SFX ENTERTAINMENT INC, 10-K, 2000-03-30

SFX ENTERTAINMENT INC
10-K, 2000-03-30
AMUSEMENT & RECREATION SERVICES

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
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

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

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

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

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ----------------------------------------------------- ------------------------
<S> <C>
Class A Common Stock, par value $.01 per share New York Stock Exchange
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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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.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement for its Annual Meeting of
Stockholders, as described in the Cross Reference Sheet and Table of Contents
included herewith, are incorporated herein by reference into Part III of this
Report. If the Proxy Statement is not filed with the Securities and Exchange
Commission in definitive form on or prior to April 29, 2000, SFX intends to
amend this Report to include the information omitted from Part III hereof.

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<PAGE>

CROSS REFERENCE SHEET
AND
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE NUMBER
PART I OR REFERENCE (1)
<S> <C> <C>
Item 1. Business .................................................................. 3
Item 2. Properties ................................................................ 22
Item 3. Legal Proceedings ......................................................... 22
Item 4. Submission of Matters to a Vote of Security Holders ....................... 23
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters ................................................................... 23
Item 6. Selected Consolidated Financial Data of SFX ............................... 24
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ..................................................... 25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ................ 45
Item 8. Financial Statements and Supplementary Data ............................... 45
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ...................................................... 45
PART III
Item 10. Directors and Executive Officers of the Registrant (2) .................... 45
Item 11. Executive Compensation (3) ................................................ 45
Item 12. Security Ownership of Certain Beneficial Owners and Management (4) 45
Item 13. Certain Relationships and Related Transactions (5) ........................ 45
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K .......... 46
</TABLE>

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1. Certain information is incorporated by reference, as indicated below, from
the registrant's Proxy Statement for its Annual Meeting of Stockholders.

2. Proxy Statement section entitled "Election of Directors."

3. Proxy Statement sections entitled "Director Compensation" and "Executive
Compensation."

4. Proxy Statement section entitled "Stock Ownership."

5. Proxy Statement section entitled "Certain Relationships and Related
Transactions."

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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:

<TABLE>
<CAPTION>
PERCENTAGE OF
SEGMENTS REVENUES
------------------------------------- --------------
<S> <C>
Music ................................ 58.0%
Theater .............................. 17.2
Sports ............................... 8.4
Family Entertainment & Other ......... 16.4
----
Total ................................ 100%
====
</TABLE>

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 February 5, 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>

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*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.

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<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.

13
<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.

14
<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.

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>
Alamo Ballroom Club 50% interest in lease that expires December 31, 1,700
2002
Tropicana de Cache Club 50% interest in lease that expires December 31, 325
2002
Mario's ballroom Club 50% interest in lease that expires December 31, 545
2002
Noa Noa West Club 50% interest in lease that expires December 31, 2,000
2002
Palladium Club 50% interest in lease that expires December 31, 525
2002
Adromenas Club 50% interest in lease that expires December 31, N/A
2002
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>

16
<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>
Aerial Theater at Bayou Place Theater 50% partnership interest in 10-year lease that 2,800
expires December 31, 2007
ATLANTA: 11
Lakewood Amphitheater Amphitheater 32.5% partnership interest in 35-year lease that 19,000
expires January 1, 2019
Chastain Park Amphitheater Amphitheater 10-year lease that expires December 31, 2000 7,000
Roxy Theater Club 7-year lease that expires March 31, 2004 1,500
Tabernacle Theater Club 10-year lease that expires January 31, 2008 800
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>

17
<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 Pavililion 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>

18
<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:

19
<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

20
<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

21
<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 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.

22
<PAGE>

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
- ---- -------- --------
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.

23
<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 & 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.

24
<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.

25
<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.

26
<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.

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.

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.

27
<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

28
<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 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.

29
<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.

30
<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.

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<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 principles ("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 1999. 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

33
<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 totalled $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.

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.

34
<PAGE>

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 ticket
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.

35
<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

36
<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 were $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

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

37
<PAGE>

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

38
<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.

39
<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.

40
<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. 37. 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;

41
<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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<PAGE>

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, 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."

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

SFX has operations in the 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.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item will be contained under the caption
"Election of Directors" in SFX's Proxy Statement to be distributed in
connection with its 2000 Annual Meeting of Stockholders and is incorporated
herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item will be contained under the captions
"Director Compensation" and "Executive Compensation" in SFX's Proxy Statement
to be distributed in connection with its 2000 Annual Meeting of Stockholders
and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item will be contained under the caption
"Stock Ownership" in SFX's Proxy Statement to be distributed in connection with
its 2000 Annual Meeting of Stockholders and is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item will be contained under the caption
"Certain Relationships and Related Transactions" in SFX's Proxy Statement to be
distributed in connection with its 2000 Annual Meeting of Stockholders and is
incorporated herein by reference.

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<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>

46
<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>

47
<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>

48
<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, by and 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>

49
<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>

50
<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)

*21.1 Subsidiaries of the Company

*23.1 Consent of Ernst & Young LLP

*27.1 Financial Data Schedule
</TABLE>

- ----------
* 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 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.

51
<PAGE>

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.

52
<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: March 30, 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 March 30, 2000
--------------------- Office of the Chairman and Director
Robert F.X. Sillerman (principal executive officer)

/s/ Michael G. Ferrel President, Chief Executive Officer, March 30, 2000
--------------------- Member of the Office of the Chairman
Michael G. Ferrel and Director

/s/ Brian Becker Executive Vice President, Member of the March 30, 2000
--------------------- Office of the Chairman and Director
Brian Becker

/s/ David Falk Member of the Office of the Chairman, March 30, 2000
--------------------- Director
David Falk

/s/ Thomas P. Benson Chief Financial Officer, Senior Vice March 30, 2000
--------------------- President and Director (principal financial
Thomas P. Benson and accounting officer)

/s/ Howard J. Tytel Member of the Office of the Chairman, March 30, 2000
--------------------- Executive Vice President, General
Howard J. Tytel Counsel, Secretary and Director

/s/ Richard A. Liese Senior Vice President, Associate General March 30, 2000
--------------------- Counsel and Director
Richard A. Liese

/s/ D. Geoff Armstrong Director March 30, 2000
---------------------
D. Geoff Armstrong

/s/ James F. O'Grady, Jr. Director March 30, 2000
---------------------
James F. O'Grady, Jr.

/s/ Paul Kramer Director March 30, 2000
---------------------
Paul Kramer

/s/ Edward F. Dugan Director March 30, 2000
---------------------
Edward F. Dugan

/s/ John D. Miller Director March 30, 2000
---------------------
John D. Miller
</TABLE>

53
<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:
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:

<TABLE>
<S> <C>
Buildings and improvements ......... 4-40 years
Furniture and equipment, including
internal use software .............. 3-7 years
</TABLE>

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 costs 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 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.

F-9
<PAGE>

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 of the February 1998 Notes
(as hereafter defined).

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 of the February 1998 Notes.

F-10
<PAGE>

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 of the February 1998 Notes.

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 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.

F-11
<PAGE>

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 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. 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.

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,

F-12
<PAGE>

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.

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. 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.

F-13
<PAGE>

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 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):

F-14
<PAGE>

<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 the 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, 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.

F-15
<PAGE>

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 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

F-16
<PAGE>

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 and 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):

<TABLE>
<CAPTION>
LONG-TERM DEBT
---------------
<S> <C>
2000 ....................... $ 6,094
2001 ....................... 41,320
2002 ....................... 44,833
2003 ....................... 56,449
2004 ....................... 69,103
2005 & Thereafter .......... 1,158,136
-----------
Total ...................... $ 1,375,935
===========
</TABLE>

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
SFX NON-WHOLLY, ENTERTAINMENT,
ENTERTAINMENT, NON-GUARANTOR OWNED GUARANTOR INC.
INC. GUARANTORS SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
---------------- -------------- --------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Current assets ............. $ 290,164 $ 223,122 $ 74,380 $ 176 $ -- $ 587,842
Property and
equipment, net ............ 17,293 464,513 204,347 93 -- 686,246
Goodwill, net .............. -- 1,284,059 210,346 9,576 -- 1,503,981
Investment in
subsidiaries .............. 1,936,237 58,195 6,179 -- (1,936,237) 64,374
Other ...................... 74,948 17,123 10,148 4,211 -- 106,430
----------- ----------- --------- -------- ------------- ----------
Total assets .............. $ 2,318,642 $ 2,047,012 $ 505,400 $ 14,056 $ (1,936,237) $2,948,873
=========== =========== ========= ======== ============= ==========
Current liabilities ........ $ 68,183 $ 175,484 $ 118,185 $ 31 $ (205) $ 361,678
Long-term debt, less
current ................... 1,119,442 264,604 9,101 -- (8,155) 1,384,992
Other ...................... 12,172 56,960 4,161 -- -- 73,293
Minority interest .......... -- 4,285 3,892 1,888 -- 10,065
Temporary equity ........... 18,876 -- -- -- -- 18,876
Shareholders' equity ....... 1,099,969 1,545,679 370,061 12,137 (1,927,877) 1,099,969
----------- ----------- --------- -------- ------------- ----------
Total liabilities and
shareholders' equity ...... $ 2,318,642 $ 2,047,012 $ 505,400 $ 14,056 $ (1,936,237) $2,948,873
=========== =========== ========= ======== ============= ==========
Revenue .................... $ -- $ 1,512,881 $ 115,357 $ 56,117 $ -- $1,684,355
Operating expenses ......... 20,238 1,465,981 107,678 53,273 -- 1,647,170
Interest expense, net ...... 59,520 25,576 4,272 (58) (1,079) 88,231
Minority interest .......... -- 5,203 299 515 -- 6,017
Gain on sale, net .......... (3,387) 2,586 41 -- -- (760)
Provision for income
taxes ..................... (2,194) 1,993 1,798 -- -- 1,597
Extraordinary loss ......... 2,490 -- -- -- -- 2,490
----------- ----------- --------- -------- ------------- ----------
Net (loss) income .......... $ (76,667) $ 11,542 $ 1,269 $ 2,387 $ 1,079 $ (60,390)
=========== =========== ========= ======== ============= ==========
Cash flow (used in)
provided by
operations ................ $ (91,596) $ 126,659 $ (367) $ 183 $ -- $ 34,879
Cash flow used in
investing ................. (837,393) (42,741) (2,906) (116) -- (883,156)
Cash flow provided by
financing ................. 1,189,213 (4,659) -- -- -- 1,184,554
Effect of exchange rate..... -- -- (1,658) -- -- (1,658)
Cash at the beginning
of the period ............. 3,685 (9,298) 53,541 93 -- 48,021
Cash at the end of the
period .................... $ 263,909 $ 69,961 $ 48,610 $ 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>
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>
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 for the year ended December 31, 1999 is summarized
as follows (in thousands):

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):

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

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.

20. 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>

21. 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>
10.30 Second Amended and Restated Employment Agreement, by and 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.
10.53 Employment Agreement between SFX Entertainment, Inc. and Richard A. Liese, dated as
of January 1, 2000.
21.1 Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
</TABLE>

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SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Employment
Agreement"), made as of December 13, 1999, between SFX ENTERTAINMENT, INC., a
Delaware corporation (the "Employer"), and BRIAN E. BECKER (the "Executive").

WHEREAS, the Executive is currently employed by the Employer as
evidenced by that certain Amended and Restated Employment Agreement dated as of
December 12, 1997 ("1997 Employment Agreement");

WHEREAS, the Employer wishes to employ the Executive in a senior
management position and be assured of his services on the terms and subject to
the conditions hereinafter set forth; and

WHEREAS, the Compensation Committee and the Board approved the terms
and conditions of this Employment Agreement;

NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the Employer and the Executive
agree as follows:

1. Employment. Upon the terms and subject to the conditions of this
Employment Agreement, the Employer hereby employs the Executive and the
Executive hereby accepts employment by the Employer. The parties agree that the
1997 Employment Agreement shall terminate concurrently with the execution of
this Employment Agreement and shall be of no further force and effect.

2. Term.

2.1. The term of the Executive's employment hereunder shall
commence immediately upon the execution of this Employment Agreement
and continue until the fifth anniversary thereof, unless terminated
earlier in accordance with the provisions of this Employment Agreement;
provided, however, that this Employment Agreement shall automatically
be renewed for additional one-year periods thereafter unless and until
terminated by the Employer or the Executive as of the end of such
five-year initial period or at the end of any renewal period by written
notice given at least 30 days prior to the scheduled termination or
scheduled renewal of this Employment Agreement. The date of the
commencement of employment pursuant to this Employment Agreement is
hereinafter referred to as the "Effective Date," the term of employment
pursuant to this Employment Agreement is hereinafter referred to as the
"Term" and the last date of employment pursuant to this Employment
Agreement is hereinafter referred to as the "Termination Date".

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3. Executive's Position, Duties, and Authority.

3.1. The Employer shall employ the Executive, and the
Executive shall serve, as Executive Vice President of Employer,
Director of Operations of Employer, and as a Member of the Office of
the Chairman of the Employer and of any successor by merger,
acquisition of substantially all of the assets of the Employer or
otherwise.

3.2. The Employer shall employ the Executive, and the
Executive shall serve, as the President of the worldwide Theatrical,
Motorsports and Family Entertainment businesses of the Employer.
"Theatrical" means (i) the presentation, production or booking of, or
the provision of any logistical or technical services in connection
with, any type of live stage shows (other than musical concerts),
including Broadway-type shows, magic shows and variety shows, (ii) the
ownership, operation or management of venues in which theatrical-type
presentations are typically presented, and (iii) related businesses;
"Motorsports" means the presentation, promotion, production, or other
exploitation of any live event featuring motorized races or
demonstrations, including motorcross and other motorized races, monster
truck shows, air shows, thrill shows, demolition derbies, tractor
pulls, truckfests, other events developed by Motorsports, and related
businesses; and "Family Entertainment" means the presentation,
production, exploitation, origination, or booking of, or the provision
of any services in connection with, any type of family entertainment
shows, programs, exhibitions, demonstrations, or events, and any
related businesses which are not otherwise included in the definition
of Theatrical or Motorsports. The Executive's duties in such capacity
shall be to control, direct and supervise the day-to-day operations of
the Employer's Theatrical, Motorsports and Family Entertainment
businesses subject only to the oversight and direction of the
Employer's Executive Chairman and Chief Executive Officer. The Employer
and the Executive acknowledge that the Employer may acquire additional
companies operating Theatrical, Motorsports and Family Entertainment
businesses, and upon doing so, such acquired companies will be managed
by the Executive, unless the revenues from the Theatrical, Motorsports
and Family Entertainment businesses do not constitute a majority of the
revenues of the acquired companies in which event the management of the
Theatrical, Motorsports and Family Entertainment businesses of the
acquired companies will report to the Executive.

3.3. The Executive agrees, and the Employer (subject to any
required shareholder vote) shall cause the Executive, to serve as a
Director of the Employer, if and so long as the Executive is
indemnified for serving in such capacity in accordance with the
provisions of Section 12 hereof.

3.4. The Executive shall have executive duties, functions,
authority and responsibilities commensurate with the office or offices
he from time to time holds with the Employer and shall report to the
Executive Chairman and/or Chief Executive Officer of the Employer.

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3.5. The Executive shall serve without additional remuneration
as (a) a member of any committee of the Board, as determined by the
Board; and (b) a director and/or officer of one or more of the
Employer's subsidiaries, if appointed to such position by the Employer.

4. Duties.

4.1. Full-time Services. The Executive shall devote
substantially all of his business time to the business and affairs of
the Employer and to the fulfillment of his duties hereunder in a
diligent and competent fashion to the best of his abilities; provided,
however, that the Executive may engage in other activities such as
charitable, educational, religious and similar types of activities, to
the extent that such activities do not prohibit or prevent the
performance of the Executive' s duties under this Agreement, or inhibit
or conflict in any material way with the business of the Employer.

4.2. Business Opportunities. The Executive covenants and
agrees that for so long as he is actively employed by the Employer he
shall inform the Employer of each business opportunity related to the
business of the Employer of which he becomes aware, and that he will,
not directly or indirectly, exploit any such opportunity for his own
account, nor will he render any services to any other person or
business or acquire any interest of any type in any other business,
which is in competition with the Employer; provided, however, that the
foregoing shall not be deemed to prohibit the Executive from acquiring,
solely as an investment (a) up to 10% of any securities of a
partnership, trust, corporation or other entity so long as he remains a
passive investor in such entity and such entity is not, directly or
indirectly, in competition with the Employer, or (b) up to 0.5% of any
securities of any publicly traded partnership, trust, corporation or
other entity provided he remains a passive investor in such entity.

5. Location of Employment. The Executive shall be based in Houston,
Texas, and shall not be required to move or to relocate during the Term. The
Executive shall perform his duties, functions and responsibilities where
reasonably required from time to time during the Term.

6. Base Salary. During the Term, the Employer shall pay or cause to be
paid to the Executive an initial base salary per annum (the "Base Salary") which
shall initially be $375,000, payable in monthly installments. Upon each
anniversary of the commencement of the Executive's employment hereunder, the
Base Salary then in effect shall be increased by an amount equal to the greater
of (a) five percent of the Base Salary then in effect or (b) the product of (i)
the Base Salary then in effect and (ii) the percentage increase in the Consumer
Price Index during the previous twelve months. In addition, the Board shall
review the Executive's Base Salary at least annually and may by action of the
Board, after and pursuant to the affirmative recommendation of the Compensation
Committee, increase, but not decrease, such Base Salary, as such salary may have
been increased, at any time and from time-to-time during the Term.

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7. Bonus. The Executive shall be entitled to receive an annual
incentive bonus (the "Bonus"), in cash, stock, options or other compensation,
during the continuance of the Executive's employment hereunder as determined by
the Board, after and pursuant to the affirmative recommendation of the
Compensation Committee, in such proportionate amount as is consistent with the
Bonuses that are given to other Senior Executives. The term "Senior Executives"
shall mean all members of the Office of the Chairman of the Employer, all
executive officers of the Employer, and all chief executive officers of each
division or subsidiary of the Employer.

8. Expenses. The Employer shall pay or reimburse the Executive for all
reasonable expenses actually incurred or paid by the Executive during the Term
in the performance of the Executive's services hereunder upon presentation of
expense statements or vouchers or such other supporting information as the
Employer may reasonably require of the Executive.

9. Benefits. During the Term, the Executive shall be eligible to
participate in any pension, profit-sharing or other employee benefit plan or
program of the Employer now existing or established hereafter, in accordance
with and to the extent that he is eligible under the general provisions thereof.
The Executive shall also be eligible to participate in any group life insurance,
hospitalization, medical, health and accident, disability or similar plan or
program of the Employer, now existing or established hereafter, in accordance
with and to the extent that he is eligible under the general provisions thereof.

10. Additional Benefits. During the Term, the Employer shall provide
the following additional benefits to the Executive:

10.1. Automobile. $1,500 per month as an allowance for the
lease of an automobile or its equivalent.

10.2. Accommodations in New York. The living accommodations
and expenses currently provided to the Executive in New York, New York,
by the Employer or their equivalent. Upon the termination of this
Employment Agreement for any reason whatsoever, the Executive may at
his option require the Employer to transfer and assign to the Executive
all rights of the Employer in and to said living accommodations without
consideration.

10.3. Office in New York. Reasonable office facilities in New
York, New York, at the principal executive offices of the Employer with
secretarial and support services for the use of the Executive.

10.4. Airplane. Reimbursement to the Executive for private air
transportation of the lesser of (i) fifty (50) hours per year at the
rate of $1,500 per hour or (ii) $75,000 per year.

11. Life or Disability Insurance. The Employer shall obtain life
insurance on the life of the Executive to the extent obtainable and in an amount
consistent with life insurance which is

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obtained by the Employer for other Senior Executives, and the Employer shall be
the beneficiary of such policy. The Employer shall obtain disability insurance
on the Executive to the extent obtainable and in an amount consistent with
disability insurance which is obtained by the Employer for other Senior
Executives. The Executive shall cooperate in assisting the Employer to obtain
such insurance. The Employer shall continue to pay all premiums on such policies
and shall maintain such policies, subject to the insurability of the Executive,
if required to keep such policies in effect during the Term. Upon the
termination of this Employment Agreement for any reason whatsoever, the
Executive may at his option require the Employer to transfer and assign to the
Executive all rights of the Employer in and to any life or disability insurance
policies without consideration, and following any such transfer or assignment,
the Executive shall be responsible for the payment of all premiums related
thereto.

12. Indemnification. The Executive shall be entitled in connection with
his employment hereunder to the benefit of the indemnification provisions
contained on the date hereof in the bylaws and certificate of incorporation of
the Employer, as the same may hereafter be amended (not including any amendments
or additions that limit or narrow, but including any that add to or broaden, the
protection afforded to the Executive), to the fullest extent permitted by
applicable law. The Employer shall in addition cause the Executive to be
indemnified in accordance with Section 145 of the Delaware General Corporation
Law to the fullest extent permitted by such section, to the extent required to
make the Executive whole in connection with any loss, costs or expense
indemnifiable thereunder.

13. Confidential Information. The Executive acknowledges that his
employment by the Employer has brought and will bring him into close contact
with confidential proprietary information of the Employer, including information
regarding costs, profits, markets, sales, products, key personnel, pricing
policies, operational methods, technical processes, other business affairs and
methods, plans for future developments, and other information not readily
available to the public, the disclosure of which to third parties would in each
case have a material adverse effect on the Employer's business operations (the
"Confidential Information"). In recognition of the foregoing, the Executive
covenants and agrees that:

(a) he will keep secret all Confidential Information and will
not intentionally disclose Confidential Information to anyone outside of the
Employer and its representatives other than in the course of performance of his
duties hereunder, either during or for a one year period after the Term except
with the Employer's written consent, provided that (i) the Executive shall have
no such obligation to the extent Confidential Information is or becomes publicly
known other than as a result of the Executive's breach of his obligations
hereunder and (ii) the Executive may, after giving prior notice to the Employer
to the extent practicable under the circumstances, disclose such matters to the
extent required by applicable laws or governmental regulations or judicial or
regulatory process; and

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(and all copies thereof) relating to the Employer's business, which he obtained
while employed by, or otherwise serving or acting on behalf of, the Employer and
which he may then possess or have under his control (the "Records"); or (ii) in
lieu of subclause (i) above, the Executive shall destroy all of the Records and
shall deliver to the Employer a certificate to that affect.

14. Termination.

14.1. For purposes of this Employment Agreement the following
definitions shall apply:

14.1.1. "Cause" shall mean:

(a) the Executive is convicted of a felony
involving moral turpitude which would render the Executive
unable to perform his duties set forth in this Employment
Agreement; or

(b) the Executive engages in conduct that
constitutes willful gross neglect or willful gross misconduct
in carrying out his duties under this Employment Agreement,
resulting, in either case, in material economic harm to the
Employer, unless the Executive believed in good faith that
such act or nonact was in the best interests of the Employer.

14.1.2. A "Change in Control" shall mean the occurrence
of any one of the following events:

(a) any "person," as such term is used in
Sections 3(a)(9) and 13(d) of the Securities Exchange Act of
1934, as amended (other than the Executive or members of
management on the date hereof or otherwise appointed by the
Board which is comprised of a majority of "incumbent
directors" or entities controlled by them), becomes a
"beneficial owner," as such term is used in Rule 13d-3
promulgated under that act, of 25% or more of the voting power
of the Employer;

(b) all or substantially all of the assets
or business of the Employer is disposed of pursuant to a
merger, consolidation or other transaction (unless the
shareholders of the Employer immediately prior to such merger,
consolidation or other transaction beneficially own, directly
or indirectly, in substantially the same proportion as they
owned the voting power of the Employer, all of the voting
power or other ownership interests of the entity or entities,
if any, that succeed to the business of the Employer);

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(c) the Employer combines with another
company and is the surviving corporation but, immediately
after the combination, the shareholders of the Employer
immediately prior to the combination hold, directly or
indirectly, 50% or less of the voting power of the combined
company; or

(d) the majority of the Board consists of
individuals other than "incumbent directors," which term means
members of the Board as of the date of this Employment
Agreement, except that any person who becomes a director
subsequent to such date whose election or nomination was
supported by two-thirds of the directors who then comprise the
incumbent directors shall be considered an incumbent director.

14.1.3. "Constructive Termination Without Cause" shall
mean a termination of the Executive's employment at his
initiative as provided in this Section 14 following the
occurrence, without the Executive's written consent, of one or
more of the following events:

(a) a reduction in the Executive's then
current Base Salary or failure by the Employer to fulfill its
obligations under Sections 6, 7, 8, or 9 above;

(b) the failure to elect or reelect the
Executive to any of the positions described in Section 3
hereof (other than the positions described in Section 3.5,
including as a Director of the Employer, or the removal of him
from any such position, including as a Director of the
Employer;

(c) a material diminution in the Executive's
duties or the assignment to the Executive of duties which are
materially inconsistent with his duties or which materially
impair the Executive's ability to function as the President,
Chief Executive Officer and Member of the Office of the
Chairman of the Employer; or

(d) the failure of the Employer to obtain
the assumption in writing of its obligation to perform this
Employment Agreement by any successor to all or substantially
all of the assets of the Employer within 15 days after a
merger, consolidation, sale or similar transaction.

14.2. Termination by the Employer for Cause. A termination for
Cause shall not take effect unless all of the provisions of this
Section 14.2 are complied

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with. The Executive shall be given written notice by the Board of the
intention to terminate him for Cause, such notice (a) to state in
detail the particular act or acts or failure of failures to act that
constitute the grounds on which the proposed termination for Cause is
based and (b) to be given within three months of the Board learning of
such act or acts or failure or failures to act. The Executive shall
have 10 business days after the date that such written notice has been
given to the Executive in which to cure such conduct, to the extent
such cure is possible. If he fails to cure such conduct, the Executive
shall then be entitled to a hearing before the Board. Such hearing
shall be held within 15 business days of such notice to the Executive,
provided he requests such hearing within 10 business days of the
written notice from the Board of the intention to terminate him for
Cause. If, within five business days following such hearing, the
Executive is furnished written notice by the Board confirming that, in
its judgment, grounds for Cause on the basis of the original notice
exist, he shall thereupon be terminated for Cause.

14.2.1. In the event the Employer terminates the
Executive' s employment for Cause, he shall be entitled to:

(a) the Base Salary through the date of the
termination of his employment for Cause; and

(b) a Bonus for the year in which he was
terminated equal to the Bonus for the year prior to such
termination, prorated over the time elapsed during the year in
which he was terminated.

14.2.2. In the event the Employer terminates the
Executive's employment for Cause, the Executive shall have no
further obligations or liability to the Employer (except his
obligations under Sections 13 and 17, which shall survive).

14.3. Termination Without Cause or Constructive Termination
Without Cause. In the event the Executive's employment is terminated
without Cause, other than due to disability or death, or in the event
there is a Constructive Termination Without Cause, the Executive shall
be entitled to:

(a) the Base Salary through the date of termination
of the Executive's employment;

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Executive's option, the Employer shall pay him the present value of
such salary continuation payments in a lump sum (using as the discount
rate 75% of the prime rate (as published by The Wall Street Journal)
for the first business day of the month in which such termination
occurs);

(c) (i) in the event that such termination occurs
during the initial five-year term of this Employment Agreement,
immediately vested options to purchase shares of Class A Stock in an
amount equal to 166,667 shares less the product of (i) 33,333 shares
and (ii) the number of full years elapsed under the Term of this
Employment Agreement at an exercise price per share equal to the lowest
exercise price of any stock option granted by the Employer in the
twelve months prior to termination;

(ii) in the event that such termination occurs
after the initial five-year term of this Employment Agreement,
immediately vested exercisable options to purchase 33,333 shares of
Class A Stock at an exercise price per share equal to the lowest
exercise price of any stock option granted by the Employer in the
twelve months prior to termination;

(d) a Bonus for the unexpired Term, based on the
Bonus received for the year prior to termination (the "Base Bonus
Amount") multiplied by the then unexpired Term; provided that, at the
Executive's option, the Employer shall pay him the present value of
such salary and bonuses in a lump sum (using as the discount rate 75%
of the prime rate (as published by The Wall Street Journal) for the
first business day of the month in which such termination occurs); and

(e) all benefits provided in Section 9 hereof until
the end of the Term.

14.4. Termination of Employment Following a Change in Control.
If, following a Change in Control, the Executive's employment is
terminated for any reason other than for Cause, whether voluntary or
involuntary or there is a Constructive Termination Without Cause, the
Executive shall be entitled to the payments and benefits provided in
Section 14.3 above, provided that the payments shall be paid in a lump
sum without any discount. In addition, the Executive shall receive
immediately vested 10 year options to purchase 166,667 shares of Class
A Stock which shall be exercisable at the lowest exercise price of any
other options that the Executive shall own as of the date of the Change
in Control. The Executive shall forfeit any rights granted pursuant to
this Section 14.4 if the Executive accepts a written offer to remain
with the surviving company in an executive position with equivalent
duties, authority and responsibility as the Executive currently holds
(other than as a non-employee director).

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14.4.1. Payment Following a Change in Control. In the
event that the termination of the Executive's employment is as
a result of a Change in Control and the aggregate of all
payments or benefits made or provided to the Executive under
the Employment Agreement and under all other plans and
programs of the Employer (the "Aggregate Payment") is
determined to constitute a Parachute Payment, as such term is
defined in Section 280G(b)(2) of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code"), the Employer
shall pay to the Executive, prior to the time any excise tax
imposed by Section 4999 of the Internal Revenue Code ("Excise
Tax") is payable with respect to such Aggregate Payment, an
additional amount which, after the imposition of all income
and excise taxes thereon, is equal to 100% of the Excise Tax
on the Aggregate Payment. The determination of whether the
Aggregate Payment constitutes a Parachute Payment and, if so,
the amount to be paid to the Executive and the time of payment
pursuant to this subsection shall be made by an independent
auditor (the "Auditor") jointly selected by the Employer and
the Executive and paid by the Employer. The Auditor shall be a
nationally recognized United States public accounting firm
which has not, during the two years preceding the date of its
selection, acted in any way on behalf of the Employer or any
affiliate thereof. If the Executive and the Employer cannot
agree on the firm to serve as the Auditor, then the Executive
and the Employer shall each select one accounting firm and
those two firms shall jointly select the accounting firm to
serve as the Auditor.

14.5. Voluntary Termination. In the event of a termination of
employment by the Executive on his own initiative other than a
termination due to death or disability or a Constructive Termination
without Cause, the Executive shall have the same entitlements as
provided in Section 14.2 above for a termination for Cause. A voluntary
termination under this Section 14.5 shall be effective upon 30 days
prior written notice to the Employer and shall not be deemed a breach
of this Employment Agreement.

14.6. Stock Options. Notwithstanding anything to the contrary,
upon termination for any reason whatsoever, the Executive shall have
the immediate right to exercise any stock options in full, whether or
not such option is fully exercisable on the date of termination, for
the remainder of the original term of each such stock option.

14.7. No Mitigation; No Offset. In the event of any
termination of employment under this Employment Agreement, the
Executive shall be under no obligation to seek other employment and
there shall be no offset against amounts due

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the Executive under this Employment Agreement on account of any
remuneration attributable to any subsequent employment that he may
obtain.

14.8. Option Adjustment. The number of options issuable
pursuant to this Section 14 and the per share exercise price thereof
shall be subject to appropriate adjustment to give effect to any
increase or decrease in the number of issued shares resulting from a
reorganization, recapitalization, stock split, spin-off or other
similar action.

15. Disability.

15.1. If during his active employment hereunder the Executive
shall become physically or mentally disabled, whether totally or
partially, so that he is prevented from performing his usual duties for
a period of six consecutive months, the Employer shall, nevertheless,
pay the Executive his full Base Salary and Bonus in respect of the
period ending on the last day of the sixth consecutive month of
disability (such last day being referred to herein as the "Disability
Date") and the following additional provisions shall apply:

15.2. If the Executive has not resumed his usual duties on or
prior to the Disability Date, the Executive's employment shall
terminate and the Employer shall pay, unless prior to the date the
Executive became physically or mentally disabled a notice of
termination was delivered to the Executive, 75% of his Base Salary from
the Disability Date through the Termination Date and, except as
provided in Section 15.4, the Employer shall have no obligation to pay
Bonus to the Executive in respect of periods after the Disability Date.
Any Base Salary payable pursuant to this Section 15.2 shall be reduced
by the amount of any benefits payable to the Executive under any group
or individual disability insurance plan or policy, the premiums for
which are paid primarily by the Employer;

15.3. Unless the Employer exercises its option under Section
15.4 to restore the Executive to his full compensation, duties,
functions, authority and responsibilities hereunder, the Executive
shall have no obligations or liabilities hereunder from and after the
Disability Date (except for his obligations under Sections 13 and 17,
which shall survive); and

15.4. If during the Term and subsequent to a Disability Date,
the Executive shall recover fully from a disability, the Employer, by
action of the Board, shall have the right (exercisable within sixty
days after notice from the Executive of such recovery), but not the
obligation, to restore the Executive to employment and to full
compensation and his full level of duties, functions, authority and
responsibilities hereunder.

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16. Death of Executive.

16.1. Upon the Executive's death, whether prior to or
subsequent to his Disability Date and prior to the delivery of a notice
of termination, this Employment Agreement and all of the Employer's
obligations to pay salary and Bonus hereunder shall terminate, except
as provided in Sections 16.2 through 16.3.

16.2. The Executive's estate or designated beneficiary shall
be entitled to receive (a) any unpaid portions of the Executive's Base
Salary in respect of the period ending on the Executive's date of
death, (b) unpaid Bonus in respect of years prior to the year of death.
The Employer shall pay to such estate or beneficiary an amount equal to
the present value of all the remaining Base Salary, calculated assuming
annual compound interest at 75% of the prime rate (as published in The
Wall Street Journal) for the first business day of the month in which
the Executive's death occurs, and (c) immediately vested options to
purchase 33,000 shares of Class A Stock at an exercise price equal to
the exercise price of the last stock option granted by the Employer to
the Executive prior to the Executive's death.

16.3. The Base Salary and Bonus payable pursuant to this
Section 16 shall be reduced by the value of any benefits payable to the
Executive's estate or designated beneficiary under any life insurance
plan or policy the premiums for which are paid primarily by the
Employer, other than such insurance identified in Section 11.

17. Non-Competition.

17.1. During the Term, the Executive will not, without the
prior written approval of the Board, become employed by, or become an
officer, director, or general partner of, any partnership, corporation
or other entity which acts as a promoter, producer or venue operator in
the live entertainment business or which acts as a marketing and
management company specializing in the representation of team sports
athletes (the "Prohibited Business").

17.2. Subject to the following proviso, for a period of one
year following the termination of the Executive's employment hereunder
the Executive will not become employed by, or become an officer,
director or general partner of, any partnership, corporation or other
entity which is primarily engaged in the Prohibited Business; provided
however, that during such one year period the Employer shall employ the
Executive as a consultant with compensation at a rate equal to fifty
percent of the Employer's Base Salary immediately prior to such
termination. If the Employer elects not to employ the Executive as a
consultant for such one year period as provided herein, the provisions
of this Section 17.2 shall not apply and the Executive shall be free to
engage in any activity referred to herein.

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18. Notices. All notices, requests, consents and other communications,
required or permitted to be given hereunder, shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by prepaid
telegram, or mailed first class, postage prepaid, by registered or certified
mail, as follows (or to such other or additional address as either party shall
designate by notice in writing to the other in accordance herewith):

18.1. If to the Employer:

SFX Entertainment, Inc.
650 Madison Avenue, 16th Floor
New York, New York 10022
Attention: Executive Chairman

18.2. If to the Executive:

Mr. Brian E. Becker
1754 Rice Boulevard
Houston, Texas 77005

19. General.

19.1. Governing Law. This Employment Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of the State of New York.

19.2. Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Employment Agreement.

19.3. Entire Agreement. This Employment Agreement including
any Exhibits attached hereto sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings,
written or oral, between the parties, except as specifically provided
herein.

19.4. Successors and Assigns. This Employment Agreement, and
the Executive's rights and obligations hereunder, may not be assigned
by the Executive, except that the Executive may designate pursuant to
Section 19.6 one or more beneficiaries to receive any amounts that
would otherwise be payable hereunder to the Executive's estate. This
Employment Agreement shall be binding on any successor to the Employer,
whether by merger, acquisition of substantially all of the Employer's
assets or otherwise, as fully as if such successor were a signatory
hereto and the Employer shall cause such successor to, and such
successor shall, expressly assume the Employer's obligations hereunder.
Notwithstanding anything else herein

-13-

<PAGE>

contained, the term "Employer" as used in this Employment Agreement,
shall include all such successors.

19.5. Amendments; Waivers. This Employment Agreement cannot be
changed, modified or amended, and no provision or requirement hereof
may be waived, without an affirmative vote of the Board after the
affirmative recommendation of the Compensation Committee of the Board,
and the consent in writing of the Executive and the Employer. The
failure of a party at any time or times to require performance of any
provision hereof shall in no manner affect the right of such party at a
later time to enforce the same. No waiver by a party of the breach of
any term or covenant contained in this Employment Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such breach,
or a waiver of the breach of any other term or covenant contained in
this Employment Agreement.

19.6. Beneficiaries. Whenever this Employment Agreement
provides for any payment to the Executive's estate, such payment may be
made instead to such beneficiary or beneficiaries as the Executive may
have designated in a writing filed with the Employer. The Executive
shall have the right to revoke any such designation and to redesignate
a beneficiary or beneficiaries by written notice to the Employer (and
to any applicable insurance company) to such effect.

IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the date first above written.

SFX ENTERTAINMENT, INC.

By: /s/
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------

/s/ BRIAN E. BECKER
------------------------------------
BRIAN E. BECKER

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<PAGE>

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is being
executed as of January 1, 2000 (the "Effective Date") between SFX ENTERTAINMENT,
INC. ("Employer"), a Delaware corporation, and DAVID FALK ("Employee")
(collectively the "Parties") to be effective as of the Effective Date.

WHEREAS, the Employer and the Employee entered into a certain Employment
Agreement effective as of April 29, 1998 (The "Employment Agreement"); and

WHEREAS, the Employer and the Employee desire to amend and restate the
Employment Agreement on the terms and conditions set forth herein;

NOW, THEREFORE, the Parties do hereby agree as follows:

1. Employment. Employer hereby employs Employee, and Employee hereby
accepts such employment, subject to the terms and conditions set forth below.

2. Duties.

2.1. Capacities

2.1.1 Employee shall be employed in the capacity of Chairman of
SFX Sports Holdings, Inc., and SFX Sports Group, Inc. (together the
"Sports Group"), and in such capacity, shall have the rights and
responsibilities attendant to that of the chief executive officer of a
subsidiary of a publicly traded company. Employee will, subject to
consultation with, and approval of, the Executive Chairman and the
President and Chief Executive Officer of the Employer, have decision
making power over any decisions, with respect to changing the Sports
Group's policies, personnel, culture, compensation structure,
reporting systems or configuration and alignment of operating
divisions. Employee's duties in such capacity shall be to control,
direct and supervise the day-to-day operations of the Sports Group.
All sports-related businesses of Employer (other than motorized

<PAGE>

sports or any sports-related business that provides less than 25% of
the revenues of any entity acquired by Employer, if a condition of the
purchase agreement for such entity is for such business to be operated
within the entity acquired) will be operated under the Sports Group
and will report to Employee subject only to the oversight and
direction of the Employer's Board of Directors (the "Board"). Employee
shall also perform other duties which may be reasonably assigned to
him from time to time by the Executive Chairman and the President and
Chief Executive Officer of Employer, or by Employer's Board of
Directors, and that are consistent with his position.

2.1.2 Employee shall be a member of the Office of the Chairman of
Employer, which shall be the highest management body of Employer,
reporting solely and directly to the Executive Chairman of Employer.
The Office of the Chairman shall include (in addition to the Executive
Chairman and the Employee) the President and Chief Executive Officer
of Employer, the ("Chief Executive Officer") the Chief Financial
Officer of Employer, and one or more Executive Vice Presidents of
Employer

2.1.3 It is expressly understood that Employee may (1) devote a
reasonable amount of time to charitable, civic and industry-related
boards or organizations, (2) manage his personal, financial and legal
affairs and (3) with the express prior written approval of the Board,
which approval shall not be unreasonably withheld, serve as a director
of any corporate entity; provided, that any such activity does not
substantially interfere with the performance by Employee of his duties
and responsibilities under this Agreement, including continuing to be
associated with or serving on any associations, organizations and
boards, with which Employee is associated with or is serving on as of
the Effective Date.

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<PAGE>

2.2. Additional Positions. During the Term of Employment (as
defined in Section 5.1 hereof), Employee agrees, and Employer shall
appoint Employee, to serve as a director of Employer, the Sports Group
and each subsidiary of the Sports Group; provided, Employer agrees
that Employee shall be indemnified for serving in any and all such
capacities on a basis no less favorable than is provided by the
Employer's bylaws as may be amended from time-to-time or by any
written agreement between the Employee and the Employer regarding
indemnification, in a manner consistent with that provided to Senior
Executives (as defined in Section 9.2 hereof) of the Employer, and, if
ever not so indemnified, Employee may, without limiting any other
remedies, cease serving in such director positions. In addition,
Employee shall continue as Chairman of Financial Advisory Management
Enterprises, Inc.

2.3. Place of Performance. In connection with his employment by
the Employer, Employee shall be based in the Washington, D.C.
metropolitan area at the current offices of the Sports Group. Employee
shall be provided with office space and support staff equivalent to
that provided to him by the Sports Group immediately before the
Effective Date.

3. Compensation.

3.1. Salary and Withholding.

3.1.1 Salary. During the Term of Employment, as compensation for
services rendered by Employee, Employer shall pay Employee a base
salary ("Salary") in semi-monthly installments at an annual rate equal
to $450,000. Employee's Salary shall be reviewed by the Executive
Chairman of Employer in accordance with Employer's standard policies
and practices, and may be increased, but not decreased, at Employer's
discretion. In any event, Employee's Salary shall be increased
effective as of each anniversary of the Effective Date by 5.0% over
the then effective Salary.

3
<PAGE>

3.1.2 Withholding for Taxes. Compensation (herein defined) shall
be subject to any and all applicable payroll and withholding
deductions required by the law of any jurisdiction, state or federal,
taxing authority with respect to such Compensation.

3.1.3 Definition of Compensation. The Salary, and the other
perquisites set forth in this Agreement including the Benefits, are
herein collectively referred to as the "Compensation."

3.2. Expenses. Employer shall reimburse Employee, in accordance with
Employer's standard expense reimbursement policy, for reasonable expenses
incurred by Employee, upon presentation of documentation reasonably
acceptable to Employer in accordance with the policies applicable to Senior
Executives of the Employer. Expenses incurred by Employee that are
consistent with the practices of the Sports Group prior to the Effective
Date, including but not limited to hotel accommodations and first class air
travel, shall be deemed reasonable under this Section 3.2. In connection
with such reimbursement, Employer shall provide Employee with a credit card
or cards to be used for paying such expenses. Such card or cards shall be
the property of Employer and upon termination of the Term of Employment
shall be returned to Employer by Employee. Employee shall be responsible
for and shall reimburse Employer for any and all payments made by Employer
for Employee's personal, non-reimbursable expenses charged on any such card
or cards. To the extent appropriate, Employee shall be permitted to travel
on charter flights or on the Employer's corporate jet.

3.3. Grant of Stock Options and Restricted Stock.

3.3.1 Grants. Employer shall grant Employee stock options (the "
Stock Options") and stock to Employee during the Term of Employment in
a manner and amount consistent

4
<PAGE>

with grants made to Senior Executives of the Employer; provided, that
Stock Options for at least 45,000 shares of Common Stock shall be
granted in each of the calendar years comprising the Term of
Employment). Each Stock Option shall have an exercise price equal to
the closing price of the Common Stock on the date of the grant. Each
Stock Option shall have a ten-year term and shall vest and become
exercisable on a schedule to be determined by the Board or the Stock
Option Committee, but in no event shall the vesting schedule exceed
the Term of Employment, nor shall the terms and conditions of such
options (including those terms and conditions described above) be any
less favorable than the terms and conditions applicable to options
granted to the other Senior Executives of Employer. The Employee shall
be permitted to use shares of Common Stock to exercise the Stock
Options and to pay any withholding obligation upon such exercise. The
Stock Options shall be granted as incentive stock options under the
Internal Revenue Code of 1986, as amended (the "Code"), to the extent
permitted under the Code.

3.3.2 Termination of Employment. Notwithstanding the foregoing,
in the event that Employee ceases to be employed by Employer for any
reason whatsoever (including upon death or permanent and total
disability of Employee) other than as a result of a voluntary
termination (that is not a Constructive Termination Event) or
termination for Cause, (x) all restricted stock which may be granted
pursuant to this Section 3.3 shall vest immediately and all options
granted pursuant to this Section 3.3 shall vest and become exercisable
immediately, and (y) the balance of all remaining stock options to be
granted during the Term of Employment pursuant to this Section 3.3
shall immediately be granted and shall vest and become exercisable
immediately at an exercise price per share equal to the lower of (A)
the closing price of the Common Stock on the date of the relevant
event or occurrence and (B) the exercise price of the last option
granted to Employee prior to such event or occurrence, and Employee
shall retain the right to exercise each such options described in
clauses (x) and (y) during the remaining original term of each such
option. In the event of Employee's voluntary

5
<PAGE>

termination (that is not a Constructive Termination Event) or
termination for Cause, all unvested options and restricted stock shall
be forfeited, all vested option shall remain exercisable until the
first to occur of the end of the original term or one year following
the termination of employment, and no Stock Options not thereto
granted will be granted.

3.3.3 Adjustments. The number of shares subject to the Stock
Options to be granted under this Section 3.3, and the kind of shares
subject to such options shall be equitably adjusted to reflect any
change in the Common Stock including, without limitation, a
recapitalization, spin-off, stock split, consolidation, reorganization
or merger. To the extent applicable, this Section 3.3 shall
automatically be deemed to be modified to ensure that Employee's
rights with respect to acceleration of option grants, acceleration of
option vesting and other rights are at least as favorable as the
rights that from time to time are generally applicable to other Senior
Executives of Employer.

3.4. Other Benefits. During the Term of Employment, Employer shall
provide the following additional benefits to Employee:

3.4.1 Health Insurance. Medical, dental and hospitalization
insurance for Employee and his family with the same scope and coverage
and on the same terms as is provided by Employer to the Chief
Executive Officer and other Senior Executives of Employer, as may be
amended from time to time; provided, that such insurance shall have no
gap in coverage with Employee's current insurance; and provided,
further, that such insurance will have no exclusions for pre-existing
conditions.

3.4.2 Term Life Insurance. Term life insurance upon the life of
Employee in an amount and on the same terms consistent with insurance
made available to the Chief Executive

6
<PAGE>

Officer and other Senior Executives of Employer, as may be amended
from time to time, including, if applicable, split-dollar insurance
policies, provided, that such insurance shall have no gap in coverage
with Employee's current insurance; and provided, further, that such
insurance will have no exclusions for pre-existing conditions.

3.4.3 Disability Insurance. Disability insurance in an amount and
on the same terms consistent with insurance made available to the
Chief Executive Officer and other Senior Executives of Employer, as
may be amended from time-to-time, provided, that such insurance shall
have no gap in coverage with Employee's current insurance; and
provided, further, that such insurance will have no exclusions for
pre-existing conditions.

3.4.4 Other Benefit Programs. Employee shall be entitled to
participate in all other employee benefit programs of Employer which
the Board may, in its sole discretion, regularly make available to the
other Senior Executives of Employer (such as a stock bonus plan,
retirement plans and fringe benefits), on terms no less favorable than
those provided to such other Senior Executives.

3.4.5 Office in New York. Employer shall provide reasonable
office facilities in New York, New York at its principal executive
offices, with secretarial and support services, for the use of
Employee.

3.4.6 Gross-Up.

(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, award, benefit or distribution (or any acceleration of
any payment, award, benefit or distribution) by Employer (or any
of its affiliated entities) to or for

7
<PAGE>

the benefit of Employee (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code, or any
corresponding provisions of state or local tax laws, or any
interest or penalties are incurred by Employee with respect to
such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Employee shall be entitled to receive an
additional payment (a "Gross-Up Payment") from Employer in an
amount such that after payment by Employee of all taxes
(including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, Employee retains an amount
of the Gross-Up Payment equal to 100% of the Excise Tax imposed
upon the Payments. The payment of a Gross-Up Payment shall not be
conditioned upon the occurrence of a termination of employment.

(b) Subject to the provisions of Section 3.4.6(a), all
determinations required to be made under this Section 3.4.6,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
Employer's independent accounting firm as of immediately prior to
the Change in Control (the "Accounting Firm"), which shall
provide detailed supporting calculations both to Employer and
Employee within fifteen (15) business days of the receipt of
notice from Employee that there has been a Payment, or such
earlier time as is requested by Employer. In the event that the
Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control,
Employer shall appoint another nationally recognized accounting
firm reasonably acceptable to Employee to make the determinations
required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be bome solely by Employer. Any
Gross-Up Payment, as determined pursuant to this Section 3.4.6,
shall be paid by Employer to Employee within five (5) days
following receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm

8
<PAGE>

shall be binding upon Employer and Employee. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not
have been made by Employer should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that Employee thereafter is required
to make a payment of any Excise Tax (or any additional Excise
Tax), the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by Employer to or for the benefit of Employee. In
the event of any claim by the Internal Revenue Service for any
Excise Tax or additional Excise Tax, Employer shall have the
right to control the defense of such claim and Employee shall
cooperate and assist Employer in connection therewith as
reasonably requested by Employer; provided that all expenses of
such claim (including any additional interest or penalties) shall
be paid by Employer, and Employer shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or
income tax (including any interests and penalties) imposed as a
result of such representation and payment of costs and expenses.
In addition, Employee will cooperate as reasonably requested by
Employer with Employer in making any refund claim for any Excise
Tax already paid, and any refunds of any such tax (or any
Gross-Up Payments or other payments made by Employer in respect
thereof) obtained by the Employee shall be promptly returned to
Employer.

If Employer directs the Employee to pay such claim and sue
for a refund, Employer shall advance the amount of such payment
to the Employee, on an interest-free basis and shall indemnify
and hold the Employee harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and
further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed to be due
is limited solely to such contested amount.

9
<PAGE>

Furthermore, Employer's control of the contest shall be limited
to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.

The reimbursement of expenses provided for in Section 3.2,
the stock and option awards provided for in Section 3.3. the
benefits provided for in this Section 3.4 and any other benefits
hereafter granted to Employee by the Board are hereinafter
referred to as the "Benefits."

4. Intentionally Deleted.

5. Term of Employment.

5.1. Definition of Term of Employment. The "Term of Employment", as
used in this Agreement, shall mean the period commencing on the Effective
Date and terminating with the first to occur of the following:

5.1.1 April 29, 2003 (the "Term Date");

5.1.2 termination of the Term of Employment by Employer without
Cause;

5.1.3 termination of the Term of Employment by Employee by notice
to Employer at any time following a Constructive Termination Event (as
such term is defined in Section 9.1 hereof); and

10
<PAGE>

5.1.4 termination of the Term of Employment as permitted by, and
in accordance with, the provisions of Section 6.

5.2. Effect of Termination of Term of Employment. Upon termination of
the Term of Employment, the following provisions shall apply:

5.2.1 Employee shall no longer be employed by Employer;

5.2.2 Employee shall no longer be obligated to provide any
employment, consulting or similar services to Employer;

5.2.3 If the Term of Employment is terminated pursuant to
Sections 5.1.2 or 5.1.3 hereof, then the provisions of Section 7.1
hereof shall become effective and the Employer shall be irrevocably
and unconditionally obligated to fulfill and discharge all of the
obligations imposed upon it pursuant to the provisions thereof,

5.2.4 In the event Employer issues a press release concerning the
termination of Employee's employment with Employer, Employee will be
offered an opportunity that is reasonable under the circumstances to
comment on such release; and

5.2.5 Employee (or his guardian or estate, as applicable) shall
in all events be paid (within thirty (30) days following the date of
termination of the Term of Employment), (A) all accrued but unpaid
Salary through the date of termination, (B) all accrued vacation
through the date of termination, and (C) all unreimbursed business
expenses through the date of termination. In addition, Employee shall
retain all rights with respect to vested equity awards (and the
applicable

11
<PAGE>

provisions of Section 3.3), and shall be entitled to all other
Benefits which are provided in accordance with and subject to the
terms of Employer's generally applicable employee benefit plans,
practices and policies. The payments and Benefits described in this
Section 5.2.5 shall be referred to herein as the "Accrued
Obligations."

6. Termination of Employment.

6.1. Employer's Right to Terminate the Term of Employment. During the
Term of Employment, Employer may terminate the Term of Employment with or
without Cause (as herein defined) by providing written notice thereof to
Employee.

6.1.1 Effect of a For Cause Termination. If Employer terminates
the Term of Employment for Cause, such termination shall take effect
immediately upon written notice thereof being provided to Employee
subsequent to the completion of the procedure set forth in Section
6.1.2. In such event, Employer shall provide Employee with the Accrued
Obligations. Upon Employer's full, complete and timely fulfillment and
discharge of the aforesaid obligations, all obligations of Employer to
Employee hereunder shall be totally and completely satisfied, and
Employer shall have no further obligations of any type to Employee
pursuant to this Agreement (except as may be provided under Sections
3.3, 3.4.6, 18 or 19).

6.1.2 Definition of "Cause". Cause for termination of the Term of
Employment shall exist only if, during the Term of Employment:

(a) Employee is convicted of a felony involving moral
turpitude which would render Employee unable to perform his
duties set forth in this Agreement; or

(b) Employee engages in conduct that constitutes willful
gross neglect

12
<PAGE>

or willful gross misconduct in carrying out his duties under this
Agreement resulting, in either case, in a material adverse
economic effect upon the business of Employer.

For purposes of this Section 6. 1, no act, or failure to act, by Employee
shall be considered "willful" unless committed in bad faith, and without a
reasonable belief that the act or omission was in the best interests of Employer
or any of its subsidiaries. Cause shall not exist under this Section 6.1 unless
and until Employer has delivered to Employee a copy of a resolution duly adopted
by a majority of the Board at a meeting of the Board called and held for such
purpose (after reasonable, but in no event less than ten (10) days notice, to
Employee and an opportunity for Employee, together with his counsel, to be heard
before the Board), finding that in the good faith opinion of the Board, Employee
was guilty of the conduct set forth in this Section 6.1 and specifying the
particulars thereof in detail. This Section 6.1 shall not prevent Employee from
challenging in an arbitration proceeding the Board's determination that Cause
exists or that Employee has failed to cure any act (or failure to act) that
purportedly formed the basis for the Board's determination. Employer must
provide notice to Employee that it is intending to terminate his employment for
Cause within sixty (60) days after Employer has knowledge of the occurrence of
the event it believes constitutes Cause.

6.2. Termination of the Term of Employment upon Employee's Death or
Permanent and Total Disability. The Term of Employment shall be deemed
terminated in the event of death or upon the termination of Employee's
employment following the permanent and total disability of Employee during
the Term of Employment.

6.2.1 Effect. In the event of a termination of the Term of
Employment for death or permanent and total disability, Employer shall
provide Employee with the Accrued Obligations. Upon Employer's full,
complete and timely fulfillment and discharge of the aforesaid

13
<PAGE>

obligations, all obligations of Employer to Employee hereunder shall
be totally and completely satisfied, and Employer shall have no
further obligations of any type to Employee pursuant to this Agreement
(except as may be provided under Sections 3.3, 3.4.6, 18 or 19).

6.2.2 Definition and Effective Date. Employee shall be considered
"permanently and totally disabled" for purposes of this Section 6.2 if
he is unable to perform with reasonable continuity his material duties
hereunder by reason of any medically determinable physical or mental
impairment, which inability to perform has lasted for a continuous
period of not less than six (6) months. A termination for permanent
and total disability shall take effect upon thirty (30) days written
notice from Employer to Employee, provided Employee does not return to
perform his material duties with reasonable continuity during such
30-day period.

6.3. Employee's Right to Terminate. Employee may terminate the Term of
Employment at any time, for any reason, by providing thirty (30) days
written notice thereof to Employer, and such termination shall not be
deemed a breach of this Agreement.

6.3.1 Effective Date. If Employee so terminates the Term of
Employment (other than under Section 5.1.3) such termination shall
take effect upon the date designated in the notice provided to
Employer which shall, in no event, be earlier than thirty (30) days
following the delivery of such notice; provided, that Employer shall
have the right in the event of such notice by Employee to accelerate
the Employee's effective date of termination to any such date that the
Employer deems appropriate in its sole discretion.

6.3.2 Effect. If Employee so terminates the Term of Employment
(other than under Section 5.1.3), Employer shall provide Employee with
the Accrued Obligations. Upon

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<PAGE>

Employer's full, complete and timely fulfillment and discharge of the
aforesaid obligations, all obligations of Employer to Employee
hereunder shall be totally and completely satisfied and Employer shall
have no further obligations of any type to Employee pursuant to this
Agreement (except as may be provided under Sections 3.3., 3.4.6, 18 or
19 hereof).

6.4. Termination of Agreement upon Fulfillment of Post Termination of
Employment Obligations. If the Term of Employment is terminated pursuant to
Sections 5.1.2 or 5.1.3 hereof, then this Agreement shall thereafter be
deemed to be terminated upon Employer's full, complete and timely
fulfillment and discharge of all obligations imposed upon Employer pursuant
to the provisions of Sections 3.3, 3.4.6, 7.1, 18 or 19 hereof.

7. Post-Termination of Employment Obligations.

7.1. Employer's Obligations after Termination of Term of Employment.
If the Term of Employment is terminated pursuant to Sections 5.1.2 or 5.1.3
hereof, then the following provisions shall apply:

7.1.1 If the Term of Employment is so terminated, Employer shall
provide Employee with the Accrued Obligations. In addition, Employer
shall be obligated to pay to the Employee, for a period of time
commencing on the date of termination of the Term of Employment and
continuing until the Term Date (herein called the "Surviving
Obligation Period"), Employee's Salary for the remaining period
pursuant to this Agreement.

7.1.2 Employee shall continue to be entitled to participate
during the Surviving Obligation Period in any and all of the
profit-sharing and retirement income, stock purchase, savings,
executive compensation plans at the same level, in the same amount and
to the

15
<PAGE>

same degree the Employee was entitled to participate at the time of
such termination, to the extent permitted by the terms of such plans,
and applicable law. If Employee's participation in any such plan is
barred, Employer shall arrange to provide Employee during the
Surviving Obligation Period with benefits substantially similar to
those which he was entitled to receive under such plans prior to the
time of such termination.

7.1.3 Employer shall maintain in full force and effect for
Employee for the longer of (a) one year after termination of the Term
of Employment and (b) the Surviving Obligation Period all life,
accident, medical and health care plans and disability benefit
programs and programs or arrangements in which Employee was entitled
to participate immediately prior to the time of such termination
provided that Employee's continued participation is possible under the
general terms and provisions of such plans and programs, and under
applicable law. If Employee's participation in any such plan or
program is barred, Employer shall arrange to provide Employee with
benefits substantially similar to those which he was entitled to
receive under such plans and programs of Employer prior to the time of
such termination; provided, however, that the cost to Employer to
provide such benefits shall be no greater than the contribution made
by Employer for such benefits for other senior executives of Employer.
In such event, appropriate adjustment shall be made so that the after
tax value thereof to Employee is similar to the after tax value to him
of the benefit plans in which Employee is not eligible to participate.
At the end of such period, Employee shall have the option to have
assigned to him at no cost and with no apportionment of pre-paid
premiums, any assignable insurance policy owned by Employer and
relating specifically to Employee.

7.1.4 Employer shall be obligated to provide to Employee, for a
one year period commencing on the date of termination of the Term of
Employment, use of a similar office and secretarial support.

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<PAGE>

7.2 No Mitigation. Under no circumstances shall the Employee be
required, whether by seeking other employment or otherwise, to mitigate the
amount of any payment or benefit under this Agreement, and there shall be
no offset against amounts due the Employee under this Agreement or any
other agreement on account of any subsequent employment he may obtain or
for any amount allegedly due Employer by Employee.

8. Employee's Rights on Change in Control.

8.1 Change in Control Payments. In the event of a Change in Control,
the Term of Employment shall not terminate, but Employer shall be obligated
to pay to Employee an amount equal to Employee's Salary for the period from
the date of the Change in Control until the Term Date. Such payment shall
be paid to Employee in a lump sum within thirty (30) days of a Change in
Control.

8.2 Stock and Option Acceleration. In addition to the payment required
under Section 8.1, in the event of a Change in Control (i) all restricted
stock which may be granted pursuant to Section 3.3 hereof shall vest
immediately and all Stock Options granted pursuant to Section 3.3 shall
vest and become exercisable immediately, and (ii) the balance of all
remaining Stock Options to be granted during the Term of Employment
pursuant to Section 3.3 shall immediately be granted and shall vest and
become exercisable immediately. The exercise price of all Stock Options
accelerated on a Change in Control shall be the lower of (a) the closing
price of the Common Stock on the date of the Change in Control, and (b) the
lowest price of any options granted to Employee prior to the Change in
Control. Employee shall retain the right to exercise all Stock Options
granted prior to, or which are accelerated upon, a Change in Control during
the remaining original term of each such option. Upon the acceleration of
all Stock Options, Employer shall have no obligation to grant any
additional Stock Options to Employee.

17
<PAGE>

9. Certain Definitions. As used herein, the following terms shall have
the meanings indicated below:

9.1. Constructive Termination Event. A "Constructive Termination
Event" shall be deemed to be the occurrence of any one or more of the
following events during the Term of Employment:

9.1.1 the assignment by Employer to the Employee of duties that
are inconsistent with the Employee's office with Employer at the time
of such assignment, or the removal by Employer from the Employee of
those duties described in Section 2.1 above, including without
limitation failure to nominate or re-nominate Employee for election to
the Board of Directors of Employer and failure of Robert F.X.
Sillerman (and his affiliates) to vote his (and their) shares in favor
of such nomination; or

9.1.2 any removal of the Employee from, or any failure to elect
or reelect the Employee to, the Designated Office (as defined in
Section 9.3 hereof), except in connection with the Employee's
promotion, with his prior written consent, to a higher office (if any)
with Employer; or

9.1.3 a reduction by Employer in the amount of the Employee's
Salary as then in effect, or the failure of Employer to pay such
Salary to the Employee at the time and in the manner specified in
Section 3 of this Agreement; or

9.1.4 the discontinuation or material reduction by Employer of
the Employee's participation in any stock option, bonus or other
employee benefit plan or arrangement

18
<PAGE>

(including, without limitation, any profit-sharing, life insurance,
medical, dental, hospitalization, incentive compensation or retirement
plan or arrangement) in which the Employee is a participant or the
failure to grant the Stock Options; or

9.1.5 the failure of Employer to obtain the assumption by any
successor to Employer of the obligations imposed upon Employer under
this Agreement, as required by Section 17 of this Agreement; or

9.1.6 the failure by Employer to reimburse the Employee for the
reasonable business expenses incurred by the Employee in the
performance of his duties to Employer, including, without limitation,
reasonable expenditures for business entertainment and for travel in
connection with Employer's business; or

9.1.7 the failure of Employer to observe, fulfill or perform any
obligation, requirement or restriction imposed upon it pursuant to
this Agreement which is not referenced in the foregoing subsections of
this Section 9.1, and such failure continues uncorrected for thirty
(30) days after notice thereof to Employer; or

9.1.8 Intentionally Deleted.

9.1.9 Intentionally Deleted.

9.1.10 the failure by Employer to put any sports related business
of Employer (other than motorized sports or any sports related
business that provides less than 25% of the revenues of any entity
acquired by Employer, if a condition of the purchase agreement for
such entity

19
<PAGE>

is for such business to be operated under the entity acquired) into
the Sports Group, in which case the sports related business may be
held by Employer outside of the Sports Group.

Employee's right to terminate the Term of Employment for a
Constructive Termination Event shall not be affected by his mental or
physical incapacity, and his continued employment prior to terminating
employment for a Constructive Termination Event shall not constitute
consent to or a waiver of rights with respect to, any act or failure
to act constituting a Constructive Termination Event.

9.2. Senior Executives. The "Senior Executives" shall mean all members
of Employer's Office of the Chairman (howsoever called), and all senior
executive officers of Employer.

9.3. Designated Office. The "Designated Office" shall mean Chairman of
the Sports Group and member of the Office of the Chairman of Employer.

9.4. Change in Control. A "Change in Control" shall mean the
occurrence of any one of the following events:

(i) any "person," as such term is used in Sections 3(a)(9) and 13(d)
of the Securities Exchange Act of 1934 (other than Employee or entities
controlled by Employee), becomes a beneficial owner of 50% or more of the
voting power of Employer or of the Common Stock beneficially owned by
Robert F.X. Sillerman as of the date hereof;

(ii) all or substantially all of the assets or business of Employer
are disposed of pursuant to a merger, consolidation, sale or other
transaction (unless the shareholders of Employer, immediately prior to such
merger, consolidation or other transaction beneficially own, directly or

20
<PAGE>

indirectly, in substantially the same proportion as they owned the voting
power of Employer, all of the voting power or other ownership interests of
the entity or entities, if any, that succeed to the business of Employer);

(iii) Employer combines with another company and, immediately after
such combination, (A) the shareholders of Employer immediately prior to the
combination do not hold, directly or indirectly, more than 50% of the
voting power of the combined company or (B) the members of the Board
immediately prior to the Board's approval of the merger transaction do not
constitute a majority of the combined company's board of directors;

(iv) the majority of the Board consists of individuals other than
incumbent directors (which term shall mean members of Board as of the
Effective Date), except that any person who becomes a director subsequent
to such date whose election or nomination was supported by two-thirds of
the directors who then comprise the incumbent directors shall be considered
an incumbent director;

(v) (A) a direct or indirect (including by sale or transfer of any
intermediate holding company) sale or transfer of the voting securities of
the Sports Group (including by way of merger, consolidation or similar
transaction) following which one or more persons other than Employer
beneficially owns 50% or more of the voting power of the Sports Group or
(B) a sale or transfer of all or substantially all the assets of the Sports
Group and its subsidiaries as a whole; or the liquidation or dissolution of
Employer or of the Sports Group.

10. Non-Compete Covenant.

10.l. During Period of Employment. During the Term of Employment,
Employee will not, without the prior written approval of the Board, become
employed in any capacity by, or become an officer, director or general
partner of, any partnership, corporation or other entity that directly
competes with any business of Employer, or any subsidiary of Employer
whether now or hereafter conducted.

21
<PAGE>

10.2. After Termination of Employment. For the period of one (1) year
following the termination of the Term of Employment by Employer for Cause
or by Employee on his own initiative (other than due to a Constructive
Termination Event), Employee will not become employed in any capacity by,
or become an officer, director, shareholder or general partner of, any
partnership, corporation or other entity that competed with any material
business of Falk Associates Management Enterprises, Inc. ("FAME") conducted
as of April 29, 1998; provided, that this Section 10.2 shall not prevent
Employee from owning no more than 5% of any class of securities of any
publicly traded entity. The material businesses of FAME conducted as of
April 29, 1998 shall be limited to the representation, as a sports agent in
contract and marketing negotiations, of male basketball and football
athletes in professional sports, and shall exclude, without limitation,
such representation of (a) athletes in sports other than basketball and
football and (b) female professional athletes, as well as the management,
marketing and/or operation of professional sports teams, sports leagues,
sports organizational committees or other sports businesses (or related
consulting or other services), and the organization or the sponsorship of
sports leagues.

10.3. No Solicitation of Other Employees. Employee additionally agrees
that, throughout the Term of Employment and for a period of one (1) year
after the termination of the Term of Employment by Employer for Cause or by
Employee on his own initiative (other than due to a Constructive
Termination Event), Employee shall not directly or indirectly, solicit, or
attempt to solicit, any employee of Employer's Affiliated Group to leave
Employer's Affiliated Group for any reason whatsoever.

10.4. Definition of Affiliated Group. As used above, the term
"Employer's Affiliated

22
<PAGE>

Group" shall mean Employer and all corporations, partnerships or other
organizations which, directly or indirectly, are controlled by Employer.

10.5. Extraordinary Remedies. In the event of a breach of Employee's
covenants in this Section 10, it is understood and agreed that Employer
shall be entitled to injunctive relief as well as other applicable remedies
at law or in equity available to Employer against Employee or others.

10.6. Survival. The provisions of this Section 10 shall survive the
termination of the Term of Employment and the termination of this Agreement
to the extent applicable; it being understood that in the event of a
termination of the Term of Employment pursuant to Sections 5.1.1, 5.1.2 or
5.1.3 hereof, the provisions of this Section 10 shall be of no force or
effect.

11. Disclosure of Confidential Information. Except to the extent (a)
authorized by the express prior consent of the Board, (b) required by law or any
legal process or (c) desirable in performing his duties under this Agreement,
Employee will not, directly or indirectly, at any time during the Term of
Employment, or at any time subsequent to the termination of the Term of
Employment, disseminate, disclose, or divulge to any person, firm, corporation,
association or other business entity, Confidential Information (herein defined)
of Employer. As used herein, the term "Confidential Information" means any and
all information about or relating to the trade secrets of Employer or any of its
subsidiaries disclosed to Employee or known by Employee as a consequence of or
through his employment by Employer, if such information is not generally known
in any industry in which Employer or any of its subsidiaries is or may become
engaged during the Term of Employment. In the event of a breach or threatened
breach by Employee of this Section 10, Employer shall be entitled to injunctive
relief as well as other applicable remedies at law or in equity available to
Employer against Employee or others.

23
<PAGE>

12. Notice. Any notice, request, reply, instruction, or other communication
provided or permitted in this Agreement must be given in writing and may be
served by depositing same in the United States mail in certified or registered
form, postage prepaid, addressed to the Party or Parties to be notified with
return receipt requested, or by delivering the notice in person to such Party or
Parties. Unless actual receipt is required by any provision of this Agreement,
notice deposited in the United States mail in the manner herein prescribed shall
be effective on dispatch. For purposes of notice, the address of Employee, his
spouse, any purported donee or transferee or any administrator, executor or
legal representative of Employee or his estate, as the case may be, shall be as
follows:

The address of Employee shall be:

c/o SFX Sports Group, Inc.
5335 Wisconsin Avenue, N.W.
Washington, D.C. 20015

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Mitchell Presser

The address of Employer shall be:

SFX Entertainment, Inc.
650 Madison Avenue
New York, New York 10022
Attention: Howard J. Tytel

24
<PAGE>

with a copy to:

Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: Jonathan Goldstein

Employer shall have the right from time-to-time and at any time to change
its address and shall have the right to specify as its address any other address
by giving at least ten (10) days written notice to Employee. Employee shall have
the right from time-to-time and at any time to change his address and shall have
the right to specify as his address any other address by giving at least ten
(10) days written notice to Employer.

13. Vacation. Employee shall be entitled to a minimum of four (4) weeks of
paid vacation during each calendar year, but in no event less than the vacation
provided to other Senior Executives of Employer.

14. Controlling Law. The execution, validity, interpretation and
performance of this Agreement shall be determined and governed by the laws of
the State of Maryland.

15. Entire Agreement. This Agreement contains the entire agreement of the
Parties with respect to the employment of Employee, and any prior employment
agreement between Employer and Employee shall be terminated effective as of the
Effective Date.

16. Severability. If any provision of the Agreement is rendered or declared
illegal or unenforceable by reason of any existing or subsequently enacted
legislation or by decree of a court of last resort, the Parties shall promptly
meet and negotiate substitute provisions for those rendered or declared illegal
or unenforceable, but all remaining provisions of this Agreement shall remain in
full force and effect.

25
<PAGE>

17. Effect of Agreement, Assignment, Required Assumption. This Agreement
shall be binding upon Employee and his heirs, executors, administrators, legal
representatives, successors and assigns and the Employer and its successors and
assigns. Employee may not assign any rights or obligations hereunder without the
prior written consent of Employer and, except with respect to a successor entity
(as described below), Employer may not assign any rights or obligations
hereunder without the prior written consent of Employee. Employer shall require
any person who is the successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or a substantial portion of the
business or assets of Employer to expressly assume the obligations of Employer
hereunder. The term "Employer" as used in this Agreement shall expressly include
any such successors.

18. Indemnification. Employer shall indemnify Employee and his legal
representatives to the fullest extent permitted by the laws of the State of
Delaware, and Employee shall be entitled to the protection of such insurance
policies which Employer maintains for the benefit of its directors and officers,
against all costs, charges or expenses whatsoever incurred or sustained by him
or his legal representatives in connection with any action, suit or proceeding
to which he or his legal representatives may be made a party by reason of his
being or having been a director of officer of Employer, or because of actions
taken purportedly on behalf of Employer after the Effective Date. Employer
shall, upon request by Employee, promptly advance or pay any amount for costs,
charge or expenses (including, without limitation, legal fees and expenses
incurred by counsel retained by Employee) in respect of his right to
indemnification hereunder, subject to a later determination as to Employee's
ultimate right to receive such payment. Employee's identification and the
insurance policies maintained for his benefit shall be at least to the same
extent, of the same type and in the same amount as that maintained by Employer
for the Chief Executive Officer of Employer, as may be amended from
time-to-time.

26
<PAGE>

19. Legal Fees and Expenses. Employee shall be entitled to receive from
Employer the amount of his legal fees (and expenses) reasonably incurred in
connection with claims or disputes under this Agreement, if Employee is the
prevailing party on any issue in any such dispute. The reimbursement shall be
made as soon as practicable following the resolution of such claim or dispute to
the extent Employer receives reasonable written evidence of such fees and
expenses.

20. Amendments; Waivers. This Agreement cannot be changed, modified or
amended, and no provision or requirement hereof may be waived, without an
affirmative vote of the Board, and the consent in writing of Employee and
Employer. The failure of a party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such party at a
later time to enforce the same. No waiver by a party of the breach of any term
or covenant contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.

21. Beneficiaries. Whenever this Agreement provides for any payment to
Employee's estate, such payment may be made instead to such beneficiary or
beneficiaries as Employee may have designated in a writing filed with Employer.
Employee shall have the right to revoke any such designation and to redesignate
a beneficiary or beneficiaries by written notice to Employer (and any applicable
insurance company) to such effect.

22. Resolution of Disputes. Any dispute or controversy between the parties
relating to or arising out of this Agreement or any amendment or modification
hereof shall be determined by arbitration in New York, New York by and pursuant
to the rules then prevailing of the American Arbitration Association, other than
claims for injunctive relief under Sections 10 or 11. All claims

27
<PAGE>

for legal remedies under this Agreement shall be limited to the actual damages
of Employer or Employee, respectively, but shall not limit any payments or
damages provided to Employee under the terms of this Agreement. The arbitration
award shall be final and binding upon the parties and judgment may be entered
there on by any court of competent jurisdiction. The service of any notice,
process, motion or other document in connection with any arbitration under this
Agreement or the enforcement of any arbitration award hereunder may be
effectuated either by personal service upon a party or by certified mail duly
addressed to him or to his executors, administrators, personal representatives,
next of kin, successors or assigns, at the last known address or addresses of
such party or parties.

23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original. It shall not be
necessary when making proof of this Agreement to account for more than one
counterpart.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.

SFX ENTERTAINMENT, INC.

/s/ By: /s/ David Falk
- ---------------------------- ----------------------------
Title: David Falk
Name:

<PAGE>

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Employment
Agreement"), made as of January 15, 2000, between SFX ENTERTAINMENT, INC., a
Delaware corporation (the "Employer"), and ROBERT F. X. SILLERMAN (the
"Executive").

WHEREAS, the Executive is currently employed by the Employer, pursuant
to an Employment Agreement, dated as of May 28, 1998, between the Executive and
the Employer (the "Original Employment Agreement"); and

WHEREAS, the Board of Directors of the Employer (the "Board") has
determined that it is in the best interests of the Employer to enter into a new
employment agreement with the Executive which shall amend and restate in its
entirety the Original Employment Agreement, in order to be assured of the
Executive's continued services as a member of senior management of the Employer
upon the terms and provisions and subject to the conditions hereinafter set
forth; and

WHEREAS, in order to retain the services of the Executive, the Employer
has agreed to issue to the Executive options to purchase shares of stock of the
Employer and, pursuant to such agreement, on the review and recommendation of
the Compensation Committee (the "Compensation Committee") of the Board, the
Employer has granted to the Executive options to purchase a total of 1,200,000
shares of Class A Common Stock, par value $.0l per share, of the Employer (the
"Class A Stock"), having a term of five (5) years, of which 750,000 options are
exercisable at an exercise price of $3.67 per share, and 450,000 options are
exercisable at an exercise price of $16.08 per share (collectively, the "January
2000 Options"), which options fully vest on the date of this Employment
Agreement, and to simultaneously forgive and renounce all Company rights
connected with any loans made to the Executive prior to the effective date of
this agreement; and

WHEREAS, the Compensation Committee and the Board approved the terms
and conditions of this Employment Agreement;

NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the Employer and the Executive
agree as follows:

1. Employment. Upon the terms and subject to the conditions of
this Employment Agreement, the Employer hereby employs the Executive and the
Executive hereby accepts employment by the Employer.

2. Term.

2.1 The term of the Executive's employment hereunder shall
commence as of the date hereof and continue until the fifth anniversary thereof,
unless terminated earlier in accordance with the provisions of this Employment
Agreement; provided, however, that this Employment Agreement shall automatically
be renewed for additional one-year periods thereafter unless and until
terminated by the Employer or the Executive as of the end of such five-year
initial period or

<PAGE>

at the end of any renewal period by written notice given at least 30 days prior
to the scheduled termination or scheduled renewal of this Employment Agreement.
The date of the commencement of employment pursuant to this Employment Agreement
is hereinafter referred to as the "Effective Date," the term of employment
pursuant to this Employment Agreement is hereinafter referred to as the "Term"
and the last date of employment pursuant to this Employment Agreement is
hereinafter referred to as the "Termination Date."

3. Executive's Position, Duties, and Authority.

3.1 The Employer shall employ the Executive, and the Executive
shall serve, as Executive Chairman and as a Member of the Office of the Chairman
of the Employer and of any successor by merger, acquisition of substantially all
of the assets of the Employer or otherwise.

3.2 The Executive shall have executive duties, functions,
authority and responsibilities commensurate with the office or offices he from
time to time holds with the Employer.

3.3 The Executive shall serve without additional remuneration as
(a) a member of any committee of the Board, as determined by the Board; and (b)
a director and/or officer of one or more of the Employer's subsidiaries, if
appointed to such position by the Employer.

4. Full-time Services. The Executive shall devote substantially
all of his business time to the business and affairs of the Employer and to the
fulfillment of his duties hereunder in a diligent and competent fashion to the
best of his abilities. Notwithstanding the foregoing, (a) the Executive shall
have the right to continue to fulfill his obligations as a director and officer
of companies in which he currently serves in such capacity, including without
limitation, Sillerman Communications Management Corporation, The Sillerman
Companies, Inc., Sillerman Management Company, Inc. and The Marquee Group, Inc.,
and (b) shall have the right to devote a portion of his business time to
personal investments and commitments not related to the Prohibited Business (as
such term is defined in Section 16.1 hereof). In addition, except as provided in
Section 16, the Executive may serve on the boards of directors of other
organizations and companies; provided that the service on such other boards of
directors does not interfere with the performance of the Executive's services
hereunder.

5. Location of Employment. Unless the Executive consents
otherwise in writing, the headquarters for performance of his services hereunder
shall be the principal offices of the Employer in New York, New York, or at such
other location within 25 miles of the residence of the Executive as the
Executive shall approve of.

6. Base Salary. During the Term, the Employer shall pay or cause
to be paid to the Executive an initial base salary per annum (the "Base Salary")
which shall initially be $625,000, payable in monthly installments. Upon each
anniversary of the commencement of the Executive's employment hereunder, the
Base Salary then in effect shall be increased by an amount equal to the greater
of (a) five percent of the Base Salary then in effect or (b) the product of (i)
the Base Salary then in effect and (ii) the percentage increase in the Consumer
Price Index during the previous twelve full calendar months. In addition, the
Board shall review the Executive's Base Salary at least annually and may by
action of the Board, after and pursuant to

<PAGE>

the affirmative recommendation of the Compensation Committee, increase, but not
decrease, such Base Salary, as such salary may have been increased, at any time
and from time to time during the Term.

7. Bonus; Option Grant.

7.1 The Executive shall be entitled to receive an annual incentive
bonus (the "Bonus") consisting of (a) a guaranteed cash bonus of $600,000 per
annum (the "Cash Bonus) payable on each anniversary of this Employment Agreement
plus (b) an additional discretionary bonus payable in cash, stock, options or
other compensation, during the continuance of the Executive's employment
hereunder as determined by the Board, after and pursuant to the affirmative
recommendation of the Compensation Committee. The Bonus shall be payable within
a reasonable period of time not to exceed ninety (90) days following the end of
each fiscal year of the Employer. To the extent that the Executive is granted
options to acquire shares of the Class A Stock of the Employer, such options
shall have an exercise price equal to the average closing ask and bid price of
the Class A Stock on the date of the grant and shall be exercisable for 10 years
and shall vest on a schedule to be determined by the Board but in no event shall
the vesting schedule be more than five years. Notwithstanding the foregoing, in
the event that the Executive ceases to be employed by the Employer for any
reason whatsoever, all options issued pursuant to this Section 7 shall vest
immediately and Executive shall retain the right to exercise each such option
during the remaining term of each such grant.

7.2 The Employer hereby confirms the grant to the Executive of the
January 2000 Options, to be evidenced by option documentation to be entered into
by the Employer and the Executive.

8. Expenses. The Employer shall pay or reimburse the Executive
for all reasonable expenses actually incurred or paid by the Executive during
the Term of employment in the performance of the Executive's services hereunder
upon presentation of expense statements or vouchers or such other supporting
information as the Employer may reasonably require of the Executive. The
Employer shall make an automobile available for Executive's exclusive use while
employed under this Employment Agreement.

10. Existing Life Insurance. The Employer shall have the right to
obtain up to $5,000,000 of life insurance on the life of Executive and to be the
beneficiary of such policy. The Executive shall cooperate in assisting the
Employer to obtain such insurance. The Employer shall continue to pay all
premiums on such policies and shall maintain such policies, subject to the
insurability of the Executive, if required to keep such policies in effect
during the Term.

<PAGE>

11. Indemnification. The Executive shall be entitled in connection
with his employment hereunder and in connection with his services as a director
of the Employer to the benefit of the indemnification provisions contained on
the date hereof in the bylaws and certificate of incorporation of the Employer,
as the same may hereafter be amended (not including any amendments or additions
that limit or narrow, but including any that add to or broaden, the protection
afforded to the Executive), to the fullest extent permitted by applicable law.
The Employer shall in addition cause the Executive to be indemnified in
accordance with Section 145 of the Delaware General Corporation Law to the
fullest extent permitted by said Section, in the Executive's capacity as an
officer and a director, to the extent required to make the Executive whole in
connection with any loss, costs or expense indemnifiable thereunder. The
indemnification obligations of the Employer hereunder shall survive from the
date hereof until three (3) months after the expiration of the applicable
statute of limitations with respect to any claim made against the Executive for
which the Executive seeks indemnification (the "Survival Period") and shall
survive thereafter with respect to any indemnification claim as to which the
Employer has received notice on or prior to the end of the Survival Period. The
Employer shall prepay in full, and maintain in full force and effect during the
Survival Period for the benefit of the Executive, on an "occurrence" basis, the
Employer's current directors and officers errors and omissions insurance policy,
or a similar insurance policy providing equivalent coverage from a financially
reputable carrier, in form and substance reasonably acceptable to the Executive.

In addition to the foregoing, the Employer hereby indemnifies the
Executive to the extent the Executive waived, released or agreed to limit in any
way any way rights to indemnification from SFX Broadcasting, Inc. ("SFX
Broadcasting"), the SBI Holding Corporation ("Buyer") and SBI Radio Acquisition
Corporation ("Buyer Sub") pursuant to the terms of that certain letter
agreement, dated August 24, 1997, among the Executive SFX Broadcasting, Buyer
and Buyer Sub.

12. Confidential Information.

The Executive acknowledges that his employment by the Employer has
brought and will bring him into close contact with confidential proprietary
information of the Employer, including information regarding costs, profits,
markets, sales, products, key personnel, pricing policies, operational methods,
technical processes, other business affairs and methods, plans for future
developments, and other information not readily available to the public, the
disclosure of which to third parties would in each case have a material adverse
effect on the Employer's business operations (the "Confidential Information").
In recognition of the foregoing, the Executive covenants and agrees that:

(a) he will keep secret all Confidential Information and will not
intentionally disclose Confidential Information to anyone outside of the
Employer and its representatives other than in the course of performance of his
duties hereunder, either during or for a one year period after the Term except
with the Employer's written consent, provided that (i) the Executive shall have
no such obligation to the extent Confidential Information is or becomes publicly
known other than as a result of the Executive's breach of his obligations
hereunder and (ii) the Executive may, after giving prior notice to the Employer
to the extent practicable under the circumstances, disclose such matters to the
extent required by applicable laws or governmental regulations or judicial or
regulatory process; and

<PAGE>

(b) he will, at the Executive's option, either (i) deliver promptly to
the Employer on termination of his employment by the Employer or at any other
time the Employer may so request, and at the Employer's request, all memoranda,
notes, records, reports and other documents (and all copies thereof) relating to
the Employer's business, which he obtained while employed by, or otherwise
serving or acting on behalf of, the Employer and which he may then possess or
have under his control (the "Records"); or (ii) in lieu of subclause (i) above,
the Executive shall destroy all of the Records and shall deliver to the Employer
a certificate to that effect.

13. Termination.

13.1 For purposes of this Employment Agreement the following
definitions shall apply:

13.1.1 "Cause" shall mean:

(a) the Executive is convicted of a felony involving moral turpitude
which would render the Executive unable to perform his duties set forth in this
Employment Agreement; or

(b) the Executive engages in conduct that constitutes willful gross
neglect or willful gross misconduct in carrying out his duties under this
Employment Agreement, resulting, in either case, in material economic harm to
the Employer, unless the Executive believed in good faith that such act or
nonact was in the best interests of the Employer.

13.1.2 A "Change in Control" shall mean the occurrence of any one of
the following events:

(a) any "person," as such term is used in Sections 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934, as amended (other than the Executive or
entities controlled by the Executive), becomes a "beneficial owner," as such
term is used in Rule 13d-3 promulgated under that Act, of 25% or more of the
voting power of the Employer;

(b) all or substantially all of the assets or business of the Employer
is disposed of pursuant to a merger, consolidation or other transaction (unless
the shareholders of the Employer immediately prior to such merger, consolidation
or other transaction beneficially own, directly or indirectly, in substantially
the same proportion as they owned the voting power of the Employer, all of the
voting power or other ownership interests of the entity or entities, if any,
that succeed to the business of the Employer);

(c) the Employer combines with another company and is the surviving
corporation but, immediately after the combination, the shareholders of the
Employer immediately prior to the combination hold, directly or indirectly, 50%
or less of the voting power of the combined company; or

<PAGE>

was supported by two-thirds of the directors who then comprise the incumbent
directors shall be considered an incumbent director.

13.1.3 "Constructive Termination Without Cause" shall mean a
termination of the Executive's employment at his initiative as provided in this
Section 13 following the occurrence, without the Executive's written consent, of
one or more of the following events:

(a) a reduction in the Executive's then current Base Salary or failure
by the Employer to fulfill its obligations under Sections 6, 7, 8 or 9 above;

(b) the failure to elect or reelect the Executive to any of the
positions described in Section 3 hereof or the removal of him from any such
position;

(c) a material diminution in the Executive's duties or the assignment
to the Executive of duties which are materially inconsistent with his duties or
which materially impair the Executive's ability to function as the Executive
Chairman and Member of the Office of the Chairman of the Employer; or

(d) the failure of the Employer to obtain the assumption in writing of
its obligation to perform this Employment Agreement by any successor to all or
substantially all of the assets of the Employer within 15 days after a merger,
consolidation, sale or similar transaction.

13.2 Termination by the Employer for Cause.

A termination for Cause shall not take effect unless all of the
provisions of this Section 13.2 are complied with. The Executive shall be given
written notice by the Board of the intention to terminate him for Cause, such
notice (a) to state in detail the particular act or acts or failure or failures
to act that constitute the grounds on which the proposed termination for Cause
is based and (b) to be given within three months of the Board learning of such
act or acts or failure or failures to act. The Executive shall have 10 business
days after the date that such written notice has been given to the Executive in
which to cure such conduct, to the extent such cure is possible. If he fails to
cure such conduct, the Executive shall then be entitled to a hearing before the
Board. Such hearing shall be held within 15 business days of such notice to the
Executive, provided he requests such hearing within 10 business days of the
written notice from the Board of the intention to terminate him for Cause. If,
within five business days following such hearing, the Executive is furnished
written notice by the Board confirming that, in its judgment, grounds for Cause
on the basis of the original notice exist, he shall thereupon be terminated for
Cause.

13.2.1 In the event the Employer terminates the Executive's
employment for Cause, he shall be entitled to:

(a) the Base Salary through the date the of termination of his
employment for Cause; and

(b) a Bonus for the year in which he was terminated equal to the Bonus
for the year prior to such termination, prorated over the time elapsed during
the year in which he was terminated.

<PAGE>

13.2.2 In the event the Employer terminates the Executive's
employment for Cause, the Executive shall have no further obligations or
liability to the Employer (except his obligations under Sections 12 and 16,
which shall survive).

13.3 Termination Without Cause or Constructive Termination Without
Cause. In the event the Executive's employment is terminated without Cause,
other than due to disability or death, or in the event there is a Constructive
Termination Without Cause, the Executive shall be entitled to:

(a) the Base Salary through the date of termination of the Executive's
employment;

(b) the Base Salary, at the annualized rate in effect on the date of
termination of the Executive's employment (or in the event a reduction in Base
Salary is the basis for a Constructive Termination Without Cause, then the Base
Salary in effect immediately prior to such reduction), for a period of 36 months
following such termination or until the end of the Term, whichever is longer;
provided that, at the Executive's option, the Employer shall pay him the present
value of such salary continuation payments in a lump sum within thirty (30) days
of the effective date of such termination (using as the discount rate 75% of the
prime rate (as published by The Wall Street Journal) for the first business day
of the month in which such termination occurs);

(c) a Bonus for the unexpired Term not less than the $600,000.00
guaranteed cash bonus provided in Section 7.1(a) multiplied by all of the
year(s) and month(s) remaining in the then unexpired Term; provided that, at the
Executive's option, the Employer shall pay him the present value of such salary
and bonuses in a lump sum within thirty (30) days of the effective date of such
termination (using as the discount rate 75% of the prime rate (as published by
The Wall Street Journal) for the first business day of the month in which such
termination occurs). Notwithstanding the foregoing, in no event shall the Base
Bonus Amount be less than $1,250,000; and

(d) all benefits provided in Section 9 hereof until the end of the
Term, with no additional cost or charge payable by the Executive.

<PAGE>

the Change in Control. The Executive shall forfeit any rights granted pursuant
to this Section 13.4 if the Executive, in his sole and absolute discretion and
without any obligation whatsoever to do so, accepts a written offer to remain
with the surviving company in an executive position with equivalent duties,
authority and responsibility as the Executive currently holds (other than as a
non-employee director).

13.4.1 Payment Following a Change in Control. In the event that the
termination of the Executive's employment is as a result of a Change in Control
and the aggregate of all payments or benefits made or provided to the Executive
under this Employment Agreement and under all other plans and programs of the
Employer (the "Aggregate Payment") is determined to constitute a Parachute
Payment, as such term is defined in Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"), the Employer shall pay
to the Executive, prior to the time any excise tax imposed by Section 4999 of
the Internal Revenue Code ("Excise Tax") is payable with respect to such
Aggregate Payment, an additional amount which, after the imposition of all
income and excise taxes thereon, is equal to 120% of the Excise Tax on the
Aggregate Payment The determination of whether the Aggregate Payment constitutes
a Parachute Payment and, if so, the amount to be paid to the Executive and the
time of payment pursuant to this subsection shall be made by an independent
auditor (the "Auditor") jointly selected by the Employer and the Executive and
paid by the Employer. The Auditor shall be a nationally recognized United States
public accounting firm which has not, during the two years preceding the date of
its selection, acted in any way on behalf of the Employer or any affiliate
thereof. If the Executive and the Employer cannot agree on the firm to serve as
the Auditor, then the Executive and the Employer shall each select one
accounting firm and those two firms shall jointly select the accounting firm to
serve as the Auditor.

13.5 Voluntary Termination. In the event of a termination of
employment by the Executive on his own initiative other than (i) a termination
due to death or disability; (ii) a Constructive Termination without Cause; or
(iii) a Change in Control (which event may be represented to third parties, at
the Executive's sole option as a voluntary separation mutually agreed to between
and among the Employer, the Company, and the Executive), the Executive shall
have the same entitlements as provided in Section 13.2 above for a termination
for Cause. A voluntary termination under this Section 13.5 (i), (ii), or (iii)
shall be effective upon reasonable prior written notice to the Employer, need
not be provided in the event of termination due to death or the consummation of
a Change in Control, and in no event shall the occurrence of any event
contemplated by Section 13.5 (i), (ii), or (iii) be deemed as the Executive's
breach of this Employment Agreement.

13.6 Stock Options. Notwithstanding anything to the contrary, upon
termination for any reason whatsoever, the Executive shall have the immediate
right to exercise any stock options in full, whether or not such option is fully
exercisable on the date of termination, for the remainder of the original term
of each such stock option.

13.7 No Mitigation; No Offset. In the event of any termination of
employment under this Employment Agreement, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due the Executive under this Employment Agreement on account of any remuneration
attributable to any subsequent employment that he may obtain.

<PAGE>

13.8 Assumption of Certain Obligations of SFX Broadcasting. The
Employer hereby assumes the obligations of SFX Broadcasting set forth in Section
13.4.1 of the Amended and Restated Employment Agreement, dated as of January 1,
1997, between the Executive and SFX Broadcasting.

13.9 Option Adjustment. The number of options issuable pursuant to
this Section 13 and the per share exercise price thereof shall be subject to
appropriate adjustment to give effect to any increase or decrease in the number
of issued shares resulting from a reorganization, recapitalization, stock split,
spin-off or other similar action.

14. Disability.

14.1 If during his active employment hereunder the Executive shall
become physically or mentally disabled, whether totally or partially, so that he
is prevented from performing his usual duties for a period of six consecutive
months, the Employer shall, nevertheless, pay the Executive his full Base Salary
and Bonus in respect of the period ending on the last day of the sixth
consecutive month of disability (such last day being referred to herein as the
"Disability Date") and the following additional provisions shall apply:

14.2 If the Executive has not resumed his usual duties on or prior
to the Disability Date, the Executive's employment shall terminate and the
Employer shall pay, unless prior to the date the Executive became physically or
mentally disabled a notice of termination was delivered to the Executive, 75% of
his Base Salary from the Disability Date through the end of the Term (without
giving effect to any early termination provisions contained in this Employment
Agreement) and, except as provided in Section 14.4, the Employer shall have no
obligation to pay Bonus to the Executive in respect of periods after the
Disability Date. Any Base Salary payable pursuant to this Section 14.2 shall be
reduced by the amount of any benefits payable to the Executive under any group
or individual disability insurance plan or policy, the premiums for which are
paid primarily by the Employer;

14.3 Unless the Employer exercises its option under Section 14.4 to
restore the Executive to his full compensation, duties, functions, authority and
responsibilities hereunder, the Executive shall have no obligations or
liabilities hereunder from and after the Disability Date (except for his
obligations under Sections 12 and 16, which shall survive); and

14.4 If during the Term and subsequent to a Disability Date, the
Executive shall recover fully from a disability, the Employer, by action of the
Board, shall have the right (exercisable within sixty days after notice from the
Executive of such recovery), but not the obligation, to restore the Executive to
employment and to full compensation and his full level of duties, functions,
authority and responsibilities hereunder.

15. Death of Executive.

15.1 Upon the Executive's death, whether prior to or subsequent to
his Disability Date and prior to the delivery of a notice of termination, this
Employment Agreement and all of the Employer's obligations to pay salary and
Bonus hereunder shall terminate except as provided in Sections 15.2 through
15.4.

<PAGE>

15.2 The Executive's estate or designated beneficiary shall be
entitled to receive (a) any unpaid portions of the Executive's Base Salary in
respect of the period ending on the Executive's date of death, (b) unpaid Bonus
in respect of years prior to the year of death, and (c) immediately vested
options to purchase 150,000 shares of Class A Stock at an exercise price equal
to the exercise price of the last stock option granted by the Employer to the
Executive prior to the Executive's death. In addition, the Employer shall pay to
such estate or beneficiary an amount equal to the present value of all the
remaining Base Salary, calculated assuming annual compound interest at 75% of
the prime rate (as published in The Wall Street Journal) for the first business
day of the month in which the Executive's death occurs.

15.3 The Base Salary and Bonus payable pursuant to this Section 15
shall be reduced by the value of any benefits payable to the Executive's estate
or designated beneficiary under any life insurance plan or policy the premiums
for which are paid primarily by the Employer, other than such insurance
identified in Section 10.

16. Non-competition.

16.1 During the Term, the Executive will not, without the prior
written approval of the Board, become employed by, or become an officer,
director, or general partner of, any partnership, corporation or other entity
which acts as a promoter, producer or venue operator in the live entertainment
business or which acts as a marketing and management company specializing in the
representation of team sports athletes (the "Prohibited Business"); provided
that nothing herein shall prohibit the Executive from continuing to fulfill his
obligations as an officer, director or partner of companies or entities in which
he currently serves in any such capacities.

16.2 Subject to the following proviso, for a period of one year
following the termination of the Executive's employment hereunder, the Executive
will not become employed by, or become an officer, director or general partner
of, any partnership, corporation or other entity which is primarily engaged in
the Prohibited Business; provided however, that during such one year period the
Employer shall employ the Executive as a consultant with compensation at a rate
equal to fifty percent of the Employer's Base Salary immediately prior to such
termination. If the Employer elects not to employ the Executive as a consultant
for such one year period as provided herein, the provisions of this Section 16.2
shall not apply and the Executive shall be free to engage in any activity
referred to herein

17. Notices. All notices, requests, consents and other
communications, required or permitted to be given hereunder, shall be in writing
and shall be deemed to have been duly given if delivered personally or sent by
prepaid telegram, or mailed first class, postage prepaid, by registered or
certified mail, as follows (or to such other or additional address as either
party shall designate by notice in writing to the other in accordance herewith):

17.1 If to the Employer:

SFX Entertainment, Inc.
650 Madison Avenue, 16th Floor
New York, New York 10022

<PAGE>

Attention: Board of Directors

17.2 If to the Executive:

Robert F. X. Sillerman
157 East 70th Street
New York, New York 10021

17.3 Copies of all communications given hereunder shall also be
delivered or sent, in like fashion, to Winston & Strawn (attention: Jonathan
Goldstein, Esq.) at 200 Park Avenue, New York, New York 10166.

18. General.

18.1 Governing Law. This Employment Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York.

18.2 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Employment Agreement

18.3 Entire Agreement. This Employment Agreement, including any
Exhibits attached hereto, sets forth the entire agreement and understanding of
the parties relating to the subject matter hereof, and supersedes all prior
and/or contemporaneous agreements, arrangements and understandings, written or
oral, between the parties with respect to such subject matter (including,
without limitation, the Original Employment Agreement), except as specifically
provided herein.

18.4 Successors and Assigns. This Employment Agreement, and the
Executive's rights and obligations hereunder, may not be assigned by the
Executive, except that the Executive may designate pursuant to Section 18.6 one
or more beneficiaries to receive any amounts that would otherwise be payable
hereunder to the Executive's estate. This Employment Agreement shall be binding
on any successor to the Employer, whether by merger, acquisition of
substantially all of the Employer's assets or otherwise, as fully as if such
successor were a signatory hereto and the Employer shall cause such successor
to, and such successor shall, expressly assume the Employer's obligations
hereunder. Notwithstanding anything else herein contained, the term "Employer",
as used in this Employment Agreement, shall include all such successors.

18.5 Amendments; Waivers. This Employment Agreement cannot be
changed, modified or amended, and no provision or requirement hereof may be
waived, without an affirmative vote of the Board after the affirmative
recommendation of the Compensation Committee of the Board, and the consent in
writing of the Executive and the Employer. The failure of a party at any time or
times to require performance of any provision hereof shall in no manner affect
the right of such party at a later time to enforce the same. No waiver by a
party of the breach of any term or covenant contained in this Employment
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Employment Agreement.

<PAGE>

18.6 Beneficiaries. Whenever this Employment Agreement provides for
any payment to the Executive's estate, such payment may be made instead to such
beneficiary or beneficiaries as the Executive may have designated in a writing
filed with the Employer. The Executive shall have the right to revoke any such
designation and to redesignate a beneficiary or beneficiaries by written notice
to the Employer (and to any applicable insurance company) to such effect.

[The remainder of this page has intentionally been left blank]

<PAGE>

IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the date first above written.

SFX ENTERTAINMENT, INC.

By: /s/ Michael G. Ferrel
---------------------------------------
Name:
Title:

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

<PAGE>

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

WHEREAS, in order to retain the services of the Executive, the Employer
has agreed to issue to the Executive options to purchase shares of stock of the
Employer and, pursuant to such agreement, on the review and recommendation of
the Compensation Committee (the "Compensation Committee") of the Board, the
Employer has granted to the Executive options to purchase a total of 400,000
shares of Class A Common Stock, par value $.0l per share, of the Employer (the
"Class A Stock"), having a term of five (5) years, of which 250,000 options are
exercisable at an exercise price of $3.67 per share and 150,000 options are
exercisable at an exercise price of $16.08 per share (collectively, the "January
2000 Options"), which options fully vest on the date of this Employment
Agreement, and to simultaneously forgive and renounce all Company rights
connected with any loans made to the Executive prior to the effective date of
this agreement; and

WHEREAS, the Compensation Committee and the Board approved the terms
and conditions of this Employment Agreement;

NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the Employer and the Executive
agree as follows:

1. Employment. Upon the terms and subject to the conditions of
this Employment Agreement, the Employer hereby employs the Executive and the
Executive hereby accepts employment by the Employer.

2. Term.

<PAGE>

3. Executive's Position, Duties, and Authority.

3.1 The Employer shall employ the Executive, and the Executive
shall serve, as President, Chief Executive Officer and as a Member of the Office
of the Chairman of the Employer and of any successor by merger, acquisition of
substantially all of the assets of the Employer or otherwise.

3.2 The Executive shall have executive duties, functions,
authority and responsibilities commensurate with the office or offices he from
time to time holds with the Employer.

4. Duties.

4.1 Full-time Services. The Executive shall devote substantially
all of his business time to the business and affairs of the Employer and to the
fulfillment of his duties hereunder in a diligent and competent fashion to the
best of his abilities; provided, however, that the Executive may engage in other
activities such as charitable, educational, religious and similar types of
activities, to the extent that such activities do not prohibit or prevent the
performance of the Executive's duties under this Employment Agreement, or
inhibit or conflict in any material way with the business of the Employer.

4.2 Business Opportunities. The Executive covenants and agrees
that for so long as he is actively employed by the Employer he shall inform the
Employer of each business opportunity related to the business of the Employer of
which he becomes aware, and that he will not, directly or indirectly, exploit
any such opportunity for his own account nor will he render any services to any
other person or business or acquire any interest of any type in any other
business, which is in competition with the Employer; provided, however, that the
foregoing shall not be deemed to prohibit the Executive from acquiring, solely
as an investment (a) up to 10% of any securities of a partnership, trust,
corporation or other entity so long as he remains a passive invest or in such
entity and such entity is not, directly or indirectly, in competition with the
Employer, or (b) up to 0.5% of any securities of any publicly traded
partnership, trust, corporation or other entity provided he remains a passive
investor in such entity.

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<PAGE>

6. Base Salary. During the Term, the Employer shall pay or cause
to be paid to the Executive an initial base salary per annum (the "Base Salary")
which shall initially be $525,000, payable in monthly installments. Upon each
anniversary of the commencement of the Executive's employment hereunder, the
Base Salary then in effect shall be increased by an amount equal to the greater
of (a) five percent of the Base Salary then in effect or (b) the product of (i)
the Base Salary then in effect and (ii) the percentage increase in the Consumer
Price Index during the previous twelve full calendar months. In addition, the
Board shall review the Executive's Base Salary at least annually and may by
action of the Board, after and pursuant to the affirmative recommendation of the
Compensation Committee, increase, but not decrease, such Base Salary, as such
salary may have been increased, at any time and from time to time during the
Term.

7. Bonus; Option Grant.

7.1 The Executive shall be entitled to receive an annual incentive
bonus (the "Bonus") consisting of (a) a guaranteed cash bonus of $300,000 per
annum (the "Cash Bonus), payable on each anniversary of this Employment
Agreement, plus (b) an additional discretionary bonus payable in cash, stock,
options or other compensation, during the continuance of the Executive's
employment hereunder as determined by the Board, after and pursuant to the
affirmative recommendation of the Compensation Committee.

7.2 The Employer hereby confirms the grant to the Executive of the
January 2000 Options, to be evidenced by option grant documentation to be
entered into by the Employer and the Executive.

10. Existing Life Insurance. The Employer shall have the right to
obtain life insurance on the life of Executive and to be the beneficiary of such
policy. The Executive shall cooperate in assisting the Employer to obtain such
insurance. The Employer shall continue to pay

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<PAGE>

all premiums on such policies and shall maintain such policies, subject to the
insurability of the Executive, if required to keep such policies in effect
during the Term.

11. Indemnification. The Executive shall be entitled in connection
with his employment hereunder and in connection with his services as a director
of the Employer to the benefit of the indemnification provisions contained on
the date hereof in the bylaws and certificate of incorporation of the Employer,
as the same may hereafter be amended (not including any amendments or additions
that limit or narrow, but including any that add to or broaden, the protection
afforded to the Executive), to the fullest extent permitted by applicable law.
The Employer shall in addition cause the Executive to be indemnified in
accordance with Section 145 of the Delaware General Corporation Law to the
fullest extent permitted by said Section, in Executive's capacity as an officer
and a director, to the extent required to make the Executive whole in connection
with any loss, costs or expense indemnifiable thereunder. The indemnification
obligations of the Employer hereunder shall survive from the date hereof until
three (3) months after the expiration of the applicable statute of limitations
with respect to any claim made against the Executive for which the Executive
seeks indemnification (the "Survival Period") and shall survive thereafter with
respect to any indemnification claim as to which the Employer has received
notice on or prior to the end of the Survival Period. The Employer shall prepay
in full, and maintain in full force and effect during the Survival Period for
the benefit of the Executive, on an "occurrence" basis, the Employer's current
directors and officers errors and omissions insurance policy, or a similar
insurance policy providing equivalent coverage from a financially reputable
carrier, in form and substance reasonably acceptable to the Executive.

12. Confidential Information.

(a) he will keep secret all Confidential Information and will not
intentionally disclose Confidential Information to anyone outside of the
Employer and its representatives other than in the course of performance of his
duties hereunder, either during or for a one year period after the Term except
with the Employer's written consent, provided that (i) the Executive shall have
no such obligation to the extent Confidential Information is or becomes publicly
known other than as a result of the Executive's breach of his obligations
hereunder and (ii) the Executive may, after giving prior notice to the Employer
to the extent practicable under the circumstances, disclose such matters to the
extent required by applicable laws or governmental regulations or judicial or
regulatory process; and

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<PAGE>

documents (and all copies thereof) relating to the Employer's business, which he
obtained while employed by, or otherwise serving or acting on behalf of, the
Employer and which he may then possess or have under his control (the
"Records"); or (ii) in lieu of subclause (i) above, the Executive shall destroy
all of the Records and shall deliver to the Employer a certificate to that
effect.

13. Termination.

13.1 For purposes of this Employment Agreement the following
definitions shall apply:

13.1.1 "Cause" shall mean:

(a) the Executive is convicted of a felony involving moral turpitude
which would render the Executive unable to perform his duties set forth in this
Employment Agreement; or

(b) the Executive engages in conduct that constitutes willful gross
neglect or willful gross misconduct in carrying out his duties under this
Employment Agreement, resulting, in either case, in material economic harm to
the Employer, unless the Executive believed in good faith that such act or
nonact was in the best interests of the Employer.

13.1.2 A "Change in Control" shall mean the occurrence of any one of
the following events:

(a) any "person," as such term is used in Sections 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934, as amended (other than the Executive or
members of management on the date hereof or otherwise appointed by the Board
which is comprised of a majority of "incumbent directors" or entities controlled
by them), becomes a "beneficial owner," as such term is used in Rule 13d-3
promulgated under that Act, of 25% or more of the voting power of the Employer;

(b) all or substantially all of the assets or business of the Employer
is disposed of pursuant to a merger, consolidation or other transaction (unless
the shareholders of the Employer immediately prior to such merger, consolidation
or other transaction beneficially own, directly or indirectly, in substantially
the same proportion as they owned the voting power of the Employer, all of the
voting power or other ownership interests of the entity or entities, if any,
that succeed to the business of the Employer);

(c) the Employer combines with another company and is the surviving
corporation but, immediately after the combination, the shareholders of the
Employer immediately prior to the combination hold, directly or indirectly, 50%
or less of the voting power of the combined company; or

(d) the majority of the Board consists of individuals other than
"incumbent directors," which term means members of the Board as of the date of
this Employment Agreement, except that any person who becomes a director
subsequent to such date whose election or nomination was supported by two-thirds
of the directors who then comprise the incumbent directors shall be considered
an incumbent director.

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<PAGE>

(a) a reduction in the Executive's then current Base Salary or failure
by the Employer to fulfill its obligations under Sections 6, 7, 8 or 9 above;

(b) the failure to elect or reelect the Executive to any of the
positions described in Section 3 hereof or the removal of him from any such
position;

(c) a material diminution in the Executive's duties or the assignment
to the Executive of duties which are materially inconsistent with his duties or
which materially impair the Executive's ability to function as the President,
Chief Executive Officer and Member of the Office of the Chairman of the
Employer; or

(d) the failure of the Employer to obtain the assumption in writing of
its obligation to perform this Employment Agreement by any successor to all or
substantially all of the assets of the Employer within 15 days after a merger,
consolidation, sale or similar transaction.

13.2 Termination by the Employer for Cause.

13.2.1 In the event the Employer terminates the Executive's
employment for Cause, he shall be entitled to:

(a) the Base Salary through the date the of termination of his
employment for Cause; and

(b) a Bonus for the year in which he was terminated equal to the Bonus
for the year prior to such termination, prorated over the time elapsed during
the year in which he was terminated.

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<PAGE>

(a) the Base Salary through the date of termination of the Executive's
employment;

(c) a Bonus for the unexpired Term not less than the $300,000.00
guaranteed cash bonus provided in Section 7.1(a) multiplied by all of the
year(s) and month(s) remaining in the then unexpired Term; provided that, at the
Executive's option, the Employer shall pay him the present value of such salary
and bonuses in a lump sum within thirty (30) days of the effective date of such
termination (using as the discount rate 75% of the prime rate (as published by
The Wall Street Journal) for the first business day of the month in which such
termination occurs); and

(d) all benefits provided in Section 9 hereof until the end of the
Term, with no additional cost or charge payable by the Executive.

13.4 Additional Rights Following a Change in Control. In the event
of a Change in Control, the Executive shall be entitled to act with respect to
this Employment Agreement as provided in section 13.5, and to all payments and
benefits provided in section 13.3, provided that such payments, together with
the additional consideration described in this section, shall be paid in a lump
sum and without any discount or reduction, or in the case of non-monetary
consideration, delivered to the Executive before or contemporaneously with the
consummation of the Change in Control. In addition, all previously granted but
unvested options to purchase Company stock immediately shall vest fully in the
Executive and remain exercisable for the full period of the initial option grant
or ten years, whichever is greater. In addition: (a) any application of Section
13.1.3(d) of this Employment Agreement by the Employer or the Company shall be
suspended from the Employer's or the Company's entry into any agreement
contemplating a Change in Control, and deemed stricken from this Employment
Agreement and rescinded upon the consummation of any Change in Control; and (b)
Section 16 of this Employment Agreement immediately, and without additional
action, shall be deemed and rendered null, void, and without any effect as
against the Executive upon the consummation of the Change in Control. The
Executive shall forfeit any rights granted pursuant to this Section

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<PAGE>

13.4 if the Executive, in his sole and absolute discretion and without any
obligation whatsoever to do so, determines that he will accept a written offer
to remain with the surviving company in an executive position with equivalent
duties, authority and responsibility as the Executive currently holds (other
than as a non-employee director).

8
<PAGE>

13.8 Option Adjustment. The number of options issuable pursuant to
this Section 13 and the per share exercise price thereof shall be subject to
appropriate adjustment to give effect to any increase or decrease in the number
of issued shares resulting from a reorganization, recapitalization, stock split,
spin-off or other similar action.

14. Disability.

15. Death of Executive.

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<PAGE>

Executive's death. In addition, the Employer shall pay to such estate or
beneficiary an amount equal to the present value of all the remaining Base
Salary, calculated assuming annual compound interest at 75% of the prime rate
(as published in The Wall Street Journal) for the first business day of the
month in which the Executive's death occurs.

16. Non-competition.

17.1 If to the Employer:

SFX Entertainment, Inc.
650 Madison Avenue, 16th Floor
New York, New York 10022
Attention: Board of Directors

17.2 If to the Executive:

Michael G. Ferrel
525 East 72nd Street, Apt. 19A
New York, New York 10021

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<PAGE>

18. General.

18.1 Governing Law. This Employment Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York.

18.2 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Employment Agreement

18.3 Entire Agreement. This Employment Agreement including any
Exhibits attached hereto, sets forth the entire agreement and understanding of
the parties relating to the subject matter hereof, and supersedes all prior
and/or contemporaneous agreements, arrangements and understandings, written or
oral, between the parties with respect to such subject matter (including,
without limitation, the Original Employment Agreement), except as specifically
provided herein.

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<PAGE>

IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the date first above written.

SFX ENTERTAINMENT, INC.

By: /s/ Robert F.X. Sillerman
--------------------------------------
Name:
Title:

/s/ Michael G. Ferrel
-----------------------------------------
MICHAEL G. FERREL

<PAGE>

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

WHEREAS, in order to retain the services of the Executive, the Employer
has agreed to issue to the Executive options to purchase shares of stock of the
Employer and, pursuant to such agreement, on the review and recommendation of
the Compensation Committee (the "Compensation Committee") of the Board, the
Employer has granted to the Executive options to purchase a total of 112,500
shares of Class A Common Stock, par value $.0l per share, of the Employer (the
"Class A Stock"), having a term of five (5) years, of which 37,500 options are
exercisable at an exercise price of $3.67 per share and 75,000 options are
exercisable at an exercise price of $16.08 per share (collectively, the "January
2000 Options"), which options fully vest on the date of this Employment
Agreement, and to simultaneously forgive and renounce all Company rights
connected with any loans made to the Executive prior to the effective date of
this agreement; and

WHEREAS, the Compensation Committee and the Board approved the terms
and conditions of this Employment Agreement;

NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the Employer and the Executive
agree as follows:

1. Employment. Upon the terms and subject to the conditions of
this Employment Agreement, the Employer hereby employs the Executive and the
Executive hereby accepts employment by the Employer.

2. Term.

<PAGE>

3. Executive's Position, Duties, and Authority.

3.1 The Employer shall employ the Executive, and the Executive
shall serve, as a Vice President and the Chief Financial Officer of the Employer
and of any successor by merger, acquisition of substantially all of the assets
of the Employer or otherwise.

3.2 The Executive shall have executive duties, functions,
authority and responsibilities commensurate with the office or offices he from
time to time holds with the Employer.

5. Business Opportunities. The Executive covenants and agrees
that for so long as he is actively employed by the Employer he shall inform the
Employer of each business opportunity related to the business of the Employer of
which he becomes aware, and that he will not, directly or indirectly, exploit
any such opportunity for his own account nor will he render any services to any
other person or business or acquire any interest of any type in any other
business, which is in competition with the Employer; provided, however, that the
foregoing shall not be deemed to prohibit the Executive from acquiring, solely
as an investment (a) up to 10% of any securities of a partnership, trust,
corporation or other entity so long as he remains a passive invest or in such
entity and such entity is not, directly or indirectly, in competition with the
Employer, or (b) up to 0.5% of any securities of any publicly traded
partnership, trust, corporation or other entity, provided he remains a passive
investor in such entity.

6. Base Salary. During the Term, the Employer shall pay or cause
to be paid to the Executive an initial base salary per annum (the "Base Salary")
which shall initially be $325,000, payable in monthly installments. Upon each
anniversary of the commencement of the Executive's employment hereunder, the
Base Salary then in effect shall be increased by an amount equal to the greater
of (a) five percent of the Base Salary then in effect or (b) the product of (i)
the Base Salary then in effect and (ii) the percentage increase in the Consumer
Price Index during the previous twelve full calendar months. In addition, the
Board shall review the Executive's Base Salary at least annually and may by
action of the Board, after and pursuant to the affirmative recommendation of the
Compensation Committee, increase, but not decrease,

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<PAGE>

such Base Salary, as such salary may have been increased, at any time and from
time to time during the Term.

7. Bonus; Option Grant.

7.1 The Executive shall be entitled to receive an annual incentive
bonus (the "Bonus") consisting of (a) a guaranteed cash bonus of $150,000 per
annum (the "Cash Bonus), payable on each anniversary of this Employment
Agreement, plus (b) an additional discretionary bonus payable in cash, stock,
options or other compensation, during the continuance of the Executive's
employment hereunder as determined by the Board, after and pursuant to the
affirmative recommendation of the Compensation Committee.

7.2 The Employer hereby confirms the grant to the Executive of the
January 2000 Options to be evidenced by option grant documentation to be entered
into by the Employer and the Executive.

10. [Intentionally left blank]

3
<PAGE>

prepay in full, and maintain in full force and effect during the Survival Period
for the benefit of the Executive, on an "occurrence" basis, the Employer's
current directors and officers errors and omissions insurance policy, or a
similar insurance policy providing equivalent coverage from a financially
reputable carrier, in form and substance reasonably acceptable to the Executive.

12. Confidential Information.

(a) he will keep secret all Confidential Information and will not
intentionally disclose Confidential Information to anyone outside of the
Employer and its representatives other than in the course of performance of his
duties hereunder, either during or for a one year period after the Term except
with the Employer's written consent, provided that (i) the Executive shall have
no such obligation to the extent Confidential Information is or becomes publicly
known other than as a result of the Executive's breach of his obligations
hereunder and (ii) the Executive may, after giving prior notice to the Employer
to the extent practicable under the circumstances, disclose such matters to the
extent required by applicable laws or governmental regulations or judicial or
regulatory process; and

13. Termination.

13.1 For purposes of this Employment Agreement the following
definitions shall apply:

13.1.1 "Cause" shall mean:

(a) the Executive is convicted of a felony involving moral turpitude
which would render the Executive unable to perform his duties set forth in this
Employment Agreement; or

(b) the Executive engages in conduct that constitutes willful gross
neglect or willful gross misconduct in carrying out his duties under this
Employment Agreement, resulting, in

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<PAGE>

either case, in material economic harm to the Employer, unless the Executive
believed in good faith that such act or nonact was in the best interests of the
Employer.

13.1.2 A "Change in Control" shall mean the occurrence of any one of
the following events:

(a) any "person," as such term is used in Sections 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934, as amended (other than the Executive or
members of management on the date hereof or otherwise appointed by the Board
which is comprised of a majority of "incumbent directors" or entities controlled
by them), becomes a "beneficial owner," as such term is used in Rule 13d-3
promulgated under that Act, of 25% or more of the voting power of the Employer;

(b) all or substantially all of the assets or business of the Employer
is disposed of pursuant to a merger, consolidation or other transaction (unless
the shareholders of the Employer immediately prior to such merger, consolidation
or other transaction beneficially own, directly or indirectly, in substantially
the same proportion as they owned the voting power of the Employer, all of the
voting power or other ownership interests of the entity or entities, if any,
that succeed to the business of the Employer);

(c) the Employer combines with another company and is the surviving
corporation but, immediately after the combination, the shareholders of the
Employer immediately prior to the combination hold, directly or indirectly, 50%
or less of the voting power of the combined company; or

(d) the majority of the Board consists of individuals other than
"incumbent directors," which term means members of the Board as of the date of
this Employment Agreement, except that any person who becomes a director
subsequent to such date whose election or nomination was supported by two-thirds
of the directors who then comprise the incumbent directors shall be considered
an incumbent director.

(a) a reduction in the Executive's then current Base Salary or failure
by the Employer to fulfill its obligations under Sections 6, 7, 8 or 9 above;

(b) the failure to elect or reelect the Executive to any of the
positions described in Section 3 hereof or the removal of him from any such
position;

(c) a material diminution in the Executive's duties or the assignment
to the Executive of duties which are materially inconsistent with his duties or
which materially impair the Executive's ability to function as a Vice President
and the Chief Financial Officer of the Employer; or

(d) the failure of the Employer to obtain the assumption in writing of
its obligation to perform this Employment Agreement by any successor to all or
substantially all of the assets of the Employer within 15 days after a merger,
consolidation, sale or similar transaction.

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<PAGE>

13.2 Termination by the Employer for Cause.

13.2.1 In the event the Employer terminates the Executive's
employment for Cause, he shall be entitled to:

(a) the Base Salary through the date the of termination of his
employment for Cause; and

(b) a Bonus for the year in which he was terminated equal to the Bonus
for the year prior to such termination, prorated over the time elapsed during
the year in which he was terminated.

(a) the Base Salary through the date of termination of the Executive's
employment;

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<PAGE>

(c) a Bonus for the unexpired Term not less than the $150,000.00
guaranteed cash bonus provided in Section 7.1(a) multiplied by all of the
year(s) and month(s) remaining in the then unexpired Term; provided that, at the
Executive's option, the Employer shall pay him the present value of such salary
and bonuses in a lump sum within thirty (30) days of the effective date of such
termination (using as the discount rate 75% of the prime rate (as published by
The Wall Street Journal) for the first business day of the month in which such
termination occurs); and

(d) all benefits provided in Section 9 hereof until the end of the
Term, with no additional charge or cost payable by the Executive.

13.4 Rights Following a Change in Control. In the event of a Change
in Control, the Executive shall be entitled to act with respect to this
Employment Agreement as provided in section 13.5, and to all payments and
benefits provided in section 13.3, provided that such payments, together with
the additional consideration described in this section, shall be paid in a lump
sum and without any discount or reduction, or in the case of non-monetary
consideration, delivered to the Executive before or contemporaneously with the
consummation of the Change in Control. In addition, all previously granted but
unvested options to purchase Company stock immediately shall vest fully in the
Executive and remain exercisable for the full period of the initial option grant
or ten years, whichever is greater. In addition: (a) any application of Section
13.1.3(d) of this Employment Agreement by the Employer or the Company shall be
suspended from the Employer's or the Company's entry into any agreement
contemplating a Change in Control, and deemed stricken from this Employment
Agreement and rescinded upon the consummation of any Change in Control; and (b)
Section 16 of this Employment Agreement immediately, and without additional
action, shall be deemed and rendered null, void, and without any effect as
against the Executive upon the consummation of the Change in Control. The
Executive shall forfeit any rights granted pursuant to this Section 13.4 if the
Executive, in his sole and absolute discretion and without any obligation
whatsoever to do so, determines that he will accept a written offer to remain
with the surviving company in an executive position with equivalent duties,
authority and responsibility as the Executive currently holds (other than as a
non-employee director).

7
<PAGE>

thereof. If the Executive and the Employer cannot agree on the firm to serve as
the Auditor, then the Executive and the Employer shall each select one
accounting firm and those two firms shall jointly select the accounting firm to
serve as the Auditor.

14. Disability.

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<PAGE>

pay Bonus to the Executive in respect of periods after the Disability Date. Any
Base Salary payable pursuant to this Section 14.2 shall be reduced by the amount
of any benefits payable to the Executive under any group or individual
disability insurance plan or policy, the premiums for which are paid primarily
by the Employer;

15. Death of Executive.

15.2 The Executive's estate or designated beneficiary shall be
entitled to receive (a) any unpaid portions of the Executive's Base Salary in
respect of the period ending on the Executive's date of death, and (b) unpaid
Bonus in respect of years prior to the year of death. In addition, the Employer
shall pay to such estate or beneficiary an amount equal to the present value of
all the remaining Base Salary, calculated assuming annual compound interest at
75% of the prime rate (as published in The Wall Street Journal) for the first
business day of the month in which the Executive's death occurs.

16. Non-competition.

16.1 For a period of one year following the termination of the
Executive's employment hereunder, the Executive will not become employed by, or
become an officer, director or general partner of, any partnership, corporation
or other entity which acts as a producer or venue operator in the live
entertainment business or which acts as a marketing and management company
specializing in the representation of team sports athletes; provided, however,
the Executive shall not be prohibited from engaging in any otherwise restricted
conduct if the competition of such competing entity with the Employer is
insubstantial, indirect, or otherwise agreed to in respect of the entire
business of such entity.

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<PAGE>

16.2 The Executive hereby acknowledges that:

(a) the respective times and area provided in Section 16.1, above, are
reasonable in scope and necessary for the protection of the business and good
will of the Employer and that a significant portion of the Base Salary payable
hereunder has been allocated to the provisions of Section 16.1:

(b) since it is the understanding and desire of the parties hereto that
the covenants contained in Section 16.1, above, be enforced to the fullest
extent possible under the laws and public policies applied in each jurisdiction
in which enforcement may be sought, should any particular provision of such
covenant be deemed invalid or unenforceable, such provision shall be deemed
amended to delete therefrom the invalid portion, and the deletion shall apply
only with respect to the operation of such provisions;

(c) to the extent a provision is deemed unenforceable by virtue of its
scope, but may be made enforceable by limitation thereof, such provision shall
be enforceable only to the extent permissible under the laws and public policies
applied in the jurisdiction to which enforcement is sought; and

(d) the Executive's obligation and undertaking provided for in this
Section 16 shall, to the extent applicable, continue beyond the termination of
the Executive's relationship with the Employer hereunder to the extent provided
herein.

17.1 If to the Employer:

SFX Entertainment, Inc.
650 Madison Avenue, 16th Floor
New York, New York 10022
Attention: Board of Directors

17.2 If to the Executive:

Thomas P. Benson
27 Radcliffe Drive
Huntington, New York 11743

18. General.

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<PAGE>

18.1 Governing Law. This Employment Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York.

18.2 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Employment Agreement

18.7 Vacation. The Executive shall be entitled to paid vacation
time at the rate of not less than four weeks per year.

[The remainder of this page has intentionally been left blank]

11
<PAGE>

IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the date first above written.

SFX ENTERTAINMENT, INC.

By: /s/ Robert F.X. Sillerman
--------------------------------------
Name:
Title:

/s/ Thomas P. Benson
-----------------------------------------
THOMAS P. BENSON

<PAGE>

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

WHEREAS, the Board of Directors of the Employer (the "Board") has
determined that it is in the best interests of the Employer to enter into a new
employment agreement with the Executive which shall amend and restate in its
entirety the Original Employment Agreement, in order to be assured of the
Executive's continued services as a member of senior management of the Employer,
upon the terms and provisions and subject to the conditions hereinafter set
forth;

WHEREAS, in order to retain the services of the Executive, the Employer
has agreed to issue to the Executive options to purchase shares of stock of the
Employer and, pursuant to such agreement, on the review and recommendation of
the Compensation Committee (the "Compensation Committee") of the Board, the
Employer has granted to the Executive options to purchase a total of 390,000
shares of Class A Common Stock, par value $.0l per share, of the Employer (the
"Class A Stock"), having a term of five (5) years, of which 250,000 options are
exercisable at an exercise price of $3.67 per share and 140,000 options are
exercisable at an exercise price of $16.08 per share (collectively, the "January
2000 Options"), which options fully vest on the date of this Employment
Agreement, and to simultaneously forgive and renounce all Company rights
connected with any loans made to the Executive prior to the effective date of
this agreement; and

WHEREAS, the Compensation Committee and the Board approved the terms
and conditions of this Employment Agreement;

NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the Employer and the Executive
agree as follows:

1. Employment. Upon the terms and subject to the conditions of
this Employment Agreement, the Employer hereby employs the Executive and the
Executive hereby accepts employment by the Employer.

2. Term.

<PAGE>

termination or scheduled renewal of this Employment Agreement. The date of the
commencement of employment pursuant to this Employment Agreement is hereinafter
referred to as the "Effective Date," the term of employment pursuant to this
Employment Agreement is hereinafter referred to as the "Term" and the last date
of employment pursuant to this Employment Agreement is hereinafter referred to
as the "Termination Date."

3. Executive's Position, Duties, and Authority.

3.1 The Employer shall employ the Executive, and the Executive
shall serve, as Executive Vice President, General Counsel and Secretary of the
Employer and of any successor by merger, acquisition of substantially all of the
assets of the Employer or otherwise.

3.2 The Executive shall have executive duties, functions,
authority and responsibilities commensurate with the office or offices he from
time to time holds with the Employer.

4. Full-time Services. The Executive shall devote substantially
all of his business time to the business and affairs of the Employer and to the
fulfillment of his duties hereunder in a diligent and competent fashion to the
best of his abilities. Notwithstanding the foregoing, (a) the Executive shall
have the right to continue to fulfill his obligations as a director and officer
of companies in which he currently serves in such capacity, including without
limitation, Sillerman Communications Management Corporation, The Sillerman
Companies, Inc., Sillerman Management Company, Inc., and The Marquee Group, and
(b) shall have the right to devote a portion of his business time to personal
investments and commitments not related to the Prohibited Business (as such term
is defined in Section 16.1 hereof). In addition, except as provided in Section
16, the Executive may serve on the boards of directors of other organizations
and companies; provided that the service on such other boards of directors does
not interfere with the performance of the Executive's services hereunder.

6. Base Salary. During the Term, the Employer shall pay or cause
to be paid to the Executive an initial base salary per annum (the "Base Salary")
which shall initially be $400,000, payable in monthly installments. Upon each
anniversary of the commencement of the Executive's employment hereunder, the
Base Salary then in effect shall be increased by an amount equal to the greater
of (a) five percent of the Base Salary then in effect or (b) the product of (i)
the Base Salary then in effect and (ii) the percentage increase in the Consumer
Price Index during the previous twelve full calendar months. In addition, the
Board shall review the Executive's Base Salary at least annually and may by
action of the Board, after and pursuant to the affirmative recommendation of the
Compensation Committee, increase, but not decrease,

2
<PAGE>

such Base Salary, as such salary may have been increased, at any time and from
time to time during the Term.

7. Bonus; Option Grant.

7.1 The Executive shall be entitled to receive an annual incentive
bonus (the "Bonus") consisting of (a) a guaranteed cash bonus of $250,000 per
annum (the "Cash Bonus), payable on each anniversary of this Employment
Agreement, plus (b) an additional discretionary bonus payable in cash, stock,
options or other compensation, during the continuance of the Executive's
employment hereunder as determined by the Board, after and pursuant to the
affirmative recommendation of the Compensation Committee.

7.2 The Employer hereby confirms the grant to the Executive of the
January 2000 Options, to be evidenced by option grant documentation to be
entered into by the Employer and the Executive.

9. Benefits. During the Term, the Executive shall be eligible to
participate in any pension or profit-sharing plan or program of the Employer now
existing or established hereafter, in accordance with and to the extent that he
is eligible under the general provisions thereof. The Executive shall also be
eligible to participate in any group life insurance, hospitalization, medical,
health and accident, disability or similar plan or program of the Employer, now
existing or established hereafter, in accordance with and to the extent that he
is eligible under the general provisions thereof. In addition, during the Term,
the Employer shall (i) provide the Executive with a chauffeur-driven limousine
for use in connection with his employment by the Company, and shall pay $25,000
toward the annual salary of the driver of such limousine, and (ii) make
available a leased vehicle for the Executive's use, and pay all lease payments
and expenses associated with the use of said vehicle.

10. [Intentionally left blank]

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<PAGE>

three (3) months after the expiration of the applicable statute of limitations
with respect to any claim made against the Executive for which the Executive
seeks indemnification (the "Survival Period") and shall survive thereafter with
respect to any indemnification claim as to which the Employer has received
notice on or prior to the end of the Survival Period. The Employer shall prepay
in full, and maintain in full force and effect during the Survival Period for
the benefit of the Executive, on an "occurrence" basis, the Employer's current
directors and officers errors and omissions insurance policy, or a similar
insurance policy providing equivalent coverage from a financially reputable
carrier, in form and substance reasonably acceptable to the Executive.