Agreement, in the form and
substance reasonably satisfactory to the Buyer.

(k) Tax Sharing Agreement. The Company shall have entered
into a Tax Sharing Agreement with SFX, in form and substance reasonably
satisfactory to SFX. The Tax Sharing Agreement shall provide that while the
Management Services Agreement is in effect SFX will bear the economic burden of
Taxes imposed on EMI's net income after the fees or other compensation (to the
extent deductible for income Tax purposes) payable under the Management Service
Agreement.

(l) Government Consents and Approval. All governmental
consents, authorizations, filings or registrations in connection with the
investment by the Buyer in the Company shall have been obtained, including,
without limitation, any required under the Hart-Scott-Rodino Act.

(m) Releases. The Sellers shall execute and deliver to the
Buyer general releases of claims against the Company and each of its
Subsidiaries, in form and substance reasonably satisfactory to the Buyer.

(n) Resignations. The Buyer shall have received the
resignations of all of the officers and directors of the Company.

<PAGE>

(o) Satisfactory Completion of Buyer's Due Diligence. The
Buyer shall have completed its due diligence investigation of the business,
affairs, assets, Liabilities, historical financial results, operations and
prospects of the Company and each of its Subsidiaries, and the Buyer shall not
have learned any information as a result of such investigation which in the
reasonable opinion of the Buyer is likely to have a Material Adverse Effect.
This condition shall be deemed satisfied unless the Buyer delivers written
notice to the Agent of the receipt of such material adverse information in
reasonable detail. In the event that the Buyer delivers such notice, this
condition shall be deemed satisfied if, within ten (10) days of receiving such
notice, the Sellers or the Agent shall have cured or prevented, to the
reasonable satisfaction of the Buyer, any such Material Adverse Effect or the
underlying causes likely to have such effect.

11. Termination.

11.1 Termination.

(a) This Agreement may be terminated prior to the Closing
and the transactions contemplated hereby may be abandoned:

(i) by the Sellers, upon written notice from the Agent to the
Buyer, if the Closing has not taken place on or before June 30, 1998,
other than by reason of a default hereunder of the Sellers;

(ii) by the Buyer, upon written notice to the Agent, if the
Closing has not taken place on or before June 30, 1998, other than by
reason of a breach or default hereunder of the Buyer; or

(iii) by either the Buyer or the Sellers, upon written notice
to the other(s), if there shall be in effect a non-appealable order of
a court of competent jurisdiction permanently prohibiting the
consummation of the transactions contemplated hereby; or

(iv) by the Buyer if any condemnation, destruction or loss
due to fire or other casualty from the date hereof until the Closing
Date is such that the Business is materially interrupted or curtailed
or the assets of the Company or any of its Subsidiaries are materially
affected; provided that if the Buyer nonetheless elects to close, the
Sellers shall remit or assign the Sellers' rights or the Company's or
such Subsidiary's rights to all net condemnation proceeds or third
party insurance proceeds to the Buyer, and the Sellers shall have no

35
<PAGE>

further liability or obligations with respect to such condemnation,
destruction or loss.

11.2 Status of Agreement after Termination. Upon any
termination of this Agreement pursuant to Section 11.1, this Agreement shall
become void and shall have no effect, except that such termination shall not
affect (a) the rights and obligations of the parties under the Confidentiality
Agreement dated January 27, 1998 between SFX and the Company, or (b) any other
liability any party may have for any loss, damage, liability, cost or expense
alleged to have been incurred by another as a consequence of such party's
default under this Agreement.

12. Arbitration.

(a) Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of Commercial Arbitration of the American Arbitration
Association (the "Rules"), and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.

(b) The arbitration tribunal shall consist of three
arbitrators, of whom one shall be nominated by Buyer, one shall be nominated by
the Seller, and the third, who shall serve as Chairman, shall be chosen by the
two party-nominated arbitrators or, in the event the party-nominated
arbitrators are unable to designate the third arbitrator, by the American
Arbitration Association.

(c) Any party to this Agreement is authorized to initiate
arbitration by providing written notice of arbitration, in accordance with the
Rules, to the Administrator of the American Arbitration Association and to the
party or parties against whom a claim is being made.

(d) The place of the arbitration shall be Los Angeles,
California.

(e) The award of the arbitrators shall be final and binding.
The parties waive any right to appeal the award, to the extent a right to
appeal may be lawfully waived. Each party retains the right to seek judicial
assistance: (i) to compel arbitration; (ii) to obtain interim measures of
protection pending arbitration; and (iii) to enforce any decision of the
arbitrators, including the final award.

13. General Provisions.

13.1 Notices. All waivers, notices, consents, demands,
requests,

<PAGE>

approvals and other communications which are required or may be given
hereunder shall be in writing and shall be deemed to have been duly given when
hand-delivered, sent by telecopier, delivered by national overnight courier
service, or 72 hours after mailed by certified first class mail, return receipt
requested, postage prepaid, as follows:

if to the Buyer:

EMI Acquisition Sub, Inc.
c/o SFX Entertainment, Inc.
630 Madison Avenue
New York, New York 10022
Attention: Kraig Fox, Esq.
fax: (212) 486-4830

with copies to:

Winston & Strawn
200 Park Avenue
New York, New York 10166-4193
Attention: John W. Kaufmann, Esq.
fax: (212) 294-4700

if to the Sellers or the Agent:

Howard Kaufman, as Agent
8900 Wilshire Blvd., Suite 300
Beverly Hills, CA 90211
fax: (310) 967-2334

with a copy to:

Law Offices of Dennis A. Roach
8900 Wilshire Blvd., Suite 310
Beverly Hills, CA 90211
fax: (310) 652-8211

or to such other address or addresses as may be designated by a party by
written notice to the other parties hereto.

13.2 Costs; Expenses. Whether or not the transactions are

<PAGE>

consummated, the Buyer will bear its own costs and expenses incurred in
negotiating this Agreement and consummating the transactions contemplated
hereby, and the Sellers will bear the Company's and their own costs and
expenses incurred in negotiating this Agreement and consummating the
transactions contemplated hereby.

13.3 Binding Effect, Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns; provided, however, that nothing in this Agreement shall
be construed to confer any rights, remedies, obligations or liabilities on any
person other than the parties hereto or their respective successors and
assigns.

13.4 Public Announcements. The parties hereto shall advise
and consult with each other prior to the making of any public announcement with
respect to the transactions contemplated hereby. In any event, none of the
parties shall issue any press release or make any public announcement or
statement without the prior written consent of the other parties, except for
filings, registrations or public statements that are required by Law.

13.5 Entire Agreement; Amendment. (a) This Agreement,
together with its Schedules and Exhibits, embodies the entire agreement and
understanding of the parties hereto and supersedes any prior agreement or
understanding between the parties with respect to the subject matter of this
Agreement. The Confidentiality Agreement dated January 27, 1998 shall be deemed
to continue in full force and effect until the Closing; provided that, upon the
Closing, such agreement shall be deemed terminated and shall have no further
force or effect.

(b) This Agreement cannot be amended or terminated orally,
but only by a writing duly making specific reference to this Agreement executed
by the parties.

13.6 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same document. Facsimile signatures will
be deemed acceptable and binding.

13.7 Headings. Headings of the Sections and paragraphs
in this Agreement are for reference purposes only and shall not be deemed to
have any substantive effect.

13.8 Assignment. This Agreement may not be assigned by either
party without the prior written consent of the other. Notwithstanding the
foregoing, the Buyer may, without the consent of the other parties hereto,
assign and delegate its obligations and rights hereunder or any part thereof to
(i) any wholly-owned Subsidiary

<PAGE>

of SFX, and (ii) any lender providing financing to the Buyer, as collateral,
but no such assignment shall relieve the Buyer of its obligations to the
Sellers hereunder.

13.9 Applicable Law. This Agreement shall be governed and
construed and interpreted in accordance with the laws of the State of New York,
without regard to choice of laws principles, and the federal laws of the United
States of America.

13.10 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validly or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.

13.11 Agent. The Sellers hereby appoint the Agent to act as
their agent with respect to this Agreement, including without limitation with
respect to all aspects of indemnity claims under Section 7 of this Agreement.
The Buyer shall be entitled to rely on and act in accordance with any notice,
consent, authorization, approval or instruction received in writing from the
Agent with the same effect as though it were received from all of the Sellers.

13.12 Waivers. Except as otherwise provided herein, no delay
on the part of a Seller or the Buyer in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of a Seller or the Buyer of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.

13.13 Miscellaneous. The rights and remedies of the Buyer and
the Sellers hereunder are cumulative and not exclusive of any rights or
remedies they would otherwise have.

<PAGE>

IN WITNESS WHEREOF, the parties have executed or caused to be
executed this Stock Purchase Agreement as of the date first set forth above.

BUYER:

EMI ACQUISITION SUB, INC.

By: /s/ Richard A. Liese
______________________
Vice President

THE COMPANY:

EVENT MERCHANDISING, INC.

By: /s/ Richard A. Liese
______________________
Vice President

SELLERS:

/s/ Howard Kaufman
--------------------------
Howard Kaufman, individually and as Agent

/s/ Howard Rose
--------------------------
Howard Rose

/s/ Peter Schivarelli
--------------------------
Peter Schivarelli

/s/ Jimmy Buffett
--------------------------
Jimmy Buffett

<PAGE>
TBA ENTERTAINMENT CORPORATION
402 Heritage Plantation Way
Hickory Valley, Tennessee 38042

March 6, 1998

SFX Entertainment, Inc.
650 Madison Avenue
New York, New York 10022
Attn: Michael G. Ferrel

Re: Acquisition by SFX Entertainment, Inc., a Delaware corporation (the
"Company"), of one hundred percent (100%) of the outstanding equity
interests in New Avalon, Inc. and TBA Media, Inc. (collectively d/b/a
Avalon Attractions), Irvine Meadows Amphitheater and West Coast
Amphitheater Corp. (singularly, a "Target Entity" and collectively,
the "Target Entities") owned by TBA Entertainment Corporation
(through its wholly owned subsidiary AWC Acquisition Corp.) (the
"Seller"), which equity interests represent fifty-one percent (51%)
of the outstanding equity of each of the Target Entities

Gentlemen:

This letter agreement (the "Letter Agreement") is intended to set forth
the agreement between the Seller and the Company on the terms set forth herein
and in the definitive Acquisition Agreement (as hereinafter defined)
contemplated hereby regarding the Company's acquisition of one hundred percent
(100%) of the equity interests in the Target Entities owned by Seller, which
equity interests represent fifty-one percent (51%) of the outstanding equity
of each of the Target Entities. Contemporaneously with the executive of this
Letter Agreement, the Company's acquisition of the remaining forty-nine percent
(49%) of the equity interests in the Target Entities owned severally by Audrey
& Jane, Inc., Shelli Meadows, Inc., Peach Street Partners, Ltd., Robert E.
Geddes, Thomas Miserendino and Brian F. Murphy (collectively, the "Other
Sellers"; Seller and the Other Sellers may hereinafter collectively be referred
to as the "Sellers").

Subject to the conditions set forth herein, the Company and the Seller
agree as follows:

1. The Company or an affiliate thereof (the "Buyer") will purchase (the
"Acquisition") from the Seller (i) a fifty-one percent (51%) partnership
interest in Irvine Meadows Amphitheater, a California general partnership ("IMA
Partners"), and (ii) fifty-one percent (51%) of the capital stock or other
equity interests in each of New Avalon, Inc., a California corporation, TBA
Media, Inc., a California corporation and West Cost Amphitheater Corp., a
California corporation. The Buyer shall have the right to require that the
Seller terminate any contract between a Target Entity and an affiliate of any
Target entity or of Seller prior to the closing and the Buyer shall have no
liability with respect to such termination.

<PAGE>

SFX Entertainment, Inc.
March 6, 1998
Page 2

2. The aggregate purchase price (the "Purchase Price") payable to the
Sellers as a group for the acquisition of the outstanding equity interests in
the Target Entities and the covenants not to compete will be $28,000,000, plus
Sellers' substantiated third-party out-of-pocket costs and expenses (excluding
any internal allocations of costs and expenses to any affiliated company or
person) incurred in connection with the development of the Camarillo Creek
Amphitheater, all of such costs and expenses currently reflected in the
existing construction budget for Camarillo Creek Amphitheater. The Purchase
Price payable to Seller shall be payable in multiple installments: (i)
$27,000,000 minus the consideration paid to the Other Sellers pursuant to the
acquisition agreement contemplated in the Second Letter Agreement (other than
any consideration paid the Other Sellers on May 15, 1998 as a result of the
completion of construction of the Camarillo Creek Amphitheater and any
reimbursement paid the Other Sellers of substantiated third-party out-of-
pocket costs and expenses incurred in connection with the development of the
Camarillo Creek Amphitheater) in cash by wire transfer or certified or
cashier's check at closing, (ii) an amount at closing equal to all
substantiated costs and expenses of Seller, as set forth above, in the
development of Camarillo Creek Amphitheater and paid by Seller prior to
closing, (iii) an amount equal to all substantiated costs and expenses of
Seller, as set forth above, in the development of the Camarillo Creek
Amphitheater and paid by Seller after closing, within thirty (30) days of
submission of such substantiation to Buyer in a form reasonably acceptable to
Buyer, and (iv) $500,000 in cash by wire transfer or certified or cashier's
check on May 15, 1998, in the event that the construction of the Camarillo
Creek Amphitheater by the Company has been completed pursuant to construction
plans and the Company has commenced producing entertainment events in such
amphitheater.

3. The agreement relating to the Acquisition (the "Acquisition Agreement")
shall contain: (i) customary representations and warranties for a transaction
of the proposed nature of the Acquisition including, but not limited to,
representations and warranties regarding (a) Authorization and Binding
Obligation; (b) Taxes; (c) Real Property (including land use and zoning
issues); (d) Contracts; (e) Environmental Matters; (f) Financial Statements;
(g) Personnel Information; (h) Litigation; (i) Compliance with Laws; (j) State
of Title to Assets and Real Property; and (k) Organization and Standing; (ii)
covenants as to the operation of the entities comprising the Target Entities in
the normal course in accordance with good commercial practice and the prior
established practices of the Seller, including but not limited to (a)
maintenance of insurance as appropriate and in accordance with past practices;
(b) preservation of the business relations of the entities comprising the
Target Entities, both contractual and otherwise, with suppliers, customers,
employees and patrons; and (c) the required maintenance of the Target
Entities' physical assets in accordance with governmental regulations and
sound commercial practices; (iii) provisions for the survival of all
representations for a reasonable period after closing (except for
environmental, tax and employment related representations and warranties which
shall survive until the expiration of any applicable statute of limitations
including any voluntary extensions thereof); (iv) customary indemnifications
from the operations of the Seller prior to the closing to Buyer from the Seller
and from the operations of the Buyer after the closing to the Seller from the
Buyer, each of which indemnifications shall not be triggered until at least
$50,000 of claims have accrued; and (v) a provision regarding the proration of
expenses and revenue as of the closing.

<PAGE>

SFX Entertainment, Inc.
March 6, 1998
Page 3

4. The Acquisition Agreement will obligate the Seller to deliver at
closing, among other things, all necessary consents to the Acquisition so that
the Company shall enjoy the same benefits of ownership of the Target Entities
as the Seller currently enjoys, and shall condition the closing of the
Acquisition upon, among other things, (i) the continued truth and accuracy of
the representations and warranties contained in the Acquisition Agreemeent;
(ii) the maintenance of the businesses of the Target Entities free of material
adverse damage or change; (iii) the conduct of the business of the Target
Entities in accordance with present practices; (iv) delivery of customary
legal opinions including, without limitation, a zoning opinion (unless Seller
provides a zoning endorsement to title coverage by Seller's title insurance
company") including, without limitation, public assembly issues; (v) delivery
of consolidated audited financial statements for 1995, 1996 and 1997 from
Arthur Andersen & Co.; (vi) ability to obtain, at standard rates, leasehold
title insurance and delivery by the Target Entities of mortgagee's title
insurance; and (vii) termination of any Hart/Scott-Rodino
Act waiting periods, if applicable.

5. During the period from the date this letter is signed (the "Signing
Date") until the closing, Seller will afford the Buyer full and free access to
the properties, contracts, books and records and all other documents and data
of the Seller relating to the Target Entities so that Buyer can complete its
under diligence examinations of the Target Entities (including environmental and
engineering reviews).

6. At the Closing, the Buyer will assume the existing employment
agreements with each of Brian F. Murphy, dated January 1, 1998, Randy Brogna,
dated January 1, 1998. The Buyer and the other parties thereto will amend such
contracts effective at closing to provide cash incentive compensation and
equity-based incentive compensation commensurate with executives of similar
responsibility in the Company.

7. By executing this Letter Agreement, the Company confirms to the
Seller that it has the financial ability to consummate the Acquisition as
provided for herein or it has the ability to obtain financing for the
Acquisition on terms and conditions satisfactory to the Company. In the event
that the Acquisition is not consummated on or before March 26, 1998, through no
fault of the Seller or the Other Sellers (with "fault" including material
misrepresentations of the Seller or the Other Sellers in the negotiation of
this Letter Agreement and the Acquisition Agreement) (subject to extension for
the sole purpose of obtaining required regulatory approvals), (i) the Company
shall pay to the Seller on such date an amount in cash equal to $1,500,000 and
(ii) the Company shall cause Pavilion Partners, a Delaware general partnership
("Pavilion"), to enter into an amendment to that certain Partnership Agreement
for Western Amphitheater Partners (the "WAP Agreement"), among Pavilion and IMA
Partners, providing that effective as of March 26, 1998, the provisions of (i)
Section 14.01 thereof restricting the right of IMA Partners to sell the Irvine
Meadows Amphitheater, (ii) Section 14.02 thereof offering a second right of
refusal to Pavilion to purchase the partnership interests of IMA Partners, and
(iii) Article 18 thereof restricting the right of IMA Partners to transfer its
interest in Western Amphitheater Partners, shall terminate and shall no longer
be of any force and effect against IMA Partners or its partners.

<PAGE>

SFX Entertainment, Inc.
March 6, 1998
Page 4

8. For the two (2) year period beginning on the date of closing of the
Acquisition, without the prior written consent of the Company, the Seller shall
not, directly or indirectly, either itself or through affiliates, (i) develop,
construct, operate or manage venues within the greater Los Angeles, California
area which shall include, but no be limited to, Los Angeles, Ventura and Santa
Barbara counties, (ii) conduct business operations resulting in aggregate annual
gross revenue from the production or promotion of "at risk" music or concert
productions or promotions in the greater Los Angeles, California area which
exceeds $10,000,000, or (iii) develop, construct, operate or manage a venue in
Portland, Oregon.

9. From the Signing Date to the closing of the Acquisition, the Seller
covenants and agrees that neither it nor any Target Entity shall authorize or
knowingly permit any officer, director, shareholder or employee of, or any
investment banker, attorney, accountant or other representative retained by,
any Target Entity or Seller to make, solicit, initiate, encourage or respond to
a submission of a proposal or offer from any person or entity (other than the
Company or Buyer) relating to any liquidation, dissolution, recapitalization,
merger, consolidation, acquisition or purchase of all or a material portion of
the assets of any Target Entity, or the outstanding equity interests of any
Target Entity, or other similar transaction or business combination involving
any Target Entity (hereinafter collectively referred to as a "Third Party
Offer"). The Sellers will immediately cease and cause to be terminated any
contracts or negotiations currently pending with respect to Third Party Offers,
if any.

10. For the two (2) year period beginning on the date of closing of
the Acquisition, Seller may not, on its own behalf or on behalf of any other
person, partnership, association, corporation, or other entity, hire or solicit
any employee of any Target Entity, or any affiliate thereof, who is an employee
of a Target Entity, or any affiliate thereof, subsequent to the closing of the
Acquisition (an "Employee") or in any manner attempt to influence or induce any
Employee to leave the employment of a Target Entity; provided, however,
nothing in this paragraph 10 shall prevent the Seller from hiring, or
soliciting to hire, any Employee who is terminated by a Target Entity, or any
affiliate thereof, during such two (2) year period. The Company acknowledges
that certain general and administrative employees of the Target Entities may
terminate their employment prior to the closing of the Acquisition. Prior to
the closing, Seller and the Company shall reasonably determine which employees
of the Target Entities shall remain employees of the Target Entities and which
shall be reassigned to other affiliates of Seller.

11. From the Signing Date until the closing of the Acquisition, no
Target Entity may, unless approved in writing by the Company, which approval
shall not be unreasonably withheld, enter into any contract with a value in
excess of $50,000.00 (except artist's agreements) or with a term in excess of
one (1) year. If the Company does not notify the Target Entity of its approval
or disapproval of any matter submitted for its approval pursuant to this
paragraph 11 within three (3) business days after its receipt of a request for
approval, the matter shall have been deemed to have been approved by the
Company.

<PAGE>

SFX Entertainment, Inc.
March 6, 1998
Page 5

12. The Seller, in conjunction with the Other Sellers, has delivered
to the Company the financial statements of the Target Entities as attached on
Exhibit "A" attached hereto (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepting
accounting principles consistently applied throughout the periods covered
thereby and present fairly the financial condition of each of the Target
Entities as of the dates for which they were prepared, and the results of
operations and changes in financial position for such periods.

13. The Company acknowledges that the Seller owns the outstanding
equity of Avalon Entertainment Group, Inc., a Tennessee corporation, which
corporation conducts business under its own name and under the name
"Warner/Avalon", a joint venture with Warner Custom Music Corp. The Company and
Seller agree that upon the closing of the Acquisition, the Company and the
Target Entities will be entitled to continue to operate the businesses of the
Target Entities under their respective names and that Seller, Avalon
Entertainment Group, Inc. and Warner/Avalon will be entitled to continue to
operate their respective businesses under their respective names.

14. Except as set forth in the next five sentences, this Letter
Agreement constitutes a binding agreement between the parties hereto as to the
matters set forth above and will inure to the benefit of the parties and their
respective successors. The execution of this Letter Agreement has been approved
by all necessary corporate action by the Company. Seller submits this Letter
Agreement as evidence of its agreement to the terms set forth herein subject
to approval hereof by its Board of Directors. This Letter Agreement shall not
be binding on Seller until approved by its Board of Directors. Seller submitted
the form of this Letter Agreement to its Board of Directors on February 26,
1998. Should the Board of Directors of TBA Entertainment Corporation fail to
approve the terms and provisions of this Letter Agreement on or before March 20,
1998, the Company may, by notice to Seller, rescind and revoke this Letter
Agreement, without payment or liability, in its sole and absolute discretion.
This letter Agreement contemplates, however, that the parties will negotiate in
good faith and enter into a mutually acceptable definitive Acquisition
Agreement which set forth, among other things, the provisions described in
paragraphs 1 through 13 above. The parties hereto agree to use their best
efforts to close the Acquisition on or prior to March 23, 1998, subject to
extension for the sole purpose of obtaining required regulatory approvals. The
parties hereto agree to cooperate each with the other to expeditiously obtain
such regulatory approvals.

15. Except as otherwise provided herein, this Letter Agreement may be
amended or modified only by a writing executed by all of the parties.

16. The obligations of the Company to close the Acquisition is
conditioned upon the simultaneous closing of the acquisition of the remaining
forty-nine percent (49%) equity interests in the Target Entities from the Other
Sellers as contemplated in the Second Letter Agreement. Should such closings
not occur simultaneously, or should the requirement that both closing occur
simultaneously not be waived by the Company, the Company shall have no
obligation under this Letter Agreement or the Acquisition Agreement
contemplated hereby.

<PAGE>

SFX Entertainment, Inc.
March 6, 1998
Page 6

Prior to the consummation of the transactions contemplated herein, no
party hereto shall make any public release, statement or communication of any
information regarding, or otherwise disclose any information with respect to,
the matters contemplated herein except (i) that a press release in conformity
with SEC disclosure requirements, in a form previously approved by Seller,
shall be issued by the Company and/or Seller if deemed necessary, (ii) that the
parties hereto shall continue such communications with directors, employees,
customers, suppliers, franchisees, lenders, lessors, shareholders, partners and
other particular groups as may be legally required or necessary or appropriate
and not inconsistent with the best interests of the other parties for the
proper consummation of the transactions contemplated herein, and (iii) as
required by law.

Please sign and date this letter in the space provided below to
confirm your understandings and agreements as set forth in this Letter Agreement
and return the signed copy thereof to the undersigned by fax to Thomas Jackson
Weaver III at (901)764-6107 and by return mail to 402 Heritage Plantation Way,
Hickory Valley, Tennessee 38042. If agreed to, the parties shall proceed in
good faith and with collective best efforts to enter into a mutually acceptable
Acquisition Agreement and other related documents.

Each of the Company on the one hand and the Seller on the other hand
will be solely responsible for and bear all of their respective expenses,
including, without limitations, expenses of legal counsel, accountants and other
advisors, incurred at any time in connection with all negotiations and efforts
to enter into the Acquisition Agreement and any other related agreement and the
transactions contemplated thereby. This Letter Agreement may be executed in
counterparts, each of which shall be deemed an original, and such counterparts
shall constitute but one and the same letter.

If this Letter Agreement is accepted, all parties agree to cooperate
promptly and negotiate in good faith in preparation of the Acquisition
Agreement and all other documents to effect this transaction. If the parties
fail to agree on the terms and conditions of the Acquisition Agreement or there
is any other dispute or controversy between the parties with respect to or
arising under this Letter Agreement or any amendment or modification hereof
which has not been resolved within thirty (30) days from the date hereof, such
dispute shall be resolved by arbitration in New York City in accordance with the
Rules for Commercial Arbitration of the American Arbitration's Association
before a panel of three (3) arbitrators, one appointed by the Company, one
appointed by the Seller, and the third appointed by said association. In such
event, the parties shall have the right to submit examples of ordinary and
customary agreements of the nature of the agreements under dispute to the
arbitration panel for review together with this Letter Agreement. The decision
and judgment or order may be entered thereon by any court of competent
jurisdiction and that decision and judgment or order may include termination of
negotiations and this Letter Agreement and specific performance, it being agreed
that the parties prefer specific performance. The service of any notice,
process, motion or other document in connection with any arbitration under this
Letter Agreement or the enforcement of any arbitration award hereunder may be
effectuated either by personal service upon a party or by certified mail duly
addressed to him or it, or to his or its executors, administrators, personal
representatives, successors or assigns, at the last known address or addresses
of such party or parties.

<PAGE>

SFX Entertainment, Inc.
March 6, 1998
Page 7

Sincerely yours,

TBA ENTERTAINMENT CORPORATION

By: /s/ Thomas Jackson Weaver
-----------------------------------
Thomas Jackson Weaver III, Chairman

CONSENTED TO AND AGREED TO FOR PURPOSES OF PARAGRAPH 6 HEREOF:

/s/ Brian F. Murphy
------------------------------------
Brian F. Murphy

/s/ Randy Brogna
------------------------------------
Randy Brogna

/s/ Matt Curto
------------------------------------
Matt Curto

AGREED TO AND ACCEPTED THIS
DAY OF MARCH , 1998:
- ---

SFX ENTERTAINMENT, INC.

By: /s/ Michael G. Ferrel
-----------------------------------
Michael G. Ferrel
President and Chief Executive Officer

<PAGE>
SFX Entertainment, Inc.
March 6, 1998
Page 8

Jointly in by the undersigned to evidence its consent to the
Acquisition and its waiver of its rights under Section 14.02 of the WAP
Agreement.

PAVILION PARTNERS

By: SM/PACE, INC.

By:/s/ Brian Becker
------------------------------
Brian Becker

DB980620015
030998 v8
139-9672-1

<PAGE>

March 9, 1998

SFX Entertainment, Inc.
650 Madison Avenue
New York, New York 10022
Attn: Robert F.X. Sillerman

Re: Acquisition by SFX Entertainment, Inc., a Delaware corporation, or an
affiliate thereof, (as the case may be, "Purchaser"), of one hundred
percent (100%) of the outstanding equity interests in New Avalon,
Inc., and TBA Media, Inc. (collectively d/b/a Avalon Attractions),
Irvine Meadows Amphitheater and West Coast Amphitheater Corp. (each, a
"Company," collectively, the "Companies") owned severally by Shelli
Meadows, Inc., Audrey & Jane, Inc. and Peach Street Partners, Ltd.,
Robert E. Geddes, Thomas Miserendino and Brian F. Murphy (each a
"Seller", collectively, "Sellers"), which equity interests represent
forty-nine percent (49%) of the outstanding equity interest of each of
the Companies

Gentlemen:

This letter agreement (this "Letter Agreement") is intent to set forth
the agreement between Sellers and Purchaser on the terms set forth herein and in
the definitive Acquisition Agreement referred to in paragraph 3 hereof regarding
Purchaser's acquisition of one hundred percent (100%) of the equity interests in
the Companies owned severally by Sellers, which equity interests represent
forty-nine percent (49%) of the outstanding equity interest of each of the
Companies. Sellers represent that the remaining fifty-one percent (51%) of the
equity interests in the Companies is owned by TBA Entertainment Corporation
("TBAEC").

Subject to the conditions set forth herein, Purchaser and Sellers agree
as follows:

1. Purchaser will purchase (the "Acquisition") from Seller (i)
partnership interests representing forty-nine percent (49%) partnership interest
in Irvine Meadows Amphitheater, a California general partnership ("IMA
Partners"), and (ii) forty-nine percent (49%) of the capital stock or other
equity interests in each of New Avalon, Inc., a California corporation, TBA
Media, Inc., a California corporation and West Coast Amphitheater Corp., a
California corporation (collectively, the "Sellers' Interest"). Robert E.
Geddes ("Mr. Geddes") represents that the Companies represent all of the "at
risk" music and concert production or promotion businesses and the business
involved in the development of the amphitheater proposed to be constructed in
Camarillo, California (the

<PAGE>

SFX Entertainment, Inc.
March 9, 1998
Page 2.

"Camarillo Creek Amphitheater") in which he has an ownership interest,
management interest, or from which he derives any economic advantage, other
than his interest in TBAEC. Purchaser shall have the right to condition its
obligations under the Acquisition Agreement upon the termination prior to the
closing of any contract between any of the Companies and any affiliate of any
of the Companies or of any of Sellers or TBAEC on terms such that Purchaser
shall have no liability with respect to such termination.

2. The aggregate purchase price (the "Purchase Price") payable to
Sellers as a group for the acquisition of Sellers' Interests and the covenants
not to compete will be $17,330,000. The Purchase Price payable to Sellers shall
be payable in multiple installments: (i) $16,830,00 in cash by wire transfer or
certified or cashier's check at closing, and (ii) $500,000 in cash by wire
transfer or certified or cashier's check on May 15, 1998, in the event that
the construction of the Camarillo Creek Amphitheater by Purchaser has been
completed pursuant to construction plans and Purchaser has commenced producing
entertainment events in such amphitheater. The Purchase Price shall be
allocated among Sellers in accordance with separate agreements among themselves.

3. The agreement relating to the Acquisition (the "Acquisition
Agreement") will contain: (i) customary representations and warranties for a
transaction of the proposed nature of the Acquisition including, but not
limited to, representations and warranties regarding (a) Authorization and
Binding Obligation; (b) Taxes; (c) Real Property (including land use and
zoning issues); (d) Contracts; (e) Environmental Matters; (f) Financial
Statements; (g) Personal Information; (h) Litigation; (i) Compliance with the
Laws; (j) State of Title to Assets and Real Property; and (k) Organization and
Standing; (ii) conditions relating to the operation of the entities comprising
the Companies in the normal course in accordance with good commercial practice
and prior established practices of the Companies, including but not limited to
(a) maintenance of insurance as appropriate and in accordance with past
practices; (b) preservation of the business relations of the Companies, both
contractual and otherwise, with suppliers, customers, employees and patrons;
and (c) maintenance of the Companies' physical assets in accordance with
governmental regulations and sound commercial practices; (iii) provisions
for the survival of all representations for a reasonable period after closing
(except that environmental-related representations and warranties shall survive
for a period of four years and tax and employment related representations and
warranties shall survive until the expiration of any applicable statute of
limitations including any voluntary extensions thereof); (iv) customary
indemnifications for the benefit of Purchaser with respect to the operations of
the Companies prior to the closing and for benefit of Sellers with respect to
the operations of the Companies after the closing, which indemnifications shall
not be triggered until at least $50,000 of claims have accrued and, as to
Sellers, shall be prorated in proportion to

<PAGE>

SFX Entertainment, Inc.
March 9, 1998
Page 3.

their respective interests in the total outstanding equity interests in the
Companies; (v) a provision regarding the proration of expenses and revenue as of
the closing; and (vi) an allocation of the Purchase Price.

4. The closing of the Acquisition will be conditioned upon the
delivery by Sellers to Purchaser at the closing of all necessary consents to
the Acquisition so that Purchaser shall enjoy the same benefits of ownership
of the Companies as Sellers currently enjoy, and shall condition the closing
of the Acquisition upon, among other things; (i) the continued truth and
accuracy of the representations and warranties contained in the Acquisition
Agreement; (ii) the maintenance of the businesses of the Companies free of
material adverse damage of change; (iii) the continued conduct of the
business of the Companies in accordance with present practices; (iv) the
delivery of customary legal opinions including, without limitation, a zoning
opinion (unless Sellers provide a zoning endorsement to title coverage by
Seller's title insurance company); (v) the delivery of consolidated audited
financial statements for 1995, 1996 and 1997 from Arthur Andersen & Co.; (vi)
Purchaser's ability to obtain, at standard rates, leasehold title insurance;
and (vii) the termination of any Hart-Scott-Rodino Act waiting periods, if
applicable.

5. During the period from the date this letter is signed (the "Signing
Date") until the closing, Sellers will afford Purchaser full and free access to
the properties, contracts, books and records and all other documents and data
of Sellers relating to the Companies so that Purchaser can complete its
due diligence examinations of the Companies (including environmental and
engineering reviews).

6. Mr. Geddes agrees that following the closing through the earlier of
completion of development of the Camarillo Creek Amphitheater of December 31,
1998, he will provide consulting services to Purchaser with respect to such
development at such times and on such terms as Purchaser and Mr. Geddes may
reasonably determine; provided, however, that Mr. Geddes shall assume no
liability with respect to such services and Purchaser shall agree to indemnify
Mr. Geddes from and against and all liabilities that may arise with respect
to the development of the Camarillo Creek Amphitheater, except for liabilities
that may arise with respect to Mr. Geddes' gross negligence of wilful misconduct
or that are a result of a material misrepresentation of Mr. Geddes in the
Acquisition Agreement.

7. At the Closing, Purchaser will, subject to receipt of the approval
of the Companies, offer the assume the Companies' existing employment
agreements with each of Brian F. Murphy, dated January 1, 1998, Randy Brogna,
dated January 1, 1998, and Matt

<PAGE>

SFX Entertainment, Inc.
March 9, 1998
Page 4.

Curro, dated January 1, 1998. In that event, Purchaser and the other parties
thereto will amend such contracts effective at closing to provide cash incentive
compensation and equity-based incentive compensation commensurate with
Purchaser's executives having similar responsibility.

8. Purchaser confirms to Sellers that it has the financial ability to
consummate the Acquisition as provided for herein or has the ability to obtain
financing for the Acquisition on terms and conditions satisfactory to Purchaser.

9. For the two (2) year period beginning on the date of closing of the
Acquisition, without the prior written consent to Purchaser, except for Brian
F. Murphy's employment, if any, with Purchaser, Sellers shall not, directly or
indirectly, as a director, officer, agent, employee, consultant, or independent
contractor, or in any other individual or representative capacity (i) develop,
construct, operate or manage venues within the greater Los Angeles, California
area which shall include, but not be limited to, Los Angeles, Ventura and
Santa Barbara Counties, (ii) act in any such capacity with any business
engaged in the production or promotion of "at risk" music or concert
productions or promotions in the greater Los Angeles, California area, or
(iii) develop, construct, operate or manage a venue in Portland, Oregon. It is
specifically understood that Irving Azoff is not subject to any obligation
under this paragraph 9.

10. From the Signing Date to the closing of the Acquisition, Sellers
covenant and agree that no Seller shall authorize or knowingly permit any
officer, director, shareholder or employee of, or any investment banker,
attorney, accountant or other representative retained by, any Seller to make,
solicit, initiate, encourage or respond to a submission of a proposal or offer
from any person or entity (other than Purchaser or Purchaser) relating to the
liquidation, dissolution, recapitalization, merger, consolidation, acquisition
or purchase of all or a material portion of the assets of any of the Companies,
or the outstanding equity interests of any of the Companies, or other similar
transaction or business combination involving any of the Companies
(hereinafter collectively referred to as a "Third Party Offer"). Sellers will
immediately cease and cause to be terminated any contracts or negotiations
currently pending with respect to Third Party Offers, if any.

11. For the two (2) year period beginning on the date of closing of the
Acquisition, no Seller may, on his or its own behalf or on behalf of any other
person, partnership, association, corporation, or other entity, hire or solicit
any employee of any of the Companies, or any affiliate thereof, who is an
employee of any of the Companies, or any affiliate thereof, subsequent to the
closing of the Acquisition (an "Employee") or in any manner attempt to influence
or induce any Employee to leave the employment of any of the Companies;
provided, however, nothing in this paragraph 11 shall prevent a Seller

<PAGE>

SFX Entertainment, Inc.
March 9, 1998
Page 5.

from hiring, or soliciting to hire, any Employee who is terminated by any of
the Companies, or any affiliate thereof, during such two (2) year period.
Purchaser acknowledges that certain general and administrative employees of the
Companies may terminate their employment prior to the closing of the
Acquisition.

12. Purchaser's obligations under the Acquisition Agreement is subject
to the condition that, from the Signing Date until the closing of the
Acquisition, none of the Companies will, unless approved in writing by
Purchaser, which approval shall not be unreasonably withheld, enter into any
contract with a value in excess of $50,000.00 (except artist's agreements) or
with a term in excess of one (1) year. If Purchaser does not notify Sellers of
its approval or disapproval of any matter submitted for its approval pursuant
to this paragraph 12 within three (3) business days after its receipt of a
request for approval, the matter shall have been deemed to have been approved
by Purchaser.

13. Financial statements of the Companies are attached on Exhibit "A"
attached hereto (collectively, the "Financial Statements"). To the knowledge of
Sellers, the Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods covered thereby. The Financial Statements present fairly the financial
condition of each of the Companies as of the dates for which they were
prepared, and the results of operations and changes in financial position for
such periods.

14. This Letter Agreement constitutes a binding agreement between the
parties hereto as to the matters set forth above and will inure to the benefit
of the parties and their respective successors and assigns. The execution of
this Letter Agreement has been approved by all necessary organizational action
by each of the organization signatories hereto. This Letter Agreement
contemplates, however, that the parties will negotiate in good faith and enter
into a mutually acceptable definitive Acquisition Agreement which sets forth,
among other things, the provisions described in paragraphs 1 through 13 above.

15. The parties hereto agree to use their best efforts to close the
Acquisition on or prior to March 23, 1998, subject to extension for the sole
purpose of obtaining required regulatory approvals. The parties hereto agree to
cooperate to expeditiously obtain such regulatory approvals. In the event that
the Acquisition is not consummated on or before March 26, 1998, through no
fault of Sellers (with "fault" including material misrepresentations of Sellers
in the negotiation of this Letter Agreement and the Acquisition Agreement)
subject to extension for the sole purpose of obtaining required regulatory
approvals), (i) Purchaser shall pay to Sellers on such date an amount in cash
equal to $1,500,000 and (ii) Purchaser shall, at the request of IMA Partners,
cause Pavilion Partners, a Delaware general partnership ("Pavilion"), to enter
into an amendment to that

<PAGE>

SFX Entertainment, Inc.
March 9, 1998
Page 6.

certain Partnership Agreement for Western Amphitheater Partners (the "WAP
Agreement"), among Pavilion and IMA Partners, providing, solely as it relates
to Sellers, that effective as of March 26, 1998, the provisions of (i) Section
14.01 thereof restricting the right of IMA Partners to sell the Irvine Meadows
Amphitheater, (ii) Section 14.02 thereof offering a second right of refusal to
Pavilion to purchase the partnership interests of IMA Partners, and (iii)
Article 18 thereof restricting the right of IMA Partners to transfer its
interest in Western Amphitheater Partners, shall terminate and shall no longer
be of any force and effect against IMA Partners or its partners.

16. Except as otherwise provided herein, this Letter Agreement may be
amended or modified only by a writing executed by all of the parties.

Prior to the consummation of the transactions contemplated herein, no
party hereto shall make any public release, statement or communication of any
information regarding, or otherwise disclose any information with respect to,
the matters contemplated herein except (i) that the parties hereto shall
continue such communications with directors, employees, customers, suppliers,
franchisees, lenders, lessors, shareholders, partners and other particular
groups as may be legally required or necessary or appropriate and not
inconsistent with the best interests of the other parties for the proper
consummation of the transactions contemplated herein, and (ii) as required by
law.

Please sign and date this letter in the space provided below to
confirm your understandings and agreements as set forth in this Letter
Agreement and return the signed copy thereof to the undersigned by fax to Mr.
Geddes at (818) 758-2544 and by return mail to 17835 Ventura Boulevard, Suite
300, Encino California 91316. If agreed to, the parties shall proceed in good
faith and with collective best efforts to enter into a mutually acceptable
Acquisition Agreement and other related documents.

Each of Purchaser on the one hand and Sellers on the other hand will
be solely responsible for and bear all of their respective expenses, including,
without limitations, expenses of legal counsel, accountants and other advisors,
incurred at any time in connection with all negotiations and efforts to enter
into the Acquisition Agreement and any other related agreement and the
transactions contemplated thereby. This Letter Agreement may be executed in
counterparts, each of which shall be deemed and an original, and such
counterparts shall constitute but one and the same letter.

<PAGE>

SFX Entertainment, Inc.
March 9, 1998
Page 7.

between the parties with respect to or arising under this Letter Agreement or
any amendment or modification hereof that has not been resolved within thirty
(30) days from the date hereof, such dispute shall be resolved by arbitration
in Los Angeles, California in accordance with the Rules for Commercial
Arbitration of the American Arbitration's Association before a panel of three
(3) arbitrators, one appointed by Purchaser, one appointed by Sellers, and
the third appointed by said association. In such event, the parties shall have
the right to submit examples of ordinary and customary agreements of the
nature of the agreements under dispute to the arbiration panel for review
together with this Letter Agreement. The decision and judgment or other may
be entered thereon by any court of competent jurisdiction and that decision and
judgment or order may include termination of negotiations and this Letter
Agreement and specific performance, it being agreed that the parties prefer
specific performance. The service of any notice, process, motion or other
document in connection with any arbitration under this Letter Agreement or the
enforcement of any arbitration award hereunder may be effected either by
personal service upon a party or by certified mail duly addressed to him or it,
or to his or its executors, administrators, personal representatives,
successors or assigns, at the last known address or addresses of such party or
parties.

Sincerely yours,

SHELLI MEADOWS, INC.*

By: /s/ Irving Azoff
--------------------------------
Irving Azoff, President
(*With respect to IMA Partners)

PEACH STREET PARTNERS, LTD.*

By: Imus, Inc., its general partner

By: /s/ Paul C. Hegness
--------------------------------
Paul C. Hegness, President
(*With respect to IMA Partners)

<PAGE>

SFX Entertainment, Inc.
March 9, 1998
Page 8.

AUDREY & JANS, INC.*

By: /s/ Robert E. Geddes
--------------------------------
Robert E. Geddes, President
(*With respect to IMA Partners)

/s/ Robert E. Geddes
-----------------------------------
(*With respect to New Avalon, Inc.,
TBA Media, Inc., and West Coast
Amphitheater Corp.)

/s/ Thomas Miserendino
-----------------------------------
Thomas Miserendino*
(*With respect to New Avalon, Inc.,
TBA Media, Inc. and West Coast
Amphitheater Corp.)

/s/ Brian F. Murphy
-----------------------------------
Brian F. Murphy*
(*With respect to New Avalon, Inc.,
TBA Media, Inc. and West Coast
Amphitheater Corp.)

<PAGE>

SFX Entertainment, Inc.
March 9, 1998
Page 9.

AGREED TO AND ACCEPTED THIS
___ DAY OF MARCH, 1998:

SFX ENTERTAINMENT, INC.

By: /s/ Michael G. Ferrell
----------------------------
Michael G. Ferrell,
President and Chief Executive Officer

Joined in by the undersigned to evidence its consent to the Acquisition
and its waiver of its rights under Section 14.02 of the WAP Agreement.

PAVILION PARTNERS

By: SM/PACE, Inc.

By: /s/ Brian Becker
-----------------------
Brian Becker

<PAGE>

March 9, 1998

SFX Entertainment, Inc.
650 Madison Avenue
New York, NY 10022

Gentlemen:

This letter shall serve as an amendment to that certain Letter Agreement of
such date herewith between the parties hereto (the "Agreement").

Notwithstanding any provision of the Agreement to the contrary, the obligation
of Purchaser (as that term is defined in the Agreement) to close the
transactions contemplated by the Agreement shall be conditioned upon the
simultaneous closing by the Purchaser of interests representing 100% of the
partnership interests or equity in each of the Companies (as defined in the
Agreement).

This letter may be executed in multiple counterparts, each of which shall be
deemed an original, and such counterparts shall constitute one and the same
letter.

Sincerely yours,

Agreed and Accepted: /s/ Irving Azoff
--------------------------
SFX ENTERTAINMENT, INC. IRVING AZOFF*
(*With respect to Shelli Meadows, Inc.)

By: /s/ Michael G. Ferrell
------------------------ /s/ Robert E. Geddes
Name: --------------------------
Title: ROBERT E. GEDDES
(*With respect to Audrey & Jane, Inc.,
New Avalon, Inc., TBA Media, Inc. and

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated (i) March 5, 1998, except for Notes 1 and 11 as
to which the date is April 27, 1998, with respect to the consolidated
financial statements of SFX Entertainment, Inc.; (ii) October 2, 1997 with
respect to the consolidated financial statements of Delsener/Slater, Ltd. and
Affiliated Companies; (iii) December 13, 1996 with respect to the
consolidated financial statements of PACE Entertainment Corporation and
Subsidiaries; (iv) March 20, 1998 with respect to the combined financial
statements of the Contemporary Group; (v) March 18, 1998 with respect to the
combined financial statements of SJS Entertainment Corporation; (vi) November
20, 1997 with respect to the combined financial statements of The Album
Network, Inc. and Affiliated Companies; (vii) March 20, 1998 with respect to
the consolidated financial statements of BG Presents, Inc. and Subsidiaries;
(viii) March 13, 1998 with respect to the combined financial statements of
Concert/Southern Promotions and Affiliated Companies; (ix) April 10, 1998
with respect to the combined financial statements of Falk Associates
Management Enterprises, Inc. and (x) May 1, 1998 with respect to the
combined financial statements of Blackstone Entertainment LLC, all
included in Amendment No. 1 to the Registration Statement (Form S-1, No.
333-50079) and related Prospectus of SFX Entertainment, Inc. for the
registration of shares of its Class A Common Stock.

/s/ Ernst & Young LLP
Ernst & Young LLP

New York, New York
May 4, 1998

<PAGE>
EXHIBIT 23.3

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
on the combined financial statements of Connecticut Performing Arts, Inc. and
Connecticut Performing Arts Partners (and to all references to our Firm)
included in or made a part of Amendment No. 1 to the Registration Statements
on Form S-1 File No. (333-50079), to be filed on or about May 4, 1998, and
the Registration Statement relating to certain rescission offers, to be filed
on or about the same time.

/s/ Arthur Andersen LLP

Hartford, Connecticut
May 4, 1998

<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports on the consolidated financial statements of PACE Entertainment
Corporation and subsidiaries dated December 15, 1997 (except with respect to
the matters discussed in Note 12, as to which the date is December 22, 1997)
and Pavilion Partners dated December 15, 1997 (except with respect to the
matters discussed in Note 11, as to which the date is December 22, 1997), and
to all references to our Firm included in or made a part of this Amendment
No. 1 to Form S-1 Registration Statement (No. 333-50079) of SFX Entertainment,
Inc.

/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP

Houston, Texas
May 4, 1998

<PAGE>

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
on the combined financial statements of Deer Creek Partners, L.P. (formerly
Sand Creek Partners, L.P.) and Murat Centre, L.P. dated September 29, 1997
(and to all references to our Firm) included in or made a part of Amendment
No. 1 to the Registration Statement of SFX Entertainment, Inc. on Form S-1
File No. 333-50079, to be filed on or about May 4, 1998, and the Registration
Statement of SFX Entertainment, Inc. relating to certain rescission offers, to
be filed on or about the same date.

/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP

Indianapolis, Indiana,
April 30, 1998

<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
on the combined financial statements of Riverport Performing Arts Centre
included in or made a part of Amendment No. 1 to the Registration Statement
on Form S-1 File No. (333-50079), to be filed on or about May 4, 1998,
and the Registration Statement relating to certain rescission offers,
to be filed on or about the same date.

/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP

St. Louis, Missouri
May 4, 1998

<PAGE>
EXHIBIT 23.4

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Amendment No. 1 to the Registration Statement on Form S-1 (No. 333-50079) of
our report dated December 12, 1996, relating to the financial statements of
Pavilion Partners, which appears in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.

/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP

Houston, Texas
May 4, 1998

<PAGE>
CONSENT

The undersigned hereby consents, pursuant to Rule 438 promulgated under
the Securities Act of 1933, as amended, to his being named as about to become
a director of SFX Entertainment, Inc. in such company's Registration
Statement on Form S-1.

Dated as of: April 30, 1998

/s/ David Falk
--------------------------------
David Falk