SFX ENTERTAINMENT INC, 10-K/A, 2000-04-28

SFX ENTERTAINMENT INC
10-K/A, 2000-04-28
AMUSEMENT & RECREATION SERVICES

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File Number: 000-24017

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

SFX ENTERTAINMENT, INC.
(Exact name of Registrant as Specified in its Charter)

DELAWARE 13-3977880
(State or other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)

650 MADISON AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10022
(Address of Principal Executive Offices) (Zip Code)

(212) 838-3100
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
- -------------------------------------------------------------------------------
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ----------------------------------------------------- ------------------------
Class A Common Stock, par value $.01 per share New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
---------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

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

Aggregate market value as of the close of business on March 28, 2000 of
the registrant's Class A Common Stock held by non-affiliates of the registrant
was approximately $2.3 billion. The closing price of the Class A Common Stock
on March 28, 2000, as reported on the New York Stock Exchange was $39 7/8 per
share.

The number of shares of the registrant's Class A Common Stock, $.01 par
value, and Class B Common Stock, $.01 par value, outstanding as of March 28,
2000 was 64,248,585 and 2,545,557, respectively.

- --------------------------------------------------------------------------------
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EXPLANATORY NOTE

This Form 10-K/A is being filed solely to include the information set
forth in Part III of this Report, which was omitted from the original Form 10-K
in accordance with applicable rules and regulations. The information contained
in Parts I, II and IV of this Report has been included from the original Form
10-K filing and has not been updated to reflect events since the date of such
filing.
<PAGE>

CROSS REFERENCE SHEET
AND
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE NUMBER
PART I OR REFERENCE
<S> <C> <C>
Item 1. Business ................................................................. 1
Item 2. Properties ............................................................... 20
Item 3. Legal Proceedings ........................................................ 20
Item 4. Submission of Matters to a Vote of Security Holders ...................... 21
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters .................................................................. 21
Item 6. Selected Consolidated Financial Data of SFX .............................. 22
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................... 23
Item 7A. Quantitative and Qualitative Disclosure About Market Risk ................ 43
Item 8. Financial Statements and Supplementary Data .............................. 43
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ..................................................... 43
PART III
Item 10. Directors and Executive Officers of the Registrant ....................... 44
Item 11. Executive Compensation ................................................... 48
Item 12. Security Ownership of Certain Beneficial Owners and Management 53
Item 13. Certain Relationships and Related Transactions ........................... 56
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .......... 60
</TABLE>

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PART I

In this Report, when we use the terms "SFX", "we","us", and "our", unless
otherwise indicated or the content otherwise requires, we are referring to SFX
Entertainment, Inc. and its consolidated subsidiaries. Substantially all of
SFX's operations are conducted through its subsidiaries. Certain disclosures
included in this Report constitute forward-looking statements that are subject
to risk and uncertainty. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Safe Harbor for
Forward-Looking Statements" and "-- Risk Factors."

ITEM 1. BUSINESS

GENERAL

SFX is the world's largest diversified promoter, producer and venue
operator for live entertainment events. In addition, SFX is a leading fully
integrated sports marketing and management company specializing in the
representation of sports athletes and broadcasters, integrated event
management, television programming and production and marketing consulting
services. SFX operates the largest network of venues used principally for music
concerts and other live entertainment events in the United States, with 92
venues in 31 of the top 50 markets. These venues include 17 amphitheaters in
the top 10 markets and 9 venues principally used for theatrical presentations.
In addition, SFX owns or operates 28 international venues used primarily for
theatrical presentations, principally in the United Kingdom.

Through its large number of venues and strong presence in each of the
markets it serves, SFX is able to provide integrated promotion, production and
venue operation and event management services for a broad variety of live
entertainment events. During 1999, SFX and the companies it acquired during
1999, promoted or produced over 23,000 events, including more than 7,700 music
concerts, 13,500 theatrical shows, 1,500 family entertainment shows and 500
specialized sport events. Nearly 60 million people attended these events.

SFX operates in four major business segments within the live entertainment
industry: music, theater, sports and family entertainment & other. The
following table presents each division's percentage of SFX's total revenues for
the year ended December 31, 1999:

PERCENTAGE OF
SEGMENTS REVENUES
- ---------------------------------------- --------------
Music ................................ 58.0%
Theater .............................. 17.2
Sports ............................... 8.4
Family Entertainment & Other ......... 16.4
----
Total ................................ 100%
====

For financial information about SFX's business segments, see Note 12 to
SFX's consolidated financial statements.

SFX'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 SFX and in third-party venues.

As promoter, SFX typically:

o books talent or tours in an individual market;

o sells tickets and advertises the event to attract ticket buyers;

o rents or otherwise provides event venues;

o arranges for local production services, such as stage, set, sound and
lighting; and

o sells event sponsorships.

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As producer, SFX typically:

o develops event content;

o hires artistic talent;

o schedules performances in select venues;

o promotes tours; and

o sells sponsorships.

SFX has benefited from significant growth in the live entertainment
industry over the last several years. SFX believes that its ability to provide
integrated production, promotion, venue operation and event management services
will encourage wider use of its venues by performers. SFX further believes that
this ability will allow SFX to capture a greater percentage of revenues
generated by those events and may contribute to the overall growth of the live
entertainment industry. When SFX promotes an event at a venue which it owns or
manages, in addition to promotion revenue, it generally receives a percentage
of revenues from concessions, merchandising, parking and premium box seats.

PROPOSED MERGER WITH CLEAR CHANNEL COMMUNICATIONS, INC.

On February 29, 2000, SFX announced that it had entered into a definitive
merger agreement with Clear Channel Communications, Inc. Under the terms of the
merger agreement, the Class A shareholders of SFX will receive 0.6 shares of
Clear Channel Communications, Inc. common stock for each SFX share, and Class B
shareholders of SFX will receive one share of Clear Channel Communications,
Inc. common stock for each SFX share, on a fixed exchange basis. The proposed
merger would require an amendment to SFX's certificate of incorporation to
allow the unequal consideration being paid to holders of Class A and Class B
Common Stock. The transaction is expected to be consummated early in the third
quarter of 2000, subject to the approval of the Class A and Class B
shareholders of SFX, customary regulatory approvals and other closing
conditions. For more information regarding the terms of the merger, please
refer to the Agreement and Plan of Merger, which has been incorporated by
reference as an exhibit to this Report. The information included in this Report
is being presented by SFX without input from Clear Channel and without
consideration of Clear Channel's plans following the merger. No assurances can
be given that the merger will be consummated, on the terms currently
contemplated, or at all.

Clear Channel is a public company and is therefore subject to the
informational reporting requirements of the Securities Exchange Act of 1934.
Accordingly, information regarding the business and operations of Clear Channel
is filed with the Securities and Exchange Commission and is publicly available.

FORMATION OF SFX

SFX's predecessor, SFX Concerts, Inc., was formed in January 1997 by SFX's
former parent, SFX Broadcasting, Inc. On April 27, 1998, SFX was spun-off from
SFX Broadcasting and became a separate publicly traded company. Since its
formation, SFX has grown rapidly through acquisitions.

The following is a summary of the material businesses acquired by SFX in
1997, 1998, 1999 and the first quarter of 2000. The following summaries 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 certain
of these acquisition agreements are filed as exhibits to this Report and are
incorporated herein by reference. For additional information regarding the
acquisitions, refer to Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

1997 ACQUISITIONS

DELSENER/SLATER

In January 1997, SFX Concerts acquired Delsener/Slater, a leading concert
promotion company. 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.

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MEADOWS

In March 1997, SFX Concerts acquired certain companies which own and
operate the Meadows Music Theater, an amphitheater located in Hartford,
Connecticut.

SUNSHINE PROMOTIONS

In June 1997, SFX Concerts acquired Sunshine Promotions, one of the
largest concert promoters in the Midwest. Sunshine Promotions owns
amphitheaters located in Indianapolis, Indiana and Columbus, Ohio, and has a
long-term lease to operate a theater and ballroom located in Indianapolis,
Indiana.

1998 ACQUISITIONS

WESTBURY

On January 8, 1998, SFX acquired a long-term lease for Westbury Music
Fair, located in Westbury, New York.

BGP

On February 24, 1998, SFX acquired Bill Graham Presents, the principal
promoter of live entertainment in the San Francisco Bay area. BGP owns and/or
operates six venues in the San Francisco area and one in Denver, Colorado.

PACE AND PAVILION PARTNERS

On February 25, 1998, SFX acquired PACE Entertainment Corporation, one of
the largest diversified promoters and producers of live entertainment in the
U.S. PACE has what SFX believes to be the largest distribution network in each
of its music, theater and motor sports events business segments. In connection
with the acquisition of PACE, SFX obtained 100% of Pavilion, a partnership that
owns interests in entertainment venues, by acquiring one-third of Pavilion
through the acquisition of PACE and the remaining two-thirds of Pavilion from
third parties.

CONTEMPORARY

On February 27, 1998, SFX acquired by merger and asset acquisition the
music concert and related businesses of the Contemporary Group and the
remaining 50% interest in the Riverport Amphitheater Joint Venture not then
owned by Contemporary. 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.

NETWORK

On February 27, 1998, SFX acquired Album Network, Inc., SJS Entertainment
Corporation and the assets of The Network 40 (collectively, "Network") as well
as an office building and related property. 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, SFX acquired Concert/Southern Promotions, a promoter of
live entertainment in the Atlanta metropolitan area.

USA MOTOR SPORTS

On March 25, 1998, PACE acquired the remaining 67% interest in certain
assets and liabilities of USA Motor Sports. The other 33% of USA Motor Sports
was held by Contemporary at the time of its acquisition by SFX.

AVALON

On May 14, 1998, SFX acquired Avalon, a leading promoter and producer of
music concerts in the Los Angeles area.

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OAKDALE

On June 3, 1998, SFX acquired certain assets of Oakdale Concerts. Oakdale
is a promoter and producer of music concerts in Connecticut and the owner of
the Oakdale Theater, a 4,800-seat facility located in Wallingford, Connecticut.

FAME

On June 4, 1998, SFX acquired Falk Associates Management Enterprises, Inc.
("FAME"), a leading full-service marketing and management company that
specializes in the representation of team sports athletes, primarily in
professional basketball.

DON LAW

On July 2, 1998, SFX acquired certain assets of Don Law, a concert and
theater promoter in New England. Don Law owns and/or operates three venues in
New England.

MAGICWORKS

On September 11, 1998, SFX acquired Magicworks Entertainment, Inc., a
publicly traded company. Magicworks specializes in the production and promotion
of live entertainment events including theatrical shows, music concerts and
ice-skating shows. Magicworks also provides representation and sports marketing
services to professional athletes in such sports.

OTHER 1998 ACQUISITIONS

In 1998, SFX also completed the acquisition of seven additional companies
in the theatrical and music segments. The seven acquisitions included two
concert promotion companies, two theatrical presenters, a theatrical presenter
and venue owner/operator, a concert merchandising company and an equity owner
of an SFX amphitheater.

1999 ACQUISITIONS

RZO

On January 11, 1999, SFX acquired The RZO Companies, a group of companies
involved in the promotion and production of international music concert tours
and the music publishing business.

THE ENTERTAINMENT GROUP

On February 5, 1999, SFX acquired The Entertainment Group, a Chicago-based
promoter. Concurrent with the acquisition, SFX entered into a ten-year
agreement with the Village of Rosemont in suburban Chicago to provide booking,
group sales and marketing services for the Rosemont Horizon, a 17,500-seat
arena, and the Rosemont Theater, a 4,000-seat venue.

CELLAR DOOR

On February 19, 1999, SFX acquired the Cellar Door group of companies.
Cellar Door is a leading promoter of live entertainment events in the Southeast
and Midwest. Cellar Door owns and/or operates venues from Virginia to Florida,
promoting concerts in most of the major markets in this region. Cellar Door
also operates venues and promotes concerts in Michigan, Wisconsin and Ohio.

ISI

On January 26, 1999, SFX acquired the assets of Integrated Sports
International, L.P. ISI is a full-service marketing company utilizing a
completely integrated approach in the development of client programs. ISI
provides:

o corporate consulting and property marketing services;

o athletic/celebrity marketing and representation;

o team and venue services;

o event planning and management; and

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o licensing and merchandising services.

NEDERLANDER

On March 16, 1999, SFX acquired certain interests in seven venues and
other assets from entities controlled by members of the Nederlander family and
other persons. The interests in the venues acquired consist of:

o long-term leases and booking and management agreements for The World
Music Theatre in Chicago and the Alpine Valley Music Amphitheatre in East
Troy, Wisconsin, serving the Milwaukee/North Chicago market;

o a long-term lease for the Merriweather Post Pavilion in Columbia,
Maryland, serving the Washington D.C. and Baltimore market;

o an operating agreement for the Riverbend Amphitheater and a booking
agreement with the Firstar Arena in Cincinnati, Ohio; and

o a long-term lease for the Taft Theater, and a short-term lease for
Bogart's Club, both located in Cincinnati, Ohio.

In addition, SFX acquired entities that produce music festivals and hold
rights to construct the Mesa del Sol Centre for the Performing Arts in
Albuquerque, New Mexico.

MARQUEE

On March 16, 1999, a subsidiary of SFX was merged with and into The
Marquee Group, Inc. and Marquee became a wholly owned subsidiary of SFX.
Marquee provides:

o integrated event management;

o talent representation and consulting services in the sports and
entertainment industries;

o marketing services; and

o television programming and production.

AL HAYMON

On June 20, 1999, SFX acquired 50% of A.H. Enterprises, an entity owned
and operated by Al Haymon. Al Haymon is the preeminent pop urban music promoter
in the U.S. In January 2000, SFX increased its ownership interest in A.H.
Enterprises to 60%.

HENDRICKS

On June 28, 1999, SFX acquired Hendricks Management Company, Inc.
Hendricks is a leading full-service marketing and management company that
specializes in the representation of professional baseball athletes.

CANDID

On July 8, 1999, SFX acquired Candid Productions, Inc. from Dick Button.
Candid promotes and produces figure skating events.

LIVENT

On August 27, 1999, SFX acquired certain assets of Livent Inc. and its
affiliates. These assets include three theaters and the intellectual property
rights to several current and future Broadway productions. The theaters, which
Livent owned or held under long-term leases, are the Ford Center in New York,
the Ford Oriental Theatre in Chicago and the Pantages Theatre in Toronto.

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CFA

On September 7, 1999, SFX acquired a 50% interest in Cardenas Fernandez &
Associates, Inc, a leading concert promoter and producer of music concerts by
Hispanic artists.

APOLLO

On September 17, 1999, SFX acquired Apollo Leisure Group plc, the largest
live theater operator as well as one of the largest providers of entertainment
and leisure management services in the United Kingdom. Apollo operates, among
other things, three arenas, a network of 23 theaters and 16 multiplex cinema
houses. Apollo owns Tickets Direct, a telephone operator-based ticketing system
which handled approximately 2.7 million tickets sales in 1999. Apollo also
holds a 62% interest in City Center Leisure (Holdings) Limited, which operates
fitness facilities for local authorities and a 50% interest in Barry Clayman
Corporation Limited, a leading promoter of concert and other live entertainment
events in the U.K. In conjunction with its acquisition of Apollo, SFX acquired
the remaining 50% interest of Barry Clayman Corporation Limited not then owned
by Apollo.

MCP

On September 20, 1999, SFX acquired Midland Concert Promotions Group
Limited, a concert promoter and motor sports venue operator in the United
Kingdom.

TELLEM

On September 29, 1999, SFX acquired Tellem & Associates, which represents
team sports athletes, primarily in professional baseball and basketball.

EMA TELSTAR

On October 4, 1999, SFX purchased EMA Telstar, a venue owner and a
promoter and producer of live entertainment in Sweden.

MOJO WORKS

On October 21, 1999, SFX purchased an 80% interest in the Mojo Works group
of companies, a leading promoter and producer of live entertainment events in
the Netherlands.

OTHER 1999 ACQUISITIONS

In 1999, SFX completed several other acquisitions in the sports and music
segments and made minority investments in certain Internet companies. See
"Operating Strategy--Launch Internet Initiatives."

2000 ACQUISITIONS

SPEAKERS OF SPORT

On February 2, 2000, SFX acquired Speakers of Sport, one of the largest
baseball talent representation agencies.

ELECTRIC FACTORY CONCERTS

On February 28, 2000, SFX acquired the Electric Factory Concerts group of
companies. Electric Factory Concerts promotes national concert tours as well as
owns and operates three live entertainment venues in and around Philadelphia,
PA.

BUSINESS SEGMENTS OF SFX

SFX operates in four major business segments within the live entertainment
industry: music, theater, sports and family entertainment & other.

MUSIC

SFX is the largest music venue owner and operator and concert promoter in
North America. In addition, SFX's music division promoted and/or produced 25
national tours in 1999.

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Within its music segment, SFX is engaged in:

o promoting music events and tours;

o producing music events and tours;

o owning and operating concert venues; and

o selling corporate sponsorships and advertising.

Promotion

SFX primarily promotes concerts performed by newer performers having
widespread popularity, such as the Backstreet Boys, Britney Spears and `N SYNC,
as well as more established performers having relatively long-standing and more
stable bases of popularity, such as Billy Joel, Elton John, Bruce Springsteen
and Jimmy Buffett. SFX believes that its large network of venues enables it to
set an aggregate guarantee for a series of shows, mitigating the risk of loss
associated with a single show. SFX also believes that its market research and
audience demographics databases will permit highly-effective, targeted
marketing, such as direct-mail and subscription series campaigns, which SFX
believes will increase advance ticket sales and overall sales in a
cost-efficient manner.

Production

As a producer, SFX generally receives revenues through guarantees from and
profit sharing agreements with promoters, a percentage of the promoters' ticket
sales, merchandising, sponsorships, licensing and the exploitation of
intellectual property and other rights related to the production. SFX produces
tours on both a national and regional basis. SFX plans to increase its
production of national and international music tours.

Artists for whom SFX has recently promoted and/or produced events include:

<TABLE>
<S> <C> <C> <C>
98 Degrees Dave Matthews Metallica Stone Temple Pilots
Aerosmith Earth, Wind & Fire Michael Bolton* Seal
Alabama Donna Summer `N SYNC* Shania Twain
Alanis Morissette Doobie Brothers Ozzy Osbourne* Sheryl Crow
Allman Brothers Duran Duran Moody Blues Steve Miller Band
Backstreet Boys* Elton John Neil Young The Rolling Stones
Barenaked Ladies Faith Hill Paul Simon* Tim Allen*
Barry Manilow George Strait* Phish Tina Turner*
Billy Joel Goo Goo Dolls* Poison Third Eye Blind
Black Sabbath* Harry Connick Jr. R.E.M. Tim McGraw
Bob Dylan* Jewel Reba McEntire TLC
Bonnie Raitt Jimmy Buffett Ricky Martin Tom Petty*
Brandy John Mellencamp Rod Stewart* Tori Amos
Britney Spears* Journey Roger Waters* Vince Gill
Bruce Springsteen Kenny G Santana* Widespread Panic
Cher* Lauryn Hill* Sarah McLachlan Willie Nelson
Chicago Lenny Kravitz Smashing Pumpkins Ziggy Marley
Cranberries Marc Anthony* Spice Girls* U2*
</TABLE>

- ----------
*SFX produced a national tour.

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Venue Operations

SFX derives revenues from its venue operations primarily from corporate
sponsorships, advertising, concessions, merchandise and parking. For each event
it hosts, a venue operator typically receives a fixed fee or percentage of
ticket sales for use of the venue, as well as fees representing a percentage of
total concession sales from the vendors and total merchandise sales from the
performer or tour producer. As a venue owner, SFX typically receives 100% of
sponsorship and advertising revenues and a rebate of a portion of ticketing
surcharges.

SFX believes that it controls the largest network of venues used
principally for music concerts in the United States. SFX wholly or partially
owns and/or operates 83 music venues in 31 of the top 50 domestic markets,
including 16 amphitheaters in the top 10 markets. See "-- Venues."

Because SFX operates a number of its venues under leases or booking
agreements, its long-term success will depend on its ability to renew these
agreements upon their expiration. There can be no assurance that SFX 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.

Sponsorships and Advertising

SFX actively pursues the sale of corporate sponsorships, including the
naming of venues such as the Tweeter Center for the Performing Arts, the
FleetBoston Pavilion, the First American Music Center and the Mars Music
Amphitheater. In addition, SFX designates providers of concessions and
"official" event or tour sponsors such as, 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 SFX's venues currently have no sponsorship
arrangements in many of the available categories, including naming rights. SFX
believes that the national venue network it has assembled will likely attract a
larger number of major corporate sponsors and enable SFX to sell national
sponsorship rights at a premium over local or regional sponsorship rights. SFX
also pursues the sale of corporate advertising at its venues, and believes that
it has substantial unutilized billboard and other advertising space available
at its venues. SFX also believes that its relationships with advertisers will
enable it to better utilize available advertising space, and that the
aggregation of its audiences nationwide will create the opportunity for
advertisers to access a nationwide market. With the additions of Apollo, EMA
Telstar and Mojo Works, SFX believes that it will have the ability to exploit
international sponsorship and marketing opportunities as well.

Competition and Seasonality

In markets where it owns or operates a venue, SFX competes with other
venues to serve artists likely to perform in that general region. In markets
where SFX does not own or operate venues, SFX competes with other venues for
dates for popular national tours. Consequently, touring artists have
significant alternatives to SFX venues in scheduling tours. In addition, in the
markets in which SFX promotes musical concerts, it faces competition from
promoters, as well as from certain artists that promote their own concerts. SFX
believes that barriers to entry into the promotion services business are low
and that certain local promoters are increasingly expanding the geographic
scope of their operations.

SFX's outdoor venues are primarily used in the summer months and do not
generate substantial revenue in the late fall, winter and early spring.

THEATER

The touring Broadway show production industry is highly fragmented. As a
result, SFX believes it is the largest promoter and producer of touring
Broadway shows in the United States.

Within its theater segment, SFX is engaged in:

o production of touring and original Broadway shows;

o owning and operating theatrical venues; and

o selling corporate sponsorships and advertising.

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Production

SFX produces touring and original Broadway shows. Touring Broadway shows
consist primarily of revivals of previous commercial successes or new
productions of theatrical shows currently playing on Broadway in New York City.
SFX invests in original Broadway productions as a lead producer or as a limited
partner in productions produced by others. Frequently, SFX obtains touring
rights and favorable scheduling for the productions in order to distribute them
across its presentation network.

SFX had a producing interest or investment in the following shows, among
others, for 1999:

<TABLE>
<CAPTION>
SHOW TITLE TYPE SFX'S INVOLVEMENT
- ------------------------------------------- -------------------------- ------------------
<S> <C> <C>
Amadeus ................................... Broadway Investment
Art ....................................... Touring Investment
Blue Man Group ............................ Long-Running Performance Production
Cabaret ................................... Touring Production
Chicago ................................... Broadway & Touring Investment
Cirque Ingenieux .......................... Touring Investment
The Civil War ............................. Broadway & Touring Production
Death of a Salesman ....................... Broadway Investment
Doctor Doolittle .......................... U.K. West End & Touring Production
Evita ..................................... Touring Production
Fame ...................................... Touring Production
Fascinating Rhythm ........................ Broadway Investment
Footloose ................................. Broadway & Touring Investment
Fosse ..................................... Broadway & Touring Production
The Gin Game .............................. Touring Production
Jekyll & Hyde ............................. Broadway & Touring Production
Phantom of the Opera ...................... Touring Production
Putting It Together ....................... Broadway Investment
Ragtime ................................... Broadway & Touring Production
Rent ...................................... Broadway & Touring Investment
Seussical ................................. Development Production
The Sound of Music ........................ Broadway Production
Sunset Blvd. .............................. Touring Production
Swan Lake ................................. Broadway Investment
Swing ..................................... Broadway Investment
Tony and Tina's Wedding ................... Touring Production
Victor, Victoria .......................... Touring Production
You're a Good Man, Charlie Brown .......... Broadway Investment
</TABLE>

Promotion

SFX 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.

SFX pre-sells tickets for its touring Broadway shows through the largest
subscription series in the United States and Canada (with 260,000 subscribers
in 1999). SFX promotes these subscription series in 44 of the largest touring
markets in North America including Atlanta, GA; Dallas, TX; Fort Lauderdale,
FL; Houston, TX; and Ottawa, Canada.

Theater Operations

SFX derives revenues from its theater operations primarily from rental
income, corporate sponsorships and advertising, concessions, and merchandise.
For each event it hosts, a theater operator typically receives a fixed fee or
percentage of ticket sales for use of the venue, as well as fees representing a

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percentage of total concession sales from the vendors and total merchandise
sales from the performer or tour producer. As a theater owner, SFX typically
receives 100% of sponsorship and advertising revenues and a rebate of a portion
of ticketing surcharges.

SFX wholly or partially owns and/or operates 9 theatrical venues in the
United States and 29 international venues used primarily for theatrical
presentations, principally in the United Kingdom. See "-- Venues."

Sponsorships and Advertising

SFX actively pursues the sale of corporate sponsorships, including the
naming of venues such as the Ford Theater for the Performing Arts. In addition,
SFX designates "official" event or tour sponsors such as credit card companies,
telephone companies and auto manufacturers, among others. Sponsorship
arrangements can provide significant additional revenues at negligible
incremental cost, and many of SFX's venues currently have no sponsorship
arrangements in many of the available categories, including naming rights. SFX
believes that the national venue network it has assembled will likely attract a
larger number of major corporate sponsors and enable SFX to sell national
sponsorship rights at a premium over local or regional sponsorship rights. SFX
also pursues the sale of corporate advertising at its venues, and believes that
it has substantial unutilized advertising space available at its venues. SFX
also believes that its relationships with advertisers will enable it to better
utilize available advertising space, and that the aggregation of its audiences
nationwide will create the opportunity for advertisers to access a nationwide
market. With the additions of Apollo, EMA Telstar and Mojo Works, SFX believes
that it will have the ability to exploit international sponsorship and
marketing opportunities as well.

Competition and Seasonality

SFX competes with other presenters to obtain presentation arrangements
with venues and performing arts organizations in various markets, including in
markets that have more than one venue suitable for presenting a touring
Broadway show. SFX's competitors, some of whom have also been partners of PACE
and Magicworks 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 presenters. SFX competes with other New
York and London based production companies for the rights to produce particular
shows. As a producer of a London or Broadway show, SFX competes with producers
of other theatrical shows for box office sales, talent and theater space. As
the producer of a touring show, SFX competes with producers of other touring
Broadway shows to book the production in desirable presentation markets.

The theatrical presenting season generally runs from September through
May.

SPORTS

The SFX Sports Group is one of the world's leading fully integrated sports
marketing and management agencies, providing marketers, athletes, broadcasters,
teams, leagues, universities, events and properties unrivaled access to each
other. The Sports Group's collective expertise and resources are organized into
five core functional areas: events, marketing, talent representation,
television and motor sports.

Within its sports segment, SFX is engaged in:

o event development and management;

o marketing;

o talent representation;

o television production and programming; and

o promoting and producing specialized motor sports events.

10
<PAGE>

Events

The SFX Sports Group focuses on turnkey event development and management
for a wide array of sports, including tennis, golf, thoroughbred racing and
soccer events. Utilizing the SFX network of talent, venues, television
production, sponsor sales and fulfillment, the SFX Sports Group creates and
develops properties that leverage the unique energy of live entertainment.
Events in 1999 included the Breeders' Cup Championship, American Century
Celebrity Golf Championship and the ATP Tennis Events in Atlanta, Georgia;
Washington, D.C.; and London, England. The SFX Sports Group also offers
entertainment and client hospitality opportunities to corporate clients looking
to utilize attendance at sporting events like the Super Bowl and The Masters as
a means of increasing their customer base and developing business
opportunities.

Marketing

The SFX Sports Group integrates all components of the modern marketing mix
to develop a full-service strategic plan that meets specific client objectives.
Revenue is generated from:

o the sale of entitlement rights (or "naming rights") to third-party
stadiums and arenas;

o the sale of sponsorships and marketing rights to international and
national sporting events, teams and properties;

o providing sports and entertainment marketing consulting services to
corporations;

o integrated branding and graphic identity consulting services to
professional sports leagues, teams and events; and

o providing retail licensing and merchandising services to a wide array
of consumer products and services companies.

Talent Representation

The SFX Sports Group represents several hundred professional athletes and
broadcasters. Revenue is primarily generated through the negotiation of
professional sports contracts and endorsement contracts for clients. Our
clients have endorsed numerous products, both domestically and internationally,
for many high profile companies.

Examples of current athletes and broadcasters represented by the SFX
Sports Group are as follows:

<TABLE>
<CAPTION>
BASEBALL BASKETBALL FOOTBALL (U.S.) GOLF TENNIS
- ------------------- -------------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Roger Clemens Kobe Bryant Jake Plummer John Daly Andre Agassi
Nomar Garciaparra Michael Jordan Vinny Testaverde Scott Hoch Alex Corretja
Juan Gonzalez Reggie Miller Peter Warrick Roger Maltbie Nicolas Kiefer
Pedro Martinez Alonzo Mourning Ricky Williams Scott Verplank Petr Korda
Larry Walker Dikembe Mutombo Steve Young Mark Wiebe Patrick Rafter

BROADCASTERS HOCKEY OLYMPICS FOOTBALL (U.K.) RUGBY (AUSTRALIA)
- ------------------- -------------------- ------------------ ----------------- ------------------
Chris Berman Nikolai Khabibulin Brandi Chastain David Beckham Bradley Clyde
Boomer Esiason Brian Leetch Janet Evans Michael Owen Ryan Girdler
Jim Lampley Adam Oates Eric Heiden Jamie Redknapp Darren Lockyer
Howie Long Sergei Samsanov Dan Jansen Alan Shearer Gorden Tallis
Forrest Sawyer Sergei Zubov Summer Sanders Dwight Yorke Geoff Toovey
</TABLE>

The amount of endorsement and other revenues that SFX's clients generate
is a function of, among other things, the clients' professional performances
and public appeal. Factors beyond SFX's control, such as injuries to clients,
declining skill or labor unrest, among others, could have an adverse affect on
the SFX Sports Group's results of operations. Representation agreements with
clients are generally for a term of one year with automatic renewal options. A
significant number of SFX's representation agreements are terminable on 15
days' notice, although SFX would continue to be entitled to the revenue streams
generated during the remaining term of any contracts that it negotiated.

11
<PAGE>

Television

The SFX Sports Group provides comprehensive sports television production
and programming services, including concept development and network
negotiations. In addition, our Tollin-Robbins and SFX/Alphabet City divisions
produce a wide variety of nationally broadcast television series, feature films
and sports-themed CDs. During 1999, the SFX Sports Group produced over 500
hours of programming for broadcast and cable networks.

Motorsports

SFX is the largest producer and promoter of specialized motorsports events
in North America. SFX's motorsports activities consist principally of the
promotion and production of specialized motorsports, which generate revenues
primarily from ticket sales and sponsorships, as well as merchandising and
video rights associated with producing motorsports events. These events include
monster truck events, demolition derbies, motocross races, freestyle motocross
events, motorcycle road racing and dirt track motorcycle racing. Other events
included in this division are thrill acts and other motorsports concepts and
events. The motorsports division of SFX produces and promotes over 500
specialized events annually, including PACE Supercross events and the U.S. Hot
Rod Association (Registered Trademark) Monster Jam (Registered Trademark)
Tour. In 1999, the motorsports division had in excess of 3.0 million spectators
at its various events and properties. SFX currently owns Grave Digger
(Trademark) , one of the most popular monster trucks on the monster truck
circuit, which along with other such names allows SFX to capitalize on
proprietary sponsorship, licensing and merchandising opportunities. In
addition, SFX provided approximately 220 hours of televised programming related
to motorsports in 1999. In addition, SFX is able to derive additional
sponsorship revenue from the sale of "naming rights" to certain of its
motorsports related properties.

Competition and Seasonality

The marketing and athlete representation industry is highly competitive.
SFX's competitors include a few large companies that operate in several of the
segments in which the SFX Sports Group operates, as well as many smaller
entities which operate in only one or two of such core areas. In the
specialized motorsports industry, SFX generally competes with various local and
regional companies.

The sports marketing and athlete representation businesses primarily earn
revenue ratably over the year, whereas the motorsports business operates
primarily in the winter and event management revenue is earned as the events
occur.

FAMILY ENTERTAINMENT & OTHER

SFX's family entertainment & other segment produces and presents
family-oriented entertainment such as children's theatrical shows, dance shows,
ice-skating, gymnastics shows and artifact exhibits. In 1999, SFX's family
entertainment segment produced and presented events such as The Magic of David
Copperfield and Lord of the Dance both domestically and internationally. The
family entertainment segment also produces ice skating television specials and
tours, such as Ice Wars, promoted the U.S. Women's Soccer Team tour in 1999 and
produces and promotes touring children's shows such as Arthur and Blues
Clues. In 1999, SFX also produced and presented the Radio City Christmas
Spectacular in Chicago and Mexico City.

In addition, SFX provides a variety of marketing and consulting services
derived from or complementary to its live entertainment operations, including
local, regional and national live marketing programs and 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. Additionally, SFX
believes that it is one of the leading producers of national mall touring
events, producing over 65 events every year in the country's shopping malls.
These events, either in stores or mall congregation areas, are designed to
promote brand awareness and drive follow-up sales. SFX believes that, along
with mall events, it is one of the industry leaders in events produced on
college campuses.

12
<PAGE>

SFX also engages 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 SFX's magazines
focuses on research and insight common to specific contemporary radio formats.
SFX also provides radio airplay and music retail research services to record
labels, artist managers, retailers and radio broadcasters. SFX, through
Network, also provides consulting and entertainment marketing services to
corporate clients with music business interests.

Sponsorships and Advertising

SFX actively pursues the sale of corporate sponsorships, primarily as
"official" event or tour sponsors. Sponsorship arrangements can provide
significant additional revenues at negligible incremental cost.

Competition and Seasonality

The family entertainment business is highly competitive. SFX's competitors
include several large companies which present and produce live entertainment
events on a national scale and many smaller entities which present live family
entertainment locally. The family entertainment & other segment generally earns
revenue ratably over the year.

VENUES

The following chart sets forth certain information with respect to the
venues that SFX wholly or partially owns and/or operates.

<TABLE>
<CAPTION>
U.S. TOTAL
MARKET TYPE OF SEATING
MARKET AND VENUE RANK(1) VENUE SFX'S INTEREST CAPACITY
- --------------------------------- --------- -------------- -------------------------------------------------- ---------------
<S> <C> <C> <C> <C>
DOMESTIC VENUES:
NEW YORK-NORTHERN 1
NEW JERSEY-LONG ISLAND:
PNC Bank Arts Center Amphitheater 22-year lease that expires October 31, 2017 17,500
Jones Beach Theatre Amphitheater 20-year license agreement that expires 14,400
December 31, 2020
Roseland Ballroom Theater exclusive booking agent 3,600
Westbury Music Fair Theater 43-year lease that expires December 31, 2034 2,870
Irving Plaza Theater 10-year lease that expires July 30, 2007 1,121
Beacon Theatre Theater 49% partnership interest in 15-year lease that 2,849
expires December 31, 2006
Ford Center Theater 40-year ground lease that expires December 31, 1,812
2028
LOS ANGELES-RIVERSIDE- 2
ORANGE COUNTY:
Glen Helen Blockbuster Pavilion Amphitheater 25-year lease that expires July 1, 2018 25,000(2)
Irvine Meadows Amphitheater Amphitheater facility owned; 20-year land lease that expires 15,500
February 28, 2017
Thousand Oaks Civic Arts Plaza Theater 5-year exclusive booking agent that expires 1,800
May 2003
CHICAGO-GARY-KENOSHA: 3
Ford Oriental Theatre Theater owned 2,149
The New World Music Theater Amphitheater interest in 19-year lease that expires December, 28,000
2013; booking and management agreement that
expires November 30, 2003
The Cadillac Palace Theater Theater 50% partnership interest in 49-year lease that
expires May, 20482,350
Rosemont Horizon Arena 10-year consulting agreement that expires 17,500
January 1, 2009 (3)
Rosemont Theater Theater 10-year consulting agreement that expires 4,402
January 1, 2009 (3)
Fiesta Palace Club 50% interest in lease that expires December 31, 21,500
2002
</TABLE>

13
<PAGE>

Tropicana de Cache Club 50% interest in lease that expires December 31, 2002 325

Mario's ballroom Club 50% interest in lease that expires December 31, 2002 545

Noa Noa West Club 50% interest in lease that expires December 31, 2002 2,000

Palladium Club 50% interest in lease that expires December 31, 2002 525

Adromenas Club 50% interest in lease that expires December 31, 2002 N/A

WASHINGTON-BALTIMORE: 4
Nissan Pavilion at Stone Ridge Amphitheater 20-year lease that expires June 9, 2014 25,000
Merriweather-Post Pavilion Amphitheater 10-year lease that expires December 31, 2007 18,000

SAN FRANCISCO-OAKLAND-SAN JOSE: 5
Shoreline Amphitheater Amphitheater facility owned; land leased for 35 years, expiring 22,000
November 30, 2021
Concord Pavilion Amphitheater Management agreement that expires 12,500
December 31, 2006
Greek Theater Theater 4-year promotion agreement that expires 8,500
October 31, 2002
Warfield Theatre Theater 10-year lease that expires May 31, 2008 2,250(4)
Fillmore Auditorium Theater 10-year lease that expires August 31, 2007 1,249
Punch Line Comedy Club Club 5-year lease that expires September 15, 2001 175

PHILADELPHIA-WILMINGTON- 6
ATLANTIC CITY:
E-Centre Amphitheater 31-year lease that expires September 29, 2025 25,000
Hershey Park Amphitheater/ Exclusive booking agreement 7,500
Stadium 25,000
Tower Theater Theater owned 3,052
Electric Factory Club majority interest 3,000
Theater of the Living Arts Club/theater owned 450/810

BOSTON-WORCESTER-LAWRENCE: 7
Tweeter Center for the Amphitheater owned 19,500
Performing Arts
FleetBoston Pavilion Amphitheater 5-year license agreement that expires January 29, 5,000
2004
Orpheum Theatre Theater 4-year operating agreement that expires 2,700
December 31, 2000
Avalon Club 5-year exclusive booking agent that expires 1,350
June 30, 2003
Wilbur Theatre Theater 5-year lease that expires August 25, 2001 1,223
Colonial Theatre Theater 8-year lease that expires August 31, 2001 1,704
Charles Playhouse (main stage) Theater owned 525
Charles Playhouse (basement) Theater owned 200

DETROIT-ANN ARBOR-FLINT: 8
Pine Knob Music Theatre Amphitheater preferred booking 16,646
The Palace at Auburn Hills Arena preferred booking 15,000(5)
Meadowbrook Amphitheater Amphitheater exclusive booking 7,619
Detroit State Theatre Theater exclusive booking 3,000

DALLAS-FORT WORTH: 9
Starplex Amphitheater Amphitheater 32.5% partnership interest in 31-year lease that 20,500
expires December 31, 2028

HOUSTON-GALVESTON-BRAZORIA: 10
Cynthia Woods Mitchell Pavilion Amphitheater 15-year management contract that expires 13,000
December 31, 2009
</TABLE>

14
<PAGE>

MIAMI-FORT LAUDERDALE: 12
Sunrise Musical Theatre Theater owned 3,968
Parker Playhouse Theater 4-year exclusive booking that expires October 17, 1,181
2000
SEATTLE-TACOMA-BREMERTON: 13
White River Amphitheatre (6) Amphitheater long-term management agreement 20,000

PHOENIX-MESA: 14
Desert Sky Blockbuster Pavilion Amphitheater 60-year lease that expires June 30, 2049 19,900

ST. LOUIS: 18
Riverport Amphitheater Amphitheater owned 21,000
American Theater Theater 10-year lease that expires July 31, 2004 2,000
Westport Playhouse Theater year-to-year lease, with renewal under negotiation 1,100

DENVER: 19
Denver Fillmore Auditorium Theater owned 3,000

PITTSBURGH: 20
Star Lake Amphitheater Amphitheater 45-year lease that expires December 31, 2034 22,500
I.C. Light Amphitheater Amphitheater lease agreement that expires December 31, 2004 4,235

CINCINNATI: 23
Riverbend Amphitheater Amphitheater 13-year management and booking agreement that 19,000
expires after 2011 season
Firstar Arena Arena 5-year operating agreement that expires 16,200
February 12, 2002
Taft Theater Theater 10-year lease that expires July 31, 2005 2,458
Bogart's Club 5-year lease that expires August 31, 2002 1,450

KANSAS CITY: 24
Sandstone Amphitheater Amphitheater 10-year lease that expires December 31, 2002 18,000
Starlight Theater Theater concert presentation agreement that expires 9,000
September 30, 2000
Memorial Hall Theater 5-year management contract that expires 3,000
January 1, 2004
SACRAMENTO-YOLO: 25
Sacramento Valley Amphitheater owned 18,500
Amphitheatre (6)
Punch Line Comedy Club Club 9-year lease that expires December 31, 2000 245

MILWAUKEE-RACINE: 26
Alpine Valley Music Amphitheater 26-year lease that expires August 31, 2019; 19-year 35,000
Amphitheater booking & management agreement that expires
November, 2013
Marcus Amphitheater Amphitheater 50% partnership in lease that expires in 2000 22,828
Modjeska Theater Theater exclusive booking 1,800

NORFOLK-VIRGINIA BEACH-NEWPORT 27
NEWS:
GTE Virginia Beach Amphitheater 30-year lease that expires in 2026 20,000
Amphitheater
The Boathouse Concert Hall lease that expires in 2013 2,460
The Abyss Club exclusive booking 900

INDIANAPOLIS: 29
Deer Creek Music Center Amphitheater owned 21,000
</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
U.S. TOTAL
MARKET TYPE OF SEATING
MARKET AND VENUE RANK(1) VENUE SFX'S INTEREST CAPACITY
- --------------------------------- --------- -------------- -------------------------------------------------- ---------
<S> <C> <C> <C> <C>
Murat Theatre Theater and 50-year lease that expires August 31, 2045 2,700
Ballroom
COLUMBUS: 31
Polaris Amphitheater Amphitheater owned 20,000

CHARLOTTE-GASTONIA-ROCK HILL: 32
Charlotte Blockbuster Pavilion Amphitheater owned 18,000

NASHVILLE: 37
First American Music Center Amphitheater owned 17,000

HARTFORD: 39
Meadows Music Theater Amphitheater facility owned; land leased for 40 years until 25,000
September 13, 2034
Oakdale Theater Theater facility owned; 15-year land lease that expires 4,800
June 3, 2013 and SFX will purchase upon
expiration

ROCHESTER: 43
Finger Lakes Amphitheater Amphitheater year to year co-presentation agreement that 12,700
expires December 31, 1999
Harro East Theater Theater exclusive booking agent that expires November 4, 1,050
2005

RALEIGH-DURHAM-CHAPEL HILL: 44
Alltel Pavilion at Walnut Creek Amphitheater 40-year lease that expires October 31, 2030 20,000
Amphitheater

WEST PALM BEACH-BOCA RATON: 48
Mars Music Amphitheater Amphitheater lease that expires December 31, 2005 20,000
Royal Poinciana Playhouse Theater 6-year lease that expires October 31, 2004 878

LOUISVILLE: 49
Palace Theatre Theatre 50% ownership 2,851

ALBANY: 55
Saratoga Performing Arts Center Amphitheater exclusive management agreement and exclusive 25,000
booking rights for rock and contemporary

ALBUQUERQUE: 62
Mesa Del Sol Centre (6) Amphitheater sublease land, own improvements 15,000

SPRINGFIELD: 71
Tanglewood Amphitheater Exclusive booking agent 13,802

RENO: 124
Reno Hilton Amphitheater Amphitheater exclusive promotion agreement that expires 18,500
December 31, 2001
INTERNATIONAL VENUES:
TORONTO, CANADA:
Pantages Theatre Theater Owned 2,200

LONDON, ENGLAND:
Apollo Victoria Theater Theater Owned 1,500
Lyceum Theater 130-Year Lease 2,000
Apollo Hammersmith Theater Theater 125-Year Lease 3,200
Dominion Theater 125-Year Lease 2,000

BRISTOL, ENGLAND:
Hippodrome Theater Owned 2,000

BIRMINGHAM, ENGLAND:
Alexandra Theater Lease expires 2012 1,300

OXFORD, ENGLAND:
Apollo Theater Lease expires 2008 1,800
Old Fire Station Club Lease expires 2000 200

LIVERPOOL, ENGLAND:
Empire Theater 125-Year Lease 2,300

MANCHESTER, ENGLAND:
Manchester Opera House Theater Owned 2,000
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
TOTAL
TYPE OF SEATING
MARKET AND VENUE VENUE SFX'S INTEREST CAPACITY
- --------------------------- --------------- ---------------------------------------------- ---------
<S> <C> <C> <C>
Manchester Palace Theater Theater Owned 2,000
Manchester Apollo Theater Theatre Owned 2,600
Tameside Hippodrome Theater Management agreement expires October 1, 2007 1,200

SHEFFIELD, ENGLAND:
Sheffield Arena Theater Management Agreement 12,000

YORK, ENGLAND:
Grand Opera House Theater Owned 1,000

FELIXTOWE, ENGLAND:
Spa Pavilion Theater Management Agreement 900

FOLKSTONE ENGLAND:
Leas Cliff Hall Theater Management agreement 800

HAYES, ENGLAND:
Beck Theater Theater Management agreement expires April 4, 2007 600

LEICESTERSHIRE, ENGLAND:
Donington Park Arena/Motor Lease expires 2022 72,500
racing circuit
SCARBOROUGH, ENGLAND:
Futurist Theater Management agreement 2,100

SOUTHPORT, ENGLAND:
Southport Theater Theater Lease expires January 4, 2008 1,600

SWINDON, ENGLAND:
Wyvern Theater Theater Management agreement expires March 25, 2004 600

TORBAY, ENGLAND:
Princess Theater Theater Lease expires November 17, 2058 1,400

EDINBURGH, SCOTLAND:
The Playhouse Theater Owned 3,300

DUBLIN, IRELAND:
The Point Arena 50% interest in long-term lease 9,000

CARDIFF, WALES:
International Arena Theater Management Agreement 6,700

STOCKHOLM, SWEDEN:
Cirkus Theater Theater owned/land leased 1,600
</TABLE>

- ----------
(1) Based on the July 1998 population of metropolitan statistical areas as
set forth in the Internet Press Release, dated December 1999, by the
Population Estimates Program, Population Division, U.S. Bureau of the
Census. Excludes venues where SFX sells subscriptions for touring
Broadway shows.

(2) Additional seating of approximately 40,000 is available for certain
events.

(3) Consulting agreement provides for booking, group sales and marketing
consultation services. Venue is available for rental by all promoters.

(4) Most shows have standing room which increases capacity.

(5) Additional seating of approximately 5,000 is available for certain
events.

(6) Venue is currently under development.

OPERATING STRATEGY

SFX's principal objectives are to maximize revenue and cash flow growth
through the following specific strategies:

OWN AND OPERATE THE LEADING INTEGRATED LIVE ENTERTAINMENT NETWORK

A key component of SFX's operating strategy is to take advantage of the
benefits provided by owning and operating an international live entertainment
network. SFX's integrated production, promotion, venue operation and event
management services enable SFX to:

17
<PAGE>

o attract leading performers and events;

o provide "one-stop shopping" for performers and agents;

o increase venue utilization;

o enhance its ability to maximize ancillary revenue from concession
sales, product merchandising, ticket rebates, and other ancillary
sources;

o capture a larger percentage of overall revenues from live
entertainment events; and

o improve operating efficiencies and take advantage of economies of
scale.

Examples of opportunities afforded to SFX as a result of its large-scale
venue operations include:

o increased percentage of concessions revenues at amphitheaters through
its agreements with concessionaires;

o increased ticket rebate revenues through its agreement with
Ticketmaster;

o increased national sales and sponsorship programs; and

o the ability to institute best business practices including special
revenue-enhancing programs such as VIP seating and tiered ticket
pricing.

MAXIMIZE SPONSORSHIP REVENUE OPPORTUNITIES

To maximize revenues, SFX actively pursues the sale of local, regional and
national corporate sponsorships, including naming rights and designating
"official" event or tour sponsors and providers of concessions. Sponsorship
arrangements can provide significant additional revenues at negligible
incremental cost. Further, many of SFX's venues currently have no sponsorship
arrangements in many of the available categories, including naming rights. By
utilizing its leadership position in the live entertainment industry, including
its access to a large audience, SFX intends to pursue the sale of local,
regional and national sponsorships to major corporations. Examples of recent
successes in pursuing this strategy include the sale of "naming rights" to
certain of our venues, including the FleetBoston Pavilion, the Tweeter Center
for the Performing Arts and the First American Music Center. SFX believes that
it is able to deliver a unique promotional vehicle to corporate sponsors by
offering the ability to target specific audiences by geography and demography.

PURSUE INTERNATIONAL CONSOLIDATION OPPORTUNITIES

The live entertainment industry outside of the U.S. is highly fragmented,
with little, if any, integration of services. Event promotion, production,
sponsorship and management are typically done at a local level by small
operators. SFX believes that the consolidation opportunities that have fueled
its domestic growth since its formation exist internationally as well.
Accordingly, SFX intends to pursue its business model outside of North America
and believes that such expansion will, among other things:

o provide it with better access to successful foreign performers and
events;

o provide it with additional outlets for its domestic performers and
events; and

o increase the opportunities for performers and events to "cross-over"
between the U.S. and foreign markets.

CONTINUE TO PURSUE DOMESTIC CONSOLIDATION OPPORTUNITIES

Notwithstanding our strong national presence, SFX believes that the U.S.
live entertainment industry continues to be highly fragmented with attractive
acquisition opportunities still available. The U.S. live entertainment business
remains characterized by numerous participants, including booking agents,
promoters, producers, venue owners and venue operators, many of which are
entrepreneurial and capital-constrained local or regional businesses that do
not achieve significant economies of scale from their operations. SFX believes
that the fragmented nature of the industry continues to present attractive

18
<PAGE>

acquisition opportunities, and that its larger size will provide it with
improved access to the capital markets. This will give SFX a competitive
advantage in implementing its acquisition strategy. Through consolidation, SFX
believes that it is better able to coordinate negotiations with performers and
talent agents, addressing what SFX believes is a growing desire among
performers and talent agents to deal with fewer, more sophisticated promoters.
SFX intends to selectively pursue additional strategic acquisitions that
complement its existing businesses.

LAUNCH INTERNET INITIATIVES

SFX's Internet initiatives strategy is designed to take advantage of SFX's
unique and extensive access to performers, athletes, live events, premium
tickets and other merchandise. SFX.com, which has centralized the access to
data on over 80 of our current websites, provides commerce-driven services such
as schedules of events, tour information and deep links to applicable pages
within ticketing agents' websites to facilitate ticket sales. SFX is currently
in the process of expanding the capabilities of SFX.com to offer merchandise
sales. SFX is also expanding its offerings of live event cybercasts, which are
often syndicated to networks of third party websites and promoted and
distributed on the SFX websites. During 2000, SFX also plans to launch
FirstInLine.com which will provide access to premium tickets through an
affinity club.

In addition to our core Internet initiatives, we have made minority equity
investments in several early stage companies possessing complementary content
and technological capabilities. Management believes that the investments in
these companies offer significant sponsorship opportunities. However, these
companies have limited operating histories and SFX's investments therein may be
subject to significant declines in value. SFX can provide no assurances that
these investments, or its core Internet initiatives, will be commercially
successful.

INTEGRATE ACQUIRED BUSINESSES INTO CENTRALIZED BOOKING, MARKETING AND
ACCOUNTING SYSTEMS

SFX's management will continue to impose strict financial reporting and
cost controls on all of its businesses and to rapidly integrate all of its
future acquisitions into its centralized booking, marketing and accounting
systems. SFX will seek to realize the benefits of systems integration,
including economies of scale, through:

o the implementation of a nationally coordinated booking system for
contracting and scheduling acts;

o the establishment of a centralized marketing team to exploit ancillary
revenue streams on local, regional and national levels, including
sponsorship, advertising and merchandising opportunities; and

o the implementation of a centralized accounting system.

REGULATORY MATTERS

Because SFX relies on acquisitions of existing businesses and assets for
much of its growth, restrictions imposed by local, state, federal and
international regulatory, licensing, approval and permit requirements,
including those relating to zoning, operation of public facilities, consumer
protection and antitrust, will significantly affect its ability to acquire and
operate its business and pursue its operating strategies. For example, the
Federal Trade Commission and the Antitrust Division of the U.S. Department of
Justice have the authority to challenge SFX's acquisitions on antitrust grounds
before or after the acquisitions are completed. Each state or other
jurisdiction in which SFX operates may also challenge an acquisition under
state, federal or foreign antitrust laws as applicable. SFX may be unable to
obtain the licenses, approvals and permits it requires from time to time,
including approvals under the Hart-Scott-Rodino Act, to acquire and operate
live entertainment businesses in accordance with its expansion strategy. See
Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Risk Factors."

ENVIRONMENTAL MATTERS

SFX is subject to various laws, regulations and ordinances which govern
the use, storage, disposal, emission and release of hazardous and non-hazardous
substances, as well as zoning and noise level

19
<PAGE>

restrictions which may effect, among other things, the hours of operations of
its venues. Management believes that SFX is in substantial compliance which
such governmental laws, regulations and ordinances. Management does not believe
that SFX will incur compliance costs pursuant to such requirements that would
have a material adverse effect on its consolidated financial position or future
results of operations.

EMPLOYEES

As of December 31, 1999, SFX had approximately 2,700 full-time employees.
SFX 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 of SFX are covered by collective bargaining agreements.

ITEM 2. PROPERTIES

SFX's executive offices are located at 650 Madison Avenue, 16th Floor, New
York, New York 10022. SFX wholly or partially owns and/or operates 124 venues
as more fully described under Item 1. "Business -- Business Segments of SFX --
Venues." In addition, SFX owns or leases office space throughout the United
States and abroad in connection with its operations. On March 3, 2000, SFX
entered into a 20-year lease agreement for the Candler Tower in Times Square,
New York. The building, which has approximately 180,000 square feet of office
space, is expected to be used as SFX's world headquarters.

ITEM 3. LEGAL PROCEEDINGS

Between approximately February 29 and March 10, 2000, 11 lawsuits were
filed in the Court of Chancery in the State of Delaware, New Castle County, by
various plaintiffs, all claiming to be shareholders of Class A common stock of
SFX, against SFX, its directors and Clear Channel Communications, Inc. The
complaints all seek essentially the same relief, i.e., certification as a class
action, an injunction enjoining consummation of the proposed SFX/Clear Channel
merger and/or damages in an amount to be determined. The complaints allege that
the difference in consideration for the Class A and Class B common stockholders
pursuant to the merger constitutes unfair consideration to the Class B common
stockholders. The complaints allege that SFX's directors have breached their
fiduciary duty in agreeing to such terms and conditions and further allege that
Clear Channel aided and abetted the actions of the directors of SFX. To date,
no answers have been filed by any of the defendants. A plaintiff in one of the
lawsuits has filed a motion for summary judgement. The defendants are scheduled
to reply to that motion in April 2000. SFX and the other defendants intend to
defend the actions vigorously.

Universal Concerts II, Inc., a California corporation formerly named MCA
Concerts II, Inc., brought suit against PACE Amphitheaters, Inc., PACE
Entertainment Group, Inc., SFX Entertainment, Inc., Brian Becker and Allen
Becker. The complaint alleged, among other things, that SFX's acquisitions of
PACE and Concert/Southern caused breaches of PACE's various agreements with
Universal. The complaint alleged that PACE is in breach of a co-promotion
agreement, that Brian Becker and Allen Becker are in breach of non-competition
agreements and that SFX has intentionally interfered with contracts between the
plaintiff and certain of the defendants. The defendants have removed the case
from the State Court to the Federal Court for the Central Division of
California and have answered the complaint denying liability. Although the
lawsuit seeks damages in an unspecified amount, in SFX management's view, the
realistic amount in controversy is not material to the business or prospects of
SFX. The defendants intend to defend the case vigorously.

On November 20, 1998, a group of plaintiffs filed a complaint against 11
talent agencies and 29 promoters, including SFX and several of its
subsidiaries. According to the complaint, the plaintiffs are five individual
African-Americans and five corporations owned by such individuals. The
complaint alleges action by the defendants to exclude African-Americans from
promoting concerts and seeks injunctive relief and damages for civil rights and
antitrust violations. The focus of the action appears to be industry-wide,
rather than specifically directed at SFX. On May 25, 1999, the complaint was
dismissed without prejudice to plaintiffs' right to file an amended pleading.
On August 9, 1999, the plaintiffs filed

20
<PAGE>

an amended complaint containing allegations that are substantially the same as
the original complaint. On October 1, 1999, the defendants filed motions to
dismiss the amended complaint. The motions to dismiss will be before the court
on April 11, 2000. SFX intends to defend the action vigorously.

Although SFX 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.

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

No matters were submitted to a vote of the stockholders during the fourth
quarter of 1999.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PRICE RANGE OF CLASS A COMMON STOCK

Since June 8, 1999, SFX's Class A Common Stock has been quoted on the New
York Stock Exchange under the symbol "SFX." Between April 21, 1998 and June 7,
1999, the Class A Common Stock was quoted on Nasdaq National Market under the
symbol "SFXE." 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." The Class B Common Stock is not 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, as reported by the Nasdaq
National Market between April 21, 1998 and June 7, 1999 and by the New York
Stock Exchange subsequent to June 7, 1999. Bid quotations reflect interdealer
prices, without retail mark-up, mark-down or commissions, and may not represent
actual transactions. The information has been adjusted to reflect a 3-for-2
stock split of SFX's outstanding Common Stock effected on July 27, 1999.

<TABLE>
<CAPTION>
CLASS A COMMON STOCK
-------------------------------
1998 HIGH LOW
- ---- ---------------- ------------
<S> <C> <C>
First Quarter, since February 18, 1998 ......... $ 16.83 $ 13.08
Second Quarter ................................. 30.58 16.67
Third Quarter .................................. 36.67 17.96
Fourth Quarter ................................. 36.58 15.08

1999 HIGH LOW
- ---- ---------------- ------------
<S> <C> <C>
First Quarter .................................. $ 43.04 $ 35.50
Second Quarter ................................. 46.58 35.54
Third Quarter .................................. 51.67 30.63
Fourth Quarter ................................. 36.56 26.38
</TABLE>

On March 28, 2000, the last reported sales price of the Class A Common
Stock on the New York Stock Exchange was $39 7/8 per share. As of March 28,
2000, SFX had 316 holders of record of the Class A Common Stock and 2 holders
of record of the Class B Common Stock.

DIVIDEND POLICY

SFX has no present plans to declare any dividends on its Common Stock.
SFX's note indentures significantly restrict its ability to pay dividends on
Common Stock in the future, and the payment of cash dividends on SFX's Common
Stock is currently prohibited under SFX's Senior Credit Facility. In, addition,
the Agreement and Plan of Merger between SFX, Clear Channel Communications,
Inc. and CCUII Merger Sub, Inc., prohibits SFX from paying cash dividends on
its Common Stock. The decision to declare a dividend and the amount thereof, if
any, will be in the sole discretion of the board of directors of SFX.

21
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA OF SFX

The selected consolidated financial data of SFX has been derived from the
historical financial statements of Delsener/Slater and affiliated companies,
the predecessor of SFX, as of and for each of the two years in the period ended
December 31, 1996 and the historical consolidated financial statements of SFX
as of and for each of the three years in the period ended December 31, 1999.

<TABLE>
<CAPTION>
Year Ended December 31,
(in thousands, except share data)
Predecessor
1995 1996 1997 1998 1999
---------- ----------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue ......................................... $48,054 $ 50,886 $ 96,653 $ 888,916 $1,684,355
Operating expenses .............................. 47,178 50,686 83,417 790,504 1,478,813
Depreciation and amortization (1) ............... 750 747 5,431 62,197 142,583
Non-cash charges ................................ -- -- -- 34,051 7,250
Non-recurring charges ........................... -- -- -- 5,600 --
Corporate expenses .............................. -- -- 2,206 11,194 18,524
------- -------- --------- ---------- ----------
Operating income (loss) ......................... 126 (547) 5,599 (14,630) 37,185
Interest expense ................................ (144) (60) (1,590) (50,759) (100,825)
Other income, net ............................... 178 198 295 2,455 6,577
Gains on sales of assets, net ................... -- -- -- -- 760
------- -------- --------- ---------- ----------
Income (loss) before income taxes ............... 160 (409) 4,304 (62,934) (56,303)
Income tax provision ............................ (13) (106) (490) (3,000) (1,597)
------- -------- --------- ---------- ----------
Income (loss) before extraordinary loss ......... 147 (515) 3,814 (65,934) (57,900)
Extraordinary loss, net of taxes ................ -- -- -- -- (2,490)
------- -------- --------- ---------- ----------
Net income (loss) ............................... $ 147 $ (515) $ 3,814 $ (65,934) $ (60,390)
======= ======== ========= ========== ==========
Net income (loss) per basic and dilutive
common share (2) ............................... $ 0.18 $ (1.83) $ (1.10)
OTHER OPERATING DATA:
EBITDA (3) ...................................... $ 871 $ 200 $ 11,030 $ 87,218 $ 187,018
Cash provided by (used in):
Operating activities ............................ $ (453) $ 4,214 $ 1,005 $ 27,441 $ 34,879
Investing activities ............................ -- (435) (73,296) (891,920) (883,156)
Financing activities ............................ (216) (1,431) 78,270 906,521 1,184,554
BALANCE SHEET DATA:
Current assets .................................. $ 3,022 $ 6,191 $ 11,220 $ 148,733 $ 587,842
Property and equipment, net ..................... 2,978 2,231 59,685 292,626 686,246
Goodwill, net ................................... -- -- 60,306 874,783 1,503,981
Total assets .................................... 6,037 8,880 146,942 1,383,452 2,948,873
Current liabilities ............................. 3,138 7,973 22,437 163,414 361,678
Long-term debt .................................. -- -- 15,255 768,195 1,384,992
Temporary equity-stock subject to
redemption (4) ................................. -- -- -- 16,500 18,876
Stockholders' equity ............................ 2,900 907 102,144 378,536 1,099,969
</TABLE>

- ----------
(1) Includes $2,406 and $12,701 of integration and start-up costs for the
years ended December 31, 1998 and 1999, respectively.

(2) Reflects three-for-two stock split which occured in July 1999.

(3) "EBITDA" is defined as earnings before interest, taxes, minority
interest, gains on sales of assets, non-cash and non-recurring charges
and depreciation and amortization, including integration and start-up
costs. Although EBITDA is not a measure of performance calculated in
accordance with generally accepted accounting principals ("GAAP"), SFX
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 SFX's operating
performance or liquidity which is calculated in accordance with GAAP. SFX
believes that the operating performance of entertainment companies, such
as SFX, is measured, in part, by their ability to generate EBITDA.
Further, SFX uses EBITDA as its primary indicator of operating
performance and as a measure of liquidity. EBITDA, as SFX calculates it,
may not be comparable to calculations of similarly titled measures
presented by other companies.

(4) As a result of the PACE and Marquee acquisitions, SFX may be obligated to
repurchase 820,000 shares of Class A Common Stock issued in connection
with these acquisitions. SFX has recorded the maximum liability under the
related agreements. During 1999, certain of the PACE sellers gave up
their put right to approximately 67,000 shares of Class A Common Stock.
In January 2000, SFX was required to repurchase 36,000 shares of Class A
Common Stock for $1,900.

22
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion of the financial condition and results of
operations of SFX should be read in conjunction with the consolidated financial
statements and related notes thereto included in this Report. The following
discussion contains certain forward-looking statements that involve risks and
uncertainties. SFX's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to the differences are
discussed in "-- Safe Harbor for Forward-Looking Statements", "-- Risk Factors"
and elsewhere in this Report. SFX undertakes no obligation to revise these
forward-looking statements to reflect any future events or circumstances.

GENERAL

SFX operates primarily in four major business segments within the live
entertainment industry:

o the music segment, which includes promoting and producing music events
and tours and owning and operating concert venues;

o the theater segment, which includes producing and promoting theatrical
events and tours and owning and operating theatrical venues;

o the sports segment, which includes talent representation and marketing
of professional athletes and broadcasters, television programming and
production, event management and promotion of motor sports events; and

o the family entertainment & other segment, which includes producing and
promoting family-oriented events, providing marketing and consulting
services, publishing music related trade magazines and producing and
distributing network radio special events and concert programming.

SFX sells corporate sponsorships and advertising in each of its segments.

Music

SFX's primary source of concert promotion revenues is from ticket sales at
events promoted by SFX. As a venue operator, SFX's primary sources of revenue
are corporate sponsorships and advertising, concessions, parking,
merchandising, ticket rebates and other ancillary services, derived principally
from events promoted by SFX.

Revenue from ticket sales is affected primarily by the number of events
SFX promotes, the average ticket price and the number of tickets sold. The
average ticket price depends on the popularity of the artist, the size and type
of venue and the general economic conditions and consumer tastes in the market
where the event is being held. Generally, the promoter or producer 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
generally assumes the financial risk of ticket sales and is responsible for
local production and advertising of the event. When the promoter assumes the
financial risk, all revenue and expenses associated with the event are
recorded. Revenue received before the event date is initially recorded on the
balance sheet as deferred revenue; after the event occurs, it is recorded on
the statement of operations as gross revenue.

SFX's most significant operating expenses are talent fees, production
costs and 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. As a producer, SFX is generally responsible for the
booking of talent for a larger number of events, often an artist's entire tour.
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 variable costs primarily related to expected
attendance. Expenses are deferred on the balance sheet as prepaid event
expenses until the event occurs; after the event occurs, the expenses are
included on the statement of operations as costs of revenues.

23
<PAGE>

Theater

SFX's theatrical operations are directed mainly towards the presentation
of touring Broadway shows at owned and/or operated venues and the production
and promotion of touring Broadway shows. Touring Broadway shows generate
revenues primarily from ticket sales and sponsorships. The principal source of
revenue at owned and/or operated venues is rental income from production
companies, merchandise sales and concession sales. 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. To reduce its dependency on the success of any single
touring production, SFX sells advance annual subscriptions that provide the
purchaser with tickets for all of the shows that SFX intends to tour in the
particular market during the touring season. Historically, approximately 30% of
ticket sales for touring Broadway shows presented by SFX were sold through
advance annual subscriptions. Subscription related revenues received before the
event date and other advanced ticket sales 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. Promotion expenses are
capitalized during the year on the balance sheet as prepaid event expenses
until the event occurs. Production expenses are capitalized on the balance
sheet as prepaid event expenses until the tour begins, at which time all costs
are amortized over the expected life of the tour, which is generally less than
one year. Subscriptions for touring Broadway shows typically cover
approximately two-thirds of SFX'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 principal operating expenses related to owned or operated venues are
building operation costs and payroll.

SFX also makes equity investments in original Broadway productions,
principally as a means to obtain the touring rights for such shows. These
investments are generally accounted for using either the equity method or the
cost method of accounting, based on the percentage of ownership. SFX monitors
the recoverability of these investments on a regular basis, and SFX may be
required to take write-offs if the original production closes or if SFX
determines that the production will not recoup the investment. The timing of
any write-off could materially adversely affect the operating results of the
theatrical segment in a particular period.

Sports

SFX is a leading fully integrated sports marketing and management company
specializing in the representation of sports athletes and broadcasters,
integrated event management, television programming and production and
marketing consulting services. SFX's talent representation and marketing
activities consist principally of the representation of sports athletes and
broadcasters in contract and endorsement negotiations. SFX's principal source
of revenue is from talent representation. SFX typically receives a percentage
of monies earned by its clients and a percentage of the endorsement deals
negotiated by SFX. Revenue from these sources is recognized in the period the
services are rendered and the fee is determinable. Principal operating expenses
include salaries, wages and travel and entertainment expenses.

SFX's motor sports activities consist principally of the production and
promotion 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. Event-related
revenues received before 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. 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. Expenses are
deferred on the balance sheet as prepaid event expenses until the event occurs;
after the event occurs, the expenses are included on the statement of
operations as costs of revenues.

24
<PAGE>

Family Entertainment & Other

The family entertainment segment produces and presents family-oriented
entertainment such as children's theatrical shows, dance shows, ice-skating,
gymnastic shows and artifact exhibits worldwide. SFX's other principal
businesses include the production and distribution of radio industry trade
magazines and the provision of radio airplay and music retail research
services. The primary sources of revenues from these activities include the
sale of advertising space in its publications and the sale of advertising time
on radio stations that carry its syndicated shows, subscription fees for its
trade publications and subscription fees for access to its database of radio
play lists and audience data. Revenues generally vary based on the overall
advertising environment and competition.

SFX 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.

PROPOSED MERGER WITH CLEAR CHANNEL COMMUNICATIONS, INC.

STOCK SPLIT

In July of 1999, SFX completed a 3-for-2 split of its Class A and Class B
Common Stock. The financial and share information presented herein has been
restated, to the extent applicable, to reflect the effect of the stock split.

1997 ACQUISITIONS

During 1997, SFX completed the following acquisitions (in thousands):

<TABLE>
<CAPTION>
CASH
CONSIDERATION VALUE OF NUMBER
DATE AND ASSUMED STOCK OF SHARES BUSINESS
COMPANY ACQUIRED DEBT ISSUED ISSUED SEGMENT
- ------------------------- ---------- --------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Delsener/Slater ......... 1/2/97 $ 26,815 $ -- -- Music
Meadows ................. 3/1/97 16,354 7,500 371 Music
Sunshine ................ 6/1/97 57,489 4,000 228 Music
-------- ------- ---
Total ................... $100,658 $11,500 599
======== ======= ===
</TABLE>

The cash portion of the purchase price for SFX's 1997 acquisitions was
financed through capital contributions from SFX Broadcasting.

25
<PAGE>

1998 ACQUISITIONS

During 1998, SFX completed the following acquisitions (in thousands):

<TABLE>
<CAPTION>
CASH
CONSIDERATION VALUE OF NUMBER
DATE AND ASSUMED STOCK OF SHARES BUSINESS
COMPANY ACQUIRED DEBT (1) ISSUED ISSUED SEGMENT
- -------------------------- ---------- --------------- ---------- ----------- -------------------------------
<S> <C> <C> <C> <C> <C>
Bill Graham Presents ..... 2/24/98 $ 72,827 $ 7,500 845 Music and Family Entertainment
& Other
PACE and Pavilion ........ 2/25/98 220,683 20,000 2,250 Music, Theatrical and Sports
Contemporary ............. 2/27/98 82,702 16,200 1,894 Music and Family Entertainment
& Other
Network .................. 2/27/98 59,145 16,239 1,284 Other
FAME ..................... 6/4/98 85,491 35,960 1,500 Sports
Don Law .................. 7/2/98 92,195 -- -- Music
Magicworks ............... 9/11/98 115,740 -- -- Music, Theatrical and Family
Entertainment & Other
Other acquisitions ....... Various 194,822 11,000 563 Music, Theatrical, Sports,
Family Entertainment and Other
-------- -------- -----
Total .................... $923,605 $106,899 8,336
======== ======== =====
</TABLE>

- ----------
(1) Includes cash paid related to deferred contingent purchase price
agreements.

The funds required to finance the 1998 acquisitions were obtained from the
February 1998 note offering, SFX's then-existing senior credit facility and the
1998 equity offering.

1999 ACQUISITIONS

During 1999, SFX completed the following acquisitions (in thousands):

<TABLE>
<CAPTION>
CASH
CONSIDERATION VALUE OF NUMBER
DATE AND ASSUMED STOCK OF SHARES BUSINESS
COMPANY ACQUIRED DEBT (1) ISSUED ISSUED SEGMENT
- ----------------------- ---------- --------------- ---------- ----------- -------------------------------
<S> <C> <C> <C> <C> <C>
Cellar Door ........... 2/19/99 $ 76,788 $ 20,000 519 Music
Nederlander ........... 3/16/99 126,423 -- -- Music
Marquee ............... 3/16/99 54,073 81,728 2,103 Sports
Livent ................ 8/27/99 100,809 -- -- Theatrical
Apollo ................ 9/17/99 218,942 37,472 980 Theatrical, Family
Entertainment & Other
EMA Telstar ........... 10/4/99 27,857 -- -- Music
Mojo Works ............ 10/21/99 40,654 -- -- Music
Other Acquisitions .... Various 175,422 15,745 397 Music, Theatrical, Sports,
Family Entertainment and Other
--------- -------- -----
Total ................. $ 820,968 $154,945 3,999
========= ======== =====
</TABLE>

- ----------
(1) Includes cash paid related to deferred contingent purchase price
agreements.

Cellar Door

26
<PAGE>

to the seller options to purchase 150,000 shares of Class A Common Stock in
equal installments over the five-year period following the closing date at fair
market value. SFX financed the acquisition with a portion of the net proceeds
from its February 1999 equity offering.

Nederlander

On March 16, 1999, SFX acquired certain interests in seven venues and
other assets of Nederlander for an aggregate purchase price of approximately
$93.8 million in cash. The agreement relating to the Mesa del Sol Centre for
the Performing Arts provides for additional payments based on the financial
performance of this venue. In the third quarter of 1999, SFX renegotiated the
agreement with respect to the Firstar Arena whereby SFX relinquished its
financial interest in the venue in exchange for a revised long-term venue
management agreement. SFX financed this acquisition with a portion of the net
proceeds of its February 1999 equity offering and borrowings under SFX's
then-existing senior credit facility. In addition, during the fourth quarter of
1999, SFX purchased the remaining 50% interest in a partnership that holds the
long-term leases to two amphitheaters for $35.5 million. SFX financed the
incremental acquisition with a portion of the net proceeds of the August 1999
equity offering and borrowings under SFX's senior credit facility.

Marquee

On March 16, 1999, a subsidiary of SFX was merged with and into The
Marquee Group, Inc. and Marquee became a wholly owned subsidiary of SFX. In
connection with the merger, SFX issued approximately 2.1 million shares of SFX
Class A Common Stock with a value of approximately $81.7 million on the date of
the merger and repaid $33.5 million of Marquee's debt. SFX financed the cash
portion of the acquisition with borrowings under its then-existing senior
credit facility. Through March 28, 2000, SFX also paid $49.4 million of
additional purchase consideration which arose from acquisitions made by Marquee
prior to SFX's acquisition of Marquee. Under certain circumstances, SFX may be
required to make additional payments arising from Marquee's acquisition
agreements.

In the third quarter of 1999, SFX disposed of the operations of QBQ
Entertainment, Inc, whose primary business is the representation of artists in
the music industry as an agent. No gain or loss was recognized on the
transaction. SFX does not have a management or ownership interest in the newly
formed company. In connection with the disposition, as of December 31, 1999,
SFX had loaned the newly formed company $7.2 million, which has been recorded
as an other asset on the consolidated balance sheet. SFX also rendered advisory
services to QBQ for which revenue of $1.0 million was recognized in 1999. The
newly formed company is in the process of obtaining independent financing.

Livent

On August 27, 1999, SFX purchased certain assets of Livent, Inc. and its
affiliates, including three theaters and the intellectual property rights to
several current and future Broadway productions, including Ragtime, Fosse,
Phantom of the Opera and Seussical. The purchase price for this acquisition was
approximately $100.8 million, consisting of $79.3 million in cash, $18.4
million of deferred purchase consideration and $3.1 million in assumption of
debt, subject to post-closing adjustments. SFX financed the cash portion of the
acquisition with a portion of the net proceeds from its August 1999 equity
offering.

Apollo

On September 17, 1999, SFX acquired Apollo Leisure Group plc, the largest
live theater operator as well as one of the largest providers of entertainment
and leisure management services in the United Kingdom. The total purchase price
for the acquisition was approximately $256.4 million, comprised of
approximately $196.4 million in cash, 979,667 shares of Class A Common Stock
with a value of approximately $37.5 million and the assumption of net
liabilities of approximately $22.5 million, subject to post-closing
adjustments. Apollo operates, among other venues, 3 arenas and a network of 23
theaters. In connection with the Apollo acquisition, SFX acquired 100% of Barry
Clayman Concerts, which is a leading promoter of concert and other live
entertainment events throughout the U.K. SFX financed the cash portion of the
acquisition with borrowings under SFX's senior credit facility.

27
<PAGE>

EMA Telstar

On October 4, 1999, SFX purchased EMA Telstar, a venue owner and a
promoter and producer of live entertainment events in Sweden, for approximately
$27.9 million in cash. The purchase price was paid with a portion of the net
proceeds from the August 1999 equity offering. Under certain conditions, SFX
may have to make significant additional payments based upon EMA's achievement
of certain earnings targets.

Mojo Works

On October 25, 1999, SFX purchased 80% of the Mojo Works group of
companies, a promoter and producer of live entertainment in the Netherlands for
approximately $40.6 million in cash, including working capital, subject to
post-closing adjustments. Under certain circumstances, the sellers have the
right to sell the remaining 20% interest to SFX and SFX has the right to
purchase the remaining 20% interest from the sellers. The purchase price was
paid with a portion of the net proceeds from the August 1999 equity offering.

Other Acquisitions

During the first quarter of 1999, SFX also completed the acquisitions of
The Entertainment Group, Inc., a concert and theatrical producer, RZO, a
concert promoter, producer of international music concert tours and music
publishing business and the assets of Integrated Sports International, L.P., a
full-service sports marketing company and a music venue. The total
consideration for these acquisitions and the long-term marketing and consulting
agreement consisted of $73.2 million in cash and 142,766 shares of Class A
Common Stock valued at $5.2 million at the time of the acquisitions. In
addition, SFX has accrued $4.0 million of contingent purchase price as of
December 31, 1999. SFX financed these transactions with the proceeds from the
February 1999 equity offering and borrowings under SFX's then-existing senior
credit facility. In addition, SFX may be required to make additional payments
of up to $13.0 million in cash and 75,000 shares of Class A Common Stock based
on the financial performance of certain of these acquired companies.

During the second quarter of 1999, SFX completed the acquisitions of
Hendricks Management Company, Inc., which represents and provides financial
consulting services to team sports athletes, primarily in professional
baseball, and a 50% interest in A.H. Enterprises, a leading promoter of urban
music. SFX increased its ownership interest in A.H. Enterprises to 60% in
January 2000. The total consideration for these acquisitions was approximately
$29.6 million in cash and $4.1 million in deferred purchase consideration. SFX
financed these acquisitions with borrowings under SFX's then-existing senior
credit facility and cash on hand. SFX may be required to make additional
payments, in shares of SFX Class A Common Stock, based on the cumulative
financial performance of Hendricks Management Company, Inc. through December
31, 2002. In addition, SFX invested approximately $11.2 million in certain
entertainment and sports related Internet companies.

During the third quarter of 1999, SFX completed the acquisitions of Candid
Productions, Inc., a producer of professional figure skating events, a 50%
interest in Cardenas Fernandez & Associates, Inc, a leading concert promoter
and producer of music concerts by Hispanic artists, Tellem & Associates, which
represents team sports athletes, primarily in professional baseball and
basketball and Midland Concert Promotions Group Limited, a concert promoter and
motorsports venue operator in the United Kingdom. The total consideration for
these acquisitions was approximately $66.4 million consisting of $49.2 million
in cash, and 253,666 shares of Class A Common Stock valued at $10.5 million and
$6.7 million in deferred purchase consideration. SFX financed these
acquisitions with a portion of the net proceeds of the August 1999 equity
offering and borrowings under the senior credit facility.

During the fourth quarter of 1999, SFX completed the acquisitions of SME
Power Branding, a sports brand identity company, the rights to a 10-year lease
of Tabernacle, a music venue in Atlanta, Georgia and the assets of a sport
talent representation company in Australia. The total cash consideration for
these acquisitions was approximately $12.6 million. SFX financed these
acquisitions with a portion of the net proceeds of the August 1999 equity
offering and borrowings under the senior credit facility.

28
<PAGE>

2000 ACQUISITIONS

In the first quarter of 2000, SFX completed the acquisitions of Speakers
of Sport, which represents professional baseball athletes and The Electric
Factory, the primary concert promoter in the Philadelphia, Pennsylvania area.
The total cash consideration of approximately $65.4 million was financed with a
portion of the net proceeds from the August 1999 equity offering.

Although SFX is currently pursuing certain additional acquisitions, 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 -- If we
are unable to complete future acquisitions, our stock price may suffer."

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 certain of these acquisition agreements have
been filed as exhibits to this Report and are incorporated herein by reference.
Pursuant to certain of the aforementioned acquisition agreements, SFX may be
required make additional payments or repurchase shares of its Class A Common
Stock.

All of SFX's acquisitions were accounted for using the purchase method of
accounting, and the intangible assets acquired will generally be amortized over
periods of up to 15 years. As of December 31, 1999, SFX had recorded net
goodwill of $1.58 billion. The amount of amortization charges will be
substantial and will continue to affect SFX's operating results in the future.
These charges, however, do not result in an outflow of cash or impact EBITDA,
as defined herein.

FINANCINGS

Senior Subordinated Notes Offerings

On February 11, 1998, SFX completed an offering of $350.0 million in
principal amount of 9 1/8% Senior Subordinated Notes due February 1, 2008.
Interest is payable on the notes on February 1 and August 1 of each year. SFX
used the proceeds from the February 1998 note offering and the initial
borrowings under SFX's then-existing credit facility to consummate certain of
SFX's 1998 acquisitions. On July 15, 1998, SFX consummated the exchange of
substantially identical publicly registered notes for all outstanding old notes
issued in the February 1998 notes offering. All original notes were tendered
for exchange and were canceled upon the issuance of the same principal amount
of exchange notes.

On November 25, 1998, SFX completed an offering of $200.0 million in
principal amount of 9 1/8% Senior Subordinated Notes due December 1, 2008.
Interest is payable on the notes on June 1 and December 1 of each year. SFX
used the proceeds from the November 1998 note offering to repay substantially
all outstanding borrowings under the revolving portion of the then-existing
senior credit facility. In March 1999, SFX consummated the exchange of
substantially identical publicly registered notes for outstanding notes issued
in the November 1998 note offering. All original notes were tendered for
exchange and were canceled upon the issuance of the same principal amount of
exchange notes.

Consent Solicitation

In July 1999, SFX completed a consent solicitation with respect to its
outstanding senior subordinated notes whereby it obtained approval from the
holders of the notes to modifications of certain covenants in the indentures
governing the notes. The modifications, among other things, provided SFX with
more flexibility to make investments and acquisitions internationally and
permitted SFX's foreign subsidiaries to incur indebtedness, subject to certain
limitations. Fees associated with the transaction totaled $13.7 million and
have been recorded as debt issuance costs on the balance sheet.

29
<PAGE>

Senior Credit Facility

On August 23, 1999, SFX entered into a new seven-year $1.1 billion senior
credit facility which replaced SFX's then-existing $350.0 million senior credit
facility. The new senior credit facility is comprised of a $250.0 million
multi-draw, multi-currency term loan maturing on December 31, 2005 (the "Term A
Loan"), a single-draw, $600.0 million U.S. dollar term loan maturing on June
30, 2006 (the "Term Loan B") and a $250.0 million reducing revolver having a
letter of credit sub-limit of $75.0 million maturing on December 31, 2005. SFX
recorded a $2.5 million extraordinary loss on the early extinguishment of debt,
net of taxes, related to the replaced facility. SFX used a portion of the
borrowings under the senior credit facility to finance certain of its 1999 and
2000 acquisitions and intends to use the remaining borrowing availability for
general corporate purposes and potential future acquisitions.

May 1998 Equity Offering

On May 27, 1998, SFX consummated an offering of 12,075,000 shares of Class
A Common Stock at an offering price of $28.83 per share and received net
proceeds of approximately $329.0 million. SFX used the proceeds to consummate
certain of its 1998 acquisitions, to fund $109.7 million of tax indemnity
payments related to the sale of SFX Broadcasting and to pay fees and other
expenses.

February 1999 Equity Offering

In February 1999, SFX consummated an offering of 7,423,000 shares of Class
A Common Stock at an offering price of $37.00 per share and received net
proceeds of approximately $260.7 million. SFX used the proceeds to finance
certain of its 1999 acquisitions.

August 1999 Equity Offering

In August 1999, SFX consummated an offering of 8,625,000 shares of SFX's
Class A Common Stock at an offering price of $41.00 per share and received net
proceeds of approximately $338.7 million. SFX used a portion of the net
proceeds to finance certain of its 1999 and 2000 acquisitions and intends to
use the remaining portion of the net proceeds for general corporate purposes
and potential future acquisitions.

RESULTS OF OPERATIONS

The operating performance of entertainment companies, such as SFX, is
measured, in part, by their ability to generate EBITDA. Further, SFX uses
EBITDA as the primary indicator of its operating performance and secondarily as
a measure of liquidity. SFX defines "EBITDA" as earnings before interest,
taxes, minority interest, gains on sales of assets, non-cash and non-recurring
charges and depreciation and amortization, including integration and start-up
costs. Although EBITDA is not a measure of performance calculated in accordance
with generally accepted accounting principals ("GAAP"), SFX believes that the
entertainment industry accepts EBITDA as a generally recognized measure of
performance and analysts who report publicly on the performance of
entertainment companies use EBITDA. 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
operating performance or liquidity that is calculated in accordance with GAAP.
SFX believes that the operating performance of entertainment companies, such as
SFX, is measured in part by their ability to generate EBITDA. Further, SFX uses
EBITDA as its primary indicator of operating performance and as a measure of
liquidity. EBITDA, as SFX calculates it, may not be comparable to calculations
of similarly titled measures presented by other companies.

SFX's operations and revenues have been largely seasonal in nature, with
generally higher revenues generated in the second and third quarters. For
example, pro forma for the 1999 acquisitions, SFX generated approximately 59%
of its revenues in the second and third calendar quarters during the year ended
December 31, 1999. SFX's outdoor venues are primarily used in the summer months
and do not generate substantial revenue in the late fall, winter and early
spring. Similarly, the musical concerts that SFX promotes largely occur in the
second and third quarters. SFX's entertainment marketing and consulting in
connection with musical concerts also generate a large share of revenues in the
second and third quarters. Therefore, the seasonality of SFX's business causes,
and will continue to cause, a significant variation in SFX's quarterly
operating results.

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<PAGE>

HISTORICAL RESULTS

Year ended December 31, 1999 as compared to the year ended December 31,
1998

During 1998 and 1999, SFX made significant acquisitions in each of its
business segments. The 1998 and 1999 acquisitions were the primary reason for
the increases in revenue, EBITDA and operating income, before corporate
charges, in each of the segments during this period. The following table
summarizes each segment's operating performance for the years ended
December 31, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
REVENUE EBITDA (1) OPERATING (LOSS) INCOME
--------------------------- -------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Segments (2):
Music ...................... $ 976,203 $ 604,469 $ 118,693 $ 61,204 $ 41,024 $ 24,598
Theatrical ................. 289,671 150,970 31,924 15,576 17,556 4,419
Sports ..................... 141,706 24,899 33,281 2,466 8,968 (2,897)
Family entertainment &
other .................... 276,775 108,578 21,644 19,166 3,349 10,095
---------- --------- --------- --------- --------- ----------
Segment performance ......... 1,684,355 888,916 205,542 98,412 70,897 36,215
Corporate ................... -- -- (18,524) (11,194) (33,712) (50,845)
---------- --------- --------- --------- --------- ----------
Total ....................... $1,684,355 $ 888,916 $ 187,018 $ 87,218 $ 37,185 $ (14,630)
========== ========= ========= ========= ========= ==========
</TABLE>

- ----------
(1) As used in these tables, EBITDA excludes integration and start-up costs
and non-cash and non-recurring charges.

(2) Certain segment information in 1998 has been reclassified to conform to
the 1999 presentation.

Music Revenue increased by $371.7 million to $976.2 million for the year
ended December 31, 1999, compared to $604.5 million for the year ended December
31, 1998. EBITDA increased by $57.5 million to $118.7 million from $61.2
million. Operating income increased by $16.4 million to $41.0 million from
$24.6 million. Approximately $262.5 million of the increase in revenue was
primarily the result of the inclusion of revenue from the operations of Cellar
Door, Nederlander, EMA Telstar and Mojo and approximately $109.2 million of the
increase was the result of increased touring activity, including radio
festivals, and increased ticket sales, sponsorships and concessions from
businesses owned during both periods. The increase in EBITDA reflected a $35.0
million improvement at businesses owned for both periods, primarily as a result
of the increased touring activity mentioned above and $22.5 million related to
the music segment acquisitions. The increase in operating income of $16.4
million resulted from the factors contributing to the increase in EBITDA,
partially offset by increased depreciation and amortization expense related to
the acquisitions and a non-recurring loss related to SFX's Latin American
touring activities.

Theatrical Revenue increased by $138.7 million to $289.7 million for the
year ended December 31, 1999, compared to $151.0 million for the year ended
December 31, 1998. EBITDA increased by $16.3 million to $31.9 million from
$15.6 million. Operating income increased by $13.2 million to $17.6 million
from $4.4 million. Approximately $116.0 million of the increase in revenue is
the result of the inclusion of revenue from the operations of Apollo, Livent
and certain acquisitions that were not owned for the full year in 1998 and
approximately $22.7 million of the increase in revenue was the result of
increased theatrical touring productions during 1999 in which SFX had a
majority interest and, therefore, revenues were consolidated in SFX's financial
statements. The increase in EBITDA reflected a $20.2 million contribution from
operations of the theatrical segment acquisitions in 1999 offset by a $3.9
million decrease related to a stronger theatrical touring season in 1998. The
increase in operating income of $13.2 million resulted from operations of the
theatrical segment acquisitions and the increase in EBITDA, partially offset by
increased depreciation and amortization expense related to the acquisitions.

Sports Revenue increased by $116.8 million to $141.7 million for the year
ended December 31, 1999, compared to $24.9 million for the year ended December
31, 1998. EBITDA increased by $30.8 million to $33.3 million from $2.5 million.
Operating income increased by $11.9 million to

31
<PAGE>

$9.0 million from an operating loss of $2.9 million. Approximately $36.3
million of the increased revenue resulted from the operations of the PACE
motorsports business. This 1998 acquisition of PACE occurred after the peak
months of motorsports activities during that year. In addition, approximately
$64.8 million of the increase in revenue resulted from the inclusion of the
operations of the entities acquired by the sports segment in 1999 and an
increase of $15.7 million related to increased sports representation and motor
sports activity. The increase in EBITDA reflected a $26.0 million increase
related to the operations of the sports companies acquired during 1998 and 1999
and a $4.8 million improvement at companies owned for both periods, primarily
increased sports representation activity. The increase in operating income of
$11.9 million resulted from the increase in EBITDA, partially offset by
increased depreciation and amortization expense related to the acquisitions.
The resulting improvement in EBITDA and operating income margins are primarily
attributable to ownership of the motor sports business for the entire year
during 1999.

Family Entertainment & Other Revenue increased by $168.2 million to
$276.8 million for the year ended December 31, 1999, compared to $108.6 million
for the year ended December 31, 1998. EBITDA increased by $2.4 million to $21.6
million from $19.2 million. Operating income decreased by $6.8 million to $3.3
million from $10.1 million. Approximately $65.3 million of the increase in
revenue was primarily the result of increased national sponsorship and an
increase in events presented, increased merchandising and increased marketing,
while $102.9 million of the increase was the result of the inclusion of
revenues from entities acquired by the family entertainment & other segment
that were not owned for the year in 1998. The increase in EBITDA of $2.4
million primarily reflects the acquisition of Apollo in 1999. The decrease in
operating income of $6.8 million resulted from increased depreciation and
amortization expense related to the acquisitions, partially offset by the
increase in EBITDA.

Corporate Corporate related expenses, including non-cash charges and
depreciation and amortization, were $33.7 million for the year ended December
31, 1999 compared to $50.8 million for the year ended December 31, 1998. This
decrease was a result of a decrease in non-cash charges and depreciation and
amortization, partially offset by increased integration and start-up costs and
increased corporate expenses.

Non-cash charges of $7.3 million in 1999 consisted of:

o $3.3 million related to the issuance of stock options to certain
executive officers pursuant to their employment agreements exercisable
for an aggregate of 517,500 shares of Class A Common Stock;

o $2.0 million related to the write off of a concert tour;

o $1.6 million related to the issuance of stock options; and

o $400,000 related to other non-cash charges.

Non-cash compensation and other non-cash charges in 1998 totaled $34.1
million, consisting of:

o $23.9 million of compensation related to the sale of 975,000 shares of
Class B Common Stock and 285,000 shares of Class A Common Stock at a
purchase price of $1.33 per share to certain executive officers pursuant
to employment agreements;

o $7.5 million associated with the issuance of 370,766 shares of Class A
Common Stock to Mr. Sillerman in connection with the repurchase of shares
of SFX Broadcasting issued to the sellers of Meadows;

o $2.4 million related to the issuance of stock options to certain
executive officers pursuant to employment agreements exercisable for an
aggregate of 528,750 shares of Class A Common Stock; and

o $300,000 related to a deferred compensation plan for each non-employee
director, adopted in January 1998, whereby each director was credited
with the right to receive 8,183 shares of Class A Common Stock based on a
stock price of $3.67 per share.

32
<PAGE>

Of these options, 517,500 vest over three years and have an exercise price
of $3.67 per share. SFX is recording non-cash compensation charges of
approximately $3.3 million annually over the three-year exercise period.

Corporate expenses related to administrative overhead increased to $18.5
million from $11.2 million, largely as a result of the growth of SFX's
operations.

Depreciation and amortization expense increased to $7.9 million from $5.6
million primarily as a result of additional amortization related to computer
systems and leasehold improvements.

During 1999, SFX incurred $12.7 million of integration and start-up costs
related primarily to the cost of implementing SFX's branding and ticketing
strategy, new Internet initiatives, the opening of a themed exhibit and the
write off of abandoned transaction costs. During 1998, SFX incurred $2.4
million of integration and start-up costs primarily relating to the cost of
implementing SFX's national sponsorship program.

In 1998, SFX recorded $5.6 million of non-recurring charges related to
certain deposits paid to Livent (prior to its acquisition by SFX) for the
Ragtime and Showboat touring productions and certain related deferred expenses
which, as a result of the Livent bankruptcy, will not be recovered. There were
no non-recurring charges in 1999.

Interest expense, net of investment income, was $88.2 million for the year
ended December 31,1999, compared to $46.3 million for year ended December 31,
1998, primarily as a result of the additional debt incurred to consummate the
1998 and 1999 acquisitions.

Minority interest increased to $6.0 million for the year ended December
31, 1999, from $2.0 million for year ended December 31, 1998, primarily as a
result of the acquisition in 1999 of a 50% interest in a partnership which
operated two amphitheaters.

SFX recorded income tax provisions of $1.6 million and $3.0 million for
the years ended December 31, 1999 and 1998, respectively. The tax provision for
1999 relates to foreign, state and local income taxes, partially offset by a
federal tax benefit. The provision differs from the statutory rate primarily as
a result of non-deductible goodwill amortization. SFX does not expect to pay
any taxes for 1999 other than federal alternative minimum tax ("AMT"), foreign
taxes and state and local taxes, as a result of the utilization of significant
Net Operating Loss ("NOL") carryforwards that were previously recognized for
book purposes. The provision for income taxes in 1998 was primarily related to
state and local taxes. No federal tax benefit was recorded in 1998 due to the
uncertainty of realizing a tax benefit for SFX's losses.

SFX recorded a $2.5 million extraordinary loss on the early extinguishment
of debt, net of $1.8 million of tax benefit, in 1999 related to the write-off
of unamortized costs incurred to complete the then-existing $350.0 million
senior credit facility which was replaced with the $1.1 billion senior credit
facility in August of 1999.

SFX's net loss decreased to $60.4 million for the year ended December 31,
1999, as compared to net loss of $65.9 million for the year ended December 31,
1998, due to the factors discussed above. SFX's net loss applicable to common
shares decreased to $63.9 million for the year ended December 31, 1999, as
compared to $68.7 million for the year ended December 31, 1998 as a result of
factors discussed above offset by the increased accretion on stock subject to
redemption.

33
<PAGE>

Year ended December 31, 1998 as compared to the year ended December 31,
1997

Prior to 1998, SFX did not operate in any business segment other than the
music segment. Therefore, a discussion of the results of each segment's actual
performance as compared to the prior period has not been presented.

<TABLE>
<CAPTION>
REVENUE EBITDA (1) OPERATING (LOSS) INCOME
-------------------------- ------------------------- ---------------------------
1998 1997 1998 1997 1998 1997
------------ ----------- ------------ ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Segments:
Music ...................... $ 604,469 $ 96,653 $ 61,204 $ 13,236 $ 24,598 $ 8,462
Theatrical ................. 150,970 -- 15,576 -- 4,419 --
Sports ..................... 24,899 -- 2,466 -- (2,897) --
Family entertainment &
other .................... 108,578 -- 19,166 -- 10,095 --
--------- -------- --------- -------- ---------- --------
Segment performance ......... 888,916 96,653 98,412 13,236 36,215 8,462
Corporate ................... -- -- (11,194) (2,206) (50,845) (2,863)
--------- -------- --------- -------- ---------- --------
Total ....................... $ 888,916 $ 96,653 $ 87,218 $ 11,030 $ (14,630) $ 5,599
========= ======== ========= ======== ========== ========
</TABLE>

- ----------
(1) As used in these tables, EBITDA excludes integration and start-up costs
and non-cash and non-recurring charges.

SFX's revenue increased by $792.2 million to $888.9 million for the year
ended December 31, 1998, compared to $96.7 million for the year ended December
31, 1997, primarily as a result of $695.7 million attributable to SFX's 1998
acquisitions, $12.4 million attributable to the acquisitions of the Meadows in
March 1997 and Sunshine Promotions in June 1997 and $80.1 million attributable
to increased tour and concert activity at Delsener/Slater. The 1998
acquisitions significantly increased the concert promotion and venues operation
business and expanded SFX's business to include theatrical promotion and
production, motor sports promotion and production, sports marketing and
management, family entertainment and radio magazine publishing, programming and
research.

Cost of revenue increased by $604.9 million to $678.8 million for the year
ended December 31, 1998, compared to $73.9 million for the year ended December
31, 1997, primarily as a result of $521.1 million attributable to SFX's 1998
acquisitions and $7.1 million attributable to the acquisition of Sunshine
Promotions.

Selling, general and administrative expenses increased by $102.2 million
to $111.7 million for the year ended December 31, 1998 as compared to $9.5
million for the year ended December 31, 1997, primarily as a result of $89.2
million attributable to the 1998 acquisitions and $5.3 million attributable to
the acquisition of Sunshine Promotions.

Depreciation and amortization expense increased to $62.2 million for the
year ended December 31, 1998, compared to $5.4 million for the year ended
December 31, 1997, due to the inclusion of $47.6 million of depreciation and
amortization expense related to the 1998 acquisitions and $1.7 million related
to the acquisition of Sunshine promotions and the Meadows. In addition, SFX
recorded a $2.7 million write down of deferred expense relating to the
Triathlon Broadcasting Company agreement as described below and recorded $2.4
million of integration costs for the year ended December 31, 1998. SFX recorded
the fixed assets of its 1997 and 1998 acquisitions at fair value and recorded
intangible assets 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 $11.2 million for the year ended December 31,
1998, net of $530,000 in fees earned from Triathlon, compared to $2.2 million
for the year ended December 31, 1997, net of Triathlon fees of $1.8 million.
The increase in corporate expense reflects the growth of SFX's operations and
the formation of the national marketing division of SFX. The fees earned 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

34
<PAGE>

services to companies engaged in the media business. These fees 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
assigned its rights to receive the fees to SFX, pursuant to the distribution
agreement. Triathlon was acquired by a third party in April of 1998. When
Triathlon was acquired, it ceased paying consulting fees.

Non-cash compensation and other non-cash charges in 1998 totaled $34.1
million, consisting of:

o $2.4 million related to the issuance of stock options to certain
executive officers pursuant to employment agreements exercisable for an
aggregate of 528,750 shares of Class A Common Stock; and

There were no non-cash charges in 1997.

The operating loss was $14.6 million for the year ended December 31, 1998,
compared to income of $5.6 million for the year ended December 31, 1997, due to
the matters discussed above.

Interest expense, net of investment income, was $46.3 million in the year
ended December 31, 1998, compared to $1.3 million for the year ended December
31, 1997, primarily as a result of $746.5 million attributable to the
incurrence of additional debt related to SFX's 1998 acquisitions and $16.2
million attributable to the debt assumed in connection with the Meadows and
Sunshine Promotions acquisitions.

Minority interest was $2.0 million for the year ended December 31, 1998,
compared to no minority interest for the year ended December 31, 1997, relating
to minority interests in two amphitheaters, certain theatrical productions and
a merchandising company which were acquired in 1998.

Income tax provision was $3.0 million and $0.1 million for the years ended
December 31, 1998 and 1997, respectively. The provision is primarily for state
and local taxes and reflects the impact of non-deductible goodwill amortization
and other non-cash compensation and other non-cash charges. No federal tax
benefit was recognized in either year due to the uncertainty of realizing a tax
benefit for SFX's losses.

SFX's net loss increased to $65.9 million for the year ended December 31,
1998, as compared to net income of $3.8 million for the year ended December 31,
1997, due to the factors discussed above. SFX's net loss applicable to common
shares increased to $68.7 million for the year ended December 31, 1998, as a
result of the accretion of the stock subject to redemption.

EBITDA, excluding non-cash compensation and other non-cash charges of
$34.1 million, non-recurring charges of $5.6 million and $2.4 million of
integration and start-up costs was $87.2 million for the year ended December
31, 1998, compared to $11.0 million for the year ended December 31, 1997,
primarily as a result of the 1998 acquisitions

35
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

SFX's principal need for funds has been for acquisitions, cash interest
expense, working capital needs, certain payments in connection with the SFX
spin-off and capital expenditures. SFX's principal sources of funds has been
proceeds from two note offerings, proceeds from three equity offerings,
borrowings under its senior credit facility and cash flows from operations.

Historical Cash Flows

Net cash provided by operations was $34.9 million for the year ended
December 31, 1999, as compared to $27.4 million for the year ended December 31,
1998. The increase was primarily attributable to an increase in operating
income, before depreciation, amortization and non-cash compensation and other
non-cash charges, partially offset by other changes in working capital.

Net cash used in investing activities for the year ended December 31, 1999
was $883.2 million as compared to $891.9 million for the year ended December
31, 1998. The decrease in the use of funds was primarily the result of the
proceeds from the sales of assets of $12.0 million.

Net cash provided by financing activities for the year ended December 31,
1999 was $1.18 billion as compared to $906.5 million for the year ended
December 31, 1998. During 1999, SFX completed the February 1999 equity
offering, resulting in net proceeds of $260.7 million, the August 1999 equity
offering, resulting in net proceeds of $337.9 million and received net proceeds
of $14.3 million related to the exercise of employee stock options. SFX also
had net borrowings under its senior credit facilities of $611.7 million and
repaid $4.7 million of other debt. The proceeds from the issuance of stock and
borrowings under its senior credit facilities were used to complete the 1999
acquisitions and also resulted in increased cash on hand. In addition, SFX paid
$34.9 million in debt issuance costs. In addition, SFX repurchased 112,528
shares of Class A Common Stock for $2.0 million in 1999. During 1998, SFX
completed a note offering for $350.0 million, had borrowings of $346.0 million
under its then-existing senior credit facility, completed an equity offering in
May 1998 resulting in net proceeds of $330.7 million, and repaid other debt of
$5.5 million. In addition, SFX made spin-off related payments of $113.9 million
and incurred debt issuance costs of $17.5 million during 1998.

Potential Future Acquisitions

Consistent with its operating strategy, SFX is currently negotiating and
expects to pursue additional acquisitions in the live entertainment business in
the future. However, SFX has not entered into any definitive agreements with
respect to such acquisitions and there can be no assurance that it will do so.
In addition, the merger agreement recently entered into with Clear Channel
Communication restricts SFX's ability to make acquisitions. SFX expects to use
its cash on hand and amounts available under its senior credit facility to
complete any future acquisitions. Future, acquisitions, if consummated, may
also result in SFX incurring a substantial amount of additional debt.

Indebtedness

SFX has incurred and expects to continue to incur substantial amounts of
indebtedness to finance acquisitions, for capital expenditures and for other
corporate purposes. As a result, SFX is, and expects to remain in the
foreseeable future, highly leveraged. On February 11, 1998, SFX completed the
offering of $350.0 million aggregate principal amount of its 9 1/8% senior
subordinated notes. Interest of approximately $16.0 million is payable on the
notes on each of February 1 and August 1 of each year, and the notes mature on
February 1, 2008. On November 25, 1998, SFX completed the offering of $200.0
million aggregate principal amount of its 9 1/8% senior subordinated notes.
Interest of $9.1 million is payable on these notes on each of June 1 and
December 1 of each year, and the notes mature on December 1, 2008. SFX's
substantial leverage could adversely affect its business.

In July 1999, SFX completed a consent solicitation which modified certain
covenants to the indentures governing its outstanding senior subordinated notes
to provide SFX greater flexibility to pursue its operating strategy, including
foreign acquisitions. SFX paid fees related to the transaction of approximately
$13.7 million which have been recorded as debt issuance costs on the
consolidated balance sheet. Debt issuance costs are being amortized as non-cash
interest expense over the term of the related debt.

In August 1999, SFX entered into a new seven-year $1.1 billion senior
credit facility which replaced SFX's then-existing $350.0 million senior credit
facility and modified certain covenants. The new senior

36
<PAGE>

credit facility is comprised of a $250.0 million multi-draw, multi-currency
term loan maturing on December 31, 2005 (the "Term A Loan"), a single-draw,
$600 million U.S. dollar term loan maturing on June 30, 2006 (the "Term Loan
B") and a $250.0 million reducing revolver, maturing on December 31, 2005,
having a letter of credit sub-limit of $75.0 million. Total fees and expenses
paid were approximately $17.5 million which have been recorded as debt issuance
costs on the consolidated balance sheet. Debt issuance costs are being
amortized as non-cash interest expense over the term of the related debt.

As of March 28, 2000, SFX had indebtedness of $846.7 million outstanding
under the senior credit facility. Loans outstanding under the senior credit
facility bear interest, at SFX's option, at 1.625 to 3.5 percentage points over
LIBOR or the greater of the Federal Funds rate plus 0.5% or The Bank of New
York's prime rate. The interest rate spreads on the term loan and revolving
portion of the Senior Credit Facility will be adjusted based on SFX's Total
Leverage Ratio, as defined in the senior credit facility. As of March 28, 2000
the average interest rate for borrowings under the senior credit facility was
9.2%. SFX pays a per annum commitment fee on unused availability under the
revolver of 0.375% to 0.5% and a per annum letter of credit fee on any
outstanding letters of credit equal to the Applicable LIBOR Margin, as defined
in the senior credit facility. In the first quarter of 2000, SFX entered into
interest rate cap transaction agreements which limit its LIBOR interest rate to
7.5% on $100.0 million notional amount for a period of two years.

SFX's indebtedness under its senior 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. Most of SFX's subsidiaries have also
guaranteed the notes and borrowings under the senior credit facility. If SFX
were unable to repay any borrowings when due, the lenders could attempt to
seize SFX's and its subsidiaries' assets and the capital stock of SFX's
subsidiaries.

The senior credit facility contains certain covenants that, among other
things, limits the ability of SFX and its subsidiaries to incur additional
indebtedness, issue certain equity interests, pay dividends and sell certain
assets. In addition, the senior credit facility requires SFX to maintain
compliance with certain specified financial covenants. The senior credit
facility also prohibits prepayment of any senior subordinated notes.

In addition, as of March 28, 2000, SFX had approximately $35.1 million of
other debt consisting primarily of debt and capital leases assumed in
acquisitions and $45.9 million of deferred purchase consideration.

SFX's senior subordinated notes and senior credit facility contain
customary covenants and other provisions which restrict SFX's ability to, among
other things:

o sell or transfer assets;

o incur additional debt;

o repay other debt;

o pay dividends;

o make certain investments or acquisitions;

o repurchase or redeem capital stock;

o engage in mergers or consolidations; and

o engage in certain transactions with subsidiaries and affiliates.

Capital Expenditures

Capital expenditures totaled $61.2 million for the year ended December 31,
1999. Based on its existing operations, SFX estimates capital expenditures for
2000 to be approximately $61.5 million, including $46.5 million for the
construction of three amphitheaters, which is expected to be funded by cash
flows from operations. The projected capital expenditures do not include
amounts that may be required for the construction of major new venues, major
renovations at existing venues or leasehold improvements that may be required
at SFX's new worldwide headquarters at the Candler Building.

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<PAGE>

Future Charges

On January 15, 2000, in connection with the renegotiation of employment
agreements with members of SFX's senior management group, SFX issued
fully-vested options to purchase an aggregate of 2,102,500 shares of SFX's
Class A Common Stock at prices that were below the then-current market price,
which will result in a non-cash compensation charge of $54.2 million in the
first quarter of 2000. These options were issued as an inducement to cause each
executive officer to enter into an amended long-term employment agreement. In
addition, SFX forgave amounts due under the executive loan program of certain
executives which will result in future charges in SFX's statement of
operations. Further, SFX settled all future obligations to one of the
executives arising from an acquisition agreement which will result in a charge
to the extent the payment is compensation related.

Future Contingent Payments

Certain of the agreements relating to SFX's 1998 and 1999 acquisitions
provide for purchase price adjustments and other future contingent payments
based on the financial performance of the acquired companies. See "-- 1998
Acquisitions" and "-- 1999 Acquisitions." Through December 31, 1999, SFX had
accrued $36.4 million related to such contingent cash payments. SFX will
continue to accrue additional amounts related to such contingent payments if
and when it becomes probable that the applicable financial performance targets
will be met.

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 SFX to repurchase up to 683,376 shares of the
Class A Common Stock received by that seller for $22.00 in cash per share, for
an aggregate purchase price of up to $15.0 million.

In connection with the SFX spin-off, SFX entered into a tax sharing
agreement with SFX Broadcasting. As of December 31, 1999, SFX has made
estimated payments of $109.7 million in federal and state taxes related to the
spin-off. In addition, SFX remains liable for certain tax indemnities.
Management's estimates of the amount of the indemnity payment are based on
assumptions which management believes are reasonable. However, upon the
completion of all tax returns, including any potential tax audits, such
assumptions could be modified in a manner that would result in a significant
variance in the actual amount of the tax indemnity.

No assurance can be given that SFX will have sufficient cash or other
available sources of capital to make any or all of the future or contingent
payments described above.

Sources of Liquidity

On February 18, 1999, SFX received approximately $260.7 million in net
proceeds from its February 1999 equity offering, which it used primarily to
complete the Cellar Door, ISI, Nederlander and Marquee acquisitions and to
repay a portion of the revolving portion of the then-existing senior credit
facility. On August 23, 1999 SFX received approximately $337.9 million in net
proceeds from its August 1999 equity offering, which it used primarily to
complete the Livent, EMA Telstar and Mojo Works acquisitions and to increase
cash on hand. On August 23, 1999, SFX also borrowed approximately $611.7
million under its new $1.1 billion senior credit facility, which represented
the proceeds from Term Loan B, less fees and expenses. SFX used the proceeds to
repay $319.0 million of borrowings under the then-existing senior credit
facility and to increase cash on hand.

As of March 28, 2000, SFX had approximately $210.0 million in borrowing
availability under its senior credit facility. Borrowing availability under the
senior credit facility is subject to customary conditions. Pursuant to the
indentures governing the senior subordinated notes, SFX, subject to certain
limited exceptions, is only permitted to incur indebtedness if it satisfies a
specified Debt to Cash Flow ratio, as defined in the indentures.

As of December 31, 1999, SFX's cash and cash equivalents totaled $382.6
million, and its working capital was $226.2 million. SFX believes that its cash
on hand, cash flow from operations and remaining borrowing availability under
the $1.1 billion senior credit facility will be sufficient to satisfy existing
commitments and plans, including those described above. However, there can be
no assurance that SFX will be able to make additional borrowings, that SFX's
business will generate sufficient cash flow from operations, or that future
borrowings will be available in an amount to enable SFX to service its debt and
to make necessary capital or other expenditures.

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<PAGE>

YEAR 2000 COMPLIANCE

In prior years, SFX discussed the nature and progress of its plans to
become Year 2000 compliant. In late 1999, SFX completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
SFX experienced no significant disruptions in mission critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. SFX is not aware of any
material problems resulting from Year 2000 issues, either with its products,
its internal systems, or the products and services of third parties. SFX will
continue to monitor its mission critical computer applications and those of its
suppliers and vendors throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.

RECENT ACCOUNTING PRONOUNCEMENT

In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which
is required to be adopted in years beginning after June 15, 2000 in accordance
with Statement No. 137. Because of SFX's minimal use of derivatives, management
does not anticipate that the adopting of the new statement will have a
significant effect on earnings or the financial position of SFX.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

SFX believes that certain statements contained in this Report are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are considered prospective. These include
statements contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Business." The following statements
are or may constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995:

o statements before, after or including the words "may," "will," "could,"
"should," "believe," "expect," "future," "potential," "anticipate,"
"intend," "plan," "estimate" or "continue" or the negative or other
variations of these words; and

o other statements about matters that are not historical facts.

SFX may be unable to achieve future results covered by the forward-looking
statements. The statements are subject to risks, uncertainties and other
factors that could cause actual results to differ materially from the future
results that the statements express or imply. Please do not put undue reliance
on these forward-looking statements, which speak only as of the date of this
report. The following risk factors should be considering carefully in
evaluating SFX and its business and the forward looking statements contained
herein. SFX 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 report or to reflect the occurrence of unanticipated events.

RISK FACTORS

You should carefully consider the following important factors, in addition
to those discussed in the documents that we have filed with the Securities and
Exchange Commission which we have incorporated by reference in this Report.

IF WE ARE UNABLE TO INTEGRATE THE OPERATIONS OF OUR VARIOUS BUSINESSES, OUR
OVERALL BUSINESS MAY SUFFER.

The acquisition and successful integration of additional live
entertainment and related businesses are key elements of our operating
strategy. As you evaluate our prospects, you should consider the many risks we
will encounter during the process of integrating recently acquired businesses
and those that may be acquired in the future, including:

o the distraction of management's attention from other business concerns;

39
<PAGE>

o our entry into markets and geographic areas where we have limited or no
experience;

o the potential loss of key employees or customers of the acquired
businesses; and

o the potential inability to integrate controls, standards, systems and
personnel.

Although our management has significant experience, we may be unable to
effectively integrate our recently acquired businesses or those businesses we
expect to acquire in the future without encountering the difficulties described
above. Failure to effectively integrate such businesses could have a material
adverse effect on our business, prospects, results of operations or financial
condition. In addition, the combined companies may not benefit as expected from
the integration.

WE INTEND TO EXPAND OUR INTERNATIONAL OPERATIONS SIGNIFICANTLY, WHICH WILL
EXPOSE US TO NEW RISKS.

A key element of our business strategy is to expand our international
operations, both through acquisitions and internal growth. This expansion will
require us to understand local customs, practices and competitive conditions as
well as develop a management infrastructure to support our international
operations. International operations are also subject to certain risks inherent
in doing business abroad, including:

o exposure to local economic conditions;

o currency exchange rate fluctuations and currency controls;

o withholding and other taxes on remittances and other payments by
subsidiaries; and

o investment restrictions or requirements.

We can provide no assurances that the risks and uncertainties outlined
above, or other risks or uncertainties inherent in doing business abroad, will
not have a material adverse effect on our business, prospects, result of
operations or financial condition.

WE HAVE A SUBSTANTIAL AMOUNT OF DEBT, WHICH MAY HARM US AND OUR STOCKHOLDERS.

We have a substantial amount of debt, and the amount of our debt could
substantially increase in the future. Our consolidated debt as of March 28,
2000 was approximately $1.4 billion.

The amount of our debt could harm the holders of our Class A Common Stock by,
among other things:

o making us more vulnerable to general adverse economic and industry
conditions;

o limiting our ability to obtain money to pay for future acquisitions,
working capital, capital expenditures and other general corporate
requirements;

o dedicating more of our cash flow to paying off our debt, which will
reduce the amount of cash available to pay for working capital, capital
expenditures or other general corporate needs;

o limiting our flexibility in planning for, or reacting to, changes in our
business and the industry; and

o placing us at a competitive disadvantage to competitors that have less
debt.

Our ability to pay principal and interest on our debt on time, to
refinance our debt, or to pay for planned expenditures will depend on various
factors, some of which it will not be able to control. These factors include
restrictions contained in our senior credit facility and the indentures
relating to our notes, which may limit our ability to, among other things,
borrow additional funds. We may be unable to generate enough money to pay our
debts because of insufficient cash flow from operations or because we are not
able to raise additional capital funds by selling securities. We may also be
required to refinance a part of its debt before the debt matures. For more
details about our financial resources, see Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

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OUR INDENTURES AND CREDIT FACILITY RESTRICT OUR OPERATIONS.

Our indentures and our senior credit facility restrict our and our
subsidiaries' ability to, among other things:

o sell or transfer assets;

o incur additional debt;

o repay other debt;

o pay dividends;

o make certain investments or acquisitions;

o repurchase or redeem capital stock;

o engage in mergers or consolidations; and

o engage in certain transactions with subsidiaries and affiliates.

The indentures, and our existing senior credit facility also require us to
comply with certain financial ratios, as discussed in Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources." These restrictions may interfere with our
ability to obtain financing or to engage in other necessary or desirable
business activities.

If we cannot comply with the requirements in our senior credit facility,
then the lenders may require us to repay immediately all of our outstanding
debt under the senior credit facility. If our debt payments were accelerated,
our assets might not be sufficient to repay fully our debt. These lenders may
also require us to use all of our available cash to repay our debt or may
prevent us from making payments to other creditors on certain portions of its
outstanding debt.

We may not be able to obtain a waiver of these provisions or refinance our
debt, if needed. In such a case, our business, prospects, results of operations
and financial condition would suffer.

IF WE ARE UNABLE TO COMPLETE FUTURE ACQUISITIONS, OUR STOCK PRICE MAY SUFFER.

Our ability to take advantage of attractive acquisition opportunities in
the future are important components in the implementation of our overall
business strategy. However, we may be unable to identify, finance or complete
additional acquisitions in the future. If the trading price of our Class A
Common Stock reflects the market's expectation that we will complete future
acquisitions, then the price of Class A Common Stock may drop if we are unable
to complete these acquisitions.

Even if we are able to complete future acquisitions, they could result in
our:

o issuing more stock, which may dilute the value of our existing Common
Stock;

o incurring a substantial amount of additional dept; and/or

o amortizing expenses related to goodwill and other intangible assets.

WE COULD BE REQUIRED TO MAKE LARGE PAYMENTS UPON A CHANGE OF CONTROL, WHICH MAY
HARM OUR FINANCIAL CONDITION.

Under the agreements relating to our senior credit facility and our 9 1/8%
senior subordinated notes, we have obligations to make payments upon certain
change of control events. If we make the payments, we may lose necessary
operating funds. If we cannot make the payments, we may be sued or forced into
bankruptcy.

If anyone other than Mr. Sillerman becomes the beneficial owner of over
35% of the voting power of our outstanding Common Stock, then a "Change in
Control" will occur under our senior credit facility and our indentures. This
would constitute a default under our senior credit facility and would require
us to offer to repurchase our outstanding notes at a premium. If we fail to
purchase all of the notes tendered for purchase upon the occurrence of a Change
of Control, such failure will constitute an event of default under the
indentures.

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<PAGE>

BECAUSE A CHANGE OF CONTROL OF SFX WOULD BE DIFFICULT TO ACHIEVE, HOLDERS OF
SFX STOCK MAY NOT HAVE THE OPPORTUNITY TO RECEIVE A PREMIUM FOR THEIR SHARES.

Holders of Class A Common Stock could receive a premium for their shares
upon a change of control of SFX. The holders of Class A Common Stock may be
less likely to receive a premium for their shares, however, because a change of
control would be difficult to achieve without the cooperation of SFX's
principal stockholders and its board of directors. There are several factors
that would make a change of control difficult, including:

o SFX has issued, and may issue in the future, shares of Class B Common
Stock, which has 10 votes per share in most matters. As of March 28,
2000, the two holders of Class B Common Stock controlled approximately
38% of SFX's total voting power based on their ownership of Class B
Common Stock. Therefore, they probably will be able to block any
potential change of control transaction that they oppose.

o SFX's certificate of incorporation allows its board of directors to
issue up to 25 million shares of preferred stock. If SFX issues shares of
preferred stock with voting rights, this issuance could dilute the voting
rights of holders of SFX's Common Stock and could delay or prevent a
change in control.

o Section 203 of the Delaware General Corporation Law prohibits SFX from
engaging in a "business combination" with an "interested stockholder" for
three years after the person became an interested stockholder, unless the
business combination is approved in a particular manner. Therefore,
Section 203 could delay or prevent a change in control of SFX.

o SFX's board of directors has also adopted other programs, plans and
agreements that may make a change of control more expensive, such as
severance payments and immediate vesting of stock options upon a change
of control.

OUR BUSINESS IS HIGHLY SENSITIVE TO PUBLIC TASTES AND DEPENDENT ON OR ABILITY
TO SECURE POPULAR ARTISTS, LIVE ENTERTAINMENT EVENTS AND VENUES.

As a participant in the live entertainment industry, our ability to
generate revenues is highly sensitive to rapidly changing public tastes and
dependent on the availability of popular performers and events. Since we rely
on unrelated parties to create and perform live entertainment content, any lack
of availability of popular musical artists, touring Broadway shows, specialized
motor sports talent and other performers could limit our ability to generate
revenues. In addition, we require access to venues to generate revenues from
live entertainment events. We operate a number of our live entertainment venues
under leasing or booking agreements. Our long-term success will depend in part
on our ability to renew these agreements when they expire or end. We may be
unable to renew these agreements on acceptable terms or at all, and may be
unable to obtain favorable agreements with new venues.

WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION, AND OUR FAILURE TO COMPLY
WITH REGULATIONS COULD ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.

We and our properties are subject to extensive environmental laws and
regulations relating to the use, storage, disposal, emission and release of
hazardous and non-hazardous substances, as well as zoning and noise level
restrictions which may affect, among other things, the hours of operations of
our venues. In addition, we are subject to other laws and regulations,
including those relating to antitrust, consumer protection and the operation of
public facilities that significantly affect the conduct of our business and the
implementation of our operating strategy. For example, the Federal Trade
Commission and the Antitrust Division of the U.S. Department of Justice have
the authority to challenge our domestic acquisitions on antitrust grounds
before or after the acquisitions are completed. State agencies may also have
standing to challenge these acquisitions under state or federal regulations,
actions or legal proceedings against us, the imposition of fines, penalties or
judgments against us or significant limitations on our activities. In addition,
the regulatory environment in which we operate is subject to change. New or
revised requirements imposed by governmental regulatory authorities could have
adverse effects on us,

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including increased costs of compliance. We also may be adversely affected by
changes in the interpretation or enforcement of existing laws and regulations
by these governmental authorities. For more information regarding regulatory
issues, see Item 1. "Business -- Regulatory Matters."

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

SFX has operations in Europe, Canada, Australia and Mexico. In the normal
course of business, theses operations are exposed to fluctuations in currency
values. Management does not consider the impact of currency fluctuations to
represent a significant risk.

Market risks relating to SFX's operations result primarily from changes in
interest rates. SFX's Senior Subordinated Notes bear interest at a fixed rate.
However, the fair market value of the fixed rate debt is sensitive to changes
in interest rates. SFX is subject to the risk that market interest rates will
decline and the interest rates under the fixed rate debt will exceed the then
prevailing market rates.

SFX's senior credit facility of $846.7 million at March 28, 2000 bears
interest at a variable rate. A 15% increase or decrease in the average cost of
SFX's variable rate debt under the facility would result in a $11.7 million
increase or decrease in interest expense based on this borrowing level.

SFX does not generally enter into derivative instruments in the normal
course of business to mitigate the impact of currency exchange rate risk or
interest rate risk, nor are such instruments used for speculative purposes.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is incorporated herein by reference
to the Consolidated Financial Statements filed with this report.

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

There have been no changes in SFX's independent accountants or
disagreements with SFX's independent accountants on accounting matters or
financial disclosures.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Board of Directors manages the business of SFX. The Board conducts its
business through meetings of the Board and its committees.

Our by-laws authorize the Board to fix the number of directors from time
to time. The number of directors of SFX is currently eleven. In addition, Mr.
John J. Boyle is a non-voting observer to the Board. The non-voting observer
has no authority to exercise the powers of a director in the management of SFX.
All directors hold office until the next annual meeting of stockholders
following their election or until successors are elected and qualified.
Officers of SFX are elected annually by the Board and serve at the Board's
discretion.

Holders of shares of Class A Common Stock are entitled to elect
two-sevenths (2/7) of the members of the Board by a separate class vote, without
the participation of the holders of Class B Common Stock. In the election of the
remaining members of the Board, the holders of Class A Common Stock and Class B
Common Stock vote together 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.

The following table sets forth information as to the directors and
executive officers of SFX:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ---- --------
<S> <C> <C>
Robert F.X. Sillerman .......... 52 Director, Executive Chairman and Member of the Office of
the Chairman
Michael G. Ferrel .............. 51 Director, President, Chief Executive Officer and Member
of the Office of the Chairman
Brian E. Becker ................ 43 Director, Executive Vice President and Member of the
Office of the Chairman
David Falk ..................... 49 Director and Member of the Office of the Chairman
Howard J. Tytel ................ 53 Director, Executive Vice President, General Counsel,
Secretary and Member of the Office of the Chairman
Thomas P. Benson ............... 37 Director, Senior Vice President and Chief Financial Officer
Richard A. Liese ............... 49 Director, Senior Vice President and Associate General
Counsel
D. Geoffrey Armstrong .......... 42 Director
James F. O'Grady, Jr. .......... 72 Director
Paul Kramer .................... 68 Director
Edward F. Dugan ................ 65 Director
John D. Miller ................. 55 Director
John J. Boyle .................. 64 Non-voting observer to Board of Directors
</TABLE>

CERTAIN INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS

ROBERT F.X. SILLERMAN has served as the Executive Chairman, a Member of
the Office of the Chairman and a director of SFX since its formation in
December 1997. Mr. Sillerman also served as the Executive Chairman of SFX
Broadcasting, from July 1, 1995 until the consummation of the SFX Broadcasting
merger in May 1998. From 1992 through June 30, 1995, Mr. Sillerman served as
Chairman of the board of directors and Chief Executive Officer of Broadcasting.
Mr. Sillerman is Chairman of the board of directors and Chief Executive Officer
of Sillerman Communications Management Company, Inc. ("SCMC"), a private
company that makes investments in and provides financial consulting services to
companies engaged in the media business. For the last twenty years, Mr.
Sillerman has been a senior executive of and principal investor in numerous
entities in the broadcasting business. In 1993, Mr. Sillerman became the
Chancellor of the Southampton College 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 SFX since its formation
in December 1997. Mr. Ferrel also served as the

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President, Chief Executive Officer and a director of Broadcasting from November
1996 until May 1998. Mr. Ferrel served as President and Chief Operating Officer
of Multi-Market Radio, Inc., a wholly-owned subsidiary of Broadcasting ("MMR"),
and a member of MMR's board of directors from MMR's inception in August 1992
until November 1996 when MMR was merged into a subsidiary of Broadcasting. Mr.
Ferrel also served as Co-Chief Executive Officer of MMR from January 1994 to
January 1996 and Chief Executive Officer of MMR from January 1996 until
November 1996. 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.

BRIAN E. BECKER has served as an Executive Vice President, a Member of the
Office of the Chairman and a director of SFX since the consummation of SFX's
acquisition of PACE in February 1998. Mr. Becker has served as Chief Executive
Officer of PACE since 1994 and 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.

DAVID FALK has served as a Member of the Office of the Chairman and a
director of SFX since the consummation of SFX's acquisition of FAME. Mr. Falk
serves as a director and as Chairman of SFX's sports group and several
subsidiaries within SFX'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.

HOWARD J. TYTEL has served as an Executive Vice President, General
Counsel, Secretary and a director of SFX since its formation in December 1997.
In January 1999, Mr. Tytel was elected as a Member of the Office of the
Chairman. Mr. Tytel also served as a director, General Counsel, Executive Vice
President and Secretary of Broadcasting from 1992 until the consummation of the
Broadcasting merger. Mr. Tytel is Executive Vice President, General Counsel and
a director of SCMC. Mr. Tytel is a director and a founder of Marquee and a
founder of Triathlon. For the last twenty-two years, Mr. Tytel has been
associated with Mr. Sillerman in various capacities with entities operating in
the broadcasting business. From 1993 to 1998, Mr. Tytel was Of Counsel to the
law firm of Baker & McKenzie, which represents SFX on certain matters.

THOMAS P. BENSON has served as a Senior Vice President since March 1999,
and as the Vice President, Chief Financial Officer and a director of SFX since
its formation in December 1997. Mr. Benson also served as the Chief Financial
Officer and a director of Broadcasting, having served in such capacity from
November 1996 until the consummation of the Broadcasting merger. Mr. Benson
became the Vice President of Financial Affairs of 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.

RICHARD A. LIESE has served as a Senior Vice President since September
1998, and as a Vice President, Associate General Counsel and a director of SFX
since its formation in December 1997. Mr. Liese also served as a director, Vice
President and Associate General Counsel of Broadcasting, having served in such
capacity from 1995 until the consummation of the Broadcasting merger. 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 a director of SFX since its formation
in December 1997. He served as an Executive Vice President of SFX from its
formation until September 1998. Mr. Armstrong currently serves as Executive Vice
President and Chief Financial Officer of AMFM, Inc. Mr. Armstrong also served as
the Chief Operating Officer and an Executive Vice President of Broadcasting,
having served in such capacity from November 1996 until the consummation of the
Broadcasting merger. Mr. Armstrong served as a director of Broadcasting from
1993 until the consummation of the Broadcasting merger. Mr. Armstrong became the
Chief Operating Officer of Broadcasting in June 1996 and the Chief

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<PAGE>

Financial Officer, Executive Vice President and Treasurer of Broadcasting in
April 1995. Mr. Armstrong was Vice President, Chief Financial Officer and
Treasurer of Broadcasting from 1992 until March 1995. He had been Executive Vice
President and Chief Financial Officer of Capstar, a predecessor of Broadcasting,
since 1989.

JAMES F. O'GRADY, JR. has served as a director of SFX since its formation
in December 1997. Mr. O'Grady also served as a director of Broadcasting from
1993 until the consummation of the Broadcasting merger. Mr. O'Grady has been
President of O'Grady and Associates, a media brokerage and consulting company,
since 1979. Mr. O'Grady was a director of Orange and Rockland Utilities, Inc.
until 1999 and was a director of Video for Broadcast, Inc. from 1991 until 1999.
Mr. O'Grady was the co-owner of Allcom Marketing Corp., a corporation that
provides marketing and public relations services for a variety of clients from
1985 until 1992, and was Of Counsel to Cahill and Cahill, a law firm located in
Brooklyn, New York, from 1986 until 1998. 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.

PAUL KRAMER has served as a director of SFX since its formation in
December 1997, served as a director of Broadcasting from 1993 until the
consummation of the Broadcasting merger and currently serves as a director of
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 SFX since its formation in
December 1997. Mr. Dugan also served as a director of Broadcasting from
November 1996 until the consummation of the Broadcasting merger. 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.

JOHN D. MILLER served as Chairman of the Board of Triathlon from June 1995
until April 1999 when Triathlon was merged with a third party. He is founder
and President of StarVest Management, Inc., a private investment group, and is
currently on the board of directors of International Keystone Entertainment,
Inc. Mr. Miller served as the President of Rothschild Ventures, Inc., a private
investment group, from July 1995 to April 1998. Prior to that he was affiliated
with Starplough, Inc. and the Clipper Group, private equity investment groups.
Mr. Miller spent 24 years with various investment arms of The Equitable Life
Assurance Society of the U.S., his last position being Chief Executive Officer
and President of Equitable Capital Management Corp.

JOHN J. BOYLE became a non-voting observer to the Board of Directors of
SFX and the Chairman of SFX's Music Group upon closing of the Cellar Door
acquisition. Mr. Boyle currently serves as the Chief Executive Officer and
Chairman of the Board of Directors of Cellar Door. Mr. Boyle purchased Cellar
Door in 1963, and has been in the concert promotion business for over thirty
years.

BOARD COMMITTEES

Audit Committee

The Audit Committee reviews and reports to the Board on various auditing
and accounting matters, including the selection, quality and performance of
SFX'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 also reviews certain related-party transactions and
potential conflict-of-interest situations involving officers, directors or
stockholders of SFX. The members of the Audit Committee are Messrs. Kramer,
O'Grady and Dugan. The Audit Committee met six times in 1999.

46
<PAGE>

Compensation Committee

The Compensation Committee reviews and makes recommendations with respect
to certain SFX compensation programs and compensation arrangements with respect
to certain officers, including Messrs. Sillerman, Ferrel, Becker, Falk, 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
Broadcasting or SFX. The Compensation Committee met two times in 1999.

Stock Option Committee

The Stock Option Committee grants options, determines which employees and
other individuals performing substantial services to SFX may be granted options
and determines the rights and limitations of options granted under SFX's plans.
The members of the Stock Option Committee are Messrs. Kramer, O'Grady and
Dugan. The Stock Option Committee met four times in 1999.

SECTION 16(a) BENEFICIAL OWNERSHIP OF REPORTING COMPLIANCE

Under the federal securities laws, SFX's directors, executive officers and
ten percent stockholders are required to report to the Securities and Exchange
Commission and the New York Stock Exchange (and until June 7, 1999, the Nasdaq
Stock Market), by specific dates, transactions and holdings in SFX's common
stock. Based solely on its review of the copies of such forms received by it or
written representations from certain reporting persons that no annual
corrective filings were required for those persons, SFX believes that during
fiscal year 1999 all these filing requirements were timely satisfied.

47
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth the annual and long-term compensation
earned by the Executive Chairman and SFX's four other most highly compensated
executive officers (the "Named Executive Officers") during 1999 and 1998. SFX
did not pay any compensation to its executive officers in 1997.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- -----------------------------
SECURITIES
RESTRICTED UNDERLYING
STOCK OPTION
NAME AND POSITION SALARY(1) BONUS AWARDS ($)(2) AWARDS (#)
- ------------------------------- --------------- ------- --------------- -----------
<S> <C> <C> <C> <C>
ROBERT F.X. SILLERMAN 1999 $565,233 -- -- 1,800,000
Executive Chairman and 1998 291,667 -- $14,250,000 930,000
Member of the Office of the
Chairman

MICHAEL G. FERREL 1999 $439,608 -- -- 150,000
President, Chief Executive 1998 204,167 -- $ 4,275,000 337,500
Officer and Member of the
Office of the Chairman

BRIAN E. BECKER 1999 $341,087 -- -- 175,001
Executive Vice President and 1998 245,000 -- -- 112,500
Member of the Office of the
Chairman

DAVID FALK 1999 $312,210 -- -- 45,000
Chairman of SFX Sports 1998 183,750 -- -- 150,000
Holding, Inc. and
Member of the Office of the
Chairman

HOWARD J. TYTEL 1999 $351,900 -- -- 225,000
Executive Vice President, 1998 175,000 $ 2,280,000 157,500
General Counsel, Secretary
and Member of the Office of
the Chairman
</TABLE>

- ----------
(1) SFX began compensating Messrs. Sillerman and Ferrel following
Broadcasting's merger into another company on May 29, 1998. SFX began
compensating Mr. Falk on June 4, 1998, upon SFX's acquisition of FAME. SFX
began compensating Mr. Tytel on June 1, 1998. SFX began compensating Mr.
Becker upon the consummation of the PACE acquisition, which occurred on
February 25, 1998. See Item 13, "Certain Relationships and Related
Transactions" for additional transactions between SFX and the Named
Executive Officers.

(2) In connection with their entering into employment agreements in 1998, SFX
awarded Mr. Sillerman 750,000 and Mr. Ferrel 225,000 restricted shares of
Class B Common Stock and Mr. Tytel was awarded 120,000 restricted shares
of Class A Common Stock. Each such individual paid $1.33 per share for
such restricted stock. The closing price of Class A Common Stock, as
reported on April 21, 1998, its first day of trading on the Nasdaq
National Market, was $20.33 and the value of the purchased shares of
restricted stock as of such date, less the amount paid for such shares, is
reported in the table above. On December 31, 1999, the closing price of
Class A Common Stock, as reported on the NYSE Composite Transaction Tape,
was $36.19. On December 31, 1999, the value of the shares of restricted
stock held by Messrs. Sillerman, Ferrel and Tytel, less the amount paid
for such shares, was $26,145,000, $7,843,500 and $4,183,200, respectively.
All calculations of the value of the restricted stock assumes that the
shares of Class B Common Stock are equal in value to the shares of Class A
Common Stock.

48
<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information with respect to each grant of
stock options during 1999 to the Named Executive Officers.

<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED EXERCISE OR
UNDERLYING OPTIONS/ TO EMPLOYEES BASE PRICE GRANT DATE
NAME GRANTED (#)(1) IN FISCAL YEAR ($/SHARE) EXPIRATION DATE PRESENT VALUE(2)
- --------------------------- -------------------- ---------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Robert F.X. Sillerman ..... 1,800,000 42.6% $ 16.08 10/8/08 $57,384,000
Michael G. Ferrel ......... 150,000 3.6 16.08 10/8/08 4,782,000
Brian E. Becker ........... 100,001(3) 2.4 16.08 10/8/08 3,188,032
75,000 1.8 16.08 10/8/08 2,391,000
David Falk ................ 45,000 1.1 16.08 10/8/08 1,434,600
Howard J. Tytel ........... 112,500(3) 2.7 16.08 10/8/08 3,586,500
112,500 2.7 16.08 10/8/08 3,586,500
</TABLE>

- ----------
(1) Stock options granted by SFX to the Named Executive Officers in 1999 were
approved by the Compensation Committee of the Board of Directors of SFX in
October 1998, subject to the approval of the 1999 Stock Option Plan by
SFX's stockholders in June 1999. The $16.08 exercise price represents the
closing price of the Class A Common Stock as reported on the NYSE
Composite Transaction Tape on the date of grant. Except as provided in
footnote (3) below, the options generally vest over five years beginning
on the first anniversary of their date of grant.

(2) The Black-Scholes option pricing model was chosen to estimate the grant
date present value of the options set forth in this table. The following
assumptions were made for purposes of calculating the Grant Date Present
Value: volatility at 76.4%; expected option life of five years; and
risk-free interest rate at 4.41%. Our use of this model should not be
construed as an endorsement of its accuracy at valuing options. The
figures given are not intended to forecast future price appreciation of
the shares. The real value of the options in this table depends solely
upon the actual performance of SFX stock during the applicable period.

(3) These options vested entirely on their date of grant.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

The following table sets forth, for each of the Named Executive Officers,
certain information concerning the exercise of stock options during 1999,
including the year-end value of unexercised options.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE- MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT FY-END (#)(1) AT FY-END ($)(1)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
- ------------------------------- ----------------- -------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Robert F.X. Sillerman ......... 574,544 $7,922,537 24,206/2,171,777 $ 0/40,152,471
Michael G. Ferrel ............. -- -- 107,500/380,000 2,014,156/7,176,850
Brian E. Becker ............... -- -- 137,501/150,000 2,548,501/2,150,925
David Falk .................... -- -- 159,000/36,000 1,446,593/732,870
Howard J. Tytel ............... -- -- 176,474/213,324 3,390,298/3,679,280
</TABLE>

- ----------
(1) Calculated by determining the difference between the closing price of
Class A Common Stock as reported on the NYSE Composite Transaction Tape
on December 31, 1999 ($36.19) and the exercise price of the options.

COMPENSATION OF DIRECTORS

Directors employed by SFX receive no compensation for attending meetings.
Each non-employee director receives a fee of $1,500 for each Board meeting
which he attends and is reimbursed for travel expenses. Each non-employee
director who is also a member of a committee receives an additional $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 receives $500 for attending the committee meeting.

49
<PAGE>

In addition, SFX adopted a deferred compensation plan for the non-employee
directors effective January 1, 1998. Pursuant to the plan, SFX pays each
non-employee director a quarterly retainer of $7,500, at least one-half of
which must be paid in shares of Class A Common Stock which are credited to a
book-entry account maintained by SFX for each participant. In 1999, the Board,
other than Messrs. Kramer, O'Grady and Dugan, also approved the issuance of
stock options to purchase 7,500 shares of Class A Common Stock to each of
Messrs. Kramer, O'Grady and Dugan. These options are fully vested and have an
exercise price of $16.08 per share.

EMPLOYMENT CONTRACTS

SFX has entered into employment agreements with each of its executive
officers, which are described below:

Sillerman, Ferrel, Tytel and Benson Employment Agreements

The amended and restated employment agreements, dated as of January 15,
2000, provide for annual base salaries of $625,000 for Mr. Sillerman, $525,000
for Mr. Ferrel, $400,000 for Mr. Tytel and $325,000 for Mr. Benson, increased
annually by the greater of five percent or the rate of inflation. Each
executive officer also may receive during his continued satisfactory
performance of the employment agreement (a) a guaranteed cash bonus, and (b) an
additional bonus to be determined annually in the discretion of the Board, on
the recommendation of its compensation committee. Each employment agreement is
for a term of five years from January 15, 2000, and unless terminated or not
renewed by either party, the executive officer's employment will continue
thereafter on a year-to-year basis on terms identical to those at the time of
renewal. Each employment agreement includes a non-competition agreement between
the executive officer and SFX which is operative during the term of the
agreement, and for one year following termination or expiration of the
agreement other than termination as a consequence of a change of control, or
upon failure of certain other conditions within the control of SFX. In
connection with entering into his amended and restated employment agreement,
each executive agreed to forfeit his change of control stock options provided
for under his previous employment agreement.

If the executive officer is terminated by SFX without cause or if there is
a constructive termination without cause, as such terms are defined in the
respective employment agreements, the employment agreements provide the
following payments to the executive officer:

o base salary through the date of termination;

o base salary for the greater of three years following termination, or
the remainder of the term; and

o a bonus for the unexpired term, not less than the bonus paid in the
first year of the agreement, multiplied by the unexpired term.

In the event of a change in control of SFX, as such term is defined
uniformly in each employment agreement (including, without limitation,
consummation of the proposed Clear Channel merger), and in addition to the
foregoing, all previously granted but unvested options to purchase SFX stock
shall vest fully and remain exercisable for the full period of the initial
grant or ten years, whichever is longer. In addition, upon a change of control,
the executive officer is not required to continue his employment, and the
post-employment non-competition provisions in the agreement no longer remain
effective. The employment agreements further provide that SFX will indemnify
the executive officer for taxes incurred if any change in control payments are
deemed "parachute payments" under the Internal Revenue Code.

As an inducement to cause each executive officer's entry into his amended
and restated employment agreement, the Board, on the review and recommendation
of the Compensation Committee, approved the issuance of stock options
exercisable for shares of Class A Common Stock to such executive officers as
follows: Mr. Sillerman received options to purchase 1,200,000 shares, of which
750,000 are exercisable at $3.67 per share and 450,000 are exercisable at
$16.08 per share; Mr. Ferrel received options to purchase 400,000 shares, of
which 250,000 are exercisable at $3.67 per share and 150,000 are exercisable at
$16.08

50
<PAGE>

per share; Mr. Tytel received options to purchase 390,000 shares, of which
250,000 are exercisable at $3.67 per share and 140,000 are exercisable at
$16.08 per share; and, Mr. Benson received options to purchase 112,500 shares,
of which 37,500 are exercisable at $3.67 per share and 75,000 are exercisable
at $16.08 per share.

Becker Employment Agreement

As a condition to execution of the PACE acquisition agreement, SFX entered
into an employment agreement with Brian Becker, the Chief Executive Officer and
President of PACE. The agreement had a term of five years that commenced on
February 25, 1998. Pursuant to a second amended and restated employment
agreement dated December 13, 1999 that replaced the original agreement, Mr.
Becker is President and Chief Executive Officer of the worldwide Theatrical,
Motor Sports and Family Entertainment businesses, as such terms are defined in
the agreement, of SFX. Mr. Becker serves as a member of SFX's Office of the
Chairman, an Executive Vice President, and Director of Operations of SFX and a
director of each of PACE and SFX. During the term of his employment, Mr. Becker
will receive a base salary of $375,000, increased annually by the greater of
five percent or the rate of inflation. Mr. Becker will receive an annual
incentive bonus to be determined annually in the discretion of the Board, on
the recommendation of its Compensation Committee. Mr. Becker's employment
agreement is for a term of five years, and unless terminated or not renewed by
either party, the term will continue thereafter on a year-to-year basis on
terms identical to those at the time of renewal.

If Mr. Becker is terminated by SFX without cause or if there is a
constructive termination without cause, as such terms are defined in the
employment agreement, Mr. Becker will be entitled to receive the following
payments:

o base salary through the date of termination;

o base salary for the greater of three years following termination or the
remainder of the term;

o a bonus for the unexpired term not less than the bonus paid in the year
before termination, multiplied by the unexpired term;

o if the termination occurs during the initial five-year term,
immediately vested options to purchase an amount equal to 166,667 shares
of Class A Common Stock less the product of (i) 33,333 shares and (ii)
the number of full years elapsed under the term of the employment
agreement at an exercise price equal to the lowest exercise price of any
stock option granted by SFX in the twelve months prior to termination;
and

o if the termination occurs after the initial five-year term, immediately
vested exercisable options to purchase 33,333 shares of Class A Common
Stock at an exercise price equal to the lowest exercise price of any
stock option granted by SFX in the twelve months prior to termination.

If Mr. Becker is terminated for any reason other than cause, or if there
is a constructive termination without cause following a change in control of
SFX, as such terms are defined in the employment agreement, in addition to the
foregoing, Mr. Becker will receive immediately vested 10 year options to
purchase 166,667 shares of Class A Common Stock exercisable at the lowest
exercise price of any other options that Mr. Becker owns as of the date of the
change of control; however, Mr. Becker will forfeit his right to receive the
additional 166,667 options if he accepts a written offer to remain with the
surviving company in an executive position. In addition, SFX has agreed to
indemnify Mr. Becker for taxes incurred if any of the change of control
payments are deemed "parachute payments" under the Internal Revenue Code.

Mr. Becker's original employment agreement gave him a right of first
refusal, subject to certain limitations, if SFX received a bona fide offer from
a third party to purchase all or substantially all of either the theatrical or
motor sports lines of business. If SFX sold either of PACE's theatrical or
motor sports line of business, it agreed not to sell the other line of business
before March 11, 2000. These provisions have been eliminated in Mr. Becker's
amended and restated employment agreement.

51
<PAGE>

Falk Employment Agreement

In connection with the acquisition of FAME, on April 29, 1998, SFX entered
into an employment agreement with David Falk. On January 1, 2000, the agreement
was amended and restated. The agreement has a term of five years commencing
April 29, 1998 and expiring April 29, 2003. Pursuant to the agreement, Mr. Falk
is the Chairman of SFX Sports Holdings, Inc. and SFX Sports Group, Inc. and is
a Member of the Office of Chairman of SFX and a director of SFX. The agreement
provides for an annual base salary of $450,000, reviewed annually and increased
by a minimum of 5% per year. In addition, SFX has agreed to make annual stock
option grants to Mr. Falk to purchase at least 35,000 shares of Class A Common
Stock during each year of his employment agreement. Each stock option shall
have an exercise price equal to the closing price of the Class A Common Stock
on the date of the grant. The options will fully vest on or before April 29,
2003 subject to a vesting schedule to be determined by the Board of Directors
of SFX.

SFX may terminate Mr. Falk's employment at any time with or without cause,
as defined in the agreement. If the agreement is terminated for any reason
other than a voluntary termination or termination for cause, then all stock
options granted or to be granted pursuant to the agreement will immediately be
granted, vest and become exercisable and SFX will be obligated to pay Mr. Falk
his base salary and annual bonuses through the original term of the agreement,
as well as certain additional benefits.

In the event of a change in control, SFX will pay to Mr. Falk an amount
equal to his salary for the period remaining from the date of the change in
control until April 29, 2003. In addition, upon a change in control, all stock
options granted to Mr. Falk will vest and become exercisable immediately.
Further, the balance of the remaining stock options to be granted to Mr. Falk
during the term of employment will be immediately granted and will also vest
and become exercisable immediately.

For one year following the termination of the employment agreement by Mr.
Falk or termination by SFX for cause, as defined in the agreement, except in
certain events, Mr. Falk has agreed that he will not compete with the business
of FAME as conducted as of the closing date of the FAME acquisition or solicit
any employees to leave SFX or its affiliates.

STOCK OPTION AND RESTRICTED STOCK PLANS

SFX's stock option plans are administered by the Stock Option Committee.
The purpose of the plans is to provide additional incentive to officers and
employees of SFX. Each option granted under the plans will be designated at the
time of grant as either an "incentive stock option" or a "non-qualified
option." Under SFX's 1998 Stock Option and Restricted Stock Plan, as of March
31, 2000, options to purchase 2,990,574 shares of our outstanding Class A
Common Stock were granted. No additional options may be granted under the 1998
Stock Option Plan. The exercise prices of these options range from $3.67 per
share to $30.58 per share. Options granted under the 1998 Stock Option and
Restricted Stock Plan vest and become exercisable at various times. All options
vest and become immediately exercisable upon a change of control.

Under SFX's 1999 Stock Option and Restricted Stock Plan, as of March 31,
2000, options to purchase 4,302,592 shares of our outstanding Class A Common
Stock were granted. The exercise prices of these options range from $16.08 per
share to $39.96 per share. Outstanding options granted under the 1999 Stock
Option and Restricted Stock Plan vest and become exercisable at various times.
All options vest and become immediately exercisable upon a change of control.

In connection with the acquisition of Marquee, SFX assumed Marquee's
outstanding stock options, warrants and stock appreciation rights ("SARs"). The
terms and conditions of these securities generally remained unchanged except
that the options and warrants became exercisable for shares of Class A Common
Stock and the SARs became exercisable for cash based on the value of Class A
Common Stock. In addition, the applicable exercise and strike prices for the
securities were adjusted to reflect the terms of the merger. As of March 31,
2000, an aggregate of 284,388 options and warrants and 5,505 SARs assumed in
connection with the Marquee merger remained outstanding. The exercise and
strike prices of these securities ranged from $18.40 to $67.48 per share.

52
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee was, during the fiscal year ended
December 31, 1999, an officer or employee of SFX or any of its subsidiaries.
None of our executive officers served as a member of:

o the compensation committee of another entity in which one of the
executive officers of such entity served on our Compensation Committee;

o the board of directors of another entity, one of whose executive
officers served on our Compensation Committee; or

o the compensation committee of another entity in which one of the
executive officers of such entity served as a member of our Board.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding ownership of SFX's
common stock as of March 31, 2000, by each Named Executive Officer, each
director nominee, the directors and executive officers of SFX as a group and
each person known by SFX to own beneficially more than 5% of any class of SFX's
common stock.

<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
------------------------------- -------------------------------
NAME AND ADDRESS OF NUMBER PERCENT NUMBER PERCENT % OF TOTAL
BENEFICIAL OWNER(1) OF SHARES OF CLASS OF SHARES OF CLASS VOTING POWER
- --------------------------------------- ------------------ ---------- ------------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Directors, and
Named Executive Officers:
Robert F.X. Sillerman ................. 7,166,963(2) 11.0% 2,286,253(2) 89.8% 32.9%
Michael G. Ferrel ..................... 855,456(3) 1.3 259,304(3) 10.2 3.8%
Brian E. Becker ....................... 865,539(4) 1.3 -- -- *
David Falk ............................ 646,500(5) 1.0 -- -- *
Howard J. Tytel ....................... 1,291,311(6) 2.0 -- -- *
Thomas P. Benson ...................... 185,500(7) * -- -- *
Richard A. Liese ...................... 11,850(8) * -- -- *
D. Geoffrey Armstrong ................. 333,699(9) * -- -- *
John D. Miller ........................ 1,416(10) -- -- -- --
James F. O'Grady, Jr. ................. 41,591(11) * -- -- *
Paul Kramer ........................... 39,001(12) * -- -- *
Edward F. Dugan ....................... 20,133(13) * -- -- *
All directors and executive officers
as a group (12 persons) ............ 11,458,959 16.9% 2,545,557 100.0% 36.7%
5% Stockholders:
Janus Capital Corporation(14)
100 Fillmore Street
Denver, Colorado 80206 ............... 8,160,611 12.7% -- -- 9.1%
Wellington Management Company,
LLP(15)
75 State Street
Boston, Massachusetts 02109 ......... 4,067,950 6.3% -- -- 4.5%
Capital Research and Management
Company(16)
333 South Hope Street
Los Angeles, CA 90071 ................ 3,495,000 5.4% -- -- 3.9%
</TABLE>
- ----------
* Less than 1%

53
<PAGE>

(1) Unless otherwise set forth above, the address of each stockholder is the
address of SFX, which is 650 Madison Avenue, 16th Floor, New York, New
York 10022. Pursuant to Rule 13d-3 of the Securities Exchange Act of
1934, as used in this table, "beneficial ownership" means the sole or
shared power to vote, or to direct the disposition of, a security, and a
person is deemed to have "beneficial ownership" of any security that the
person has the right to acquire within 60 days of March 31, 2000. Unless
noted otherwise, information as to beneficial ownership is based on
statements furnished to SFX by the beneficial owners, and stockholders
possess sole voting and dispositive power with respect to shares listed
on this table. As of March 31, 2000, there were issued and outstanding
64,251,092 shares of Class A Common Stock and 2,545,557 shares of Class B
Common Stock.

(2) Includes 999,862 shares of Class A Common Stock held by the Sillerman
Partnership, 355,179 shares of Class A Common Stock held by the Tomorrow
Foundation, 59,015 shares of Class A Common Stock held by SCMC, and
warrants to purchase an aggregate of 6,083 shares of Class A Common
Stock and options to purchase an aggregate of 1,437,670 shares of
Class A Common Stock held by Mr. Sillerman which are, or will become,
exercisable within 60 days of March 31, 2000. Also includes 1,291,311
shares of Class A Common Stock beneficially owned by Mr. Tytel that
Mr. Sillerman has the right to vote. Excludes options to purchase an
aggregate of 1,958,313 shares of Class A Common Stock held by Mr.
Sillerman which are not exercisable within 60 days of March 31, 2000.
If the 2,286,253 shares of Class B Common Stock held by Mr. Sillerman
were included in calculating his ownership of the Class A Common
Stock, Mr. Sillerman would beneficially own 9,453,216 shares of Class
A Common Stock, representing approximately 14.4% of the class. All
shares of Class A and Class B Common Stock beneficially owned by Mr.
Sillerman are subject to the terms of a Stockholder Agreement dated
February 28, 2000 (the "Sillerman Stockholder Agreement") between Mr.
Sillerman and Clear Channel. Pursuant to the Sillerman Stockholder
Agreement, Mr. Sillerman is, among other things, required to vote his
shares in favor of the proposed merger between SFX and a subsidiary of
Clear Channel under certain circumstances. In addition, Mr. Sillerman
may be required to forfeit a portion of the proceeds to be received by
Mr. Sillerman in the event SFX completes an alternative sale
transaction with another party following any termination of the
proposed Clear Channel merger agreement.

(3) Includes options to purchase an aggregate of 585,000 shares of Class A
Common Stock held by Mr. Ferrel which are, or will become, exercisable
within 60 days of March 31, 2000. Excludes options to purchase an
aggregate of 302,500 shares of Class A Common Stock held by Mr. Ferrel
which are not exercisable within 60 days of March 31, 2000. If the
259,304 shares of Class B Common Stock held by Mr. Ferrel were included
in calculating his ownership of Class A Common Stock, then Mr. Ferrel
would beneficially own 1,114,759 shares of Class A Common Stock,
representing approximately 1.7% of the class. All shares of Class A and
Class B Common Stock beneficially owned by Mr. Ferrel are subject to the
terms of a Stockholder Agreement dated February 28, 2000 (the "Ferrel
Stockholder Agreement") between Mr. Ferrel and Clear Channel. Pursuant to
the Ferrel Stockholder Agreement, Mr. Ferrel is, among other things,
required to vote his shares in favor of the proposed merger between SFX
and a subsidiary of Clear Channel under certain circumstances. In
addition, Mr. Ferrel may be required to forfeit a portion of the proceeds
to be received by Mr. Ferrel in the event SFX completes an alternative
sale transaction with another party following any termination of the
proposed Clear Channel merger agreement.

(4) Includes options to purchase an aggregate of 660,001 shares of Class A
Common Stock held by Mr. Becker which are, or will become, exercisable
within 60 days of March 31, 2000. Also includes 161,435 shares of Class A
Common Stock held by the Becker Issue Trust for which Mr. Becker serves as
trustee. Excludes options to purchase an aggregate of 127,500 shares of
Class A Common Stock held by Mr. Becker which are not exercisable within
60 days of March 31, 2000.

(5) Includes options to purchase an aggregate of 159,000 shares of Class A
Common Stock held by Mr. Falk which are, or will become, exercisable
within 60 days of March 31, 2000. Excludes options to purchase an
aggregate of 36,000 shares of Class A Common Stock held by Mr. Falk which
are not exercisable within 60 days of March 31, 2000.

54
<PAGE>

(6) Includes warrants to purchase an aggregate of 1,411 shares of Class A
Common Stock and options to purchase an aggregate of 603,992 shares of
Class A Common Stock held by Mr. Tytel which are, or will become,
exercisable within 60 days of March 31, 2000. Excludes options to
purchase an aggregate of 175,806 shares of Class A Common Stock held by
Mr. Tytel which are not exercisable within 60 days of March 31, 2000. Mr.
Tytel also has an economic interest in SCMC, which beneficially owns
59,015 shares of Class A Common Stock, although he lacks voting or
dispositive power with respect to the shares beneficially held by SCMC.
Mr. Sillerman has the right to vote all of the shares of Class A Common
Stock beneficially owned by Mr. Tytel. All shares of SFX common stock
beneficially owned by Mr. Tytel are subject to the terms of a Voting
Agreement dated February 28, 2000 (the "Voting Agreement") between Mr.
Tytel and Clear Channel. Pursuant to the Voting Agreement, Mr. Tytel is,
among other things, required to vote his shares in favor of the proposed
merger between SFX and a subsidiary of Clear Channel.

(7) Includes options to purchase an aggregate of 157,000 shares of Class A
Common Stock held by Mr. Benson which are, or will become, exercisable
within 60 days of March 31, 2000. Excludes options to purchase an
aggregate of 83,000 shares of Class A Common Stock held by Mr. Benson
which are not exercisable within 60 days of March 31, 2000. All shares of
SFX common stock beneficially owned by Mr. Benson are subject to the
terms of a Voting Agreement dated February 28, 2000 (the "Voting
Agreement") between Mr. Benson and Clear Channel Communications, Inc.
Pursuant to the Voting Agreement, Mr. Benson is, among other things,
required to vote his shares in favor of the proposed merger between SFX
and a subsidiary of Clear Channel.

(8) Includes options to purchase an aggregate of 7,650 shares of Class A
Common Stock held by Mr. Liese which are, or will become exercisable
within 60 days of March 31, 2000. Excludes options to purchase an
aggregate of 15,600 shares of Class A Common Stock held by Mr. Liese
which are not exercisable within 60 days of March 31, 2000.

(9) Includes options to purchase an aggregate of 62,000 shares of Class A
Common Stock held by Mr. Armstrong which are, or will become, exercisable
within 60 days of March 31, 2000. Excludes options to purchase an
aggregate of 102,500 shares of Class A Common Stock held by Mr. Armstrong
which are not exercisable within 60 days of March 31, 2000.

(10) Includes options to purchase an aggregate of 750 shares of Class A Common
Stock held by Mr. Miller which are currently exercisable. Excludes
options to purchase an aggregate of 3,000 shares of Class A Common Stock
held by Mr. Miller which are not exercisable within 60 days of March 31,
2000.

(11) Includes options to purchase an aggregate of 11,250 shares of Class A
Common Stock held by Mr. O'Grady which are currently exercisable.
Excludes 539 shares credited to Mr. O'Grady's account in the deferred
compensation plan for non-employee directors which shares are not
deliverable to Mr. O'Grady within 60 days of March 31, 2000.

(12) Includes options to purchase an aggregate of 7,500 shares of Class A
Common Stock held by Mr. Kramer which are currently exercisable. Excludes
539 shares credited to Mr. Kramer's account in the deferred compensation
plan for non-employee directors which shares are not deliverable to Mr.
Kramer within 60 days of March 31, 2000.

(13) Includes options to purchase an aggregate of 11,250 shares of Class A
Common Stock held by Mr. Dugan which are currently exercisable. Excludes
8,459 shares credited to Mr. Dugan's account in the deferred compensation
plan for non-employee directors which shares are not deliverable to Mr.
Dugan within 60 days of March 31, 2000.

(14) We have been informed by Janus Capital Corporation ("Janus Capital") and
Thomas H. Bailey, in a report on Schedule 13G dated January 10, 2000,
that (a) Janus Capital is a registered investment adviser, (b) Janus
Capital may be deemed to be the beneficial owner of the reported shares
as a result of its role as investment adviser, (c) Mr. Bailey owns
approximately 12.2% of Janus Capital and is the President and Chairman of
the Board of Janus Capital, (d) Mr. Bailey may be deemed to

55
<PAGE>

have the power to exercise the voting and/or dispositive power that Janus
Capital may have over the reported shares, (e) Janus Capital and
Mr. Bailey disclaim beneficial ownership of the reported shares, and
(f) neither Janus Capital nor Mr. Bailey has an economic interest in the
reported shares.

(15) We have been informed by Wellington Management Company, LLP ("WMC"), in a
report on Schedule 13G dated February 9, 2000, that (a) WMC is a
registered investment adviser (b) WMC may be deemed to beneficially own
the reported shares in its capacity as investment adviser, and (c) WMC
does not have an economic interest in the reported shares.

(16) We have been informed by Capital Research and Management Company, in a
report on Schedule 13G dated February 10, 2000, that (a) it is a
registered investment adviser, (b) it is deemed to beneficially own the
reported shares as a result of acting as investment adviser to various
investment companies, and (c) it disclaims beneficial ownership of any of
the reported shares.

PLEDGE OF COMMON STOCK BY MR. SILLERMAN

Mr. Sillerman has pledged an aggregate of 2,170,118 of his shares of Class
A Common Stock as collateral for a line of credit. He continues to be entitled
to exercise voting and consent rights with respect to the pledged shares, with
certain restrictions. However, if he defaults in the payment of any advances
made to him under the line of credit, the bank will be entitled to sell the
pledged shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

AGREEMENTS PRIOR TO THE SPIN-OFF

In January 1998, to retain the services of certain officers and directors
of SFX and, if necessary, to facilitate Broadcasting's ability to pursue an
alternative transaction to the SFX spin-off, as contemplated in the
Broadcasting merger agreement, SFX reached an agreement with such individuals
to waive the individuals' right to receive shares of SFX in the spin-off in
return for the number of shares that were otherwise distributable in the
spin-off or, in an alternative transaction, receive $4.20 in value of stock of
the acquiring company or $4.20 in cash depending on the circumstances, for each
share of Broadcasting common stock held by them or which they were entitled to
receive. The amount of $4.20 was based on the value attributed to the Class A
Common Stock in the fairness opinion obtained by Broadcasting in connection
with the Broadcasting merger. If the spin-off were consummated, SFX was
permitted to satisfy its obligations by delivering shares in connection with
the spin-off. The following table sets forth the executive officers and
directors who entered into such an agreement, along with the number of shares
of Broadcasting common stock that they held or were entitled to receive:

<TABLE>
<CAPTION>
NAME SHARES OF SFX BROADCASTING
- -------------------------------- ----------------------------------
<S> <C>
Robert F.X. Sillerman .......... 1,989,372 of Class A Common Stock
1,536,252 of Class B Common Stock
Michael G. Ferrel .............. 147,956 of Class A Common Stock
34,304 of Class B Common Stock
Howard J. Tytel ................ 372,923 of Class A Common Stock
Thomas P. Benson ............... 13,500 of Class A Common Stock
Richard A. Liese ............... 4,200 of Class A Common Stock
D. Geoffrey Armstrong .......... 242,700 of Class A Common Stock
James F. O'Grady, Jr. .......... 22,158 of Class A Common Stock
Paul Kramer .................... 23,883 of Class A Common Stock
Edward F. Dugan ................ 8,883 of Class A Common Stock
</TABLE>

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<PAGE>

In accordance with this agreement, SFX's obligations were deemed satisfied upon
delivery of the shares in connection with the SFX spin-off. No cash payment was
made.

ASSUMPTION OF EMPLOYMENT AGREEMENTS; CERTAIN CHANGE OF CONTROL PAYMENTS

At the time of the consummation of the Broadcasting merger, SFX assumed
all obligations under any employment agreement or arrangement between
Broadcasting, or any of its subsidiaries, and any employee of SFX, 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 included the obligations to make
cash payments aggregating approximately $3.3 million to Mr. Sillerman, $1.5
million to Mr. Ferrel and $200,000 to Mr. Benson after the termination of their
employment with Broadcasting following the Broadcasting merger. SFX has paid
these amounts. In addition, SFX's assumed obligations including 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 Broadcasting in connection with
the Broadcasting merger.

INDEMNIFICATION OF MR. SILLERMAN

On August 24, 1997, Mr. Sillerman entered into an agreement with
Broadcasting, and the Broadcasting buyer to waive his right to receive
indemnification, except to the extent covered by directors' and officers'
insurance, from Broadcasting, its subsidiaries, the Broadcasting buyer and its
subsidiaries for claims and damages arising out of the Broadcasting merger and
related transactions. Mr. Sillerman's employment agreement with SFX provides
that SFX will indemnify Mr. Sillerman for these claims and damages to the
fullest extent permitted by law.

RELATIONSHIP BETWEEN HOWARD J. TYTEL AND BAKER & MCKENZIE

Howard J. Tytel, who is the Executive Vice President, General Counsel,
Secretary, Member of the Office of the Chairman and a director of SFX, was "Of
Counsel" to the law firm of Baker & McKenzie from 1993 to May 31, 1998. During
the time Mr. Tytel was associated with Baker & McKenzie he was compensated, in
part, based on the legal fees which he generated, including the legal fees paid
by SFX, Broadcasting, Marquee and other affiliates of Mr. Tytel and Mr.
Sillerman. Baker & McKenzie agreed to a severance agreement with Mr. Tytel,
which was not based on fees received by Baker & McKenzie. From April 27, 1998,
the date of the spin-off, until May 31, 1998, the date that Mr. Tytel
terminated his fee-based arrangement with Baker & McKenzie, SFX incurred and
paid Baker & McKenzie approximately $1.5 million for legal services. SFX
believes that this arrangement was as fair to SFX as any that could have been
obtained from an unrelated party on an arms-length basis.

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,
Broadcasting and SFX. In consideration for certain services provided by Mr.
Tytel in connection with those ventures, Mr. Tytel has generally 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
Broadcasting did not compensate Mr. Tytel directly, 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 Broadcasting. In 1997, these cash fees
aggregated approximately $5.0 million. In connection with the consummation of
the Broadcasting merger and certain related transactions, Mr. Tytel received
462,561 shares of SFX's Class A Common Stock, with Mr. Sillerman retaining the
right to vote these shares, and cash fees from TSC, SCMC and Mr. Sillerman
personally. Mr. Tytel has also granted Mr. Sillerman the right to vote all
other shares of SFX Class A Common Stock beneficially owned by him.

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<PAGE>

TRIATHLON FEES

SCMC, a corporation controlled by Mr. Sillerman and in which Mr. Tytel has
an equity interest, had an agreement to provide consulting and marketing
services to Triathlon, a publicly-traded company in which Mr. Sillerman was a
significant stockholder. Under the terms of the agreement, SCMC 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. Triathlon paid fees of $3,000,000 for the year ended December 31,
1996, and fees of $1,794,000, $530,000 and $132,000 for the years ended December
31, 1997, 1998 and 1999, respectively. These fees 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 to Broadcasting. Pursuant to the terms of the distribution
agreement, Broadcasting assigned its rights to receive these fees to SFX. All
services provided by SCMC were provided by employees of SFX. On April 30, 1999,
Triathlon was acquired by a third party and such party paid SFX $2.0 million in
consideration for SFX's agreement to terminate the consulting and marketing
agreement.

COMMON STOCK RECEIVED IN THE SPIN-OFF

In the SFX spin-off, the holders of Broadcasting's Class A Common Stock,
Series D preferred stock and warrants, upon exercise, received shares of SFX's
Class A Common Stock, whereas Messrs. Sillerman and Ferrel, as the holders of
Broadcasting's Class B Common Stock, which is entitled to ten votes per share
on most matters, received shares of SFX's Class B Common Stock. Class A Common
Stock and Class B Common Stock have similar rights and privileges, except that
the Class B Common Stock has greater voting rights. 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. Mr. Sillerman currently
holds approximately 32.9% of the combined voting power of SFX, and Messrs.
Sillerman and Ferrel control approximately 36.7% of the combined voting power
of SFX. Accordingly, Mr. Sillerman, alone and together with SFX's current
directors and executive officers, will generally be able to control the outcome
of the votes of the stockholders on most matters. See Item 12, "Security
Ownership of Certain Beneficial Owners and Management."

In addition, in August 1997, the board of directors of Broadcasting
approved amendments to certain warrants to purchase an aggregate of 900,000
shares of Broadcasting's Class A common stock. The warrants were held by SCMC,
an entity controlled by Mr. Sillerman. The amendments memorialized the original
intent of the directors of Broadcasting that SCMC receive the aggregate number
of shares of Class A Common Stock that it would have received if it had
exercised the warrants immediately before the spin-off. Because of these
amendments, SCMC received 900,000 shares of Class A Common Stock in the
spin-off.

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

On April 27, 1998, SFX issued 784,412 shares of its Class A Common Stock
to holders as of the spin-off record date of the stock options or SARs of
Broadcasting, whether or not vested. SFX also issued 487,500 shares of Class A
Common Stock to Mr. Sillerman and 105,000 shares of Class A Common Stock to Mr.
Ferrel with respect to options issuable under their employment agreements with
Broadcasting. In addition, SFX issued 487,500 shares of its Class A Common
Stock to Mr. Sillerman and 45,000 shares of SFX Class A Common Stock to Mr.
Ferrel, which corresponded to change-of-control options of Broadcasting that
they waived in connection with the Broadcasting merger. The issuances were made
in consideration for past services to SFX and to allow holders of such options
and SARs to participate in the spin-off in a manner similar to holders of
Broadcasting's Class A Common Stock. Additionally, many of the option and SAR
holders are officers, directors or employees of SFX. The members of the Board,
other than Messrs. Becker and Falk, received an aggregate of 1,275,719 shares
pursuant to such issuances.

MEADOWS REPURCHASE

In connection with the acquisition of Meadows Music Theater, Broadcasting
obtained an option, as subsequently amended, to repurchase 370,766 shares of
its Class A Common Stock (the "Meadows

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<PAGE>

Shares") for an aggregate purchase price of $8.2 million. Pursuant to the terms
of the Broadcasting merger agreement, if the Meadows Shares were outstanding at
the effective time of the Broadcasting merger, the amount of working capital
which SFX would receive in connection with its spin-off from Broadcasting would
be decreased by approximately $10.3 million. However, Broadcasting was
restricted from exercising the Meadows Repurchase by certain loan covenants and
other restrictions.

In January 1998, Mr. Sillerman committed to finance the $8.2 million
exercise price of the Meadows Repurchase in a transaction structured to offset
the $10.3 million reduction to SFX's working capital. In consideration for his
commitment, the board of directors of 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. Broadcasting
received a fairness opinion with respect to the transaction and the transaction
was approved by Broadcasting's board of directors, including the independent
directors.

LOANS TO CERTAIN EXECUTIVE OFFICERS

In July 1999, the Compensation Committee of the Board of Directors approved
the making of loans aggregating $12.7 million to certain executive officers of
SFX and a loan in the amount of $2.0 million to another employee of SFX. Under
the loan program, Mr. Sillerman received a loan of $10.0 million, Mr. Ferrel
received a loan of $900,000, and Messrs. Becker, Tytel and Benson each received
a loan of $600,000. In connection with amended and restated employment
agreements entered into by the Company and each of the loan recipients, the
loans were forgiven in January 2000. SFX recorded a charge in the first quarter
of 2000 of approximately $14.9 million, including approximately $200,000 of
related payroll taxes, to reflect the forgiveness of the loans.

SETTLEMENT OF FAME EARN-OUT

In February 2000, SFX paid $7.0 million to David Falk in full satisfaction
of certain deferred consideration obligations owed by SFX to Mr. Falk arising
from the purchase of Falk Associates Management Enterprises in June 1998. Mr.
Falk is a Member of the Office of the Chairman and is the Chairman of the SFX
Sports Group.

INTERESTS OF CERTAIN PERSONS IN THE PROPOSED CLEAR CHANNEL MERGER

Under the merger agreement with Clear Channel, the holders of SFX Class B
Common Stock are entitled to receive higher per share consideration for their
shares than holders of SFX Class A Common Stock. The only two holders of Class
B Common Stock are Mr. Sillerman, Executive Chairman and Member of the Office
of the Chairman, and Mr. Ferrel, President, Chief Executive Officer and Member
of the Office of the Chairman. In addition, in the event the merger is
consummated, certain of SFX's executive officers will receive benefits under
their employment agreements with SFX. See Item 11, "Executive Compensation."

59
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Exhibits

(a-1 and a-2) Consolidated Financial Statements, See Index to Consolidated
Financial Statements and Schedule which appears on F-1 herein.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
2.1 Distribution Agreement between SFX Entertainment, SFX Broadcasting and SFX Buyer
(incorporated by reference to Amendment No. 1 to Form S-1 (File No. 333-50079) filed with the
SEC on May 5, 1998)
2.2 Amended and Restated Tax Sharing Agreement between SFX Entertainment, SFX Broadcasting
and SBI Holding Corporation (incorporated by reference to Amendment No. 1 to Exhibit 1.1 to
Current Report on Current Report Form 8-K (File No. 000-24017) filed with the SEC on June 3,
1998)
2.3 Employee Benefits Agreement between SFX Entertainment and SFX Broadcasting (incorporated
by reference to Amendment No. 1 to Form S-1 (File No. 333-50079) filed with the SEC on May 5,
1998)
2.4 Amendment No. 1 to Distribution Agreement among SFX Entertainment, Inc., SFX Broadcasting,
Inc. and SBI Holding Corporation (incorporated by reference to Exhibit 2.1 to Form 8-K (File
No. 000-24017) filed with the SEC on June 3, 1998)
3.1 Amended and Restated Certificate of Incorporation of SFX Entertainment (incorporated by
reference to Amendment No. 1 to Form S-1 (File No. 333-50079) filed with the SEC on May 5,
1998)
3.2 Bylaws of the SFX Entertainment (incorporated by reference to Amendment No. 2 to Form S-1
(File No. 333-43287) filed with the SEC on February 2, 1998)
3.3 Amendment No. 1 to the Bylaws of SFX Entertainment (incorporated by reference to Annual
Report on Form 10-K (File No. 333-72221) filed with the SEC on April 1, 1999)
4.1 Indenture, dated February 11, 1998, by and among SFX Entertainment, certain of its subsidiaries
and Chase Manhattan Bank (incorporated by reference to Exhibit 4.1 to Current Report on Form
8-K of SFX Broadcasting (File No. 000-22486) filed with the SEC on February 18, 1998)
4.2 Indenture, dated November 25, 1998, by and among SFX Entertainment, certain of its
subsidiaries and Chase Manhattan Bank (incorporated by reference to Exhibit 4.2 to Registration
Statement on Form S-4 (File No. 333-71195) filed with the SEC on January 26, 1999)
4.3 Registration Rights Agreement, dated as of November 25, 1998, relating to the 9 1/8% Senior
Subordinated Notes due December 1, 2008 (incorporated by reference to Exhibit 4.3 to
Registration Statement on Form S-4 (File No. 333-71195) filed with the SEC on January 26, 1999)
4.4 Supplemental Indenture No. 14 dated July 20, 1999, by and among SFX certain of its subsidiaries
and The Chase Manhattan Bank (incorporated by reference on Form 10-Q for the fiscal quarter
ended June 30, 1999)
4.5 Supplemental Indenture No. 3 dated July 20, 1999, by and among SFX of its subsidiaries and The
Chase Manhattan Bank (incorporated by reference to 10-Q for the fiscal quarter ended June 30,
1999) (File No. 001-14993) filed with the SEC on August 3, 1999)
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- ----------------------
<S> <C>
10.1 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 on December 24, 1997)
10.2 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 on December 24, 1997)
10.3 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 on December 24, 1997)
10.4 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 on December 24, 1997)
10.5 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 on December 24, 1997)
10.6 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 Broadcasting, Inc. (composite version) (incorporated
by reference to Annex A of SFX Broadcasting, Inc.'s Definitive Proxy Statement (File No.
000-22486) filed with the SEC on February 17, 1998)
10.7 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 Amendment No. 1 to
Form S-1 (File No. 333-43287) filed with the SEC on January 22, 1998)
10.8 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 Amendment No. 1 to Form S-1
(File No. 333-43287) filed with the SEC on January 22, 1998)
10.9 Agreement, dated as of October 10, 1988, by and between the City of Atlanta and MCA
Concerts, Inc. (incorporated by reference to Amendment No. 1 to Form S-1 (File No. 333-43287)
filed with the SEC on January 22, 1998)
10.10 Amended Indenture of Lease, February 2, 1984, by and between the City of Atlanta and
Filmworks U.S.A., Inc. (incorporated by reference to Amendment No. 1 to Form S-1 (File No.
333-43287) filed with the SEC on January 22, 1998)
10.11 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 Amendment No. 1 to Form
S-1 (File No. 333-43287) filed with the SEC on January 22, 1998)
</TABLE>

61
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- -------- ----------------------
<S> <C>
10.12 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 Amendment No. 1 to Form S-1 (File
No. 333-43287) filed with the SEC on January 22, 1998)
10.13 First Amendment to Sublease, dated as of January 21, 1988, between Filmworks U.S.A., Inc. and
MCA Concerts, Inc. (incorporated by reference to Amendment No. 1 to Form S-1 (File No.
333-43287) filed with the SEC on January 22, 1998)
10.14 Second Amendment to Sublease, dated as of April 19, 1988, between Filmworks U.S.A., Inc. and
MCA Concerts, Inc. (incorporated by reference to Amendment No. 1 to Form S-1 (File No.
333-43287) filed with the SEC on January 22, 1998)
10.15 Third Amendment to Sublease, dated as of September 15, 1988, between Filmworks U.S.A., Inc.
and MCA Concerts, Inc. (incorporated by reference to Amendment No. 1 to Form S-1 (File No.
333-43287) filed with the SEC on January 22, 1998)
10.16 Memorandum of Agreement, dated as of October 10, 1988, by and between the City of Atlanta
and MCA Concerts, Inc. (incorporated by reference to Amendment No. 1 to Form S-1 (File No.
333-43287) filed with the SEC on January 22, 1998)
10.17 Assignment of Sublease, dated as of June 15, 1989, by Filmworks U.S.A., Inc. and MCA Concerts,
Inc. (incorporated by reference to Amendment No. 1 to Form S-1 (File No. 333-43287) filed with
the SEC on January 22, 1998)
10.18 Assignment of Sublease, dated as of June 23, 1989, by Filmworks U.S.A., Inc. and MCA Concerts,
Inc. (incorporated by reference to Amendment No. 1 to Form S-1 (File No. 333-43287) filed with
the SEC on January 22, 1998)
10.19 Assignment of Agreement, dated as of June 15, 1989, by the City of Atlanta and MCA Concerts,
Inc. (incorporated by reference to Amendment No. 1 to Form S-1 (File No. 333-43287) filed with
the SEC on January 22, 1998)
10.20 Assignment of Agreement, dated as of June 23, 1989, by the City of Atlanta and MCA Concerts,
Inc. (incorporated by reference to Amendment No. 1 to Form S-1 (File No. 333-43287) filed with
the SEC on January 22, 1998)
10.21 1998 Stock Option and Restricted Stock Plan of the Company (incorporated by reference to
Form S-8 (File No. 333-58737) filed with the SEC on July 9, 1998)
10.22 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 Exhibit 10.2 to Current Report on Form 8-K (File No. 333-43287) filed with the SEC
on March 10, 1998)
10.23 Increase Supplement to the Credit and Guarantee Agreement, dated as of September 10, 1998,
by and among SFX Entertainment, Inc., 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 Exhibit 10.1 to Form 8-K (File No. 000-24017) filed with the SEC
on September 22, 1998)
</TABLE>

62
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- -------- ----------------------
<S> <C>
10.24 Amendment to the Credit and Guarantee Agreement, dated as of November 20, 1998, by and
among SFX Entertainment, Inc., 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 Exhibit 10.24 to Registration Statement on Form S-4 (File No. 333-71195) filed
with the SEC January 26, 1999)
10.25 Purchase Agreement, dated November 25, 1998, relating to the 9 1/8% Senior Subordinated Notes
due December 1, 2008 of SFX Entertainment, Inc., by and among SFX Entertainment, Inc.,
Morgan Stanley & Co. Incorporated, Lehman Brothers Inc., BancBoston Robertson Stephens
Inc. and BNY Capital Markets, Inc. (incorporated by reference to Exhibit 10.25 to Registration
Statement on Form S-4 (File No. 333-71195) filed with the SEC January 26, 1999)
10.26 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)
10.27 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 (incorporated by
reference to Amendment No. 1 to Form S-1 (File No. 333-50079) filed with the SEC on May 5,
1998)
10.28 Asset Purchase Agreement, dated April 29, 1998, by and among Blackstone Entertainment LLC,
its members, DLC Acquisition Corp., and SFX Entertainment, Inc. (incorporated by reference to
Amendment No. 1 to Form S-1 (File No. 333-50079) filed with the SEC on May 5, 1998)
10.29 Purchase and Sale Agreement, dated April 22, 1998, by and among Oakdale Concerts, LLC,
Oakdale Development Limited Partnership and Oakdale Theater Concerts, Inc. (incorporated by
reference to Amendment No. 1 to Form S-1 (File No. 333-50079) filed with the SEC on May 5,
1998)
+10.30 Second Amended and Restated Employment Agreement between SFX Entertainment, Inc. and
Brian E. Becker, dated as of December 13, 1999.
+10.31 Amended and Restated Employment Agreement between SFX Entertainment, Inc. and David
Falk, dated as of January 1, 2000.
+10.32 Amended and Restated Employment Agreement between SFX Entertainment, Inc. and Robert
F.X. Sillerman, dated as of January 15, 2000.
+10.33 Amended and Restated Employment Agreement between SFX Entertainment, Inc. and Michael
G. Ferrel, dated as of January 15, 2000.
+10.34 Amended and Restated Employment Agreement between SFX Entertainment, Inc. and Thomas
P. Benson, dated as of January 15, 2000.
+10.35 Amended and Restated Employment Agreement between SFX Entertainment, Inc. and Howard
J. Tytel, dated as of January 15, 2000.
10.36 Agreement and Plan of Merger, dated as of August 6, 1998, among SFX Entertainment, Inc.,
MWE Acquisition Corp. and Magicworks Entertainment Incorporated (incorporated by reference
to Exhibit 99(c)(1) to SFX's Schedule 14D-1 filed with the SEC on August 13, 1998)
</TABLE>

63
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- ----------------------
<S> <C>
10.37 Agreement and Plan of Merger, as amended, among SFX Entertainment, Inc., SFX Acquisition
Corp. and The Marquee Group, Inc. (composite version) (incorporated by reference to Exhibit
10.37 to Registration Statement on Form S-4 (File No. 333-71195) filed with the SEC on
January 26, 1999)
10.38 Director Deferred Stock Ownership Plan of SFX (incorporated by reference to Exhibit 10.38 to
Registration Statement on Form S-4 (File No. 333-71195) filed with the SEC on January 26, 1999)
10.39 Stock Purchase Agreement, dated as of January 25, 1999, by and among SFX Entertainment, Inc.
and the sellers party thereto (incorporated by reference to Exhibit 10.39 to Amendment No. 1 to
Form S-4 (File No. 333-71195) filed with the SEC on February 5, 1999)
10.40 Purchase Agreement, dated as of February 1, 1999, by and among SFX Entertainment, Inc.,
Concert Acquisition Sub, Inc., Nederlander of New Mexico LLC, Nederlander Festivals, Inc. and
the other sellers party thereto (incorporated by reference to Exhibit 10.40 to Amendment No. 1
to Form S-4 (File No. 333-71195) filed with the SEC on February 5, 1999)
10.41 Asset Purchase Agreement, dated as of February 1, 1999, by and among SFX Entertainment, Inc.,
Concert Acquisition Sub, Inc. and Nederlander of Ohio, Inc. (incorporated by reference to
Exhibit 10.41 to Amendment No. 1 to Form S-4 (File No. 333-71195) filed with the SEC on
February 5, 1999)
10.42 Membership Interest Purchase Agreement, dated February 1, 1999, by and among SFX
Entertainment, Inc., Concert Acquisition Sub, Inc., Nederlander Arena Management LLC,
Nederlander Cincinnati, LLC, Nederlander Club Management LLC and the sellers party thereto
(incorporated by reference to Exhibit 10.42 to Amendment No. 1 to Form S-4 (File No.
333-71195) filed with the SEC on February 5, 1999)
10.43 Stock Purchase Agreement, dated February 1, 1999 by and among SFX Entertainment, Inc.,
Concert Acquisition Sub, Inc., Greater Detroit Theatres, Inc. and the sellers party thereto
(incorporated by reference to Exhibit 10.43 to Amendment No. 1 to Form S-4 (File No.
333-71195) filed with the SEC on February 5, 1999.
10.44 Amended and Restated 1998 Stock Option and Restricted Stock Plan (incorporated by reference
to Exhibit 10.1 to Form 10-Q for the Fiscal Quarter ended June 30, 1999 (File No. 001-14993) field
with the SEC on August 3, 1999)
10.45 Amended and Restated 1999 Stock Option and Restricted Stock Plan (incorporated by reference
to Exhibit 10.2 to Form 10-Q for Fiscal Quarter ended June 30, 1999 (File No. 001-14993) filed
with the SEC on August 3, 1999)
10.46 Director Deferred Stock Ownership Plan as Amended and Restated Effective June 1, 1999
(incorporated by reference to Exhibit 10.3 to Form 10-Q for Fiscal Quarter ended June 30, 1999
(File No. 001-14993) filed with the SEC on August 3, 1999)
10.47 Asset Purchase Agreement, dated May 28, 1999, among SFX Entertainment, Inc., Livent Inc.
(U.S.) Inc., Livent Realty (New York) Inc., Livent Realty (Chicago) Inc. and Livent International
Inc. and Amendments No.1 and No. 2 thereto, dated June 14, 1999 and August 9, 1999,
respectively (incorporated by reference to Amendment No. 2 to Form S-3 (File No. 333-84371)
filed with the SEC on August 17, 1999)
10.48 Amendment No. 3 to Asset Purchase Agreement, dated as of August 17, 1999, among Livent Inc.,
Livent International Inc., Livent (U.S.) Inc., Livent Realty (New York) Inc., Livent Realty
(Chicago) Inc. and SFX Entertainment, Inc. incorporated by reference to Exhibit 10.2 of the
Current Report on Form 8-K (File No. 001-14993) filed with the SEC on September 9, 1999)
</TABLE>

64
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- -------------------------------------------------------------------------------------------------
<S> <C>
10.49 Amendment No. 4 to Asset Purchase Agreement, dated as of August 27, 1999, among Livent Inc.,
Livent International Inc., Livent (U.S.) Inc., Livent Realty (New York) Inc., Livent Realty
(Chicago) Inc. and SFX Entertainment, Inc. (incorporated by reference to Exhibit 10.3 of the
Current Report on Form 8-K (File No. 001-14993) filed with the SEC on September 9, 1999)
10.50 Share Purchase Agreement, dated August 2, 1999, among SFX Entertainment, Inc., Anita Gregg,
Paul Gregg and certain other individuals set forth therein (incorporated by reference to
Amendment No.2 to Form S-3 (File No. 333-84371) filed with the SEC on August 17, 1999)
10.51 Share Purchase Agreement, dated September 17, 1999, among SFX Entertainment, Inc., Anita
Gregg, Paul Gregg and certain other individuals set forth therein (incorporate by reference to
Exhibit No. 10.1 to the Current Report on Form 8-K (File No. 001-14993) filed with the SEC on
September 20, 1999)
10.52 Amended and Restated Credit and Guarantee Agreement, dated as of February 26, 1998 and
amended and restated as of August 23, 1999, among SFX Entertainment, Inc., SFX U.K.
Holdings Limited, the Eligible Subsidiaries (as defined therein), the Lenders Party thereto, the
LC Issuing Bank (as defined therein), the Apollo LC Issuer (as defined therein), Lehman
Commercial Paper Inc., as Syndication Agent, Societe Generale, as Documentation Agent and
The Bank of New York, as Administrative Agent (incorporated by reference to Exhibit No. 10.3
to the Current Report on Form 8-K (File No. 001-14993) filed with the SEC on August 25, 1999)
+10.53 Employment Agreement between SFX Entertainment, Inc. and Richard A. Liese, dated as of
January 1, 2000.
10.54 Agreement and Plan of Merger among Clear Channel Communications, Inc., CCU II Merger
Sub, Inc. and SFX Entertainment, Inc. dated February 28, 2000 (incorporated by reference to
Exhibit 10.1 to Current Report on Form 8-K (File No. 001-14993) filed with the SEC on
February 29, 2000)
*10.55 Stockholder Agreement, dated February 28, 2000, between Clear Channel Communications, Inc.
and Robert F.X. Sillerman.
*10.56 Stockholder Agreement, dated February 28, 2000, between Clear Channel Communications, Inc.
and Michael G. Ferrel.
*10.57 Voting Agreement, dated February 28, 2000, between Clear Channel Communications, Inc. and
Howard J. Tytel.
*10.58 Voting Agreement, dated February 28, 2000, between Clear Channel Communications, Inc. and
Thomas P. Benson.
+21.1 Subsidiaries of the Company
*23.1 Consent of Ernst & Young LLP
+27.1 Financial Data Schedule
</TABLE>

- ----------
+ Previously filed

* Filed herewith

(B) CURRENT REPORTS ON FORM 8-K

SFX filed a Current Report on Form 8-K on February 4, 1999 disclosing an
agreement to acquire certain interests in seven venues and other assets
from entities controlled by members of the Nederlander family and other
persons.

SFX filed a Current Report on Form 8-K on April 14, 1999 for the purpose
of filing historical financial statements of certain acquired businesses
and the unaudited pro forma condensed

65
<PAGE>

combined financial statements of SFX at and for the year ended December
31, 1998,giving effect to certain acquisitions and financial transactions
completed since January 1, 1998.

SFX filed a Current Report on Form 8-K on June 1, 1999 disclosing an
agreement to acquire substantially all of the assets of Livent Inc. and
its subsidiaries (collectively, "Livent"), including Livent's theaters in
New York, Chicago and Toronto and the rights to current and future Livent
productions.

SFX filed a Current Report on Form 8-K on June 22, 1999 to report its
development of a multi-faceted internet strategy.

SFX filed a Current Report on Form 8-K on June 23, 1999 to disclose its
solicitation of consents to amend the indentures under which it's
outstanding 9 1/8% Senior Subordinated Notes were issued.

SFX filed a Current Report on Form 8-K on August 25, 1999 to disclose its
entry into a new senior credit facility providing for up to $1.1 Billion
of borrowing capacity and the completion of its public offering of
8,625,000 shares of Class A Common Stock.

SFX filed a Current Report on Form 8-K on September 9, 1999 to disclose
the consummation of its acquisition of substantially all of the assets of
Livent.

SFX filed a Current Report on Form 8-K on September 20, 1999 to disclose
the consummation of its acquisition of Apollo Leisure Group Limited.

SFX filed a Current Report on Form 8-K on September 30, 1999 to amend the
Form 8-K filed on September 20, 1999, for the purpose of filing the
unaudited pro forma condensed combined financial statements of SFX for the
year ended December 31, 1998 and as of and for the six months ended June
30, 1999, which give effect to the Apollo acquisition and certain other
transactions.

SFX filed a Current Report on Form 8-K on February 29, 2000 to disclose
its entering into a merger agreement with Clear Channel Communications.

66
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

SFX ENTERTAINMENT, INC.

By: /s/ Robert F.X. Sillerman
---------------------
Name: Robert F.X. Sillerman
Title: Executive Chairman and Member of
the Office of the Chairman
Date: April 28, 2000

Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report 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>
/s/ Robert F.X. Sillerman Executive Chairman, Member of the April 28, 2000
--------------------- Office of the Chairman and Director
Robert F.X. Sillerman (principal executive officer)

/s/ Michael G. Ferrel President, Chief Executive Officer, April 28, 2000
--------------------- Member of the Office of the Chairman
Michael G. Ferrel and Director

/s/ Brian Becker Executive Vice President, Member of the April 28, 2000
--------------------- Office of the Chairman and Director
Brian Becker

/s/ David Falk Member of the Office of the Chairman, April 28, 2000
--------------------- Director
David Falk

/s/ Thomas P. Benson Chief Financial Officer, Senior Vice April 28, 2000
--------------------- President and Director (principal financial
Thomas P. Benson and accounting officer)

/s/ Howard J. Tytel Member of the Office of the Chairman, April 28, 2000
--------------------- Executive Vice President, General
Howard J. Tytel Counsel, Secretary and Director

/s/ Richard A. Liese Senior Vice President, Associate General April 28, 2000
--------------------- Counsel and Director
Richard A. Liese

/s/ D. Geoff Armstrong Director April 28, 2000
---------------------
D. Geoff Armstrong

/s/ James F. O'Grady, Jr. Director April 28, 2000
---------------------
James F. O'Grady, Jr.

/s/ Paul Kramer Director April 28, 2000
---------------------
Paul Kramer

/s/ Edward F. Dugan Director April 28, 2000
---------------------
Edward F. Dugan

/s/ John D. Miller Director April 28, 2000
---------------------
John D. Miller
</TABLE>

67
<PAGE>

SFX ENTERTAINMENT, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
The following consolidated financial statements are included in Item 8:
Report of Independent Auditors .................................................... F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998 ...................... F-3
Consolidated Statements of Operations for each of the
Three Years in the Period Ended December 31, 1999 ................................ F-4
Consolidated Statements of Cash Flows for each of the
Three Years in the Period Ended December 31, 1999 ................................ F-5
Consolidated Statements of Shareholders' Equity for each of the
Three Years in the Period Ended December 31, 1999 ................................ F-6
Notes to Consolidated Financial Statements ........................................ F-7
The following consolidated financial statement schedule is included in Item 14 (a):
Schedule I -- Valuation and Qualifying Accounts ................................... S-1
</TABLE>

All other schedules have been omitted because the information is not applicable
or is not material or because the information required is included in the
consolidated financial statements or the notes thereto.

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors
SFX Entertainment, Inc.

We have audited the accompanying consolidated balance sheets of SFX
Entertainment, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of operations, cash flows and shareholders' equity for
each of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of SFX Entertainment, Inc. at December 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

ERNST & YOUNG LLP

New York, New York
February 28, 2000

F-2
<PAGE>

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

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................................. $ 382,640 $ 48,021
Accounts receivable, net ................................................... 113,074 53,162
Prepaid event expenses ..................................................... 41,154 23,043
Investments in and receivables from theatrical and other productions ....... 13,134 12,222
Other prepaid expenses ..................................................... 23,686 4,475
Notes receivables from related parties and employees ....................... 1,749 972
Other current assets ....................................................... 12,405 6,838
---------- ----------
Total current assets ........................................................ 587,842 148,733
Property and equipment, net ................................................. 686,246 292,626
Goodwill, net ............................................................... 1,503,981 874,783
Investments in and receivables from investees ............................... 64,374 18,450
Notes receivable from related parties and employees, less current portion ... 29,225 12,464
Debt issuance costs, net .................................................... 49,888 23,650
Other assets ................................................................ 27,317 12,746
---------- ----------
TOTAL ASSETS ................................................................ $2,948,873 $1,383,452
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................... $ 23,714 $ 17,712
Accrued expenses ........................................................... 109,163 50,887
Accrued interest payable ................................................... 23,972 17,241
Deferred revenue ........................................................... 139,393 60,142
Current portion of long-term debt .......................................... 7,826 5,581
Current portion of deferred purchase consideration ......................... 57,610 11,851
---------- ----------
Total current liabilities ................................................... 361,678 163,414
Long-term debt, less current portion ........................................ 1,384,992 768,195
Deferred purchase consideration, less current portion ....................... 18,617 7,983
Deferred income taxes ....................................................... 45,403 38,826
Other liabilities ........................................................... 9,273 1,940
---------- ----------
TOTAL LIABILITIES ........................................................... 1,819,963 980,358
Minority interest ........................................................... 10,065 8,058
Temporary equity -- stock subject to redemption ............................. 18,876 16,500
Shareholders' equity:
Preferred stock, $.01 par value, 25,000,000 shares authorized, none issued
and outstanding as of December 31, 1999 and 1998 ........................... -- --
Class A Common Stock, $.01 par value, 100,000,000 shares authorized,
63,873,657 and 42,919,791 shares issued and outstanding as of
December 31, 1999 and 1998, respectively .................................... 639 430
Class B Common Stock, $.01 par value, 10,000,000 shares authorized,
2,545,557 shares issued and outstanding as of December 31, 1999 and
1998 ....................................................................... 25 25
Additional paid-in capital .................................................. 1,238,186 449,484
Deferred compensation ....................................................... (3,775) (6,533)
Accumulated deficit ......................................................... (133,106) (64,870)
Less: Cost of Class A Common Stock in treasury, 112,528 shares as of
December 31, 1999 .......................................................... (2,000) --
---------- ----------
TOTAL SHAREHOLDERS' EQUITY .................................................. 1,099,969 378,536
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................................. $2,948,873 $1,383,452
========== ==========
</TABLE>

See accompanying notes.

F-3
<PAGE>

SFX ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenue ............................................... $ 1,679,452 $ 884,286 $ 96,144
Income from equity investments ........................ 4,903 4,630 509
----------- ----------- -----------
Total revenue ........................................ 1,684,355 888,916 96,653
Operating expenses:
Cost of revenues ...................................... 1,253,647 678,756 73,881
Selling, general and administrative expenses .......... 225,166 111,748 9,536
Depreciation and amortization, including integration
and start-up costs of $12,701 in 1999 and $2,406 in
1998 ................................................. 142,583 62,197 5,431
Corporate expenses .................................... 18,524 11,194 2,206
Non-recurring charges ................................. -- 5,600 --
Non-cash charges ...................................... 7,250 34,051 --
----------- ----------- -----------
1,647,170 903,546 91,054
----------- ----------- -----------
Income (loss) from operations ......................... 37,185 (14,630) 5,599
Interest expense ...................................... (100,825) (50,759) (1,590)
Investment income ..................................... 12,594 4,491 295
Minority interest ..................................... (6,017) (2,036) --
Gains on sales of assets, net ......................... 760 -- --
----------- ----------- -----------
(Loss) income before income taxes and extraordinary
item ................................................. (56,303) (62,934) 4,304
Provision for income taxes(1) ......................... (1,597) (3,000) (490)
----------- ----------- -----------
(Loss) income before extraordinary item ............... (57,900) (65,934) 3,814
Extraordinary item-loss on early extinguishment of
debt, net of $1,800 of income taxes .................. (2,490) -- --
----------- ----------- -----------
Net (loss) income ..................................... (60,390) (65,934) 3,814
Accretion on stock subject to redemption .............. (3,522) (2,750) --
----------- ----------- -----------
Net (loss) income applicable to common shares ......... $ (63,912) $ (68,684) $ 3,814
=========== =========== ===========
Net (loss) income per basic and dilutive common
share before extraordinary item ...................... $ (1.06) $ (1.83) $ .18
Extraordinary loss on early extinguishment of debt,
net of taxes per common share ........................ ( 0.04) -- --
----------- ----------- -----------
Net (loss) income per basic and dilutive common
share ................................................ $ (1.10) $ (1.83) $ .18
=========== =========== ===========
Weighted average basic and dilutive common shares
outstanding .......................................... 58,204,408 37,467,620 21,667,500
=========== =========== ===========
</TABLE>

(1) The provision for income taxes for the year ended December 31, 1997 would
have been $2,540 if such provision had been calculated on a stand--alone
basis (see Note 13).

See accompanying notes.

F-4
<PAGE>

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1999 1998 1997
------------- ------------- ------------
<S> <C> <C> <C>
Operating activities:
Net (loss) income ........................................................ $ (60,390) $ (65,934) $ 3,814
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization ........................................... 129,882 59,791 5,431
Income (loss) from equity investments, net of amounts received .......... 3,614 2,809 (479)
Non-cash charges ........................................................ 7,250 34,051 --
Minority interest ....................................................... 6,017 2,036 --
Gains on sales of assets, net ........................................... (760) -- --
Extraordinary item-loss on early extinguishment of debt, net of
taxes ................................................................. 2,490 -- --
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable, net ................................................ (508) 8,463 (923)
Prepaid event expenses, other prepaid expenses and other current
assets ................................................................ (32,825) (23,496) 419
Other assets ............................................................ (874) 882 (275)
Notes receivable from related parties and employees ..................... (17,538) (1,132) --
Accounts payable, accrued expenses and other liabilities ................ (14,318) (1,550) 165
Accrued interest payable ................................................ 8,103 17,204 --
Deferred revenue ........................................................ 4,736 (5,683) (7,147)
---------- ---------- ---------
Net cash provided by operating activities ................................ 34,879 27,441 1,005
---------- ---------- ---------
Investing activities:
Purchases of businesses, net of cash acquired ........................... (834,001) (827,147) (71,213)
Proceeds from sales of assets ........................................... 12,038 -- --
Purchases of property and equipment ..................................... (61,193) (64,773) (2,083)
---------- ---------- ---------
Net cash used in investing activities .................................... (883,156) (891,920) (73,296)
---------- ---------- ---------
Financing activities:
Capital contributed by SFX Broadcasting ................................. -- -- 79,093
Receipts from (payments made) to SFX Broadcasting pursuant to
the Spin-Off .......................................................... 1,500 (135,679) --
Proceeds from issuance of senior subordinated notes and
borrowings under the senior credit facilities ......................... 1,091,720 951,500 --
Proceeds from sale of common stock ...................................... 612,877 328,568 --
Payment for treasury stock .............................................. (2,000) -- --
Repayment of senior credit facilities and capital lease obligations ..... (484,685) (215,212) (823)
Other, principally debt issuance costs .................................. (34,858) (22,656) --
---------- ---------- ---------
Net cash provided by financing activities ................................ 1,184,554 906,521 78,270
Effect of exchange rate changes in cash .................................. (1,658) -- --
---------- ---------- ---------
Net increase in cash and cash equivalents ................................ 334,619 42,042 5,979
Cash and cash equivalents at beginning of period ......................... 48,021 5,979 --
---------- ---------- ---------
Cash and cash equivalents at end of period ............................... $ 382,640 $ 48,021 $ 5,979
========== ========== =========
Supplemental disclosure of cash flow information:
Cash paid for interest ................................................... $ 89,156 $ 33,604 $ 1,504
========== ========== =========
Cash paid for income taxes ............................................... $ 8,477 $ 501 $ --
========== ========== =========
</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 4).

o Agreements to pay future cash consideration in connection with certain
acquisitions (see Note 4).

o The balance sheet includes certain assets and liabilities which were
contributed by SFX Broadcasting in 1998 (Note 1).

See accompanying notes.

F-5
<PAGE>

SFX ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL ACCUMULATED TOTAL
COMMON COMMON PAID-IN DEFERRED EARNINGS TREASURY SHAREHOLDERS'
STOCK STOCK CAPITAL COMPENSATION (DEFICIT) STOCK EQUITY
--------- --------- -------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1997 ....... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Capital contributed by SFX
Broadcasting ................... 204 15 98,111 -- -- -- 98,330
Net income ...................... -- -- -- -- 3,814 -- 3,814
----- ---- ---------- --------- ---------- --------- -----------
Balances, December 31, 1997 ..... 204 15 98,111 -- 3,814 -- 102,144
Net liabilities assumed,
principally income taxes
and shares issued to
employees in the Spin-Off ...... 20 -- (109,762) -- -- -- (109,742)
Sale of 12,075,000 shares of
Class A Common Stock ........... 121 -- 328,447 -- -- -- 328,568
Issuance of 8,177,046 shares
of Class A Common Stock
for acquisitions ............... 82 -- 95,516 -- -- -- 95,598
Issuance of Class A and Class
B Common Stock pursuant
to employment agreements ....... 3 10 34,422 (8,625) -- -- 25,810
Amortization of deferred
compensation ................... -- -- -- 2,092 -- -- 2,092
Accretion on stock subject to
redemption ..................... -- -- 2,750 -- (2,750) -- --
Net loss ........................ -- -- -- -- (65,934) -- (65,934)
----- ---- ---------- --------- ---------- --------- -----------
Balances, December 31, 1998 ..... 430 25 449,484 (6,533) (64,870) -- 378,536
----- ---- ---------- --------- ---------- --------- -----------
Adjustment to Working
Capital in the Spin-Off ........ -- -- 1,500 -- -- -- 1,500
Sale of 16,048,000 shares of
Class A Common Stock ........... 160 -- 598,400 -- -- -- 598,560
Issuance of 4,158,650 shares
and options
to purchase Class A
Common Stock for
acquisitions ................... 42 -- 169,504 (508) -- -- 169,038
Issuance of 727,800 shares of
Class A Common Stock
pursuant to the exercise of
employee stock options ......... 7 -- 14,310 -- -- -- 14,317
Repurchase of 112,528 shares
of Class A Common Stock ........ -- -- -- -- -- (2,000) (2,000)
Amortization of deferred
compensation ................... -- -- -- 3,266 -- -- 3,266
Accretion on stock subject to
redemption ..................... -- -- 3,522 -- (3,522) -- --
Reduction of stock subject to
redemption ..................... -- -- 1,466 -- -- -- 1,466
Net loss ........................ -- -- -- -- (60,390) -- (60,390)
Foreign currency translation
adjustment ..................... -- -- -- -- (4,324) -- (4,324)
----- ---- ---------- --------- ---------- --------- -----------
Comprehensive loss .............. -- -- -- -- (64,714) -- (64,714)
----- ---- ---------- --------- ---------- --------- -----------
Balances, December 31, 1999 ..... $ 639 $ 25 $1,238,186 $ (3,775) $ (133,106) $ (2,000) $ 1,099,969
===== ==== ========== ========= ========== ========= ===========
</TABLE>

See accompanying notes.

F-6
<PAGE>

SFX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

SFX Entertainment, Inc. ("SFX" or the "Company") is the world's largest
diversified promoter, producer and venue operator for live entertainment
events. In addition, SFX is a leading fully integrated sports marketing and
management company specializing in the representation of sports athletes and
broadcasters, integrated event management, television programming and
production and marketing consulting services. SFX owns, partially or entirely,
and/or operates under lease or exclusive booking arrangements, the largest
network of venues used principally for music concerts and other live
entertainment events. SFX operates in four major business segments within the
live entertainment industry: music, theater, sports and family entertainment
and other.

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 1997 to acquire and
hold SFX Broadcasting's live entertainment operations.

In August 1997, SFX Broadcasting agreed to the merger 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") (See Note 5). The Spin-Off was completed on April 27, 1998 and the
Broadcasting Merger was completed on May 29, 1998. Prior to the Spin-Off, SFX
Broadcasting provided various administrative services to the Company. SFX
Broadcasting allocated these expenses on the basis of direct usage. In the
opinion of management, this method of allocation was reasonable and allocated
expenses approximated what the Company would have incurred on a stand-alone
basis. The Company recorded the Spin-Off at the historical cost of the assets
and liabilities contributed by SFX Broadcasting.

Certain 1998 and 1997 amounts have been reclassified to conform to the
1999 presentation.

2. PROPOSED MERGER WITH CLEAR CHANNEL COMMUNICATIONS, INC.

On February 29, 2000, SFX announced that it entered into a definitive
merger agreement with Clear Channel Communications, Inc. Under the terms of the
merger agreement, the Class A shareholders of SFX will receive 0.6 shares of
Clear Channel Communications, Inc. common stock for each SFX share, and Class B
shareholders of SFX will receive one share of Clear Channel Communications,
Inc. common stock for each SFX share, on a fixed exchange basis. The proposed
merger would require an amendment to SFX's certificate of incorporation to
allow the unequal consideration being paid to the holders of Class A and Class
B Common Stock. The transaction is expected to be consummated early in the
third quarter of 2000, subject to the approval of the Class A and Class B
shareholders of SFX, customary regulatory approvals and other closing
conditions.

3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
SFX and its majority-owned subsidiaries. Investments in other companies that
SFX does not control, but has the ability to exercise significant influence
over operating and financial policies, are accounted for by the equity method.
Investments in other companies that the Company does not control or possess
significant influence are accounted for by the cost method. All intercompany
transactions and balances have been eliminated.

CASH AND CASH EQUIVALENTS

The Company considers all investments with an original maturity of three
months or less when purchased to be cash equivalents.

F-7
<PAGE>

PREPAID EVENT EXPENSES

Prepaid event expenses include show advances and deposits and other costs
directly related to future events. Such costs are charged to operations upon
completion of the related events. As of December 31, 1999 and 1998, prepaid
event expenses included advertising costs of approximately $872,000 and
$480,000, respectively. The Company recognized event advertising expense of
approximately $83,002,000, $51,865,000, and $7,109,000 in 1999, 1998, and 1997,
respectively.

PROPERTY AND EQUIPMENT

Land, buildings, 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:

Buildings and improvements ......... 4-40 years
Furniture and equipment, including
internal use software .............. 3-7 years

Leasehold improvements primarily represent the capitalized costs to
renovate leased venues. These costs are being amortized over the shorter of the
useful life of the improvement or the term of their respective leases.
Maintenance and repairs which do not extend the useful lives of the respective
assets are expensed as incurred. Depreciation of assets under capital leases is
included in depreciation and amortization expense.

GOODWILL

Goodwill represents the excess of the purchase price, including deferred
and contingent purchase consideration, over the fair market value of the assets
acquired, and is amortized using the straight-line method over 10-15 years.

It is the Company's policy to account for goodwill at the lower of
amortized cost or estimated realizable value. As part of an ongoing review of
the valuation and amortization of goodwill of the Company and its subsidiaries,
management assesses the carrying value of goodwill if facts and circumstances
suggest that there may be impairment. If this review indicates that goodwill
will not be recoverable as determined by a non-discounted cash flow analysis of
the operating results over the remaining amortization period, the carrying
value of the goodwill would be reduced to estimated realizable value.

Certain of the agreements entered into in connection with the Company's
acquisitions require that the Company pay the sellers additional amounts based
upon the achievement of a certain level of operating results as defined in the
respective acquisition agreements. It is the Company's policy to record these
additional amounts when, in management's opinion, it is probable that the
results will be achieved. These amounts are recorded as additional purchase
price or as compensation expense in accordance with EITF 95-8, "Accounting for
Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in
a Purchase Business Combination."

DEBT ISSUANCE COSTS

Debt issuance costs are amortized over the term of the related debt and
are included as non-cash interest expense in the consolidated statement of
operations. Debt issuance costs of $49.9 million and $23.7 million, net of
accumulated amortization of $5.2 million and $1.9 million, were recorded as of
December 31, 1999 and 1998, respectively.

REVENUE RECOGNITION

Music, Theatrical and Family Entertainment

Revenue from the presentation and production of an event is recognized on
the date of the performance. Advance ticket sales are recorded as deferred
revenue until the event occurs. Sponsorship and other revenues that are not
related to any single event are classified as deferred revenue and are
generally amortized on a straight-line basis over the operating season during
the term of the contract.

F-8
<PAGE>

Sports

Revenue from talent representation arises primarily from percentage fees
or commissions received for the negotiation of professional sporting contracts
and marketing endorsements. The Company recognizes such revenue in the period
when the service is rendered and the fee is determinable. Revenue from the
presentation and production of an event is recognized on the date of the
performance. Advance ticket sales are recorded as deferred revenue until the
event occurs. Sponsorship and other revenues that are not related to any single
event are classified as deferred revenue and are amortized on a straight-line
basis over the term of the agreement. Revenue from television programming and
production services are recognized when the programs are available for
broadcast. For syndicated shows, revenues are recognized when the programs are
available for broadcast and the license period has begun.

Other

Revenue is recognized as services are performed or as goods are shipped.

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. The Company has recorded an allowance for doubtful
accounts of $2.4 million and $1.7 million as of December 31, 1999 and 1998,
respectively, related to these accounts receivable.

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.

INCOME (LOSS) PER COMMON SHARE

Basic income (loss) per common share is based upon the net income (loss)
applicable to common shares after the accretion of stock subject to redemption
and upon the weighted average of common shares outstanding during the period.
Diluted income (loss) per common share adjusts for the effect of convertible
securities and stock options only in the periods presented in which such effect
would have been dilutive. As the Company incurred losses in 1999 and 1998,
there were no dilutive securities during those periods. During 1997, there were
no dilutive securities. For the periods prior to the Spin-Off, the calculation
of income per common share reflects the recapitalization of the Company.

In July 1999, SFX completed a 3-for-2 split of its Class A and Class B
Common Stock. The financial information presented herein has been restated to
reflect the effect of the stock split.

INTEGRATION AND START-UP COSTS

Integration and start-up cost represent costs associated with combining
the acquired entities and introducing new products and services. During 1999,
SFX recorded $12.7 million of integration and start-up costs relating primarily
to the cost of implementing SFX's branding and ticketing strategy, new Internet
initiatives, the opening of a themed exhibit and the write-off of abandoned
transaction costs. During 1998, SFX incurred $2.4 million of integration and
start-up costs primarily relating to the cost of implementing SFX's national
sponsorship program.

COMPREHENSIVE LOSS: FOREIGN CURRENCY TRANSLATION

The financial position and operating results of all foreign subsidiaries
are consolidated using the local currency as the functional currency. Local
currency assets and liabilities are translated at the rate of exchange on the
consolidated balance sheet date and local currency revenues and expenses are
translated

F-9
<PAGE>

at average rates of exchange during the period, resulting in translation loss.
As of December 31, 1999, the Company recorded a translation loss of
approximately $4.3 million as a component of other comprehensive loss in
accumulated earnings (deficit) in the statement of shareholders' equity.

4. ACQUISITIONS

1997 ACQUISITIONS

In January 1997, SFX Broadcasting acquired Delsener/Slater, a concert
promotion company which has long-term leases or is the exclusive promoter for
seven of the major concert venues in the New York City metropolitan area. Total
aggregate consideration was approximately $26.8 million. In March 1997, the
Company acquired certain companies which own and operate the Meadows Music
Theater, an indoor/outdoor complex located in Hartford, Connecticut for
$900,000 in cash, 370,757 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. In June 1997, the Company acquired the stock of Sunshine
Promotions, Inc. and certain other related companies, an owner-operator of
venues and a concert promoter in the Midwest for $57.5 million in cash and
assumed debt, shares of SFX Broadcasting Class A Common Stock issued with a
value of approximately $4.0 million.

The 1997 Acquisitions were financed through capital contributions from SFX
Broadcasting.

1998 ACQUISITIONS

PACE and Pavilion Partners

On February 25, 1998, the Company acquired PACE Entertainment Corporation,
a diversified producer and promoter of live entertainment in the United States,
for total consideration of approximately $150.1 million, including issuance
upon the Spin-Off of 2,250,000 shares of the Company's Class A Common Stock
valued by the parties at $20.0 million. In a related transaction, the Company
acquired, for total consideration of approximately $90.6 million, the 66 2/3%
ownership in the Pavilion Partners venue partnership not already owned by PACE.
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
$22.00 per share. With certain limited exceptions, these option rights are not
assignable by the PACE sellers. The stock, which is subject to redemption, has
been recorded as temporary equity on the accompanying consolidated balance
sheet and is being accreted over a five-year period. In connection with the
signing of new employee agreements during 1999, 66,624 shares of the PACE
consideration stock was released from this requirement during 1999.

In addition, on March 25, 1998, SFX paid $4.0 million to acquire a 67%
interest in certain assets and liabilities of USA Motor Sports, a producer and
promoter of motor sports events. The remaining 33% interest was already owned
by SFX.

Contemporary

On February 27, 1998, SFX acquired Contemporary Group and the remaining
50% interest in the Riverport Amphitheatre Joint Venture not owned by
Contemporary. The total consideration for the Contemporary acquisition was
approximately $82.7 million, including $72.8 million in cash, a payment for
working capital of $9.9 million, and the issuance of 1,894,275 shares of Class
A Common Stock having a negotiated value of approximately $16.2 million. SFX
financed the purchase price with borrowings under the then-existing senior
credit facility and with a portion of the proceeds from the February 1998 note
offering.

F-10
<PAGE>

BGP

On February 24, 1998, SFX acquired BGP for a total consideration of $72.8
million in cash and assumed debt, including the issuance of 844,500 shares of
Class A Common Stock having a negotiated value of approximately $7.5 million.
SFX financed the purchase price with borrowings under the then-existing senior
credit facility and with a portion of the proceeds from the February 1998 note
offering.

Network

On February 27, 1998, SFX acquired all of the outstanding capital stock of
each of The Album Network, Inc. and SJS Entertainment Corporation (collectively
"Network") 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 $75.4 million, including
approximately $59.2 million in cash and assumed debt, and the issuance of
approximately 1,284,000 shares of Class A Common Stock having a negotiated
value of approximately $16.2 million. The purchase price was subject to an
increase based on Network's operating results, as defined in the acquisition
agreement. The Company paid $8.6 million related to this agreement in 1999. In
October 1999, SFX sold a portion of the business acquired for $11.7 million and
recognized a $3.4 million gain. SFX financed the initial purchase price with
borrowings under the then-existing senior credit facility and with a portion of
the proceeds from the February 1998 note offering.

FAME

On June 4, 1998, SFX acquired the Falk Associates Management Enterprises,
Inc. ("FAME"). The aggregate purchase price for FAME was approximately $85.5
million in cash and 1.5 million shares of Class A Common Stock having a
negotiated value of approximately $36.0 million. The sellers were entitled to a
potential additional purchase price of $15.0 million if FAME met or exceeded
defined earnings targets through 2003 of which $2.5 million was paid during
1999. Further, in December 1999 and February 2000, SFX paid approximately $10.0
million to the sellers in settlement of their potential rights to future
payments under the contingent purchase price agreement. An earnings charge of
$4.1 million will be recorded in the first quarter of 2000 relating to the
payment made in such quarter as it is considered to be compensation expense.
SFX financed the initial purchase price with a portion of the proceeds from the
1998 Equity Offering.

Don Law

On July 2, 1998, SFX acquired certain assets of Don Law, for an aggregate
cash consideration of approximately $92.2 million, including the repayment of
approximately $7.0 million in debt. SFX financed the purchase price with a
portion of the proceeds of the 1998 Equity Offering.

Magicworks

On September 11, 1998, SFX purchased all of the outstanding shares of
Common Stock of Magicworks, a publicly traded company, for a total
consideration of approximately $115.7 million in cash. SFX consummated the
acquisition by means of a tender offer. SFX financed the acquisition with
available cash and borrowings under the then-existing senior credit facility.

Other Acquisitions

In 1998, SFX completed the acquisition of thirteen additional companies.
The thirteen acquisitions included four concert promotion and venue
owner/operators, two concert promotion companies, two theatrical presenters, a
theatrical presenter and venue owner/operator, a motor sports promoter and
presenter, a concert merchandising company and the equity owner of an SFX
amphitheater. The aggregate purchase price for these acquisitions was $194.8
million in cash, $10.0 million (present value at $8.2 million) in deferred
purchase consideration and 562,529 shares of Class A Common Stock having a
negotiated value of approximately $11.0 million. On December 16, 1999, the
Company repurchased

F-11
<PAGE>

112,528 shares of Class A Common Stock for $2.0 million in connection with the
one of these acquisitions. SFX may be required to make additional payments to
the sellers of certain of the acquired companies based on the companies'
operating results (as defined in the acquisition agreements) for the years 1998
through 2000. SFX has accrued an additional $5.9 million of contingent purchase
price as of December 31, 1999. SFX paid $14.6 million related to these
agreements in 1999. SFX financed the initial purchase prices with available
cash and a portion of the proceeds of the 1998 Equity Offering.

1999 ACQUISITIONS

Cellar Door

On February 19, 1999, SFX purchased all of the issued and outstanding
capital stock of the Cellar Door group of companies for a purchase price of
$70.0 million in cash, 519,357 shares of Class A Common Stock with a value of
$20.0 million, and $8.5 million (present value of $6.8 million) payable in five
equal annual installments beginning on the first anniversary of the closing
date. In addition, SFX agreed to issue to the seller options to purchase
150,000 shares of Class A Common Stock in equal installments over the five-year
period following the closing date at fair market value. SFX financed the
acquisition with a portion of the net proceeds from its February 1999 Equity
Offering.

Nederlander

On March 16, 1999, SFX acquired certain interests in seven venues and
other assets of Nederlander for an aggregate purchase price of approximately
$93.8 million in cash. The agreement relating to the Mesa del Sol Centre for
the Performing Arts provides for additional payments based on the financial
performance of this venue. In the third quarter of 1999, SFX renegotiated the
agreement with respect to the Firstar Arena whereby SFX relinquished its
financial interest in the venue in exchange for a revised long-term venue
management agreement. SFX financed this acquisition with a portion of the net
proceeds of its February 1999 equity offering and borrowings under SFX's
then-existing senior credit facility. In addition, during the fourth quarter of
1999, SFX purchased the remaining 50% interest in a partnership which holds the
long-term leases to two amphitheaters for $32.6 million. SFX financed the
initial acquisition with a portion of the net proceeds of the February 1999
Equity Offering and borrowings under SFX's then-existing senior credit
facility.

Marquee

On March 16, 1999, a subsidiary of SFX was merged with and into The
Marquee Group, Inc. and Marquee become a wholly owned subsidiary of SFX. In
connection with the merger, SFX issued approximately 2.1 million shares of SFX
Class A Common Stock with a value of approximately $81.7 million on the date of
the merger and repaid $33.5 million of Marquee's debt. SFX financed the cash
portion of the acquisition with borrowings under its then-existing senior
credit facility. In addition to the above, SFX paid $20.5 million of contingent
purchase price which arose from purchases made by Marquee during 1999 and has
accrued an additional $22.9 million of contingent purchase price as of December
31, 1999. These amounts were recorded as additional purchase price and were
financed with a portion of the net proceeds from its August 1999 equity
offering. Under certain circumstances, the Company may be required to make
additional payments arising from Marquee's acquisition agreements.

As a result of the Marquee acquisition, the Company may be obligated to
repurchase 69,978 shares of Class A Common Stock issued in connection with the
acquisition. In January 2000, the Company repurchased 36,080 of such shares for
$1.9 million.

In the third quarter of 1999, SFX disposed of the operations of QBQ
Entertainment, Inc, whose primary business is the representation of artists in
the music industry as agent. No gain or loss was recognized on the transaction.
SFX does not have a management or ownership interest in the newly formed
company. In connection with the disposition, as of December 31, 1999, SFX had
loaned the newly formed company $7.2 million, which has been recorded as an
other asset on the consolidated balance sheet. SFX also rendered advisory
services to QBQ for which $1.0 million was recognized as revenue by the Company
in the consolidated statement of operations. The newly formed company is in the
process of obtaining independent financing.

F-12
<PAGE>

Livent

On August 27, 1999, SFX purchased certain assets of Livent, Inc., and its
affiliates, including three theaters and the intellectual property rights to
several current and future Broadway productions, including Ragtime, Fosse,
Phantom of the Opera and Seussical. The purchase price for this acquisition was
approximately $100.8 million, consisting of $79.3 million in cash, $18.4
million of deferred purchase consideration and $3.1 million in assumption of
debt, subject to post-closing adjustments. SFX financed the cash portion of the
acquisition with a portion of the net proceeds from its August 1999 Equity
Offering.

Apollo

On September 17, 1999, SFX acquired Apollo Leisure Group plc, the largest
live theater operator as well as one of the largest providers of entertainment
and leisure management services in the United Kingdom. The total purchase price
for the acquisition was approximately $256.4 million, comprised of
approximately $196.4 million in cash, 979,667 shares of Class A Common Stock
with a value of approximately $37.5 million and the assumption of net
liabilities of approximately $22.5 million, subject to post-closing
adjustments. Apollo operates, among other venues, 3 arenas and a network of 23
theaters. In connection with the Apollo acquisition, SFX acquired 100% of Barry
Clayman Concerts, which is a leading promoter of concert and other live
entertainment events throughout the U.K. SFX financed the cash portion of the
acquisition with borrowings under the Senior Credit Facility.

EMA Telstar

On October 4, 1999, SFX purchased EMA Telstar, a venue owner and a
promoter and producer of live entertainment events in Sweden, for approximately
$27.9 million in cash. The purchase price was paid with a portion of the net
proceeds from the August 1999 Equity Offering. Under certain conditions, the
Company may be required to make significant additional payments based upon
EMA's achievement of certain earnings targets.

Mojo Works

On October 21, 1999, SFX purchased 80% of the Mojo Works group of
companies, a promoter and producer of live entertainment in the Netherlands for
approximately $40.6 million in cash, including working capital, subject to
post-closing adjustments. The purchase price was paid with a portion of the net
proceeds from the August 1999 Equity Offering. Under certain circumstances, the
sellers have the right to sell the remaining 20% interest to SFX and SFX has
the right to purchase the remaining 20% interest from the sellers.

Other Acquisitions

During the first quarter of 1999, SFX also completed the acquisitions of
The Entertainment Group, Inc., a concert and theatrical producer, RZO, a
concert promoter, producer of international music concert tours and music
publishing business and the assets of Integrated Sports International, L.P., a
full-service sports marketing company and a music venue. The total
consideration for these acquisitions and the long-term marketing and consulting
agreement consisted of $73.2 million in cash and 142,766 shares of Class A
Common Stock valued at $5.2 million. In addition, SFX has accrued $4.0 million
of contingent purchase price as of December 31, 1999. SFX financed these
transactions with the proceeds from the February 1999 Equity Offering and
borrowings under SFX's then-existing senior credit facility. In addition, SFX
may be required to make additional payments of up to $13.0 million in cash and
75,000 shares of Class A Common Stock based on the financial performance of
certain of these acquired companies.

F-13
<PAGE>

consideration for these acquisitions was approximately $29.6 million in cash
and $4.1 million in deferred purchase consideration. SFX financed these
acquisitions with borrowings under SFX's then-existing senior credit facility
and cash on hand. In addition, SFX may be required to make additional payments,
in shares of SFX Class A Common Stock, based on the cumulative financial
performance of Hendricks Management Company, Inc. through December 31, 2002. In
addition, SFX invested approximately $11.2 million in certain entertainment and
sports related Internet companies.

During the third quarter of 1999, SFX completed the acquisitions of Candid
Productions, Inc., a producer of professional figure skating events, a 50%
interest in Cardenas Fernandez & Associates, Inc, a leading concert promoter
and producer of music concerts by Hispanic artists, Tellem & Associates, which
represents team sports athletes, primarily in professional baseball and
basketball and Midland Concert Promotions Group Limited, a concert promoter and
motorsports venue operator in the United Kingdom. The total consideration for
these acquisitions was approximately $66.4 million consisting of $49.2 million
in cash, and 253,666 shares of Class A Common Stock valued at $10.5 million and
$6.7 million in deferred purchase consideration. SFX financed these
acquisitions with a portion of the net proceeds of the August 1999 Equity
Offering and borrowings under the Senior Credit Facility.

During the fourth quarter of 1999, SFX completed the acquisitions of SME
Power Branding, a sports brand identity company, the rights to a 10-year lease
of Tabernacle, a music venue in Atlanta, Georgia and the assets of a sport
talent representation company in Australia. The total cash consideration for
these acquisitions was approximately $12.6 million. SFX financed these
acquisitions with a portion of the net proceeds of the August 1999 Equity
Offering and borrowings under the Senior Credit Facility.

The purchase price for all these acquisitions have been preliminarily
allocated to the assets acquired and liabilities assumed and are subject to
change. Operating results for these acquisitions are included herein from their
respective acquisition dates.

The following unaudited pro forma summary represents the consolidated
results for the years ended December 31, 1999, 1998 and 1997 as if the
acquisitions completed in 1999 had occurred as of January 1, 1998 and the
acquisitions completed in 1998 had occurred as of January 1, 1997. 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 such date or of results which may occur in the future (in
thousands).

<TABLE>
<CAPTION>
PROFORMA YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997
-------------- -------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Total revenues ......................... $ 2,020,092 $ 1,651,693 $ 883,901
Loss before extraordinary item ......... (74,981) (60,084) (49,414)
Net loss ............................... (77,471) (60,084) (49,414)
Loss applicable to basic and dilutive
common shares ......................... $ (1.23) $ (0.97) $ (1.17)
</TABLE>

5. SPIN-OFF

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 $5.0 million, as well as the obligation to
indemnify one-half of certain of these employees' excise tax. SFX received $2.0
million of net Working Capital (as defined in the Broadcasting Merger
Agreement). In connection with the Spin-Off, the Company entered into a tax
sharing agreement with SFX Broadcasting. Pursuant to the tax sharing agreement,
as amended, the Company was responsible for certain taxes incurred by SFX
Broadcasting, including income taxes imposed with respect to income generated
by the Company for periods prior to the Spin-Off and taxes resulting from gain
recognized by SFX Broadcasting

F-14
<PAGE>

in the Spin-Off. The Company paid $109.7 million of estimated payments related
to this agreement during 1998. In 1999, the Company received $1.5 million in
cash from the Buyer as the settlement of the net Working Capital and certain
tax indemnities. The Company remains liable for certain other tax indemnities
(see Note 13).

6. PROPERTY AND EQUIPMENT

The Company's property and equipment as of December 31, 1999 and 1998
consisted of the following (in thousands):

<TABLE>
<CAPTION>
1999 1998
----------- -------------
<S> <C> <C>
Land and improvements ............................................. $ 43,550 $ 20,379
Building and improvements ......................................... 475,821 145,438
Furniture and equipment, including internal use software .......... 70,339 38,416
Leasehold improvements ............................................ 145,468 98,483
Assets under capital lease ........................................ 6,456 6,898
--------- ---------
741,634 309,614
Accumulated depreciation .......................................... (55,388) (16,988)
--------- ---------
$ 686,246 $ 292,626
========= =========
</TABLE>

7. GOODWILL

The Company's goodwill as of December 31, 1999 and 1998 consisted of the
following (in thousands):

<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Goodwill .......................... $1,639,182 $ 919,618
Accumulated amortization .......... (135,201) (44,835)
---------- ---------
$1,503,981 $ 874,783
========== =========
</TABLE>

8. FINANCIAL INSTRUMENTS

The carrying amount of cash and cash equivalents and short-term,
long-term, and variable-rate debt approximate fair value as of December 31,
1999 and 1998. The Company estimates the fair value of its long-term,
fixed-rate debt generally by obtaining the applicable market quotation. The
estimated fair value of the Company's fixed rate notes ($350.0 million and
$200.0 million Senior Subordinated Notes) was $522.1 million and $507.3 million
at December 31, 1999 and 1998, respectively.

9. LONG-TERM DEBT

As of December 31, 1999 and 1998, the Company's long-term debt consisted
of the following (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------------- ------------
<S> <C> <C>
Senior credit facility ............................... $ 807,720 $ 196,000
Senior subordinated notes due February 2008 .......... 350,000 350,000
Senior subordinated notes due December 2008 .......... 200,000 200,000
Other debt ........................................... 18,215 14,996
Capital lease obligations (see Note 17) .............. 16,883 12,780
---------- ---------
1,392,818 773,776
Less: current portion ................................ (7,826) (5,581)
---------- ---------
$1,384,992 $ 768,195
========== =========
</TABLE>

Senior Credit Facility

On August 23, 1999, SFX entered into a new seven-year $1.1 billion Senior
Credit Facility which replaced SFX's then-existing $350.0 million senior credit
facility, which was entered into on February 26,

F-15
<PAGE>

1998. The new Senior Credit Facility is comprised of a $250.0 million
multi-draw, multi-currency term loan maturing on December 31, 2005 (the "Term A
Loan"), a single-draw, $600.0 million U.S. dollar term loan maturing on June
30, 2006 (the "Term Loan B") and a $250.0 million reducing revolver having a
letter of credit sub-limit of $75.0 million maturing on December 31, 2005. The
Company recorded a $2.5 million extraordinary loss on the early extinguishment
of debt, net of taxes of $1.8 million, related to the replaced facility.

Loans outstanding under the Senior Credit Facility bear interest, at SFX's
option, at certain spreads over LIBOR or the greater of the Federal Funds rate
plus 0.50% or the lender's prime rate. The interest rate spreads on the term
loan and the revolver are adjusted based on SFX's total leverage ratio, as
defined. SFX pays an annual commitment fee ranging from 0.50% to 0.75% on the
unused availability under the revolver. SFX pays an annual commitment fee
ranging from 0.8125% to 1.5625% on the unused availability under Team Loan A.
SFX also pays an annual letter of credit fee equal to the applicable LIBOR
margin, as defined, for the revolver then in effect. Loans outstanding under
the Senior Credit Facility at December 31, 1999 accrued interest at 9.23%.

Commitments to lend under the revolver are required to be reduced in equal
quarterly installments commencing March 31, 2003 according to the following
schedule: by 25.0% in 2003; by 25.0% in 2004; and by the remaining 50% upon
final maturity. Term Loan A is required to be repaid in equal quarterly
installments commencing March 31, 2001 according to the following schedule:
15.0% in 2001, 15.0% in 2002, 20.0% in 2003, 25.0% in 2004, and the remaining
balance of 25.0% upon maturity. Term Loan B is required to be repaid in equal
quarterly installments commencing September 30, 2001 totalling: 1.0% from
September 30, 2001 to June 30, 2002, 1.0% from September 30, 2002 to June 30,
2003, 1.0% from September 30, 2003 to June 30, 2004, 1.0% from September 30,
2004 to June 30, 2005, and the remaining balance of 96.0% from September 30,
2005 to June 30, 2006. It is expected that amounts outstanding under the Senior
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 Senior
Credit Facility), subject to standard reinvestment provisions; b) 50.0% of
Excess Cash Flow (as defined in the Senior Credit facility), calculated for
each fiscal year beginning with the year ending December 31, 2001; and c)
100.0% of the proceeds of casualty insurance or condemnation not used to repair
or replace the properties with respect to which the loss occurred within one
year from the receipt of such proceeds.

Borrowings under the new Senior Credit Facility are secured by
substantially all of the assets of SFX, including a pledge of the outstanding
stock of substantially all of its subsidaries, and are guaranteed by
substantially all of SFX's subsidiaries. The Senior Credit Facility contains
certain covenants that, among other things, limits the ability of SFX and its
subsidiaries to incur additional indebtedness, issue certain equity interests,
pay dividends and sell certain assets. In addition, the Senior Credit Facility
requires SFX to maintain compliance with certain specified financial covenants.
The new Senior Credit Facility also prohibits prepayment of any subordinated
notes.

Senior Subordinated Notes

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

On November 25, 1998, SFX completed an offering of $200.0 million in
principal amount of 9 1/8% Senior Subordinated Notes due December 1, 2008 (the
"November 1998 Notes" and together with the February 1998 Notes, the "Senior
Subordinated Notes"). Interest is payable on the notes on June 1 and December 1
of each year.

The Senior Subordinated Notes are general unsecured obligations of SFX,
subordinate in right to all senior debt, whether outstanding on the date of
issuance of the Senior Subordinated Notes or thereafter incurred, of SFX and
senior in right of payment to or with all other indebtedness of the Company.

The February 1998 Notes are not redeemable at SFX's option before February
1, 2003, and the November 1998 Notes are not redeemable at SFX's option before
December 1, 2003. Thereafter, each

F-16
<PAGE>

series of notes will be subject to redemption at any time at the option of SFX,
in whole or in part, at specified redemption prices plus accrued and unpaid
interest, and liquidated damages (as defined), if any. In addition, at any time
prior to February 1, 2001 with respect to the February 1998 Notes and December
1, 2001 with respect to the November 1998 Notes, SFX may on any one or more
occasions redeem up to 35.0% of the original aggregate principal amount of each
series of notes at a redemption price of 109.125% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages, if any, with
the net proceeds of one or more offerings of common equity of SFX.

The Senior Subordinated Note indentures contain certain covenants that,
among other things, significantly limit the ability of SFX and its subsidiaries
to incur additional indebtedness, issue certain equity interests, pay dividends
and sell certain assets.

In July 1999, SFX completed a consent solicitation with respect to its
outstanding Senior Subordinated Notes whereby it obtained approval from the
holders of the notes to modifications of certain covenants in the indentures
governing the notes. The modifications, among other things, provided SFX with
more flexibility to make investments and acquisitions internationally and
permit SFX's foreign subsidiaries to incur indebtedness, subject to certain
limitations. Fees associated with the transaction totaling approximately $13.7
million have been recorded as debt issuance costs as of December 31, 1999.

Upon a change of control under the indentures, SFX will be required to
make an offer to repurchase the Senior Subordinated Notes at a price equal to
101% of their principal amount, together with accrued and unpaid interest, if
any, to the date of purchase.

Principal maturities of the long-term debt, excluding capital leases and
deferred purchase consideration, over the next five years as of December 31,
1999 are as follows (in thousands):

2000 ...................... $ 6,094
2001 ...................... 41,320
2002 ...................... 44,833
2003 ...................... 56,449
2004 ...................... 69,103
2005 & Thereafter ......... 1,158,136
-----------
Total ..................... $ 1,375,935
===========

The Company is a holding company that has no operating assets or
operations of its own. Substantially all of the Company's subsidiaries are
wholly owned and have jointly and severally guaranteed the Company's Senior
Subordinated Notes (the "Guarantors"). A certain subsidiary which is not wholly
owned (the "Non-Wholly Owned Guarantor Subsidiary") guarantees such
indebtedness and certain subsidiaries (the "Non-Guarantor Subsidiaries") do not
guarantee such indebtedness.

Full financial statements of the Guarantors, Non-Guarantor Subsidiaries or
the Non-Wholly Owned Guarantor Subsidiary have not been included because,
pursuant to their respective guarantees, the Guarantors are jointly and
severally liable with respect to the Senior Subordinated Notes and management
believes that the Non-Guarantor Subsidiaries and Non-Wholly Owned Guarantor are
not material to the Company on a consolidated basis. Accordingly, the Company
does not believe that the information contained in separate full financial
statements of the Guarantors, Non-Guarantor Subsidiaries or the Non-Wholly
Owned Guarantor Subsidiary would be material to investors.

F-17
<PAGE>

The following are summarized unaudited statements setting forth certain
financial information concerning the Guarantors, the Non-Guarantor Subsidiaries
and the Non-Wholly Owned Guarantor Subsidiary as of and for the years ended
December 31, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------
SFX
ENTERTAINMENT, NON-GUARANTOR
INC. GUARANTORS SUBSIDIARIES
---------------- -------------- ---------------
<S> <C> <C> <C>
Current assets ................ $ 290,164 $ 223,122 $ 74,380
Property and
equipment, net ............... 17,293 464,513 204,347
Goodwill, net ................. -- 1,284,059 210,346
Investment in
subsidiaries ................. 1,936,237 58,195 6,179
Other ......................... 74,948 17,123 10,148
----------- ----------- ---------
Total assets ................. $ 2,318,642 $ 2,047,012 $ 505,400
=========== =========== =========
Current liabilities ........... $ 68,183 $ 175,484 $ 118,185
Long-term debt, less
current ...................... 1,119,442 264,604 9,101
Other ......................... 12,172 56,960 4,161
Minority interest ............. -- 4,285 3,892
Temporary equity .............. 18,876 -- --
Shareholders' equity .......... 1,099,969 1,545,679 370,061
----------- ----------- ---------
Total liabilities and
shareholders' equity ......... $ 2,318,642 $ 2,047,012 $ 505,400
=========== =========== =========
Revenue ....................... $ -- $ 1,512,881 $ 115,357
Operating expenses ............ 20,238 1,465,981 107,678
Interest expense, net ......... 59,520 25,576 4,272
Minority interest ............. -- 5,203 299
Gains on sales of assets,
net .......................... (3,387) 2,586 41
(Benefit) provision for
income taxes ................. (2,194) 1,993 1,798
Extraordinary loss ............ 2,490 -- --
----------- ----------- ---------
Net (loss) income ............. $ (76,667) $ 11,542 $ 1,269
=========== =========== =========
Cash flow (used in)
provided by
operations ................... $ (91,596) $ 126,659 $ (367)
Cash flow used in
investing .................... (837,393) (42,741) (2,906)
Cash flow provided by
(used in) financing .......... 1,189,213 (4,659) --
Effect of exchange rate -- -- (1,658)
Cash at the beginning
of the period ................ 3,685 (9,298) 53,541
Cash at the end of the
period ....................... $ 263,909 $ 69,961 $ 48,610

<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1999
---------------------------------------------------
SFX
NON-WHOLLY, ENTERTAINMENT,
OWNED GUARANTOR INC.
SUBSIDIARY ELIMINATIONS CONSOLIDATED
----------------- ----------------- ---------------
<S> <C> <C> <C>
Current assets ................ $ 176 $ -- $ 587,842
Property and
equipment, net ............... 93 -- 686,246
Goodwill, net ................. 9,576 -- 1,503,981
Investment in
subsidiaries ................. -- (1,936,237) 64,374
Other ......................... 4,211 -- 106,430
-------- ------------- ----------
Total assets ................. $ 14,056 $ (1,936,237) $2,948,873
======== ============= ==========
Current liabilities ........... $ 31 $ (205) $ 361,678
Long-term debt, less
current ...................... -- (8,155) 1,384,992
Other ......................... -- -- 73,293
Minority interest ............. 1,888 -- 10,065
Temporary equity .............. -- -- 18,876
Shareholders' equity .......... 12,137 (1,927,877) 1,099,969
-------- ------------- ----------
Total liabilities and
shareholders' equity ......... $ 14,056 $ (1,936,237) $2,948,873
======== ============= ==========
Revenue ....................... $ 56,117 $ -- $1,684,355
Operating expenses ............ 53,273 -- 1,647,170
Interest expense, net ......... (58) (1,079) 88,231
Minority interest ............. 515 -- 6,017
Gains on sales of assets,
net .......................... -- -- (760)
(Benefit) provision for
income taxes ................. -- -- 1,597
Extraordinary loss ............ -- -- 2,490
-------- ------------- ----------
Net (loss) income ............. $ 2,387 $ 1,079 $ (60,390)
======== ============= ==========
Cash flow (used in)
provided by
operations ................... $ 183 $ -- $ 34,879
Cash flow used in
investing .................... (116) -- (883,156)
Cash flow provided by
(used in) financing .......... -- -- 1,184,554
Effect of exchange rate -- -- (1,658)
Cash at the beginning
of the period ................ 93 -- 48,021
Cash at the end of the
period ....................... $ 160 $ -- $ 382,640
</TABLE>

F-18
<PAGE>

<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------
SFX
ENTERTAINMENT, NON-GUARANTOR
INC. GUARANTORS SUBSIDIARIES
---------------- -------------- ---------------
<S> <C> <C> <C>
Current assets ................ $ 19,587 $ 122,118 $ 6,836
Property and
equipment, net ............... 10,390 272,243 9,993
Goodwill, net ................. -- 844,722 19,853
Investment in
subsidiaries ................. 1,161,103 18,450 --
Other assets .................. 28,911 17,377 2,572
----------- ---------- --------
Total assets ................. $ 1,219,991 $1,274,910 $ 39,254
=========== ========== ========
Current liabilities ........... $ 41,071 $ 118,766 $ 7,541
Long-term debt, less
current portion .............. 747,746 20,449 7,855
Other liabilities ............. 36,138 12,321 290
Minority interest ............. -- 5,505 428
Temporary equity .............. 16,500 -- --
Shareholders' equity .......... 378,536 1,117,869 23,140
----------- ---------- --------
Total liabilities
and shareholders'
equity ..................... $ 1,219,991 $1,274,910 $ 39,254
=========== ========== ========
Revenue ....................... $ -- $ 837,236 $ 25,245
Operating expenses ............ 50,963 805,418 22,174
Interest expense, net ......... 44,626 895 1,649
Minority interest ............. -- 644 989
Provision for income
taxes ........................ 1,350 1,650 --
----------- ---------- --------
Net (loss) income ............. $ (96,939) $ 28,629 $ 433
=========== ========== ========
Cash flow (used in)
provided by
operations ................... $ (44,932) $ 73,877 $ (962)
Cash flow used in
investing activities ......... (861,341) (30,005) (574)
Cash flow provided by
(used in) financing
activities ................... 909,958 (2,021) (1,416)
Cash at the beginning
of the period ................ -- 2,281 3,063
Cash at the end of the
period ....................... $ 3,685 $ 44,132 $ 111

<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------
SFX
NON-WHOLLY, ENTERTAINMENT,
OWNED GUARANTOR INC.
SUBSIDIARY ELIMINATIONS CONSOLIDATED
----------------- ----------------- ---------------
<S> <C> <C> <C>
Current assets ................ $ 192 $ -- $ 148,733
Property and
equipment, net ............... -- -- 292,626
Goodwill, net ................. 10,208 -- 874,783
Investment in
subsidiaries ................. -- (1,161,103) 18,450
Other assets .................. -- -- 48,860
-------- ------------- -----------
Total assets ................. $ 10,400 $ (1,161,103) $ 1,383,452
======== ============= ===========
Current liabilities ........... 76 $ (4,040) $ 163,414
Long-term debt, less
current portion .............. -- (7,855) 768,195
Other liabilities ............. -- -- 48,749
Minority interest ............. 2,125 -- 8,058
Temporary equity .............. -- -- 16,500
Shareholders' equity .......... 8,199 (1,149,208) 378,536
-------- ------------- -----------
Total liabilities
and shareholders'
equity ..................... $ 10,400 $ (1,161,103) $ 1,383,452
======== ============= ===========
Revenue ....................... $ 26,435 $ -- $ 888,916
Operating expenses ............ 24,991 -- 903,546
Interest expense, net ......... (33) (869) 46,268
Minority interest ............. 403 -- 2,036
Provision for income
taxes ........................ -- -- 3,000
-------- ------------- -----------
Net (loss) income ............. $ 1,074 $ 869 $ (65,934)
======== ============= ===========
Cash flow (used in)
provided by
operations ................... $ (542) $ -- $ 27,441
Cash flow used in
investing activities ......... -- -- (891,920)
Cash flow provided by
(used in) financing
activities ................... -- -- 906,521
Cash at the beginning
of the period ................ 635 -- 5,979
Cash at the end of the
period ....................... $ 93 $ -- $ 48,021
</TABLE>

10. CAPITAL STOCK

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.

In the Spin-Off, (a) 20,368,536 shares of Class A Common Stock were
distributed to holders on the Spin-Off record date of SFX Broadcasting's Class
A common stock and Series D preferred stock, including 914,784 shares of Class
A common stock issued upon the exercise of certain warrants of SFX.

F-19
<PAGE>

Broadcasting and (b) 1,570,556 shares of Class B Common Stock were distributed
to holders on the Spin-Off record date of SFX Broadcasting Class B Common
Stock. 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, 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 975,000 shares of the Company's Class B Common
Stock and 285,000 shares of the Company's Class A Common Stock to certain
officers for a purchase price of $1.33 per share. Such shares were issued in
April 1998.

During 1998, the Board of Directors 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 were expected to become officers, directors and employees of the
Company.

On May 27, 1998, SFX consummated an offering of 12,075,000 shares of Class
A Common Stock at an offering price of $28.83 per share and received net
proceeds of approximately $329.0 million. SFX used the proceeds to consummate
certain of its 1998 acquisitions, to fund $93.7 million of tax indemnity
payments and to pay fees and other expenses.

In February 1999, SFX consummated an offering of 7,423,500 shares of Class
A Common Stock at an offering price of $37.00 per share and received net
proceeds of approximately $260.7 million. SFX used the proceeds to finance
certain of the 1999 Acquisitions.

In July of 1999, the Company completed a three-for-two split of SFX's
Class A and Class B Common Stock. The financial information presented herein
has been restated to reflect the effect of the stock split.

In August 1999, SFX consummated an offering of 8,625,000 shares of the
Company's Class A Common Stock at an offering price of $41.00 per share and
received net proceeds of approximately $337.9 million. SFX used a portion of
the net proceeds to finance certain of the 1999 Acquisitions and intends to use
the remaining portion of the net proceeds for general corporate purposes,
including potential future acquisitions.

On December 16, 1999, the Company repurchased 112,528 shares of Class A
Common Stock for $2.0 million in connection with the Westbury Music Fair, Inc.
acquisition. These shares were recorded as Class A Common Stock in treasury in
the consolidated balance sheet as of December 31, 1999.

11. STOCK OPTIONS

During January 1998, the Board of Directors and SFX Broadcasting, as sole
stockholder, approved and adopted a stock option plan providing for the
issuance of options to purchase shares of the Company's Class A Common Stock
totaling up to approximately 3.0 million shares. Under the stock option plan,
options to acquire Class A Common Stock have been granted to certain officers,
key employees and other individuals who perform services for the Company.
Options granted under these plans are generally granted at option prices equal
to the fair market value of the Class A Common Stock on the date of the
approval of the grant. Terms of the options, determined by the Company,
provided that the maximum term of each option shall not exceed ten years and
the options become fully exercisable within five years of continued employment
with the exception of certain options which were fully vested at the date of
grant.

F-20
<PAGE>

On November 4, 1998, the Board of Directors approved the grant of options
covering 4,500,000 shares of Class A Common Stock under the 1999 Plan to
employees, directors and consultants of SFX. Options granted under these plans
are generally granted at option prices equal to the fair market value of the
Class A Common Stock on the date of the approval of the grant. Terms of the
options, determined by the Company, provided that the maximum term of each
option shall not exceed ten years and the options become fully exercisable
within five years of continued employment with the exception of certain options
which were fully vested at the date of grant. As of December 31, 1999,
4,224,866 options had been granted under this Plan.

In addition, the Company granted an additional 575,312 options pursuant to
certain acquisition agreements.

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options, as opposed to the
fair value accounting provided for under FAS Statement No. 123, "Accounting for
Stock-Based Compensation" ("Statement 123").

Pro forma information regarding net loss and loss per basic and dilutive
common share is required by Statement 123, and has been determined as if the
Company had accounted for its employee stock options under the fair value
method of that statement. The fair value for these options was estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1999: risk-free interest rate of 5.29%; no
dividend yield; volatility factor of the expected market price of the Company's
Common Stock of 76.4%; and a weighted-average expected life of the options of 5
years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Therefore,
the impact on the pro forma results of operations in 1999 and 1998 may not be
representative of the impact in future periods should additional options be
granted. The Company's pro forma information follows (in thousands, except for
loss per share information).

<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Pro forma net loss applicable to common shares ............... $ (77,741) $ (74,477)
Pro forma loss per basic and dilutive common share: .......... $ (1.34) $ (1.99)
</TABLE>

F-21
<PAGE>

A summary of the Company's stock options activity (adjusted for the stock
split), and related information for the years ended December 31 follows:

<TABLE>
<CAPTION>
1999 1998
--------------------------------- ----------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------------ ------------------ -------------- -----------------
<S> <C> <C> <C> <C>
Outstanding: beginning of year ................... 2,990,574 $ 21.84 -- $ --
Granted .......................................... 4,800,178 21.64 2,990,574 21.84
Exercised ........................................ (778,951) 18.25 -- --
Cancelled ........................................ (51,009) 18.93 -- --
---------- -------- --------- ------
Outstanding: end of year ......................... 6,960,792 $ 22.13 2,990,574 $ 21.84
========== ======== ========= =======
Exercisable at end of year ....................... 1,717,309 $ 26.48 -- $ --
========== ======== ========= =======
Weighted average fair value of options
granted during the year:
Stock price equal to exercise Price ............. $ 21.56 $ 25.60
Stock price in excess of exercise price ......... $ 31.68 $ 26.81
Stock price less than exercise price ............ $ 25.47 $ --
</TABLE>

A summary of the Company's options as of December 31, 1999 follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------ -----------------------------
WEIGHTED AVERAGE
NUMBER OF REMAINING CONTRACTUAL WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE
RANGE OF EXERCISE PRICE OPTIONS LIFE (YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE
- ---------------------------- ----------- ----------------------- ------------------ ----------- -----------------
<S> <C> <C> <C> <C> <C>
$3.67 to $8.89.............. 452,500 8.0 $ 3.76 107,500 $ 4.03
$16.08 to $19.42............ 3,943,225 8.7 16.67 694,391 16.47
$20.45 to $29.14............ 1,589,607 8.4 28.47 475,994 27.87
$30.13 to $42.67............ 788,027 9.2 38.25 258,650 36.57
$48.05 to $67.48............ 187,433 8.8 59.85 180,774 60.18
--------- --- -------- ------- --------
$3.67 to $67.48............. 6,960,792 8.6 $ 22.13 1,717,309 $ 26.48
========= === ======== ========= ========
</TABLE>

12. BUSINESS SEGMENTS

SFX classifies its operations into four major business segments in the
live entertainment industry: music, theatrical, sports, and family
entertainment and other. The music segment primarily consists of the promotion
and production of live entertainment events, most significantly for concert and
other music performances in venues owned (partially or entirely) and/or
operated by SFX and in third party venues. The theatrical segment develops and
manages touring Broadway shows and other theatrical productions and owns and
operates theatrical venues. The sports segment acts as a full-service marketing
and management company specializing in the representation of athletes, as well
as promoting specialized motor sports events. The family entertainment and
other segment primarily consist of the promotion and marketing of
family-oriented events, marketing and consulting of local, regional and
national live marketing programs, the subscription or fee based radio and music
industry data compilation and distribution, the creation and distribution of
network radio special events and live concert programming and merchandising at
live events.

The Company evaluates performance based on several factors, of which the
primary financial measure is EBITDA, since this measure approximates the cash
flow generated by each segment. EBITDA is defined as earnings before interest,
taxes, minority interest, gains on sales of assets, non-cash and non-recurring
charges and depreciation and amortization, including start-up and integration
costs. The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The segment performance for
1997 is not presented as the Company did not have operations other than the
music segment during 1997.

F-22
<PAGE>

<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS)
-------------------------------------------------------------------------------------
FAMILY
ENTERTAINMENT
MUSIC THEATRICAL SPORTS AND OTHER CORPORATE TOTAL
-------------- ------------ ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues ....................... $ 976,203 $ 289,671 $ 141,706 $ 276,775 $ -- $ 1,684,355
=========== ========= ========= ========= ========== ===========
EBITDA ......................... $ 118,693 $ 31,924 $ 33,281 $ 21,644 $ (18,524) $ 187,018
Depreciation and amortization,
including integration and
start-up costs of $12,701 ..... 77,669 14,368 24,313 18,295 7,938 142,583
Non-cash charges ............... -- -- -- -- 7,250 7,250
----------- --------- --------- --------- ---------- -----------
Income (loss) from operations .. $ 41,024 $ 17,556 $ 8,968 $ 3,349 $ (33,712) $ 37,185
=========== ========= ========= ========= ========== ===========
Total assets ................... $ 1,417,984 $ 568,705 $ 379,418 $ 188,998 $ 393,768 $ 2,948,873
=========== ========= ========= ========= ========== ===========
</TABLE>

<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
------------------------------------------------------------------------------------
FAMILY
ENTERTAINMENT
MUSIC THEATRICAL SPORTS AND OTHER CORPORATE TOTAL
------------ ------------ ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues ...................... $ 604,469 $ 150,970 $ 24,899 $ 108,578 $ -- $ 888,916
========= ========= ========= ========= ========== ===========
EBITDA ........................ $ 61,204 $ 15,576 $ 2,466 $ 19,166 $ (11,194) $ 87,218
Depreciation and amortization,
including integration and
start-up costs of $2,406 ..... 36,606 5,557 5,363 9,071 5,600 62,197
Non-cash and non-recurring
charges ...................... -- 5,600 -- -- 34,051 39,651
--------- --------- --------- --------- ---------- -----------
Income (loss) from operations . $ 24,598 $ 4,419 $ (2,897) $ 10,095 $ (50,845) $ (14,630)
========= ========= ========= ========= ========== ===========
Total assets .................. $ 841,139 $ 220,865 $ 134,810 $ 122,262 $ 64,376 $ 1,383,452
========= ========= ========= ========= ========== ===========
</TABLE>

The regional reporting as of and for the year ended December 31, 1999 is
summarized as follows (in thousands):

<TABLE>
<CAPTION>
REGION REVENUES LONG-LIVED ASSETS
- ------------------------------- ------------- ------------------
<S> <C> <C>
North America ............... $1,593,335 $1,972,805
Europe ...................... 91,020 386,167
Other ....................... -- 2,059
---------- ----------
Total ....................... $1,684,355 $2,361,031
========== ==========
</TABLE>

The Company did not maintain operations outside of North America prior to
the year ended December 31, 1999.

F-23
<PAGE>

13. INCOME TAXES

The provisions for income taxes for the years ended December 31, 1999,
1998 and 1997 are summarized as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- ----------
<S> <C> <C> <C>
Income from continuing operations before taxes and
extraordinary item:
Domestic .................................................. $ (55,846) $ (62,934) $ 4,304
Foreign ................................................... (457) -- --
---------- ---------- -------
(Loss) income before taxes and extraordinary item ......... $ (56,303) $ (62,934) $ 4,304
========== ========== =======
Provision (benefit) for income taxes:
Current:
Federal .................................................. $ 217 $ -- $ --
State and local .......................................... 1,693 3,000 420
Foreign .................................................. 1,880 -- --
---------- ---------- -------
3,790 3,000 420
---------- ---------- -------
Deferred:
Federal .................................................. (2,734) -- --
State and local .......................................... 541 -- 70
Foreign .................................................. -- -- --
---------- ---------- -------
(2,193) -- 70
---------- ---------- -------
Total provision for income taxes .......................... $ 1,597 $ 3,000 $ 490
========== ========== =======
</TABLE>

No federal benefit was recorded in 1998 as the Company was not assured it
would realize a tax benefit from the loss. 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.

During the period January 1, 1998 through April 27, 1998 the Company was a
member of the SFX Broadcasting consolidated federal income tax return.
Subsequent to April 27,1998, the date of the Spin-Off, the Company filed
separate tax returns. The Company has provided income taxes for all of 1999 and
1998 on a stand-alone basis.

F-24
<PAGE>

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, 1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Deferred tax assets:
Deferred compensation ....................................... $ 2,528 $ 783
Accounts receivable ......................................... 216 --
Depreciation and amortization ............................... 5,364 --
Deferred revenue ............................................ 5,345 6,274
Net operating loss carryforward ............................. 15,330 16,010
---------- ----------
Total deferred tax asset ..................................... 28,783 23,067
Valuation allowance ......................................... (2,631) (2,789)
---------- ----------
Total deferred tax asset, net of valuation allowance ......... 26,152 20,278
Deferred tax liabilities:
Assets acquired in business combinations .................... (71,437) (59,104)
Other ....................................................... (118) --
---------- ----------
Deferred tax liability ....................................... $ (45,403) $ (38,826)
========== ==========
</TABLE>

At December 31, 1999, 1998, and 1997 the tax provision differs from tax
provided at the statutory federal income tax rate as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- ----------
<S> <C> <C> <C>
Statutory rate ............................... $ (19,706) $ (21,398) $ 1,463
State taxes, net of federal benefit .......... 1,452 3,000 490
Nondeductible stock compensation ............. -- 11,513 --
Minority interest ............................ 2,106 -- --
Goodwill amortization ........................ 17,658 3,869 800
Meals & entertainment ........................ 667 175 20
Effect of consolidated return loss ........... -- -- (2,283)
Valuation allowance .......................... (1,270) 2,789 --
Tax loss prior to Spin-Off ................... -- 3,052 --
Other ........................................ 690 -- --
---------- ---------- --------
$ 1,597 $ 3,000 $ 490
========== ========== ========
</TABLE>

The Company made numerous acquisitions during 1999 and 1998. As a result
of the purchase accounting for these acquisitions, the Company has recorded
deferred taxes of $15.3 million and $59.1 million, respectively, associated
with the excess of financial statement basis over the tax basis in the acquired
assets.

In conjunction with the Spin-Off, the Company paid approximately $109.7
million in tax of which approximately $90.2 million was recorded through equity
and the remaining $19.5 million was recorded as a deferred tax asset. The
deferred tax asset relates to basis differences in the assets received in the
Spin-Off. In addition, SFX remains liable for certain tax indemnities.
Management's estimates of the amount of the indemnity payment are based on
assumptions which management believes are reasonable. However, such assumptions
could be modified, including any potential tax audit adjustments, in a manner
that would result in a significant variance in the actual amount of the tax
indemnity. As of December 31, 1999, the Company has approximately $42.7 million
of net operating loss ("NOL") carryforwards. The Company's NOL carryforwards
will expire in the year 2019. The Company is currently reviewing whether these
losses can be carried back to an earlier year for a refund of federal income
taxes previously paid.

F-25
<PAGE>

14. NON-CASH AND NON-RECURRING CHARGES

In 1999, non-cash charges of $7.3 million consisted of (a) $3.3 million
related to the issuance of stock options to certain executive officers pursuant
to the employment agreements exercisable for an aggregate of 517,500 shares of
Class A Common Stock; (b) $2.0 million related to the write off of a concert
tour (c) $1.6 million related to the issuance of stock options, and (d)
$400,000 related to other non-cash charges.

In 1998, non-cash charges of $34.1 million consisted of (a) $23.9 million
of compensation related to the sale of 975,000 shares of Class B Common Stock
and 285,000 shares of Class A Common Stock at a purchase price of $1.33 per
share to certain executive officers (Note 10), (b) $7.5 million associated with
the issuance of 370,766 shares of Class A Common Stock to Mr. Robert F.X.
Sillerman, Executive Chairman of the Company, in connection with the repurchase
of shares of SFX Broadcasting issued to the sellers of the Meadows (Note 15);
(c) $2.4 million related to the issuance of stock options to certain executive
officers pursuant to employment agreements exercisable for an aggregate of
528,750 shares of Class A Common Stock; and (d) $300,000 related to the
deferred compensation plan for each non-employee director, adopted in January
1998, whereby each director was credited with the right to receive 8,183 shares
of Class A Common Stock based upon a $3.67 stock price per share.

In 1998, the non-recurring charges of $5.6 million consisted of certain
deposits paid for the Ragtime and Showboat touring productions and certain
related deferred expenses which, as a result of the Livent bankruptcy, were not
recovered.

15. RELATED PARTY TRANSACTIONS

Relationship between Howard J. Tytel and Baker & McKenzie

Howard J. Tytel, who is the Executive Vice President, General Counsel,
Secretary, Member of the Office of the Chairman and a director of SFX, was "Of
Counsel" to the law firm of Baker & McKenzie from the inception of the Company
to May 31, 1998. Mr. Tytel was also an executive vice president, the general
counsel and a director of SFX Broadcasting. Baker & McKenzie served as counsel
to SFX Broadcasting and Marquee and currently serves as counsel to SFX and
certain other affiliates of Mr. Sillerman. Baker & McKenzie formerly
compensated Mr. Tytel based, in part, on the fees it received from providing
legal services to SFX Broadcasting, SFX, Marquee, other affiliates of Mr.
Sillerman and other clients introduced to the firm by Mr. Tytel. Baker &
McKenzie has agreed to a severance arrangement with Mr. Tytel, which is not
based on fees received by Baker & McKenzie. In 1997, the Company incurred fees
of approximately $2.9 million for legal services. Such fees were funded by SFX
Broadcasting on behalf of the Company. In February 1998, the Company reimbursed
SFX Broadcasting for these fees. From April 27, 1998, the date of the Spin-Off,
until May 31, 1998, SFX incurred and paid Baker & McKenzie approximately $1.5
million for legal services. Management believes that this arrangement was as
fair to SFX as any that could have been obtained from an unrelated party on an
arms-length basis.

Triathlon Fees

Under the terms of an agreement to provide marketing services to Triathlon
Broadcasting, Inc., 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
to consulting and of transactional investment banking services, the Company
recorded fees of $132,000, $530,000 and $1,794,000 for the year ended December
31, 1999, 1998 and 1997, respectively. In 1999, Triathlon was acquired by a
third party and ceased paying consulting fees.

Meadows Repurchase

In connection with the acquisition of the Meadows, SFX Broadcasting
obtained an option to repurchase 370,766 shares of its Class A common stock for
$8.2 million. Pursuant to the terms of the Broadcasting Merger Agreement, if
the Meadows Shares were outstanding at the effective time of the Broadcasting
Merger, working capital paid to SFX would be decreased by approximately $10.3
million. However, SFX Broadcasting was restricted from exercising the Meadows
Repurchase by certain loan covenants and other restrictions.

F-26
<PAGE>

In January 1998, Robert F.X. Sillerman, the Executive Chairman of SFX,
financed the $8.2 million exercise price of the Meadows Repurchase to offset
the $10.3 million reduction to working capital. In consideration, Mr. Sillerman
received the Class A shares in the Spin-Off.

16. 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. During 1999 and 1998, each subsidiary
maintained its own pension/profit sharing plan. The amounts charged to
operations under these separate plans in 1999 and 1998 was approximately
$1,543,000 and $627,870, respectively. There were no contributions in 1997.

17. LEASES

The Company's leases primarily relate to venues, office space and land.
The lease terms range from 1 to 38 years for operating leases and 1 to 49 years
for capital leases. A number of the 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. Rental expense
associated with operating leases for 1999, 1998 and 1997 was approximately
$26,137,000, $19,496,000 and $2,753,000, respectively. Contingent rental
expense associated with operating leases for 1999 and 1998 was approximately
$5,887,000 and $4,282,000, respectively. There was no contingent rental expense
for 1997. Interest rates on capital leases range form 6.5% to 14%.

Minimum rental commitments on long-term capital and operating leases at
December 31, 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
OPERATING LEASES CAPITAL LEASES
------------------ ---------------
<S> <C> <C>
2000 ........................... $ 21,256 $ 3,546
2001 ........................... 19,935 3,440
2002 ........................... 18,005 3,033
2003 ........................... 17,506 1,257
2004 ........................... 15,426 1,257
2005 and thereafter ............ 179,136 23,878
--------- -------
$ 271,264 36,411
=========
Less: Interest ................. 19,528
-------
16,883
Less: Current portion .......... 1,732
-------
$15,151
=======
</TABLE>

On March 13, 2000, the Company entered into a lease agreement covering the
Candler Tower, a 24 story building in New York. The bottom three floors will be
subleased for retail uses. The balance of the building, consisting of
approximately 180,000 square feet will be used as the Company's world
headquarters. The lease is for a 20 year term with two consecutive 10 year
options. The landlord has committed to contribute in excess of $7.0 million
toward the tenant build-out work. In addition, the City and State of New York
have committed to provide economic development benefits to the Company in
connection with its initial and ongoing capital purchases.

F-27
<PAGE>

18. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

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

The Company has employment agreements and arrangements with its executive
officers and certain management personnel. The agreements provide for various
minimum annual base compensation packages with terms varying between 1-5 years,
expiring on various dates, as well as insurance coverage and discretionary
bonus clauses. The future minimum payments for all noncancelable employee
agreements at December 31, 1999 are as follows (in thousands):

EMPLOYMENT
AGREEMENTS
-----------
2000 ........................ $ 32,757
2001 ........................ 30,523
2002 ........................ 26,694
2003 ........................ 16,716
2004 ........................ 6,975
2005 and thereafter ......... --
---------
Total ....................... $ 113,665
=========

Certain employment contracts, primarily those of the executive officers,
contain provisions for payments in the event of a change in control, as defined
in the employment agreements. In July 1999, SFX adopted an executive loan
program which is intended to incentivize certain executives to enter into new
employment agreements with the Company upon the expiration of their existing
agreements. During the third quarter of 1999, the Company loaned certain senior
executives $14.1 million pursuant to this plan. The loans, which bear interest
at a rate of 6.0% per annum, are included in notes receivable from related
parties and employees on the consolidated balance sheet. Under the terms of the
loans, if any of the participants in the loan program enter into new long-term
employment agreements with SFX, effective upon termination of the existing
employment agreement, the participant's loan would be forgiven ratably over the
term of the new employment agreement.

On January 15, 2000, in connection with the renegotiation of employment
agreements with members of the Company's senior management group, the Company
issued fully-vested options to purchase an aggregate of 2,102,500 shares of the
Company's Class A Common Stock at prices that were below the then-current
market price, which will result in a non-cash compensation charge of $54.2
million in the first quarter of 2000. These options were issued as an
inducement to cause each executive officer to enter into an amended long-term
employment agreement. In addition, the Company forgave amounts due under the
executive loan program of certain executives which will result in future
charges in the Company's statement of operations.

Pursuant to a real estate purchase agreement with the sellers of Oakdale
Theater, the Company has agreed to purchase the land, building and improvements
of the Oakdale Theater at the end of the Company's fifteen-year lease of the
premises in June 2013 for $15.4 million. In June 1998, the Company extended an
$11.4 million note receivable to the sellers which is secured by the property
which has been recorded in notes receivable from related parties and employees
in the accompanying consolidated balance sheet.

The Company has committed to construct three new amphitheaters in the
Seattle, Washington, Sacramento, California and the Albuquerque, New Mexico
markets. SFX expects to spend an additional $46.5 million on these projects in
2000. In addition, the Company has committed to other capital projects totaling
approximately $15.0 million in 2000. The committed capital expenditures do not
include amounts that may be required for construction of major new venues,
major renovations at existing venues or leasehold improvements that may be
required at SFX's new world headquarters at the Candler Building.

F-28
<PAGE>

As of December 31, 1999, 1998 and 1997, outstanding letters of credit for
$39,727,000, $2,597,000 and $1,110,000, respectively, were issued by banks on
behalf of the Company as security for loans and the rental of theaters.

In 1994, the Connecticut Development Authority ("CDA") entered into a
non-recourse assistance agreement with the Company whereby the CDA provided
grant funds of $8,863,000 for the construction and development of the Meadows
through the issuance of State of Connecticut General Fund Obligation Bonds
("GFO Bonds"). The annual tax revenues derived from the operation of the
amphitheater are utilized to satisfy the annual service requirements of the GFO
Bonds. If the annual tax revenues are less than the annual service
requirements, the Company must deposit the lesser of the operating shortfall,
as defined, or 10.0% of the annual service requirements 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%.

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.

Pursuant to certain acquisition agreements certain sellers have the right
to repurchase certain of the businesses sold to SFX.

19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations for the
year ended December 31, 1999 (in thousands):

<TABLE>
<CAPTION>
1999 QUARTER
----------------------------------------------------------- YEAR ENDED
1ST 2ND 3RD 4TH DECEMBER 31, 1999
------------ ------------ -------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Total revenue ............................ $ 276,121 $ 407,685 $ 527,185 $ 473,364 $ 1,684,355
Gross profit ............................. 27,030 55,702 100,430 22,380 205,542
(Loss) income before extraordinary
item .................................... (17,625) (10,052) 15,245 (45,468) (57,900)
Net (loss) income ........................ (17,625) (10,052) 12,625 (45,338) (60,390)
Net (loss) income per basic common
share before extraordinary item ......... $ (0.55) $ (0.20) $ 0.23 $ (0.70) $ (1.06)
Extraordinary loss on early
extinguishment of debt per basic
common share ............................ -- -- ( 0.04) -- ( 0.04)
--------- --------- ---------- --------- -----------
Net (loss) income per basic common
share ................................... $ (0.55) $ (0.20) $ 0.19 $ (0.70) $ (1.10)
========= ========= ========== ========= ===========
Net (loss) income per dilutive
common share before
extraordinary item ...................... $ (0.55) $ (0.20) $ 0.22 $ (0.70) $ (1.06)
Extraordinary loss on early
extinguishment of debt per dilutive
common share ............................ -- -- ( 0.04) -- ( 0.04)
--------- --------- ---------- --------- -----------
Net (loss) income per dilutive
common share ............................ $ (0.55) $ (0.20) $ 0.18 $ (0.70) $ (1.10)
========= ========= ========== ========= ===========
</TABLE>

F-29
<PAGE>

20. SUBSEQUENT EVENTS (UNAUDITED)

2000 ACQUISITIONS

In the first quarter of 2000, SFX completed the acquisitions of Speakers
of Sport, which represents team sports athletes, primarily in professional
baseball and the Electric Factory Concerts group of companies, the primary
concert promoter in the Philadelphia, Pennsylvania area. The total
consideration for these acquisitions was approximately $65.4 million. These
acquisitions were financed through a portion of the proceeds of the August 1999
Equity Offering.

See Note 2 regarding proposed merger with Clear Channel Communications,
Inc.

F-30
<PAGE>

SFX ENTERTAINMENT, INC.
SCHEDULE I -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR
- -------------------------------------- -------------- ------------ --------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Year ended December 31, 1997 ......... $ -- -- -- -- $ --
Year ended December 31, 1998 ......... $ -- 216 1,646 (a) (126) (b) $ 1,736
Year ended December 31, 1999 ......... $ 1,736 686 -- -- $ 2,422
</TABLE>

- ----------
(a) Represents amounts acquired in acquisitions.

(b) Write-off of accounts receivable.

S-1
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- --------------------------------------------------------------------------------------
<S> <C>
10.55 Stockholder Agreement, dated February 28, 2000, between Clear Channel Communications,
Inc. and Robert F. X. Sillerman.
10.56 Stockholder Agreement, dated February 28, 2000, between Clear Channel Communications,
Inc. and Michael G. Ferrel.
10.57 Voting Agreement, dated February 28, 2000, between Clear Channel Communications, Inc.
and Howard J. Tytel.
10.58 Voting Agreement, dated February 28, 2000, between Clear Channel Communications, Inc.
and Thomas P. Benson.
23.1 Consent of Ernst & Young LLP
</TABLE>

<PAGE>

STOCKHOLDER AGREEMENT

This STOCKHOLDER AGREEMENT (the "AGREEMENT"), dated as of this 28th day of
February, 2000, is entered into by and between Clear Channel Communications,
Inc., a Texas corporation ("PARENT"), and Robert F.X. Sillerman (the
"STOCKHOLDER").

W I T N E S S E T H:

WHEREAS, Parent, CCU II Merger Sub, Inc., a Delaware corporation ("MERGER
SUB"), and SFX Entertainment, Inc., a Delaware corporation (the "COMPANY"), have
entered into an Agreement and Plan of Merger of even date herewith (as the same
may be amended from time to time the "MERGER AGREEMENT"), pursuant to which the
parties thereto have agreed, upon the terms and subject to the conditions set
forth therein, to merge Merger Sub with and into the Company (the "MERGER");

WHEREAS, as of the date hereof, the Stockholder is the record or beneficial
owner of the number of shares (the "SHARES") of Class A common stock, par value
$0.01 per share, of the Company (the "COMPANY CLASS A COMMON STOCK"), and of
Class B common stock, par value $0.01 per share, of the Company (the "COMPANY
CLASS B COMMON STOCK" and, together with the Company Class A Common Stock, the
"COMPANY COMMON STOCK"), set forth on Schedule I attached hereto; and

WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
is willing to agree, to the matters set forth herein. Except as specified
herein, terms defined in the Merger Agreement are used herein as defined
therein.

NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:

1. Definitions. Capitalized terms not expressly defined in this Agreement
shall have the meanings ascribed to them in the Merger Agreement. For purposes
of this Agreement:

(a) "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person.

(b) "Amendment Proposal" shall mean the proposal to amend the Company's
Amended and Restated Certificate of Incorporation as contemplated in Section 3.3
of the Merger Agreement.

(c) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3(a)(1) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. The Shares subject to
this Agreement shall include Shares held by the Sillerman
<PAGE>

Communications Management Corporation, The Sillerman Companies and Sillerman
Communications Partners as well as any Shares transferred to any Affiliate or
family member of the Stockholder after the date of this Agreement in accordance
with Section 4(a)(vi). For purposes of this Agreement, the Shares Beneficially
Owned by the Stockholder shall not include the shares of Company Class A Common
Stock held of record by Howard J. Tytel, his nominees or his Affiliates (other
than the Stockholder or the entities described above) and with respect to which
the Stockholder has the right to vote.

(d) "Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity.

2. Voting Agreement. From the date of this Agreement and ending as of the
Termination Date, the Stockholder hereby agrees to vote (or cause to be voted)
all of the Shares (and any and all securities issued or issuable in respect
thereof) which the Stockholder is entitled to vote (or to provide his written
consent thereto), at any annual, special or other meeting of the stockholders of
the Company, and at any adjournment or adjournments thereof, or pursuant to any
consent in lieu of a meeting or otherwise:

(a) in favor of the Merger and the approval and adoption of the terms
contemplated by the Merger Agreement and the Amendment Proposal and any actions
required in furtherance thereof;

(b) against any action or agreement that is reasonably likely to result
in a breach in any material respect of any covenant, representation or warranty
or any other obligation of the Company under the Merger Agreement; and

(c) except for all such actions which may be permitted to the Company
under the Merger Agreement, against (i) any extraordinary corporate transaction,
such as a merger, rights offering, reorganization, recapitalization or
liquidation involving the Company or any of its subsidiaries other than the
Merger, (ii) a sale or transfer (other than to a subsidiary of the Company) of
assets of the Company or any of its material subsidiaries comprising more than
15% of the assets of the Company on a consolidated basis, (iii) any change in a
majority of the Board of Directors of the Company other than in connection with
an annual meeting of the stockholders of the Company with respect to the slate
of directors proposed by the incumbent Board of Directors of the Company (in
which case he agrees to vote for the slate proposed by the incumbent Board) or
(iv) any action that is reasonably likely to materially impede, interfere with,
delay, postpone or adversely affect in any material respect the Merger and the
transaction contemplated by the Merger Agreement;

provided, however, that in the event the Parent Common Stock Market Value at the
time any annual, special or other meeting of the stockholders of the Company is
first convened to consider the Merger (or on the date of any consent in lieu of
such a meeting) is less than $69.72 per share, then notwithstanding the
foregoing provisions of this Section 2, the Stockholder may, at his option,
either (i) vote all the Shares in favor of the Merger, the Merger Agreement and
the Amendment Proposal (collectively, the "Merger Proposals") or (ii) in any
class vote of the holders of Company Class A Common Stock on the approval and
adoption of the Merger

2
<PAGE>

Proposals, vote the Shares in a manner consistent (either all "FOR" or all
"AGAINST") with the vote of the holders of a majority of the holders of Company
Class A Common Stock who vote FOR or AGAINST the Merger Proposals.

3. Capture.

(a) In the event that any of the Shares are sold, transferred,
exchanged, canceled or disposed of in connection with or as a result of any
Acquisition Proposal that is in existence on or that has been otherwise made
prior to the Termination Date (an "Alternative Disposition") then, within five
business days after the closing of such Alternative Disposition, the Stockholder
shall tender and pay to, or shall cause to be tendered and paid to, Parent, or
its designee, in immediately available funds, 30% of the Profit realized from
such Alternative Disposition. As used in this Section 3(a), "Profit" shall mean
an amount equal to the excess, if any, of (i) the Alternative Transaction
Consideration over (ii) the Current Transaction Consideration. As used in this
Section 3, Alternative Transaction Consideration shall mean all cash,
securities, settlement or termination amounts, notes or other debt instruments,
and other consideration received or to be received, directly or indirectly, by
the Stockholder (as well as any members of the Stockholder's family and/or his
Affiliates to whom he has transferred Shares after the date hereof pursuant to
Section 4(a)(vi) below) in respect of the Shares in connection with or as a
result of such Alternative Disposition or any agreements or arrangements
(including, without limitation, any employment agreement (except a bona fide
employment agreement pursuant to which the Stockholder is required to devote,
and under which the Stockholder in good faith intends to devote, substantially
all of his business time and effort to the performance of executive services for
the Company in a manner substantially similar to Stockholder's current
employment arrangements with the Company), consulting agreement, non-competition
agreement, confidentiality agreement, settlement agreement or release agreement)
entered into, directly or indirectly, by the Stockholder as a part of or in
connection with the Alternative Disposition or associated Acquisition Proposal.
As used in this Agreement, Current Transaction Consideration shall mean the sum
of all amounts to be received, directly or indirectly, by the Stockholder
pursuant to Article II of the Merger Agreement as well as the value of all
Options to be received by the Stockholder in connection with the Merger and the
aggregate amount of all other payments or other consideration to be received by
the Stockholder as a direct result of the Merger.

(b) For purposes of determining Profit under this Section 3, (i) all
non-cash items shall be valued based upon the fair market value thereof as
determined by an independent expert selected by Parent and who is reasonably
acceptable to Stockholder, (ii) all deferred payments or consideration shall be
discounted to reflect a market rate of net present value thereof as determined
by the above-referenced independent expert, (iii) all contingent payments will
be assumed to have been paid and (iv) if less than all of the Shares are subject
to the Alternative Disposition, then the Current Transaction Consideration shall
be deemed to be an amount equal to the Current Transaction Consideration
multiplied by a fraction, the numerator of which is the number of the Shares
sold, transferred, exchanged, canceled or disposed of in such Alternative
Disposition and the denominator of which is the total number of the Shares. In
the event any contingent payments included in the determination of Profits
ultimately are not paid pursuant to an Alternative Disposition, then Parent
shall reimburse Stockholder for any amounts paid to

3
<PAGE>

Parent hereunder in respect of such uncollected contingent payments promptly
after receipt of written notice of such non payment, unless the Stockholder has
not used its best efforts to receive such contingent payments.

(c) In the event that after the date of this Agreement, the amount of
consideration to be received by the holders of Company Common Stock in
connection with the Merger should be increased (a "Second Transaction"), then,
as may be requested by Parent, Stockholder shall either (i) execute and deliver
to Parent such documents or instruments as may be necessary to waive the right
to receive 30% of such increase to the extent that such increase results in any
Profit or (ii) tender and pay, or cause to be tendered and paid, to Parent, or
its designee, in immediately available funds 30% of the Profit realized from
such Second Transaction. As used in this Section 3(c), Profit shall mean an
amount equal to the excess, if any, of (y) the Second Transaction Consideration
over (z) the Current Transaction Consideration. As used in this Agreement,
Second Transaction Consideration shall mean all cash, securities, settlement or
termination amounts, notes or other debt instruments, and other consideration
received or to be received, directly or indirectly, by the Stockholder (as well
as any members of the Stockholder's family and/or his Affiliates to whom he has
transferred Shares after the date hereof pursuant to Section 4(a)(vi) below) in
respect of the Shares in connection with or as a result of the Second
Transaction or any agreements or arrangements (including, without limitation,
any employment agreement (except a bona fide employment agreement pursuant to
which the Stockholder is required to devote, and under which Stockholder in good
faith intends to devote, substantially all of his business time and effort to
the performance of executive services for the Company in a manner substantially
similar to Stockholder's current employment arrangements with the Company),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement or release agreement) entered into, directly or indirectly,
by the Stockholder as a part of or in connection with the Second Transaction.

4. Covenants, Representations and Warranties of the Stockholder and Parent.

(a) The Stockholder hereby represents, warrants and covenants to Parent
as follows:

(i) Ownership. As of the date of this Agreement, the Stockholder is
either (A) the record and Beneficial Owner of, or (B) the Beneficial
Owner but not the record holder of, the number of issued and
outstanding Shares set forth on Part A of Schedule I hereto and the
Options and SARs set forth on Part B of Schedule I hereto. As of the
date of this Agreement, the Shares set forth on Part A of Schedule I
hereto constitute all of the issued and outstanding Shares owned of
record or Beneficially Owned by the Stockholder. Except as otherwise
set forth in Part A to Schedule I, the Stockholder has sole power of
disposition, sole power of conversion, sole power to demand appraisal
rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Shares set forth on
Part A of Schedule I hereto, with no material limitations,
qualifications or restrictions on such rights, subject to applicable
securities laws, the terms of this Agreement and to the right of
pledgees under the pledge

4
<PAGE>

agreements entered into in connection with bona fide lending
transactions that are not entered into in connection with an
Acquisition Proposal.

(ii) Power; Binding Agreement. The Stockholder has the legal
capacity, power and authority to enter into and perform all of the
Stockholder's obligations under this Agreement. This Agreement has been
duly and validly executed and delivered by the Stockholder and
constitutes a valid and binding agreement of the Stockholder,
enforceable against the Stockholder in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)).
There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which the Stockholder is trustee whose
consent is required for the execution and delivery of this Agreement or
the consummation by the Stockholder of the transactions contemplated
hereby. If the Stockholder is married and the Shares constitute
community property, this Agreement has been duly authorized, executed
and delivered by, and constitutes a valid and binding agreement of, the
Stockholder's spouse, enforceable against such person in accordance
with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and by general equitable
principles (regardless of whether enforceability is considered in a
proceeding in equity or at law)).

(iii) No Conflicts. Except for filings under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), no filing with, and no
permit, authorization, consent or approval of, any state or federal
public body or authority is necessary for the execution of this
Agreement by the Stockholder and the consummation by the Stockholder of
the transactions contemplated hereby, except where the failure to
obtain such consent, permit, authorization, approval or filing would
not materially interfere with the Stockholder's ability to perform his
obligations hereunder, and none of the execution and delivery of this
Agreement by the Stockholder, the consummation by the Stockholder of
the transactions contemplated hereby or compliance by the Stockholder
with any of the provisions hereof shall (A) result in a violation or
breach of, or constitute (with or without notice or lapse of time or
both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any material note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which the
Stockholder is a party or by which the Stockholder or any of his
properties or assets may be bound, or (B) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of the Shares, in each such case
except to the extent that any conflict, breach, default or violation
would not interfere with the ability of the Stockholder to perform its
obligations hereunder.

5
<PAGE>

(iv) No Encumbrances. Except (A) as required by Sections 2 and 3,
(B) for pledges or encumbrances created in compliance with Section
4(a)(vi), and (C) items listed in Schedule I, at all times during the
term hereof, all of the Shares will be held by the Stockholder, an
Affiliate of the Stockholder, by a nominee or custodian for the benefit
of the Stockholder, or by a family member of the Stockholder (subject
to the conditions set forth in clause (vi) below) free and clear of all
liens, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any liens, claims, understandings or
arrangements that do not limit or impair Stockholder's ability to
perform his obligations under this Agreement.

(v) No Solicitation. The Stockholder shall comply with the terms of
Section 5.10 of the Merger Agreement to the extent such terms would be
applicable to him.

(vi) Restriction on Transfer, Proxies and Non-Interference. Except
as otherwise contemplated by the Merger Agreement or this Agreement,
from and after the date of this Agreement and ending on the Termination
Date, the Stockholder shall not, and shall cause each of his Affiliates
who Beneficially Own any of the Shares not to, directly or indirectly
without the consent of Parent in respect of any Acquisition Proposal or
otherwise: (A) offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to or consent
to the offer for sale, sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of (each, a "Transfer"), any or all of
the Shares, or any interest therein, (B) grant any proxies or powers of
attorney, deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares, (C) enter into any agreement or
arrangement providing for any of the actions described in clause (A) or
(B) above or (D) take any action that would reasonably be expected to
have the effect of preventing or disabling the Stockholder from
performing the Stockholder's obligations under this Agreement;
provided, however, the Stockholder may, without the consent of Parent,
(x) Transfer his Shares to members of his family and/or Affiliates,
further provided, however, that such transferees agree to be bound by
the terms of this Agreement and such transferred Shares shall continue
to constitute "Shares" hereunder; and (y) pledge or encumber all or any
portion of the Shares in connection with a bona fide lending
transaction with any institutional lender that is not entered into in
connection with an Acquisition Proposal, provided that the Stockholder
shall not be in default of any obligation securing such pledge. The
Stockholder will provide Parent with notice of any pledge of the
Shares.

(vii) Waiver of Appraisal Rights. The Stockholder hereby waives, and
shall cause any of its Affiliates who hold of record any of the Shares
to waive, any rights of appraisal or rights to dissent from the Merger
that the Stockholder or such Affiliate may have.

6
<PAGE>

(viii) Further Assurances. From time to time, at Parent's request
and without further consideration, the Stockholder shall execute and
deliver such additional documents as may be necessary or desirable to
consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.

(b) Parent hereby represents, warrants and covenants to the Stockholder
as follows:

(i) Organization, Standing and Corporate Power. Parent is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, with full corporate power
and authority to own its properties and carry on its business as
presently conducted. Parent has the corporate power and authority to
enter into and perform all of its obligations under this Agreement and
to consummate the transactions contemplated hereby.

(ii) No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority
is necessary for the execution of this Agreement by Parent and the
consummation by Parent of the transactions contemplated hereby, except
where the failure to obtain such consent, permit, authorization,
approval or filing would not interfere with its ability to perform its
obligations hereunder, and none of the execution and delivery of this
Agreement by Parent, the consummation by Parent of the transactions
contemplated hereby or compliance by Parent with any of the provisions
hereof shall (A) conflict with or result in any breach of any
applicable organizational documents applicable to Parent, (B) result in
a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party right
of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind
to which Parent is a party or by which Parent or any of Parent's
properties or assets may be bound, (C) require any consent, approval,
authorization or permit of, registration, declaration or filing (except
for filings under the Exchange Act) with, or notification to, any
government entity, (D) require any material consent, authorization or
approval of any person other than a governmental entity, or (E) violate
any order, writ, injunction, decree, judgment, order, statute, rule or
regulation applicable to Parent or any of Parent's properties or
assets, in each such case except to the extent that any conflict,
breach, default or violation would not interfere with the ability of
Parent to perform its obligations hereunder.

7
<PAGE>

consummate the transactions contemplated by this Agreement. This
Agreement constitutes the valid and binding obligations of Parent and
is enforceable in accordance with its terms, except as enforceability
may be subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights
generally.

(c) The Stockholder hereby represents and warrants to Parent that the
Board of Directors of the Company has approved the terms of this Agreement and
the transactions contemplated herein and such approval is sufficient to render
inapplicable to this Agreement and the transactions contemplated herein the
provisions of Section 203 of the Delaware General Corporation Law.

6. Stop Transfer. From and after the date of this Agreement and ending as
of the first to occur of the Effective Time or the Termination Date, the
Stockholder will not request that the Company register the transfer (book-entry
or otherwise) of any certificate or uncertificated interest representing any of
the Shares, except as otherwise contemplated hereby.

7. Recapitalization; Option Exercise. In the event of a stock dividend or
distribution, or any change in the Shares (or any class thereof) by reason of
any split-up, recapitalization, combination, exchange of shares or the like, the
term "Shares" shall include, without limitation, all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
(or any class thereof) may be changed or exchanged as may be appropriate to
reflect such event. The term "Shares" shall also include any shares of Company
Common Stock with respect to which the Stockholder acquires record or Beneficial
Ownership after the date of this Agreement and prior to the Termination Date.

8. Stockholder Capacity. The Stockholder does not make any agreement or
understanding herein in the Stockholder's capacity as a director or officer of
the Company. The Stockholder executes this Agreement solely in his capacity as a
record owner and/or Beneficial Owner of the Shares and nothing herein shall
limit or affect any actions taken by the Stockholder or any designee of the
Stockholder in his capacity as an officer or director of the Company or any of
its Subsidiaries.

9. No Conversion. The Stockholder will not, prior to the Termination Date,
convert any of the shares of Company Class B Common Stock that he Beneficially
Owns into shares of Company Class A Common Stock.

10. Miscellaneous.

(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.

8
<PAGE>

(b) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto.

(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses or the addresses set forth on the
signature pages hereto:

If to Stockholder: Robert F.X. Sillerman
157 East 70th Street
New York, New York 10021

with a copy to: Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: Jonathan Goldstein
Daniel A. Ninivaggi
Facsimile: (212) 294-4700

If to Parent: Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Facsimile: (212) 822-2299

with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Attention: Stephen C. Mount
John Strickland
Facsimile: (201) 224-2035

or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.

(d) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.

9
<PAGE>

(e) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by the Stockholder of any covenants or agreements
contained in this Agreement will cause the Parent to sustain damages for which
it would not have an adequate remedy at law for money damages, and therefore
each of the parties hereto agrees that in the event of any such breach the
Parent shall be entitled to the remedy of specific performance of such covenants
and agreements and injunctive and other equitable relief in addition to any
other remedy to which they may be entitled, at law or in equity.

(f) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.

(g) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.

(h) No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity who or
which is not a party hereto; provided that, in the event of the Stockholder's
death, the benefits and obligations of the Stockholder hereunder shall inure to
his successors and heirs.

(i) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.

(j) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware 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 non conveniens or any other objection
to venue therein); provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this paragraph and shall not be deemed to
be a general submission to the jurisdiction of said Court or in the State of
Delaware other than for such purposes. Each party hereto hereby waives any right
to a trial by jury in connection with any such action, suit or proceeding.

(k) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.

(l) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which, taken together,
shall constitute one and

10
<PAGE>

the same Agreement. This Agreement shall not be effective as to any party hereto
until such time as this Agreement or a counterpart thereof has been executed and
delivered by each party hereto.

(m) Trust Funds. In the event that any party hereto should receive any
funds that are to be paid to another party pursuant to the terms of this
Agreement, then the receiving party shall hold such funds in trust for the
benefit of the party entitled to receive such funds and shall promptly pay such
funds to the party entitled to receive such funds in accordance with this
Agreement.

10. Termination. This Agreement shall terminate without any further action
on the part of any party hereto on the first to occur of the Effective Time or
the Termination Date (as such terms are defined in the Merger Agreement).

11
<PAGE>

STOCKHOLDER AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the Stockholder and a duly authorized officer of Parent on the day and year
first written above.

PARENT:

CLEAR CHANNEL COMMUNICATIONS, INC.

By: /s/ Randall T. Mays
-----------------------------------------
Randall T. Mays
Executive Vice President
and Chief Financial Officer
Address: 200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Facsimile: (210) 822-2299

STOCKHOLDER:

By: /s/ Robert F.X. Sillerman
-----------------------------------------
ROBERT F.X. SILLERMAN

12
<PAGE>

SCHEDULE I
----------

Part A
------

Name of Owner Shares
- ------------- ------

Robert F.X. Sillerman 4,082,803 shares of Company Class A Common Stock
2,286,253 shares of Company Class B Common Stock

Part B
------

Name of Owner Other Securities
- ------------- ----------------

Robert F.X. Sillerman 3,970,527 Options and Warrants

<PAGE>

STOCKHOLDER AGREEMENT

This STOCKHOLDER AGREEMENT (the "Agreement"), dated as of this 28th day of
February, 2000, is entered into by and between Clear Channel Communications,
Inc., a Texas corporation ("Parent"), and Michael G. Ferrel (the "Stockholder").

W I T N E S S E T H:

WHEREAS, Parent, CCU II Merger Sub, Inc., a Delaware corporation ("Merger
Sub"), and SFX Entertainment, Inc., a Delaware corporation (the "Company"), have
entered into an Agreement and Plan of Merger of even date herewith (as the same
may be amended from time to time the "Merger Agreement"), pursuant to which the
parties thereto have agreed, upon the terms and subject to the conditions set
forth therein, to merge Merger Sub with and into the Company (the "Merger");

WHEREAS, as of the date hereof, the Stockholder is the record or beneficial
owner of the number of shares (the "Shares") of Class A common stock, par value
$0.01 per share, of the Company (the "Company Class A Common Stock"), and of
Class B common stock, par value $0.01 per share, of the Company (the "Company
Class B Common Stock" and, together with the Company Class A Common Stock, the
"Company Common Stock"), set forth on Schedule I attached hereto; and

NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:

1. Definitions. Capitalized terms not expressly defined in this Agreement
shall have the meanings ascribed to them in the Merger Agreement. For purposes
of this Agreement:

(a) "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first Person.

(b) "Amendment Proposal" shall mean the proposal to amend the
Company's Amended and Restated Certificate of Incorporation as contemplated
in Section 3.3 of the Merger Agreement.

(c) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3(a)(1) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including pursuant to any
agreement, arrangement or understanding, whether or not in writing.

<PAGE>

(d) "Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity.

(a) in favor of the Merger and the approval and adoption of the terms
contemplated by the Merger Agreement and the Amendment Proposal and any
actions required in furtherance thereof;

(b) against any action or agreement that is reasonably likely to
result in a breach in any material respect of any covenant, representation
or warranty or any other obligation of the Company under the Merger
Agreement; and

(c) except for all such actions which may be permitted to the Company
under the Merger Agreement, against (i) any extraordinary corporate
transaction, such as a merger, rights offering, reorganization,
recapitalization or liquidation involving the Company or any of its
subsidiaries other than the Merger, (ii) a sale or transfer (other than to
a subsidiary of the Company) of assets of the Company or any of its
material subsidiaries comprising more than 15% of the assets of the Company
on a consolidated basis, (iii) any change in a majority of the Board of
Directors of the Company other than in connection with an annual meeting of
the stockholders of the Company with respect to the slate of directors
proposed by the incumbent Board of Directors of the Company (in which case
he agrees to vote for the slate proposed by the incumbent Board) or (iv)
any action that is reasonably likely to materially impede, interfere with,
delay, postpone or adversely affect in any material respect the Merger and
the transaction contemplated by the Merger Agreement;

3. Capture.

(a) In the event that any of the Shares are sold, transferred,
exchanged, canceled or disposed of in connection with or as a result of any
Acquisition Proposal that is in

2
<PAGE>

existence on or that has been otherwise made prior to the Termination Date
(an "Alternative Disposition") then, within five business days after the
closing of such Alternative Disposition, the Stockholder shall tender and
pay to, or shall cause to be tendered and paid to, Parent, or its designee,
in immediately available funds, 30% of the Profit realized from such
Alternative Disposition. As used in this Section 3(a), "Profit" shall mean
an amount equal to the excess, if any, of (i) the Alternative Transaction
Consideration over (ii) the Current Transaction Consideration. As used in
this Section 3, Alternative Transaction Consideration shall mean all cash,
securities, settlement or termination amounts, notes or other debt
instruments, and other consideration received or to be received, directly
or indirectly, by the Stockholder (as well as any members of the
Stockholder's family and/or his Affiliates to whom he has transferred
Shares after the date hereof pursuant to Section 4(a)(vi) below) in respect
of the Shares in connection with or as a result of such Alternative
Disposition or any agreements or arrangements (including, without
limitation, any employment agreement (except a bona fide employment
agreement pursuant to which the Stockholder is required to devote, and
under which the Stockholder in good faith intends to devote, substantially
all of his business time and effort to the performance of executive
services for the Company in a manner substantially similar to Stockholder's
current employment arrangements with the Company), consulting agreement,
non-competition agreement, confidentiality agreement, settlement agreement
or release agreement) entered into, directly or indirectly, by the
Stockholder as a part of or in connection with the Alternative Disposition
or associated Acquisition Proposal. As used in this Agreement, Current
Transaction Consideration shall mean the sum of all amounts to be received,
directly or indirectly, by the Stockholder pursuant to Article II of the
Merger Agreement as well as the value of all Options to be received by the
Stockholder in connection with the Merger and the aggregate amount of all
other payments or other consideration to be received by the Stockholder as
a direct result of the Merger.

(b) For purposes of determining Profit under this Section 3, (i) all
non-cash items shall be valued based upon the fair market value thereof as
determined by an independent expert selected by Parent and who is
reasonably acceptable to Stockholder, (ii) all deferred payments or
consideration shall be discounted to reflect a market rate of net present
value thereof as determined by the above-referenced independent expert,
(iii) all contingent payments will be assumed to have been paid and (iv) if
less than all of the Shares are subject to the Alternative Disposition,
then the Current Transaction Consideration shall be deemed to be an amount
equal to the Current Transaction Consideration multiplied by a fraction,
the numerator of which is the number of the Shares sold, transferred,
exchanged, canceled or disposed of in such Alternative Disposition and the
denominator of which is the total number of the Shares. In the event any
contingent payments included in the determination of Profits ultimately are
not paid pursuant to an Alternative Disposition, then Parent shall
reimburse Stockholder for any amounts paid to Parent hereunder in respect
of such uncollected contingent payments promptly after receipt of written
notice of such non payment, unless the Stockholder has not used its best
efforts to receive such contingent payments.

3
<PAGE>

be necessary to waive the right to receive 30% of such increase to the
extent that such increase results in any Profit or (ii) tender and pay, or
cause to be tendered and paid, to Parent, or its designee, in immediately
available funds 30% of the Profit realized from such Second Transaction. As
used in this Section 3(c), Profit shall mean an amount equal to the excess,
if any, of (y) the Second Transaction Consideration over (z) the Current
Transaction Consideration. As used in this Agreement, Second Transaction
Consideration shall mean all cash, securities, settlement or termination
amounts, notes or other debt instruments, and other consideration received
or to be received, directly or indirectly, by the Stockholder (as well as
any members of the Stockholder's family and/or his Affiliates to whom he
has transferred Shares after the date hereof pursuant to Section 4(a)(vi)
below) in respect of the Shares in connection with or as a result of the
Second Transaction or any agreements or arrangements (including, without
limitation, any employment agreement (except a bona fide employment
agreement pursuant to which the Stockholder is required to devote, and
under which Stockholder in good faith intends to devote, substantially all
of his business time and effort to the performance of executive services
for the Company in a manner substantially similar to Stockholder's current
employment arrangements with the Company), consulting agreement,
non-competition agreement, confidentiality agreement, settlement agreement
or release agreement) entered into, directly or indirectly, by the
Stockholder as a part of or in connection with the Second Transaction.

4. Covenants, Representations and Warranties of the Stockholder and Parent.

(a) The Stockholder hereby represents, warrants and covenants to
Parent as follows:

(i) Ownership. As of the date of this Agreement, the Stockholder
is either (A) the record and Beneficial Owner of, or (B) the
Beneficial Owner but not the record holder of, the number of issued
and outstanding Shares set forth on Part A of Schedule I hereto and
the Options and SARs set forth on Part B of Schedule I hereto. As of
the date of this Agreement, the Shares set forth on Part A of Schedule
I hereto constitute all of the issued and outstanding Shares owned of
record or Beneficially Owned by the Stockholder. Except as otherwise
set forth in Part A to Schedule I, the Stockholder has sole power of
disposition, sole power of conversion, sole power to demand appraisal
rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Shares set forth on
Part A of Schedule I hereto, with no material limitations,
qualifications or restrictions on such rights, subject to applicable
securities laws, the terms of this Agreement and to the right of
pledgees under the pledge agreements entered into in connection with
bona fide lending transactions that are not entered into in connection
with an Acquisition Proposal.

4
<PAGE>

bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in
equity or at law)). There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which the
Stockholder is trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by the Stockholder of
the transactions contemplated hereby. If the Stockholder is married
and the Shares constitute community property, this Agreement has been
duly authorized, executed and delivered by, and constitutes a valid
and binding agreement of, the Stockholder's spouse, enforceable
against such person in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally
and by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)).

(iii) No Conflicts. Except for filings under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), no filing with,
and no permit, authorization, consent or approval of, any state or
federal public body or authority is necessary for the execution of
this Agreement by the Stockholder and the consummation by the
Stockholder of the transactions contemplated hereby, except where the
failure to obtain such consent, permit, authorization, approval or
filing would not materially interfere with the Stockholder's ability
to perform his obligations hereunder, and none of the execution and
delivery of this Agreement by the Stockholder, the consummation by the
Stockholder of the transactions contemplated hereby or compliance by
the Stockholder with any of the provisions hereof shall (A) result in
a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which the Stockholder is a party or by
which the Stockholder or any of his properties or assets may be bound,
or (B) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to the Stockholder or any of
the Shares, in each such case except to the extent that any conflict,
breach, default or violation would not interfere with the ability of
the Stockholder to perform its obligations hereunder.

(iv) No Encumbrances. Except (A) as required by Sections 2 and 3,
(B) for pledges or encumbrances created in compliance with Section
4(a)(vi), and (C) items listed in Schedule I, at all times during the
term hereof, all of the Shares will be held by the Stockholder, an
Affiliate of the Stockholder, by a nominee or custodian for the
benefit of the Stockholder, or by a family member of the Stockholder
(subject to the conditions set forth in clause (vi) below) free and
clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other
encumbrances whatsoever, except

5
<PAGE>

for any liens, claims, understandings or arrangements that do not
limit or impair Stockholder's ability to perform his obligations under
this Agreement.

(v) No Solicitation. The Stockholder shall comply with the terms
of Section 5.10 of the Merger Agreement to the extent such terms would
be applicable to him.

(vi) Restriction on Transfer, Proxies and Non-Interference.
Except as otherwise contemplated by the Merger Agreement or this
Agreement, from and after the date of this Agreement and ending on the
Termination Date, the Stockholder shall not, and shall cause each of
his Affiliates who Beneficially Own any of the Shares not to, directly
or indirectly without the consent of Parent in respect of any
Acquisition Proposal or otherwise: (A) offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender,
pledge, encumbrance, assignment or other disposition of (each, a
"Transfer"), any or all of the Shares, or any interest therein, (B)
grant any proxies or powers of attorney, deposit any Shares into a
voting trust or enter into a voting agreement with respect to any
Shares, (C) enter into any agreement or arrangement providing for any
of the actions described in clause (A) or (B) above or (D) take any
action that would reasonably be expected to have the effect of
preventing or disabling the Stockholder from performing the
Stockholder's obligations under this Agreement; provided, however, the
Stockholder may, without the consent of Parent, (x) Transfer his
Shares to members of his family and/or Affiliates, further provided,
however, that such transferees agree to be bound by the terms of this
Agreement and such transferred Shares shall continue to constitute
"Shares" hereunder; and (y) pledge or encumber all or any portion of
the Shares in connection with a bona fide lending transaction with any
institutional lender that is not entered into in connection with an
Acquisition Proposal, provided that the Stockholder shall not be in
default of any obligation securing such pledge. The Stockholder will
provide Parent with notice of any pledge of the Shares.

(vii) Waiver of Appraisal Rights. The Stockholder hereby waives,
and shall cause any of its Affiliates who hold of record any of the
Shares to waive, any rights of appraisal or rights to dissent from the
Merger that the Stockholder or such Affiliate may have.

6
<PAGE>

(b) Parent hereby represents, warrants and covenants to the
Stockholder as follows:

(i) Organization, Standing and Corporate Power. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, with full
corporate power and authority to own its properties and carry on its
business as presently conducted. Parent has the corporate power and
authority to enter into and perform all of its obligations under this
Agreement and to consummate the transactions contemplated hereby.

(ii) No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority
is necessary for the execution of this Agreement by Parent and the
consummation by Parent of the transactions contemplated hereby, except
where the failure to obtain such consent, permit, authorization,
approval or filing would not interfere with its ability to perform its
obligations hereunder, and none of the execution and delivery of this
Agreement by Parent, the consummation by Parent of the transactions
contemplated hereby or compliance by Parent with any of the provisions
hereof shall (A) conflict with or result in any breach of any
applicable organizational documents applicable to Parent, (B) result
in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or
obligation of any kind to which Parent is a party or by which Parent
or any of Parent's properties or assets may be bound, (C) require any
consent, approval, authorization or permit of, registration,
declaration or filing (except for filings under the Exchange Act)
with, or notification to, any government entity, (D) require any
material consent, authorization or approval of any person other than a
governmental entity, or (E) violate any order, writ, injunction,
decree, judgment, order, statute, rule or regulation applicable to
Parent or any of Parent's properties or assets, in each such case
except to the extent that any conflict, breach, default or violation
would not interfere with the ability of Parent to perform its
obligations hereunder.

(iii) Execution, Delivery and Performance by Parent . The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by the Board of Directors of Parent, and Parent
has taken all other actions required by law, its Amended and Restated
Articles of Incorporation and its Bylaws to consummate the
transactions contemplated by this Agreement. This Agreement
constitutes the valid and binding obligations of Parent and is
enforceable in accordance with its terms, except as enforceability may
be subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights
generally.

7
<PAGE>

(c) The Stockholder hereby represents and warrants to Parent that the
Board of Directors of the Company has approved the terms of this Agreement
and the transactions contemplated herein and such approval is sufficient to
render inapplicable to this Agreement and the transactions contemplated
herein the provisions of Section 203 of the Delaware General Corporation
Law.

10. Miscellaneous.

(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.

(b) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except
upon the execution and delivery of a written agreement executed by the
parties hereto.

8
<PAGE>

providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses or the
addresses set forth on the signature pages hereto:

If to Stockholder: Michael G. Ferrel
One East River Place
525 East 72nd Street, Apt. 16A
New York, New York 10021

with a copy to: Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: Jonathan Goldstein
Daniel A. Ninivaggi
Facsimile: (212) 294-4700

If to Parent: Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Facsimile: (212) 822-2299

with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Attention: Stephen C. Mount
John Strickland
Facsimile: (201) 224-2035

or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.

(d) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such
jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
or portion of any provision had never been contained herein.

(e) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by the Stockholder of any covenants or
agreements contained in this Agreement will cause the Parent to sustain
damages for which it would not have an adequate remedy at law for money
damages, and therefore each of the parties hereto agrees that in the event
of any such breach the Parent shall be entitled to the remedy of specific
performance of

9
<PAGE>

such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which they may be entitled, at law or in
equity.

(f) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such party.

(g) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or
other right, power or remedy or to demand such compliance.

(h) No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity
who or which is not a party hereto; provided that, in the event of the
Stockholder's death, the benefits and obligations of the Stockholder
hereunder shall inure to his successors and heirs.

(i) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.

(j) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware 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 non conveniens or
any other objection to venue therein); provided, however, that such consent
to jurisdiction is solely for the purpose referred to in this paragraph and
shall not be deemed to be a general submission to the jurisdiction of said
Court or in the State of Delaware other than for such purposes. Each party
hereto hereby waives any right to a trial by jury in connection with any
such action, suit or proceeding.

(k) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.

(l) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement. This Agreement shall
not be effective as to any party hereto until such time as this Agreement
or a counterpart thereof has been executed and delivered by each party
hereto.

10
<PAGE>

shall promptly pay such funds to the party entitled to receive such funds
in accordance with this Agreement.

11
<PAGE>

STOCKHOLDER AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the Stockholder and a duly authorized officer of Parent on the day and year
first written above.

PARENT:

CLEAR CHANNEL COMMUNICATIONS, INC.

By: /s/ Randall T. Mays
------------------------------------------
Randall T. Mays
Executive Vice President
and Chief Financial Officer
Address: 200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Facsimile: (210) 822-2299

STOCKHOLDER:

By: /s/ Michael G. Ferrel
------------------------------------------
MICHAEL G. FERREL

12
<PAGE>

SCHEDULE I

Part A

Name of Owner Shares
- ------------- ------
Michael G. Ferrel 270,455 shares of Company Class A Common Stock
259,302 shares of Company Class B Common Stock

Part B

Name of Owner Other Securities
- ------------- ----------------
Michael G. Ferrel 887,500 Options and Warrants

<PAGE>

VOTING AGREEMENT

This VOTING AGREEMENT (the "Agreement"), dated as of this 28th day of
February, 2000, is entered into by and among CLEAR CHANNEL COMMUNICATIONS, INC.,
a Texas corporation ("Parent"), and HOWARD J. TYTEL (the "Stockholder").

W I T N E S S E T H:

WHEREAS, Parent, CCU II Merger Sub, Inc., a Delaware corporation ("Merger
Sub"), and SFX Entertainment, Inc., a Delaware corporation (the "Company"), have
entered into an Agreement and Plan of Merger of even date herewith (as the same
may be amended from time to time, the "Merger Agreement"), pursuant to which the
parties thereto have agreed, upon the terms and subject to the conditions set
forth therein, to merge Merger Sub with and into the Company (the "Merger");

WHEREAS, as of the date hereof, the Stockholder is the record or Beneficial
Owner of the number of shares (the "Shares") of Class A common stock, par value
$0.01 per share, of the Company (the "Company Class A Common Stock"), and of
Class B common stock, par value $0.01 per share, of the Company (the "Company
Class B Common Stock" and, together with the Company Class A Common Stock, the
"Company Common Stock"), set forth on Schedule I attached hereto; and

NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:

1. Definitions. Capitalized terms not expressly defined in this Agreement
shall have the meanings ascribed to them in the Merger Agreement. For purposes
of this Agreement:

(a) "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first Person.

(b) "Amendment Proposal" shall mean the proposal to amend the
Company's Amended and Restated Certificate of Incorporation as contemplated
in Section 3.3 of the Merger Agreement.

(c) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having voting power with respect to such securities
(as determined pursuant to Rule 13d-3(a)(1) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), including pursuant to any
agreement, arrangement or understanding, whether or not in writing.

<PAGE>

(d) "Equity Hedging Transaction" shall mean any equity swap, collar or
other derivative instrument that hedges the Stockholder's risk with respect
to the value of all or a portion of the Shares, provided that the term or
settlement date with respect to any such instrument is on or after January
31, 2001 and, prior to settlement, the Stockholder retains the right to
vote the Shares.

(e) "Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity.

2. Voting Agreement. From the date of this Agreement and ending as of the
Termination Date, the Stockholder hereby agrees to vote (or cause to be voted)
all of the Shares (and any and all securities issued or issuable in respect
thereof) which such Stockholder is entitled to vote (or to provide his written
consent thereto), at any annual, special or other meeting of the stockholders of
the Company, and at any adjournment or adjournments thereof, or pursuant to any
consent in lieu of a meeting or otherwise:

(a) in favor of the Merger and the approval and adoption of the terms
contemplated by the Merger Agreement and the Amendment Proposal and any
actions required in furtherance thereof;

(b) against any action or agreement that is reasonably likely to
result in a breach in any material respect of any covenant, representation
or warranty or any other obligation of the Company under the Merger
Agreement; and

(c) except for all such actions which the Company may undertake under
the Merger Agreement, against (i) any extraordinary corporate transaction,
such as a merger, rights offering, reorganization, recapitalization or
liquidation involving the Company or any of its subsidiaries, other than
the Merger, (ii) a sale or transfer (other than to a subsidiary of the
Company) of assets of the Company or any of its material subsidiaries
comprising more than 15% of the assets of the Company on a consolidated
basis, (iii) any change in a majority of the Board of Directors of the
Company other than in connection with an annual meeting of the shareholders
of the Company with respect to the slate of directors proposed by the
incumbent Board of Directors of the Company (in which case he agrees to
vote for the slate proposed by the incumbent Board) or (iv) any action that
is reasonably likely to materially impede, interfere with, delay, postpone
or adversely affect in any material respect the Merger and the transaction
contemplated by the Merger Agreement.

3. Covenants, Representations and Warranties of the Stockholder and Parent.

(a) The Stockholder hereby represents, warrants and covenants to
Parent as follows:

(i) Ownership. As of the date of this Agreement, the Stockholder
is either (A) the record and Beneficial Owner of, or (B) the
Beneficial Owner but

2
<PAGE>

not the record holder of, the number of issued and outstanding Shares
set forth on Part A of Schedule I hereto and the Options and SARs set
forth on Part B of Schedule I hereto. As of the date of this
Agreement, the Shares set forth on Part A of Schedule I hereto
constitute all of the issued and outstanding Shares owned of record or
Beneficially Owned by the Stockholder. Except as otherwise set forth
in Part A to Schedule I, the Stockholder has the sole power to agree
to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares set forth on Part A of Schedule I hereto,
with no material limitations, qualifications or restrictions on such
rights, subject to applicable securities laws, the terms of this
Agreement and to the right of pledgees under pledge agreements entered
into in connection with bona fide lending transactions that are not
entered into in connection with an Acquisition Proposal.

(ii) Power; Binding Agreement. The Stockholder has the legal
capacity, power and authority to enter into and perform all of the
Stockholder's obligations under this Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholder and
constitutes a valid and binding agreement of the Stockholder,
enforceable against the Stockholder in accordance with its terms
(except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in
equity or at law)). There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which the
Stockholder is trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by the Stockholder of
the transactions contemplated hereby. If the Stockholder is married
and the Stockholder's Shares constitute community property, this
Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms
(except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in
equity or at law)).

(iii) No Conflicts. As of the date of this Agreement, except for
filings under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), if applicable no filing with, and no permit,
authorization, consent or approval of, any state or federal public
body or authority is necessary for the execution of this Agreement by
the Stockholder and the consummation by the Stockholder of the
transactions contemplated hereby, except where the failure to obtain
such consent, permit, authorization, approval or filing would not
materially interfere with the Stockholder's ability to perform his
obligations hereunder, and none of the execution and delivery of this
Agreement by the Stockholder, the consummation by the Stockholder of
the transactions contemplated hereby or compliance by the Stockholder
with any of the provisions hereof shall (A) result in a violation or
breach of, or constitute (with or without notice or lapse of time or
both) a default

3
<PAGE>

(or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms,
conditions or provisions of any material note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which the
Stockholder is a party or by which the Stockholder or any of his
properties or assets may be bound, or (B) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of the Shares, in each such case
except to the extent that any conflict, breach, default or violation
would not interfere with the ability of the Stockholder to perform its
obligations hereunder.

(iv) No Encumbrances. Except (A) as required by Section 2, (B)
for pledges or encumbrances created in compliance with Section
3(a)(vi), and (C) items listed in Schedule I, at all times during the
term hereof, all of the Shares will be held by the Stockholder, or by
a nominee or custodian for the benefit of the Stockholder, or by a
family member or Affiliate of the Stockholder (subject to the
conditions set forth in clause (vi) below) free and clear of all
liens, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any liens, claims, understandings or
arrangements that do not limit or impair Stockholder's ability to
perform his obligations under this Agreement.

(v) No Solicitation. The Stockholder shall comply with the terms
of Section 5.10 of the Merger Agreement to the extent such terms would
be applicable to him.

(vi) Restriction on Transfer, Proxies and Non-Interference.
Except as otherwise contemplated by the Merger Agreement or this
Agreement, from and after the date of this Agreement and ending on the
Termination Date, the Stockholder shall not, directly or indirectly
without the consent of Parent in respect of any Acquisition Proposal
or otherwise: (A) offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to or
consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of (each, a "Transfer"),
any or all of the Shares, or any interest therein, (B) grant any
proxies or powers of attorney, deposit any Shares into a voting trust
or enter into a voting agreement with respect to any Shares, (C) enter
into any agreement or arrangement providing for any of the actions
described in clause (A) or (B) above or (D) take any action that would
reasonably be expected to have the effect of preventing or disabling
the Stockholder from performing the Stockholder's obligations under
this Agreement; provided, however, the Stockholder may, without the
consent of Parent, (x) Transfer his Shares to members of his family
and/or Affiliates, further provided, however, that such transferees
agree to be bound by the terms of this Agreement; (y) pledge or
encumber all or any portion of the Shares in connection with a bona
fide lending

4
<PAGE>

transaction with any institutional lender that is not entered into in
connection with an Acquisition Proposal; and (z) engage in an Equity
Hedging Transaction.

(vii) Further Assurances. From time to time, at Parent's request
and without further consideration, the Stockholder shall execute and
deliver such additional documents as may be necessary or desirable to
consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.

(b) Parent hereby represents, warrants and covenants to the
Stockholder as follows:

(i) Organization, Standing and Corporate Power. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, with full
corporate power and authority to own its properties and carry on its
business as presently conducted. Parent has the corporate power and
authority to enter into and perform all of its obligations under this
Agreement and to consummate the transactions contemplated hereby.

(ii) No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority
is necessary for the execution of this Agreement by either Parent and
the consummation by Parent of the transactions contemplated hereby,
except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with its ability
to perform its obligations hereunder, and none of the execution and
delivery of this Agreement by Parent, the consummation by Parent of
the transactions contemplated hereby or compliance by Parent with any
of the provisions hereof shall (A) conflict with or result in any
breach of any applicable organizational documents applicable to
Parent, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to
any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which Parent is a party or by which
Parent or any of Parent's properties or assets may be bound, (C)
require any consent, approval, authorization or permit of,
registration, declaration or filing (except for filings under the
Exchange Act) with, or notification to, any government entity, (D)
require any material consent, authorization or approval of any person
other than a governmental entity, or (E) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation
applicable to Parent or any of Parent's properties or assets, in each
such case except to the extent that any conflict, breach, default or
violation would not interfere with the ability of Parent to perform
its obligations hereunder.

(iii) Execution, Delivery and Performance by Parent. The
execution, delivery and performance of this Agreement and the
consummation of the

5
<PAGE>

transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of Parent, and Parent has taken all other
actions required by law, its Amended and Restated Certificate of
Incorporation and its Bylaws to consummate the transactions
contemplated by this Agreement. This Agreement constitutes the valid
and binding obligations of Parent and is enforceable in accordance
with its terms, except as enforceability may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally.

4. Recapitalization; Option Exercise. In the event of a stock dividend or
distribution, or any change in the Shares (or any class thereof) by reason of
any split-up, recapitalization, combination, exchange of shares or the like, the
term "Shares" shall include, without limitation, all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
(or any class thereof) may be changed or exchanged as may be appropriate to
reflect such event. The term "Shares" shall also include any shares of Company
Common Stock acquired by the Stockholder after the date of this Agreement and
before the Termination Date.

5. Stockholder Capacity. The Stockholder does not make any agreement or
understanding herein in the Stockholder's capacity as a director or officer of
the Company. The Stockholder executes this Agreement solely in his capacity as a
record owner and/or Beneficial Owner of the Shares and nothing herein shall
limit or affect any actions taken by the Stockholder or any designee of the
Stockholder in his capacity as an officer or director of the Company or any of
its Subsidiaries.

6. Indemnification. Parent shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless the Stockholder against any costs or
expenses (including attorneys' fees as provided below), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation by or on
behalf of the Company or any stockholder of the Company asserting any breach by
the Stockholder of any fiduciary duty on his part to the Company or the other
stockholders of the Company by reason of the Stockholder entering into this
Agreement, for a period of six years after the date hereof. In the event the
Stockholder seeks indemnification from Parent for any such claim, action, suit,
proceeding or investigation (whether arising before or after the termination of
this Agreement), (a) Parent shall pay the fees and expenses of one counsel
selected by such Stockholder and reasonably acceptable to Parent to represent
such Stockholder in connection therewith promptly after statements therefor are
received, and (b) Parent will cooperate in the defense of any such matter;
provided, however, that Parent shall not be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld);
provided, further, that in the event that any claim or claims for
indemnification under this Section 6 are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until the final disposition of any and all such claims. This
Section 6 shall survive until the latest of the following: (i) six years from
the date hereof, (ii) the termination of this Agreement, and (iii) the final
disposition of all claims for indemnification asserted or made within the
six-year period following the date hereof.

6
<PAGE>

7. Miscellaneous.

(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.

(b) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except
upon the execution and delivery of a written agreement executed by the
parties hereto.

(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if so given) by hand delivery,
telegram, telex or telecopy, or by mail (registered or certified mail,
postage prepaid, return receipt requested) or by any courier service, such
as Federal Express, providing proof of delivery. All communications
hereunder shall be delivered to the respective parties at the following
addresses or the addresses set forth on the signature pages hereto:

If to Stockholder: Howard J. Tytel
c/o SFX Entertainment, Inc.
650 Madison Avenue
New York, New York 10022

with a copy to: Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: Jonathan Goldstein
Daniel A. Ninivaggi
Facsimile No.: (212) 294-4700

If to Parent: Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Facsimile No.: (210) 822-2299

with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Attention: Stephen Mount
John Strickland
Facsimile No.: (210) 224-2035

or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.

7
<PAGE>

(d) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such
jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
or portion of any provision had never been contained herein.

(e) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by the Stockholder of any covenants or
agreements contained in this Agreement will cause the Parent to sustain
damages for which they would not have an adequate remedy at law for money
damages, and therefore each of the parties hereto agrees that in the event
of any such breach the Parent shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which they may be
entitled, at law or in equity.

(f) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such party.

(g) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or
other right, power or remedy or to demand such compliance.

(h) No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity
who or which is not a party hereto; provided that, in the event of the
Stockholder's death, the benefits and obligations of the Stockholder
hereunder shall inure to his successors and heirs.

(i) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.

8
<PAGE>

forum non conveniens or any other objection to venue therein); provided,
however, that such consent to jurisdiction is solely for the purpose
referred to in this paragraph and shall not be deemed to be a general
submission to the jurisdiction of said Court or in the State of Delaware
other than for such purposes. Each party hereto hereby waives any right to
a trial by jury in connection with any such action, suit or proceeding.

(k) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.

8. Termination. This Agreement shall terminate without any further action
on the part of any party hereto on the first to occur of the Effective Time or
the Termination Date.

9
<PAGE>

VOTING AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the Stockholder and a duly authorized officer of Parent on the day and year
first written above.

PARENT:

CLEAR CHANNEL COMMUNICATIONS, INC.

By: /s/ Randall T. Mays
---------------------------------------
Randall T. Mays
Executive Vice President
and Chief Financial Officer
Address: 200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Facsimile No.: (210) 822-2299

STOCKHOLDER:

/s/ Howard J. Tytel
------------------------------------------
Howard J. Tytel

10
<PAGE>

SCHEDULE I*

Part A

Name of Owner Shares
- ------------- ------
Howard J. Tytel 687,319 shares of Company Class A Common Stock
0 shares of Company Class B Common Stock

Part B

Name of Owner Other Securities
- ------------- ----------------
Howard J. Tytel 779,798 Options and Warrants

* Robert F.X. Sillerman has the right to vote certain Shares owned of record by
Mr. Tytel.

<PAGE>

VOTING AGREEMENT

W I T N E S S E T H:

WHEREAS, Parent, CCU II Merger Sub, Inc., a Delaware corporation ("Merger
Sub"), and SFX Entertainment, Inc., a Delaware corporation (the "Company"), have
entered into an Agreement and Plan of Merger of even date herewith (as the same
may be amended from time to time, the "Merger Agreement"), pursuant to which the
parties thereto have agreed, upon the terms and subject to the conditions set
forth therein, to merge Merger Sub with and into the Company (the "Merger");

NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:

1. Definitions. Capitalized terms not expressly defined in this Agreement
shall have the meanings ascribed to them in the Merger Agreement. For purposes
of this Agreement:

(a) "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first Person.

(b) "Amendment Proposal" shall mean the proposal to amend the
Company's Amended and Restated Certificate of Incorporation as contemplated
in Section 3.3 of the Merger Agreement.

<PAGE>

(e) "Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity.

2. Voting Agreement. From the date of this Agreement and ending as of the
Termination Date, the Stockholder hereby agrees to vote (or cause to be voted)
all of the Shares (and any and all securities issued or issuable in respect
thereof) which such Stockholder is entitled to vote (or to provide his written
consent thereto), at any annual, special or other meeting of the stockholders of
the Company, and at any adjournment or adjournments thereof, or pursuant to any
consent in lieu of a meeting or otherwise:

(a) in favor of the Merger and the approval and adoption of the terms
contemplated by the Merger Agreement and the Amendment Proposal and any
actions required in furtherance thereof;

(b) against any action or agreement that is reasonably likely to
result in a breach in any material respect of any covenant, representation
or warranty or any other obligation of the Company under the Merger
Agreement; and

3. Covenants, Representations and Warranties of the Stockholder and Parent.

(a) The Stockholder hereby represents, warrants and covenants to
Parent as follows:

(i) Ownership. As of the date of this Agreement, the Stockholder
is either (A) the record and Beneficial Owner of, or (B) the
Beneficial Owner but

2
<PAGE>

(ii) Power; Binding Agreement. The Stockholder has the legal
capacity, power and authority to enter into and perform all of the
Stockholder's obligations under this Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholder and
constitutes a valid and binding agreement of the Stockholder,
enforceable against the Stockholder in accordance with its terms
(except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in
equity or at law)). There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which the
Stockholder is trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by the Stockholder of
the transactions contemplated hereby. If the Stockholder is married
and the Stockholder's Shares constitute community property, this
Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms
(except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in
equity or at law)).

3
<PAGE>

(v) No Solicitation. The Stockholder shall comply with the terms
of Section 5.10 of the Merger Agreement to the extent such terms would
be applicable to him.

(vi) Restriction on Transfer, Proxies and Non-Interference.
Except as otherwise contemplated by the Merger Agreement or this
Agreement, from and after the date of this Agreement and ending on the
Termination Date, the Stockholder shall not, directly or indirectly
without the consent of Parent in respect of any Acquisition Proposal
or otherwise: (A) offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to or
consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of (each, a "Transfer"),
any or all of the Shares, or any interest therein, (B) grant any
proxies or powers of attorney, deposit any Shares into a voting trust
or enter into a voting agreement with respect to any Shares, (C) enter
into any agreement or arrangement providing for any of the actions
described in clause (A) or (B) above or (D) take any action that would
reasonably be expected to have the effect of preventing or disabling
the Stockholder from performing the Stockholder's obligations under
this Agreement; provided, however, the Stockholder may, without the
consent of Parent, (x) Transfer his Shares to members of his family
and/or Affiliates, further provided, however, that such transferees
agree to be bound by the terms of this Agreement; (y) pledge or
encumber all or any portion of the Shares in connection with a bona
fide lending

4
<PAGE>

transaction with any institutional lender that is not entered into in
connection with an Acquisition Proposal; and (z) engage in an Equity
Hedging Transaction.

(b) Parent hereby represents, warrants and covenants to the
Stockholder as follows:

(i) Organization, Standing and Corporate Power. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, with full
corporate power and authority to own its properties and carry on its
business as presently conducted. Parent has the corporate power and
authority to enter into and perform all of its obligations under this
Agreement and to consummate the transactions contemplated hereby.

(ii) No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority
is necessary for the execution of this Agreement by either Parent and
the consummation by Parent of the transactions contemplated hereby,
except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with its ability
to perform its obligations hereunder, and none of the execution and
delivery of this Agreement by Parent, the consummation by Parent of
the transactions contemplated hereby or compliance by Parent with any
of the provisions hereof shall (A) conflict with or result in any
breach of any applicable organizational documents applicable to
Parent, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to
any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which Parent is a party or by which
Parent or any of Parent's properties or assets may be bound, (C)
require any consent, approval, authorization or permit of,
registration, declaration or filing (except for filings under the
Exchange Act) with, or notification to, any government entity, (D)
require any material consent, authorization or approval of any person
other than a governmental entity, or (E) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation
applicable to Parent or any of Parent's properties or assets, in each
such case except to the extent that any conflict, breach, default or
violation would not interfere with the ability of Parent to perform
its obligations hereunder.

(iii) Execution, Delivery and Performance by Parent. The
execution, delivery and performance of this Agreement and the
consummation of the

5
<PAGE>

6
<PAGE>

7. Miscellaneous.

(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.

(b) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except
upon the execution and delivery of a written agreement executed by the
parties hereto.

(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if so given) by hand delivery,
telegram, telex or telecopy, or by mail (registered or certified mail,
postage prepaid, return receipt requested) or by any courier service, such
as Federal Express, providing proof of delivery. All communications
hereunder shall be delivered to the respective parties at the following
addresses or the addresses set forth on the signature pages hereto:

If to Stockholder: Thomas P. Benson
c/o SFX Entertainment, Inc.
650 Madison Avenue
New York, New York 10022

with a copy to: Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: Jonathan Goldstein
Daniel A. Ninivaggi
Facsimile No.: (212) 294-4700

If to Parent: Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Facsimile No.: (210) 822-2299

with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Attention: Stephen Mount
John Strickland
Facsimile No.: (210) 224-2035

or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.

7
<PAGE>

(d) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such
jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
or portion of any provision had never been contained herein.

(e) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by the Stockholder of any covenants or
agreements contained in this Agreement will cause the Parent to sustain
damages for which they would not have an adequate remedy at law for money
damages, and therefore each of the parties hereto agrees that in the event
of any such breach the Parent shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which they may be
entitled, at law or in equity.

(f) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such party.

(g) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or
other right, power or remedy or to demand such compliance.

(h) No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity
who or which is not a party hereto; provided that, in the event of the
Stockholder's death, the benefits and obligations of the Stockholder
hereunder shall inure to his successors and heirs.

(i) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.

8
<PAGE>

(k) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.

8. Termination. This Agreement shall terminate without any further action
on the part of any party hereto on the first to occur of the Effective Time or
the Termination Date.

9
<PAGE>

VOTING AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the Stockholder and a duly authorized officer of Parent on the day and year
first written above.

PARENT:

CLEAR CHANNEL COMMUNICATIONS, INC.

By: /s/ Randall T. Mays
-----------------------------------
Randall T. Mays
Executive Vice President
and Chief Financial Officer
Address: 200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Facsimile No.: (210) 822-2299

STOCKHOLDER:

By: /s/ Thomas P. Benson
-----------------------------------
Thomas P. Benson

<PAGE>

SCHEDULE I

Part A

Name of Owner Shares
- ------------- ------
Thomas P. Benson 28,500 shares of Company Class A Common Stock
0 shares of Company Class B Common Stock

Part B

Name of Owner Other Securities
- ------------- ----------------
Thomas P. Benson 240,000 Options and Warrants

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference of our report dated February 28,
2000, with respect to the consolidated financial statements and schedule of SFX
Entertainment, Inc. included in this Annual Report on Form 10-K/A for the year
ended December 31, 1999, in each of the following:

1. Registration Statement No. 333-88741 on Form S-8 pertaining to the 1999
Stock Option and Restricted Stock Plan;

2. Registration Statement No. 333-58737 on Form S-8 pertaining to the
1998 Stock Option and Restricted Stock Plan;

3. Registration Statement No. 333-88473 on Form S-8 pertaining to the
Director Deferred Stock Ownership Plan;

4. Registration Statement No. 333-76123 on Form S-3 pertaining to 118,000
shares of Class A Common Stock; and

5. Registration Statement No. 333-57511 on Form S-1 pertaining to
2,618,448 shares of Class A Common Stock.

Ernst & Young LLP

New York, New York
April 28, 2000