<PAGE>

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

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


                                    FORM 10-K
(Mark One)
|X|                  ANNUAL REPORT PURSUANT TO SECTION 13 OR
                     15(d) OF THE SECURITIES EXCHANGE ACT OF
                     1934 For the fiscal year ended December
                     31, 1998

                                       OR
[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
         SECURITIES EXCHANGE ACT OF 1934

              For the transition period from _________ to _________

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


                         Commission file number 0-26530
                         TRIATHLON BROADCASTING COMPANY
             (Exact name of Registrant as specified in its charter)


            Delaware                                           33-0668235
  (State or other jurisdiction                              (I.R.S. Employer
of incorporation or organization)                           Identification No.)

                                 Symphony Towers
                            750 B Street, Suite 1920
                           San Diego, California 92101
                                 (619) 239-4242
   (Address of principal executive offices and Registrant's telephone number)

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


    Securities registered pursuant to Section 12(b) of the Exchange Act: None

               Securities registered pursuant to Section 12(g) of
               the Exchange Act:

                      CLASS A COMMON STOCK, $.01 PAR VALUE
     DEPOSITARY SHARES, EACH REPRESENTING A ONE-TENTH INTEREST IN A SHARE OF
            9% MANDATORY CONVERTIBLE PREFERRED STOCK, $.01 PAR VALUE
                                (Title of Class)

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


         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. |_|

         The aggregate market value of the Class A Common Stock (one vote per
share) held by non-affiliates, computed by reference to the average closing bid
and asked price of the Class A Common Stock on March 17, 1999, was $39,375,951.

         The number of shares of the Registrant's Class A Common Stock, $.01 par
value, Class B Common Stock, $.01 par value, Class C Common Stock, $.01 par
value, Class D Common Stock, $.01 par value, and Depositary Shares, each
representing a one-tenth interest in a share of 9% Mandatory Convertible
Preferred Stock, outstanding as of March 17, 1999, was 3,181,895, 886,811,
24,750, 802,445, and 5,834,000, respectively.

                       DOCUMENTS INCORPORATED BY REFERENCE
         None.

-------------------------------------------------------------------------------
<PAGE>



                                     PART I

ITEM 1.           BUSINESS

General

         Triathlon Broadcasting Company (the "Company") owns and operates radio
stations primarily in medium and small markets in the midwestern and western
United States. The Company generally defines medium and small markets as those
ranked below the top 70 markets in terms of population by The Arbitron Company
(an independent rating service). The Company currently owns and operates, sells
advertising on behalf of or provides programming to 22 FM and 10 AM radio
stations in six markets. The Company also owns Pinnacle Sports Productions LLC,
a regional sports radio network (the "Sports Network"), which broadcasts all of
the games of the men's football, basketball and baseball and women's basketball
and volleyball teams of the University of Nebraska over a network of
approximately 61 radio stations located in the western United States.

         On July 23, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Capstar Radio Broadcasting Partners, Inc.
("Buyer") and TBC Radio Acquisition Corp. ("Buyer Sub") pursuant to which the
Buyer Sub will merge with and into the Company and the Company will become a
wholly-owned subsidiary of the Buyer (the "Merger"). When a Certificate of
Merger relating to the Merger is filed with the Secretary of State of the State
of Delaware or as otherwise specified in such Certificate of Merger (the
"Effective Time"), Buyer Sub will merge with and into the Company, with the
Company as the surviving corporation (the "Surviving Corporation"). Pursuant to
the Merger, each outstanding share (except for shares of holders who perfect and
exercise dissenters' appraisal rights) of the Company's (a) Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), Class B Common
Stock, par value $.01 per share (the "Class B Common Stock"), Class C Common
Stock, par value $.01 per share (the "Class C Common Stock"), and Class D Common
Stock, par value $.01 per share (the "Class D Common Stock" and, collectively
with the Class A Common Stock, the Class B Common Stock and the Class C Common
Stock, the "Common Stock"), will convert into the right to receive $13.00 (the
"Common Stock Merger Consideration"), (b) Mandatory Preferred Stock will convert
into the right to receive $108.30, plus accrued and unpaid dividends up to and
including the date immediately prior to the Effective Time (the "Mandatory
Preferred Stock Merger Consideration"), and (c) Series B Convertible Preferred
Stock, par value $.01 per share (the "Series B Preferred Stock"), will convert
into the right to receive $.01. Each Depositary Share, which represents
one-tenth of a share of Mandatory Preferred Stock (the "Depositary Shares"),
will be entitled to receive one-tenth of the Mandatory Preferred Stock Merger
Consideration, or $10.83 plus accrued and unpaid dividends up to and including
the date immediately prior to the Effective Time on one-tenth of a share of
Mandatory Preferred Stock subject to increase under certain circumstances (the
"Depositary Share Merger Consideration"). The Depositary Share Merger
Consideration is equivalent to .833 of the Common Stock Merger Consideration,
which represents the fraction of a share of Class A Common Stock into which
each Depositary Share is currently convertible. Each such amount will be
payable in cash, without interest. Pursuant to the Merger Agreement, holders of
derivative securities of the Company will be able to receive an amount in
respect of such securities which is generally equal to the difference between
$13.00 and the exercise price of the derivative security. See "--The Merger
Agreement."


                                       -2-

<PAGE>



         The Merger (as presently contemplated) is subject to a number of
conditions. One such condition was the adoption of the Merger Agreement by the
shareholders of the Company. A special meeting of the stockholders was held on
March 24, 1999 (the "Special Stockholders Meeting") for which a proxy statement
and proxy card relating to the Special Stockholders Meeting were mailed on
February 16, 1999 to stockholders of record on February 1, 1999. At the Special
Stockholders Meeting, the Merger Agreement was adopted by the Company's
stockholders pursuant to the affirmative vote of a majority of the stockholders
entitled to vote. 

         On October 19, 1998, the U.S. Department of Justice, Antitrust
Division (the "DOJ") filed comments with the Federal Communications Commission
(the "FCC"), objecting to the Merger. The DOJ comments expressed concerns that
the Merger would lessen competition for the sale of radio advertising in the
Wichita, Kansas area, where the Buyer currently operates other radio stations.
The DOJ and the Buyer have reached a settlement (the "Settlement") according
to which the Buyer will divest two FM and three AM radio stations in the
Wichita, Kansas area to address the DOJ's anti-competitive concerns, and on
March 4, 1999, the DOJ withdrew its objections to the Merger. In connection
with the Settlement, the Buyer and the Company will enter into a consent decree
with the DOJ obligating the Buyer to divest certain stations in the Wichita,
Kansas area after completion of the Merger. Upon the DOJ filing such consent
decree with a federal court, the DOJ will terminate the waiting period for the
Merger required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act").

         Upon the consent of the FCC to the transfer of control of the
Company's and its subsidiaries' radio stations resulting from the Merger, the
Company believes that all of the conditions to the Merger will be satisfied.
The Merger is currently expected to be consummated in the second quarter of
1999. While the Company has no reason to believe that the conditions to the
closing of the Merger will not be satisfied during such period, there can be no
assurance that the Merger will be consummated in the second quarter of 1999 or
at all. See "The Merger." 

Radio Stations

         The following chart sets forth certain information with respect to the
Company's radio stations:



<TABLE>
<CAPTION>
                                                                   Number of Stations         Breakdown of Stations
                Market                     Market Rank(1)          Currently-Operated           Currently-Operated
-------------------------------------------------------------- ----------------------------------------------------------
                                                                                                AM             FM
                                                                                          -------------------------------
<S>                                              <C>                      <C>                   <C>             <C>
Omaha, Nebraska (2)....................          72                       4                     1               3

Spokane, Washington....................          87                     8(3)(4)                 3               5

Wichita, Kansas........................          89                       6                     2               4

Colorado Springs, Colorado.............          93                       4(5)                  2               2

Lincoln, Nebraska (2)..................          172                      4                    --               4

Tri-Cities, Washington (6).............          207                      6(7)                  2               4        
                                                               ----------------------------------------------------------
         Total                                                             32                   10             22
---------------------------
</TABLE>


(1)      Market rankings as determined by The Arbitron Company for the Fall 1998
         Radio Market Report.
(2)      The Company also acquired the Sports Network pursuant to the Pinnacle
         Acquisition.
(3)      Includes four stations for which Citadel Broadcasting Company sells
         advertising pursuant to a joint sales agreement.
(4)      Includes one station that is not owned by the Company but on which it
         sells advertising pursuant to a joint sales agreement.
(5)      Consists of four stations owned by the Company for which Citadel
         Broadcasting Company sells advertising pursuant to a joint sales
         agreement.
(6)      The Tri-Cities, Washington market consists of the cities of Richland,
         Kennewick and Pasco in the State of Washington.
(7)      Includes two stations that are not owned by the Company but on which it
         provides services and sells advertising pursuant to local marketing
         agreements.


RADIO STATION ACQUISITIONS

         The Company was incorporated in February 1995 and commenced operations
in September 1995 with the acquisition of four radio stations in the Wichita,
Kansas market. Since its inception on June 29, 1995 (the "Company's Inception")
through the date hereof, the Company (i) has


                                       -3-

<PAGE>



purchased a total of 34 radio stations, including certain stations on which the
Company has previously provided advertising or programming pursuant to such
agreements, (ii) has disposed of a total of five radio stations, (iii) has
assumed a local marketing agreement ("LMA") for one station and a joint sales
agreement ("JSA") for one station, and (iv) has entered into a LMA for one
additional station.


Acquisitions Completed During 1996

         During the year ended December 31, 1996 ("1996"), the Company purchased
a total of 23 radio stations, including certain stations on which the Company
already sold advertising or provided programming, as follows:

         In the Colorado Springs, Colorado and Spokane, Washington markets, the
Company has provided programming since January 16, 1996 pursuant to an LMA with
Pourtales for radio stations KSPZ-FM, KVUU-FM, KVOR-AM and KTWK-AM
(collectively, the "Colorado Stations"), and KKZX-FM, KEYF-FM, KEYF-AM and
KUDY-AM (collectively, the "Spokane Stations"). At the same time, to take
advantage of certain sales synergies in these markets, the Company entered into
a JSA with Citadel Broadcasting Company with respect to the Colorado Stations
and the Spokane Stations (the "Citadel JSA.")

         On January 24, 1996, the Company entered the Lincoln, Nebraska market
when it purchased radio stations KZKX-FM and KTGL-FM from Pourtales Radio
Partnership ("Pourtales") for an aggregate of approximately $9.7 million. On
January 29, 1996, the Company entered into a JSA with, and on June 13, 1996
purchased, radio stations KIBZ-FM, KKNB-FM and KHAT-AM, also operating in the
Lincoln, Nebraska market, from Rock Steady, Inc. for approximately $3.3 million.
KHAT-AM was not broadcasting at the time of purchase and the Company
subsequently allowed its license to expire.

         On February 1, 1996 the Company began providing programming and selling
advertising pursuant to an LMA with Silverado Broadcasting Company in the
Spokane, Washington market for radio stations KISC-FM, KNFR-FM and KAQQ-AM
(collectively, the "Silverado Stations") and assumed the rights and obligations
under a JSA for an additional radio station, KCDA-FM. The Company acquired the
Silverado Stations on May 15, 1996 for an aggregate of $8.75 million.

         On April 10, 1996, the Company entered the Omaha, Nebraska market, as a
complement to its radio stations in the Lincoln, Nebraska market, by acquiring
radio station KRRK-FM (subsequently renamed KTNP-FM) from 93.3, Inc. and radio
station KXKT-FM from Valley Broadcasting Company for approximately $2.7 million
and $8.1 million, respectively.

         On April 19, 1996, the Company entered the Tri-Cities, Washington
market, which consists of the cities of Richland, Kennewick and Pasco in the
State of Washington, by acquiring radio stations KIOK-FM and KALE-AM from
Sterling Realty Organization for an aggregate of approximately $1.2 million.


                                       -4-

<PAGE>



         On July 1, 1996, the Company also began providing programming and
selling advertising in the Tri-Cities, Washington market pursuant to an LMA with
Pourtales with respect to radio stations KEGX-FM and KTCR-AM (collectively, the
"Tri-Cities Stations"), and assumed the rights and obligations under an LMA with
respect to radio station KNLT-FM.

         On November 22, 1996, the Company acquired the Colorado Stations, the
Spokane Stations, the Tri-Cities Stations, and radio station KEYN-FM in the
Wichita, Kansas market (which the Company had been operating pursuant to a JSA
with Pourtales since September 13, 1995). The aggregate purchase price for these
radio stations was approximately $22.9 million.


Acquisitions Completed During 1997

         During the year ended December 31, 1997 ("1997"), the Company purchased
a total of seven radio stations, including certain stations on which the Company
already sold advertising or provided programming, as follows:

         On January 9, 1997 the Company purchased radio stations KZSN-FM and
KZSN-AM, both operating in the Wichita, Kansas market (collectively, the
"Wichita Southern Skies Acquisition"), and on April 25, 1997, the Company
purchased radio stations KSSN-FM and KMVK-FM, both operating in the Little Rock,
Arkansas market, from Southern Skies Corporation for an aggregate of (i) $22.6
million and (ii) 46,189 shares of the Company's Class A Common Stock, valued at
approximately $486,000. In addition, the Company became obligated to pay
$750,000 pursuant to a non-competition agreement with one of the principals of
Southern Skies Corporation.

         Also on April 25, 1997, the Company purchased radio station KOLL-FM,
operating in the Little Rock, Arkansas market, from SFX Broadcasting, Inc. ("SFX
Broadcasting") for $4.1 million. The Company had provided programming and sold
advertising for KOLL-FM pursuant to an LMA since March 15, 1996.

         On May 15, 1997, the Company purchased the Sports Network (the 
"Pinnacle Acquisition") for approximately $3.3 million, which may be increased
by $1.7 million if the University of Nebraska renews its contract with the
Company in 2001 for a minimum of an additional three-year term. While renewal
of the contract with the University of Nebraska cannot be assured, based on
discussions the Company has had with the University of Nebraska, the Company
presently knows of no reason why the contract would not be renewed.

         On June 2, 1997, the Company added to its presence in the Omaha,
Nebraska market by purchasing radio stations KFAB-AM and KGOR-FM and the
exclusive Muzak franchise for the Lincoln, Nebraska and Omaha, Nebraska markets
from American Radio Systems Corporation for an aggregate purchase price of $38.0
million.

         During the year ended December 31, 1998 ("1998"), the Company did not
purchase any radio stations.


                                       -5-

<PAGE>



         Since the Company's Inception, the Company's acquisitions have been
accounted for using the purchase method of accounting. The operating results of
the acquired stations are included in the Company's consolidated statements of
operations from their respective dates of acquisition or from the dates on which
the respective LMA or JSA began.


RADIO STATION DISPOSITIONS

         On October 1, 1997, the Company completed the disposition of radio
stations KOLL-FM, KSSN-FM and KMVK-FM, each operating in the Little Rock,
Arkansas market (collectively, the "Little Rock Disposition"), pursuant to an
agreement with Clear Channel Radio, Inc. The aggregate sale price was $20.0
million. The Company did not recognize a gain or loss on the Little Rock
Disposition. During the period from the date of acquisition through date of
sale, the Company capitalized a loss of approximately $235,000, principally
resulting from interest expense, related to the stations sold pursuant to the
Little Rock Disposition.

         During 1996 and 1998, the Company did not dispose of any radio
stations.


CITADEL JSA

         The DOJ commenced an investigation of the Citadel JSA in connection
with the concentration of radio station ownership in the Colorado Springs,
Colorado and Spokane, Washington markets. See "Item 3. Legal Proceedings."
The DOJ is increasingly scrutinizing the radio broadcasting industry, and,
in at least one instance, has required the termination of a radio station
JSA that, in the opinion of the DOJ, would have given a radio station
owner, together with its proposed acquisition of other radio stations in the
area, control over more than 60% of radio advertising revenue in the area.

         The Citadel JSA currently may be deemed to provide Citadel with control
over approximately 52.5% and 51.5% of the radio advertising revenue in the
Spokane, Washington market and the Colorado Springs, Colorado market,
respectively. The Citadel JSA provided approximately 15% of the Company's net
revenues during 1998. In the event that the DOJ requires the termination or
modification of the Citadel JSA, the Company believes that such termination or
modification will not have a long-term material adverse effect on the Company
because the Company believes that it can provide more efficiently the services
currently performed by Citadel given the fee structure of the Citadel JSA.
While the DOJ has not required termination of the Citadel JSA in connection
with its review of the Merger under the HSR Act, the Company has begun
preparations for an orderly transition in the event that the Merger is not
consummated and the DOJ thereafter requires the termination of the Citadel JSA.

         During the period that the Company programmed the Colorado Stations and
the Spokane Stations pursuant to an LMA, the Company recognized the Citadel JSA
fee as net revenue. As of November 22, 1996, when the Company purchased the
Colorado Stations and the Spokane Stations, the Company included the related
stations' operating expenses in its consolidated statements of operations as
expenses and the reimbursement of the expenses and the Citadel JSA fee as
revenues. The inclusion of the reimbursement expenses results in a permanent
reduction in the Company's


                                       -6-

<PAGE>



Broadcast Cash Flow Margin (Broadcast Cash Flow as a percentage of net
revenues). See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation."


THE STATIONS AND THE MARKETS

         The following table summarizes certain information with respect to the
radio stations that the Company owns and operates, provides programming to or
sells advertising on behalf of:
















                                       -7-

<PAGE>





<TABLE>
<CAPTION>
                                                                                                 1998       TOTAL
                                                              STATION RANK      1998 AUDIENCE   STATION   NUMBER OF   EXPIRATION 
                  MARKET        STATION           TARGET      AMONG-TARGET     SHARE-FOR-TARGET REVENUE  STATIONS IN  DATE OF FCC 
    STATION(1)     RANK        FORMAT-(2)      DEMOGRAPHICS  DEMOGRAPHICS (2)  DEMOGRAPHICS (2) RANK (2)  MARKET (2) AUTHORIZATION
----------------  ------  ------------------   ------------  ---------------- ----------------- -------- ----------- -------------
<S>               <C>     <C>                  <C>           <C>              <C>               <C>      <C>         <C>
OMAHA MARKET        72                                                                                       23
   KXKT-FM                Country              Adults 25-54         2               9.6%           2                    2/1/05
   KGOR-FM                Oldies               Adults 25-54         4               7.8%           5                    6/1/05
   KTNP-FM                Pop Alternative      Adults 18-34         4*              4.1%          12                    6/1/05
   KFAB-AM                Talk/News/Sports     Adults 25-54         8               5.3%           3                    6/1/05
SPOKANE MARKET      87                                                                                       28
   KKZX-FM(3)             Classic Rock         Adults 25-54         1               11.9%          1                    2/1/06
   KISC-FM                Adult Contemporary   Adults 25-54         6               7.2%           2                    2/1/06
   KNFR-FM                Country              Adults 25-54         9               4.4%           4                    2/1/06
   KEYF-FM(3)             Oldies               Adults 25-54         5               7.5%           6                    2/1/06
   KAQQ-AM                Middle-of-the-Road   Adults 35-64         9               4.7%          11                    2/1/06
   KCDA-FM(4)             Country              Adults 25-54        15               1.7%          13                    10/1/05
   KEYF-AM(3)             Oldies               Adults 25-54        21                .3%          N/A                   2/1/06
   KUDY-AM(3)             Religion             Adults 25-64         -                 -           N/A                   2/1/06
WICHITA MARKET      89                                                                                       23
   KZSN-FM                Country              Adults 25-54         1               9.4%           1                    6/1/05
   KRBB-FM                Adult Contemporary   Adults 25-54         2               8.9%           4                    6/1/05
   KEYN-FM                Oldies               Adults 25-54         4               7.0%           8                    6/1/05
   KWSJ-FM                New Age              Adults 25-54        10*              3.8%          15                    6/1/05
                          Contemporary
   KFH-AM                 Talk/News/Sports     Adults 35-64         5               6.3%          16                    6/1/05
   KQAM-AM                Talk/News/Sports     Adults 35-64        15               1.9%          17                    6/1/05
COLORADO SPRINGS    93                                                                                       20
MARKET
   KSPZ-FM(3)             Oldies               Adults 25-54         7               5.5%           6                    4/1/05
   KVUU-FM(3)             Adult Contemporary   Adults 25-54         6               5.8%           3                    4/1/05
   KVOR-AM(3)             News/Talk            Adults 25-54         8               4.9%           8                    4/1/05
   KTWK-AM(3)             Nostalgia            Adults 35-64        15               1.7%          14                    4/1/05
</TABLE>


                                                       -8-

<PAGE>


<TABLE>
<CAPTION>
                                                                                                 1998       TOTAL
                                                              STATION RANK      1998 AUDIENCE   STATION   NUMBER OF   EXPIRATION 
                  MARKET        STATION           TARGET      AMONG-TARGET     SHARE-FOR-TARGET REVENUE  STATIONS IN  DATE OF FCC 
    STATION(1)     RANK        FORMAT-(2)      DEMOGRAPHICS  DEMOGRAPHICS (2)  DEMOGRAPHICS (2) RANK (2)  MARKET (2) AUTHORIZATION
----------------  ------  ------------------   ------------  ---------------- ----------------- -------- ----------- -------------
<S>               <C>     <C>                  <C>           <C>              <C>               <C>      <C>         <C>

LINCOLN MARKET    172                                                                                        12
   KZKX-FM                 Country             Adults 25-54        3                 8.0%           1                   6/1/05
   KTGL-FM                 Classic Rock        Adults 25-54        1*                9.9%           2                   6/1/05
   KIBZ-FM                 Album-Orientated    Adults 18-34        2                14.6%           7                   6/1/05
                           Rock
   KKNB-FM                 Pop Alternative     Adults 18-34        8                 4.9%          10                   6/1/05
TRI-CITIES        207                                                                                        18
MARKET(5)
   KEGX-FM                 Classic Hits        Adults 25-54        1                13.3%           1*                  2/1/06
   KIOK-FM                 Country             Adults 25-54        7                 6.3%           1*                  2/1/06
   KNLT-FM(6)              Oldies              Adults 25-54        5                 7.0%           8                   2/1/06
   KTCR-AM                 News/Talk/Sports    Adults 35-64       12*                3.8%          14                   2/1/06
   KALE-AM                 News/Talk           Adults 35-64       12*                3.8%          13                   2/1/06
   KUJ-FM(6)               Current Hit         Adults 18-34       12                 3.1%          12                   2/1/06
</TABLE>

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


*        Tied in rank with other stations in the market.
(1)      Some stations are licensed to a different community located within the
         market they serve.
(2)      Based upon The Arbitron Company's Fall 1998 Radio Market Report for the
         respective markets and BIA's MasterAccess database for the first
         quarter of Fiscal Year 1999.
(3)      Citadel Broadcasting Company sells advertising on these stations
         pursuant to the Citadel JSA.
(4)      The Company sells advertising on this station pursuant to a JSA.
(5)      The Tri-Cities market consists of the cities of Richland, Kennewick and
         Pasco in the State of Washington.
(6)      The Company provides programming to and sells advertising on these
         stations pursuant to an LMA.

                                       -9-

<PAGE>



ADVERTISING

         The primary source of the Company's revenues is the sale of
broadcasting time for local, regional and national advertising. Stations' sales
staff generate most of the stations' local advertising sales, which comprise
approximately 81% of the Company's revenues (exclusive of Citadel JSA fees
received). To generate national advertising sales, the Company engages an
advertising representative for each of its stations who specializes in national
advertising sales and is compensated on a commission-only basis. Most
advertising contracts are short-term and generally run only for a few weeks.

         The Company believes that radio is an efficient and cost-effective
means for advertisers to reach specific demographic groups, because radio is a
precisely-targeted medium and is highly flexible due to the short lead time
between production and broadcast and the relative ease of production of
commercials. To ensure that an advertising message will be heard mainly by its
targeted customer base, an advertiser can choose to advertise on a station with
a format that appeals to a specific demographic group. In addition, radio can
more readily reach people in the workplace and in their cars than television and
other media.

         Advertising rates charged by a radio station are based primarily on (i)
the station's ability to attract audiences in the demographic groups targeted by
advertisers (as measured by ratings service surveys quantifying the number of
listeners tuned to the station at various times of the day and week), (ii) the
supply of and demand for radio advertising time and (iii) competing forms of
advertising. Rates are generally highest during morning and afternoon drive-time
hours.

         Depending on the format of a particular station, there are
predetermined numbers of advertisements that are broadcast each hour. The
Company endeavors to determine the number of advertisements broadcast per hour
that can maximize available revenue dollars without jeopardizing listening
levels. Although the number of advertisements broadcast during a given time
period may vary, the total number of slots available for broadcast advertising
on a particular station generally does not vary significantly from year to year.


COMPETITION

         The radio broadcasting industry is highly competitive. The financial
results of each of the Company's stations are dependent to a significant degree
upon its audience ratings and its share of the overall advertising revenue
within its geographic market. The Company's stations compete for audience share
and advertising revenues directly with other FM and AM radio stations, as well
as with other media, within their respective markets. Radio stations compete for
listeners primarily on the basis of program content and by hiring high-profile
talent with appeal to a particular demographic group. The Company competes for
advertising revenues principally through effective promotion of its stations'
listener demographics and audience shares, and through the number of listeners
in a target group that can be reached for the price charged for the air-time.

         The Company's audience ratings and market share are subject to change,
and any adverse change in audience rating and market share in any particular
market could have a material adverse effect on the Company's business, financial
condition and results of operations. Although the Company competes with other
radio stations with comparable programming formats in most of its markets, the
Company's stations could suffer a reduction in ratings or advertising revenue
and could require increased promotional and other expenses if another station in
a given market were to 


                                      -10-

<PAGE>



convert its programming format to a format similar to one of the Company's radio
stations, if a new radio station were to adopt a competitive format, or if an
existing competitor were to strengthen its operations. As a result of the
Telecom Act, certain radio broadcasting companies have become significantly
larger and have greater financial resources than the Company. Furthermore, the
Telecom Act has permitted other radio broadcasting companies to enter the
markets in which the Company operates or may operate in the future. Although the
Company believes that each of its stations is able to compete effectively in its
market, there can be no assurance that any of the Company's stations will be
able to maintain or increase its current audience ratings and advertising
revenue market share.

         The Company's stations also compete for advertising revenues with other
media, including newspapers, broadcast television, cable television, magazines,
billboard advertising, transit advertising and direct mail advertising. Factors
that affect a station's competitive position include its appeal to demographic
groups that advertisers seek to reach, its authorized power, terrain, assigned
frequency, audience characteristics, local program acceptance and the number and
characteristics of other stations in the market area. The radio broadcasting
industry also is subject to competition from new media technologies that are
being developed or introduced, such as the delivery of audio programming by
cable television systems, delivery of audio programming via the Internet and the
introduction of digital audio broadcasting. See "--Federal Regulation of Radio
Broadcasting--Proposed Changes." The radio broadcasting industry historically
has grown despite the introduction of new technologies for the delivery of
entertainment and information, such as television broadcasting, cable
television, audio tapes and compact discs. There can be no assurance, however,
that the development or introduction in the future of any new media technology
will not adversely affect the radio broadcasting industry generally or the
Company in particular.


SEASONALITY

         The Company's revenues vary throughout the year. As is typical in the
radio broadcasting industry, the Company's first quarter generally produces the
lowest revenues for the year and the fourth quarter generally produces the
highest revenues for the year. The Company's operating results in any period may
be affected by the incurrence of advertising and promotion expenses that do not
necessarily produce commensurate revenues until the impact of the advertising
and promotion is realized in future periods.


EMPLOYEES

         As of December 31, 1998, the Company had approximately 306 full-time
and 130 part-time employees, none of whom were represented by unions. The
Company believes that its relations with its employees are good.

         The Company endeavors to enter into employment agreements with on-air
personalities and station general managers whose services are deemed by the
Company to be important for its continued success.

FEDERAL REGULATION OF RADIO BROADCASTING

         Adoption of the Telecom Act in February 1996 eliminated the national
limits and liberalized the local limits on radio station ownership by a single
company. However, the DOJ has indicated 

                                      -11-

<PAGE>


that, in certain cases, ownership of the number of radio stations permitted by
the Telecom Act may result in the undue concentration of ownership within a
market or otherwise have an anti-competitive effect. The DOJ is increasingly
scrutinizing acquisitions of radio stations and the entering into of JSAs and
LMAs. In particular, the DOJ has indicated that a prospective buyer of a radio
station may not enter into an LMA in connection with the acquisition of such
station before expiration of the applicable waiting period under the HSR Act.
Certain of the JSAs entered into by the Company have been the subject of
inquiries from the DOJ. See "--Citadel JSA" and "Item 3. Legal Proceedings."
There can be no assurance that future inquiries or policy and rule-making
activities of the FCC or the DOJ will not adversely impact the Company's
operations (including existing stations or markets) or its expansion strategy.

         The ownership, operation and sale of radio stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act of 1934, as amended (the "Communications Act"). Among other
things, the FCC assigns frequency bands for broadcasting; determines the
particular frequencies, locations and operating power of stations; issues,
renews, revokes and modifies station licenses; determines whether to approve
changes in ownership or control of station licenses; regulates equipment used by
stations; adopts and implements regulations and policies that directly or
indirectly affect the ownership, operation and employment practices of stations;
and has the power to impose penalties for violations of its rules or the
Communications Act.

         The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Reference
should be made to the Communications Act, FCC rules and the public notices and
rulings of the FCC for further information concerning the nature and extent of
federal regulation of broadcast stations.

FCC Licenses

         Radio stations operate pursuant to broadcasting licenses that are
granted by the FCC for maximum terms of eight years and are subject to renewal
upon application to the FCC. During certain periods when renewal applications
are pending, petitions to deny license renewals can be filed by interested
parties, including members of the public. The FCC will grant a renewal
application if it finds that the station has served the public interest,
convenience and necessity, that there have been no serious violations by the
licensee of the Communications Act or the rules and regulations of the FCC and
that there have been no other violations by the licensee of the Communications
Act or the rules and regulations of the FCC that, when taken together, would
constitute a pattern of abuse.

Ownership Matters

          The Communications Act prohibits the assignment of a broadcast license
or the transfer of control of a broadcast licensee without the prior approval of
the FCC. In determining whether to grant such approval, the FCC considers a
number of factors pertaining to the licensee, including compliance with various
rules limiting common ownership of media properties, the "character" of the
licensee and those persons holding "attributable" interests therein and
compliance with the Communications Act's limitations on alien ownership.

         To obtain the FCC's prior consent to transfer control of or assign a
broadcast license, appropriate applications must be filed with the FCC. If the
transfer or assignment application involves a "substantial change" in ownership
or control, the application is placed on public notice 


                                      -12-

<PAGE>


for a period of approximately 30 days, during which petitions to deny the
application may be filed by interested parties, including members of the public.
If the transfer or assignment application does not involve a "substantial
change" in ownership or control, it is a "pro forma" application. The "pro
forma" application is nevertheless subject to having informal objections filed
against it. If the FCC grants a transfer or assignment application, interested
parties have approximately 30 days from public notice of the grant to seek
reconsideration or review of that grant. The FCC normally has approximately an
additional ten days to set aside that grant on its own motion.

         As a result of the Telecom Act, the limit on the number of radio
stations one entity may own nationally has been eliminated and the limits on the
number of radio stations one entity may own locally is as follows: (i) in a
market with 45 or more commercial radio stations, an entity may own up to eight
commercial radio stations, not more than five of which are in the same service
(FM or AM); (ii) in a market with between 30 and 44 (inclusive) commercial radio
stations, an entity may own up to seven commercial radio stations, not more than
four of which are in the same service; (iii) in a market with between 15 and 29
(inclusive) commercial radio stations, an entity may own up to six commercial
radio stations, not more than four of which are in the same service; and (iv) in
a market with 14 or fewer commercial radio stations, an entity may own up to
five commercial radio stations, not more than three of which are in the same
service, except that an entity may not own more than 50% of the stations in such
market. FCC ownership rules continue to permit an entity to own one FM and one
AM station locally regardless of market size. For the purposes of these rules,
in general, a radio station being programmed pursuant to an LMA by an entity is
not counted as an owned station for purposes of determining the programming
entity's local ownership limits unless the entity already owns a radio station
in the market of the station with which the entity has the LMA; and a radio
station whose advertising time is being sold pursuant to a JSA is currently not
counted as an owned station of the entity selling the advertising time even if
that entity owns a radio station in the market of the station with which the
entity has the JSA. As a result of the elimination of the national ownership
limits and the liberalization of the local ownership limits effected by the
Telecom Act, radio station acquisitions have come under increased antitrust
review by the DOJ even where the acquisition complies with the FCC's multiple
ownership rules. The DOJ has articulated what it believes to be the relevant
market for competitive analysis in the radio broadcasting industry, but no court
has determined its validity.

         The Communications Act and FCC rules also prohibit the common
ownership, operation or control (i) of a radio broadcast station and a
television broadcast station serving the same geographic market, subject to a
presumptive waiver of such prohibition for stations located in the largest
television markets if certain conditions are satisfied (the Telecom Act directs
the FCC to extend such waiver policy to the top 50 television markets), and (ii)
of a radio broadcast station and a daily newspaper serving the same geographic
market. Under these rules, absent waivers, the Company would not be permitted to
acquire any daily newspaper or television broadcast station (other than
low-power television) in any geographic market in which it owns broadcast
properties. The FCC has pending an inquiry to determine whether it should
liberalize its waiver policy with respect to common ownership of a daily
newspaper and one or more radio stations in the same market.

         The FCC generally applies its ownership limits to "attributable"
interests held by an individual, corporation, partnership or other association.
In the case of corporations holding (or through subsidiaries controlling)
broadcast licenses, the interests of officers, directors and those who, directly
or indirectly, have the right to vote 5% or more of the corporation's stock (or
10% or more of such stock in the case of insurance companies, investment
companies and bank trust departments that are passive investors) are generally
attributable, except that, in general, no minority voting stock interest will be
attributable if there is a single holder of more than 50% of the 


                                      -13-

<PAGE>

outstanding voting power of the corporation. Also, under certain circumstances,
the FCC's "cross-interest" policy may prohibit one party from acquiring an
attributable interest in one media outlet (newspaper, radio and television
station) and a substantial non-attributable economic interest in another media
outlet in the same market. The FCC has outstanding a notice of proposed
rulemaking that, among other things, seeks comment on whether the FCC should
modify its attribution rules by (i) restricting the availability of the single
majority stockholder exemption, (ii) attributing under certain circumstances
certain interests such as non-voting stock or debt, and (iii) attributing JSAs
under certain circumstances. The Company cannot predict the outcome of this
proceeding or how it will affect the Company's business.

         The Communications Act prohibits the issuance of a broadcast license
to, or the holding of a broadcast license by, any corporation of which more than
20% of the capital stock is owned of record or voted by non-U.S. citizens or
their representatives or a foreign government or a representative thereof or a
corporation organized under the laws of a foreign country ("Aliens"). The
Communications Act also authorizes the FCC, if the FCC determines that it would
be in the public interest, to prohibit the issuance of a broadcast license to,
or the holding of a broadcast license by, any corporation directly or indirectly
controlled by any other corporation of which more than 25% of the capital stock
is owned of record or voted by Aliens. The Company has been advised that the FCC
staff has interpreted this provision to require a finding that such a grant or
holding would be in the public interest before a broadcast license may be
granted to or held by any such corporation. The Company has also been advised
that the FCC staff has made such a finding only in limited circumstances. The
FCC has issued interpretations of existing law under which these restrictions in
modified form apply to other forms of business organizations, including
partnerships. As a result of these provisions, the licenses granted to the radio
station subsidiaries of the Company by the FCC could be revoked if, among other
restrictions imposed by the FCC, more than 25% of the Company's stock were
directly or indirectly owned or voted by Aliens. The Certificate of
Incorporation contains limitations on Alien ownership and control of the Company
that are substantially similar to those contained in the Communications Act.

Local Marketing Agreements

         Over the past few years, a number of radio stations, including certain
of the Company's stations, have entered into what have commonly been referred to
as LMAs. While these agreements may take varying forms, pursuant to a typical
LMA, separately owned and licensed radio stations agree to enter into
cooperative arrangements of varying sorts, subject to compliance with the
requirements of antitrust laws and with the FCC's rules and policies. Under
these types of arrangements, separately-owned stations could agree to function
cooperatively in terms of programming, advertising sales, etc., subject to the
requirement that the licensee of each station shall maintain independent control
over the programming and operations of its own station. One typical type of LMA
is a programming agreement between two separately-owned radio stations serving a
common service area, whereby the licensee of one station programs substantial
portions of the broadcast day on the other licensee's station, subject to
ultimate editorial and other controls being exercised by the latter licensee,
and sells advertising time during such program segments. Such arrangements are
an extension of the concept of "time brokerage" agreements, under which a
licensee of a station sells blocks of time on its station to an entity or
entities that program the blocks of time and which sell their own commercial
advertising announcements during the time periods in question.

         The FCC has specifically revised its cross-interest policy to make that
policy inapplicable to time brokerage arrangements. Furthermore, over the past
few years, the staff of the FCC's Mass 

                                      -14-

<PAGE>

Media Bureau has held that LMAs are not contrary to the Communications Act,
provided that the licensee of the station which is being substantially
programmed by another entity maintains complete responsibility for and control
over programming and operations of its broadcast station and assures compliance
with applicable FCC rules and policies.

         The FCC's multiple ownership rules specifically permit radio station
LMAs to continue to be entered into and implemented, but provide that a licensee
of a station that brokers more than 15% of the time on another station serving
the same market will be considered to have an attributable ownership interest in
the brokered station for purposes of the FCC's multiple ownership rules. As a
result, in a market in which the Company owns a radio station, the Company would
not be permitted to enter into an LMA with another local radio station in the
same market that it could not own under the local ownership rules, unless the
Company's programming constitutes 15% or less of the other local station's
programming time on a weekly basis. The FCC's rules also prohibit a broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM-AM or FM-FM) through a time brokerage or
LMA arrangement where the brokered and brokering stations which it owns or
programs serve substantially the same area.

Joint Sales Agreements

         Under a typical JSA, the licensee of one radio station sells the
advertising time of another licensee's radio station. Currently, JSAs are not
deemed by the FCC to be attributable. However, the FCC has outstanding a notice
of proposed rulemaking concerning, among other things, whether JSAs should be
considered attributable interests under certain circumstances. If JSAs become
attributable interests as a result of such rulemaking, the Company would be
required to terminate any JSA it might have with a radio station with which the
Company could not have an LMA.

         The DOJ has indicated that it may consider that a JSA between radio
broadcasters in the same market violates the antitrust law's prohibition against
competitors agreeing on prices. The Company's JSA in the Wichita, Kansas market
had been, and the Citadel JSA in the Colorado Springs, Colorado market and the
Spokane, Washington market are being, investigated by the DOJ, but the DOJ has
not indicated the outcome of its investigation of the Citadel JSA. See
"--Citadel JSA." The Company has terminated its JSA in the Wichita, Kansas
market.

Programming and Operation

         The Communications Act requires broadcasters to serve the "public
interest." The FCC gradually has relaxed or eliminated many of the more
formalized procedures it had developed in the past to promote the broadcast of
certain type of programming responsive to the needs of a station's community of
license. A licensee continues to be required, however, to present programming
that is responsive to issues of the station's community, and to maintain certain
records demonstrating such responsiveness. Complaints from listeners concerning
a station's programming often will be considered by the FCC when it evaluates
renewal applications of a licensee, although such complaints may be filed at any
time and generally may be considered by the FCC at any time. Stations also must
follow various rules promulgated under the Communications Act that regulate,
among other things, political advertising, sponsorship identifications, the
advertisement of contests and lotteries, obscene and indecent broadcasts, and
technical operations, including limits on radio frequency radiation. Certain of
the FCC's rules that required licensees to develop and implement affirmative
action programs designed to promote equal employment opportunities and the
annual 

                                      -15-

<PAGE>

submission of reports to the FCC with respect to these matters were found
unconstitutional by the U.S. Court of Appeals. The FCC has initiated a
rulemaking proceeding to revise these rules.

         Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short" (less than the maximum) renewal terms or, for particularly egregious 
violations, the denial of a license renewal application or the revocation of a 
license.

Proposed Changes

         The Congress and/or the FCC have under consideration, and in the future
may consider and adopt, new laws, regulations and policies regarding a wide
variety of matters that could affect, directly or indirectly, the operation,
ownership and profitability of the Company's radio broadcast stations, result in
the loss of audience share and advertising revenues for the Company's radio
broadcast stations and affect the ability of the Company to acquire additional
radio broadcast stations or finance such acquisitions. Such matters may include:
changes to the license renewal process; spectrum use or other fees on FCC
licensees; revisions to the FCC's equal employment opportunity rules and other
matters relating to minority and female involvement in the broadcasting
industry; proposals to change rules relating to political broadcasting;
technical and frequency allocation matters; proposals to permit expanded use of
FM translator stations; proposals to restrict or prohibit the advertising of
beer, wine and other alcoholic beverages on radio; changes in the FCC's
cross-interest, multiple ownership and attribution policies; changes to
broadcast technical requirements; delivery by telephone companies of audio and
video programming to the home through existing phone lines; proposals to limit
the tax deductibility of advertising expenses by advertisers; and proposals to
auction the right to use the radio broadcast spectrum to the highest bidder.

         The FCC has authorized the use of a new technology, digital audio
broadcasting ("DAB"), to deliver audio programming by satellite and is
considering terrestrial DAB. DAB will provide a medium for the delivery by
satellite or terrestrial means of multiple new audio programming formats to
local and national audiences. It is not presently known precisely how this
technology may be used in the future by existing radio broadcast stations either
on existing or alternate broadcasting frequencies.

         In addition, the FCC has initiated a rulemaking proceeding proposing to
create a new low power FM radio service and new technology has introduced the
broadcast of radio programming over the Internet, both of which may create 
additional sources of competition to the Company.

         The Company cannot predict what other matters might be considered in
the future by the FCC and/or Congress or what affect the implementation of 
any of these proposals or changes may have on the Company's business,
financial condition or results of operations.

THE MERGER

         On July 23, 1998, the Company entered into the Merger Agreement
pursuant to which the Buyer Sub will merge with and into the Company and the
Company will become a wholly-owned subsidiary of the Buyer. Pursuant to the
Merger, each outstanding share (except for shares of holders who perfect and
exercise dissenters' appraisal rights) of the Company's (a) Common Stock will
convert into the right to receive $13.00, (b) Mandatory Preferred Stock will
convert into the 

                                      -16-

<PAGE>


right to receive $108.30, plus accrued and unpaid dividends up to and including
the date immediately prior to the Effective Time and (c) Series B Convertible
Preferred Stock, par value $.01 per share, will convert into the right to
receive $.01. Each Depositary Share, which represents one-tenth of a share of
Mandatory Preferred Stock, will be entitled to receive one-tenth of the
Mandatory Preferred Stock Merger Consideration, or $10.83 plus accrued and
unpaid dividends up to and including the date immediately prior to the Effective
Time on one-tenth of a share of Mandatory Preferred Stock subject to increase in
certain circumstances. The Depositary Share Merger Consideration is equivalent
to .833 of the Common Stock Merger Consideration, which represents the fraction
of a share of Class A Common Stock into which each Depositary Share is currently
convertible. Each such amount will be payable in cash, without interest.
Pursuant to the Merger Agreement, holders of derivative securities of the
Company will be able to receive an amount in respect of such securities which is
generally equal to the difference between $13.00 and the exercise price of the
derivative security.

Special Stockholders Meeting

         The Company held a Special Stockholders Meeting on March 24, 1999. At
the Special Stockholders Meeting, the Merger Agreement was adopted by the
Company's stockholders pursuant to the affirmative vote of a majority of the
stockholders entitled to vote.

         Subject to the satisfaction or waiver of the closing conditions set
forth in the Merger Agreement, the Merger will be consummated (the "Closing") on
the earlier of (a) April 30, 1999 (subject to extension under certain
circumstances, as provided in the Merger Agreement, until as late as September
14, 1999) or (b) any other date specified by Buyer at least 5 business days in
advance.

         The Merger is currently expected to be consummated in the second
quarter of 1999. While the Company has no reason to believe that the conditions
to the closing of the Merger will not be satisfied during such period, there
can be no assurance that the Merger will be consummated in the second quarter
of 1999 or at all.

         For more information about the Merger, see the definitive Proxy
Statement, dated February 12, 1999, of the Company included in the Schedule 14A
of the Company filed with the Securities and Exchange Commission (the "SEC") on
February 16, 1999 (and any supplements thereto).

The Merger Agreement

         The following is a summary of certain of the material provisions of the
Merger Agreement.

Treatment of Warrants, Options and Stock Appreciation Rights

         Each warrant to purchase shares of Common Stock granted by the Company
that is outstanding at the Effective Time will continue to be outstanding after
the Effective Time (subject to the terms and conditions contained in the
appropriate warrant agreement) and will be exercisable without payment of the
per share exercise price for an amount of cash, without interest, equal to the
difference between the Common Stock Merger Consideration and the per share
exercise price of such warrant, less any applicable withholding taxes.

         Each option granted by the Company that is outstanding at the Effective
Time, whether or not it is then exercisable, will be canceled at the Effective
Time. Each holder of a canceled option will be entitled to receive, in
consideration for the cancellation, an amount of cash, without interest, equal
to the difference between the Common Stock Merger Consideration and the per
share exercise price of the canceled option, less any applicable withholding
taxes.


                                      -17-

<PAGE>

         Each Stock Appreciation Right of the Company (each, a "SAR"), whether
or not then exercisable, will be canceled at the Effective Time. Each holder of
a canceled SAR will be entitled to receive, in consideration for the
cancellation, an amount of cash, without interest, equal to (a) with respect to
each then outstanding cash-only SAR granted to Messrs. Jeffrey Leiderman and
Frank E. Barnes, III under agreements dated January 31, 1996, providing for the
grant to each such individual of SARs in respect of 2,000 shares of Class A
Common Stock, 50% of the difference between $0.01 and the Common Stock Merger
Consideration or (b) with respect to all other outstanding SARs, the difference
between the Common Stock Merger Consideration and the per share base price of
such SAR, in every case less any applicable withholding taxes.

Covenants

         The Company has agreed that, until the Effective Time, except in
accordance with the documents contemplated by the Merger Agreement (collectively
referred to as the "Transaction Documents") it will, and will cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as theretofore conducted, and
will not, and will not permit its subsidiaries to, without the consent of Buyer,
among other things: (a) declare or pay dividends or other distributions or sell
or acquire any shares of its capital stock (with certain exceptions, including
scheduled cash dividends on shares of the Mandatory Preferred Stock and
issuances of Common Stock upon the conversion or exercise of outstanding
securities), (b) amend its certificate of incorporation or by-laws, (c) acquire
or sell any assets, (d) with certain significant exceptions, incur any
indebtedness in excess of $50,000 or capital expenditures in excess of $25,000
in the aggregate or make any loans, (e) modify, terminate or fail to renew any
material contract (with certain exceptions), (f) fail to act in the ordinary
course of business consistent with past practices exercising commercially
reasonable care to (i) preserve substantially intact the Company's and each
subsidiary's present business organization, (ii) keep available the services of
certain employees or (iii) preserve its relationships with customers, suppliers
and others, (g) fail to use commercially reasonable efforts to maintain the
Company's and each subsidiary's material assets, (h) merge or consolidate with
any other entity or dissolve or liquidate any subsidiary, (i) materially
increase the compensation or benefits of any director, officer or employee, (j)
pay, discharge or satisfy any material claims or liabilities other than in the
ordinary course of business or fail to pay any material accounts payable, (k)
enter into a local marketing agreement, time-brokerage agreement, joint sales
agreement, non-compete agreement or similar agreement with any entity other than
Buyer, (l) engage in any transaction with any of its affiliates (with certain
exceptions), (m) fail to pay on each scheduled quarterly payment date all
accrued and unpaid dividends on the outstanding Mandatory Preferred Stock, (n)
take any action that would result in any adjustment to the Redemption Rate or
the Optional Conversion Rate (each as defined in the Certificate of Designations
of the Mandatory Preferred Stock) or (o) authorize, commit or agree to take any
of the foregoing actions.

         Prior to the Effective Time, the Company is obligated to obtain from
all members of its management holding options and SARs, and to use its
commercially reasonable efforts to obtain from all other holders of options and
SARs, an agreement relating to such holders' options and SARs. In this
agreement, as described under "--Treatment of Warrants, Options and Stock
Appreciation Rights" above, the holders agree to cancel their options and SARs
and will receive in return, without payment therefor, a per share amount equal
to the Common Stock Merger Consideration less the exercise price per option or
base price per SAR.

         The Company and Buyer are required to use all reasonable efforts to
complete the Merger, to file an application requesting the FCC consent (the "FCC
Consent") for the transfer of control of 


                                      -18-

<PAGE>

the Company's radio stations (and those of its subsidiaries) resulting from the
Merger and to file all documents required under the HSR Act. Without the prior
written consent of Buyer, the Company is prohibited, with certain exceptions,
from taking any action that could impair or delay obtaining the FCC Consent or
complying with or satisfying the terms thereof. The FCC application was filed on
August 21, 1998 and has not been granted to date. The filing under the HSR Act
was made on August 17, 1998 and the waiting period thereunder has been extended
due to the Company's receipt of a request for additional information from the
DOJ. The DOJ filed comments with the FCC on October 19, 1998, objecting to the
Merger. The DOJ comments expressed concerns that the Merger would lessen
competition for the sale of radio advertising in the Wichita, Kansas area, 
where the Buyer currently operates other radio stations. The DOJ and the Buyer
have reached a settlement according to which the Buyer will divest two FM and
three AM radio stations in the Wichita, Kansas area to address the DOJ's
anti-competitive concerns. On March 4, 1998, the DOJ withdrew its objections to
the Merger. In connection with the Settlement, the Buyer and the Company will
enter into a consent decree with the DOJ obligating the Buyer to divest certain
stations in the Wichita, Kansas area after completion of the Merger. Upon the
DOJ filing such consent decree with a federal court, the DOJ will terminate the
waiting period for the Merger required by the HSR Act. In addition, the Company
and Buyer are required to use all reasonable efforts to (i) obtain all
necessary consents, approvals or waivers from third parties including the
waiver from the Company's lenders under the Amended Credit Agreement (as
defined in "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources") of certain
prepayment premiums, penalties and fees and (ii) defend any lawsuit challenging
Transaction Documents or the transactions contemplated thereby.

         The Company is required, at or prior to the Effective Time, to amend or
terminate certain agreements with affiliates without any liability to the
Company. The Company was also required to use commercially reasonable efforts to
enter into, and has entered into an agreement, on terms acceptable to Buyer, to
downgrade Saga Communications of Iowa, Inc.'s signal for KIOA-FM operating in
the Des Moines, Iowa market, if necessary, and to upgrade the Company's signal
for KTNP-FM operating the Omaha, Nebraska market. The contemplated changes in
operating power require the approval of the FCC which was applied for in
September 1998.

         The Merger Agreement contains certain additional provisions requiring
the Surviving Corporation to (a) provide certain employee benefits and (b)
indemnify, to the fullest extent permitted by the Delaware General Corporation
Law, each officer, director, employee or agent of (i) the Company or any of its
subsidiaries or (ii) Howard Tytel or Robert F.X. Sillerman or affiliates of Mr.
Sillerman (the "Indemnified Parties"), against certain losses, reasonable
expenses (including reasonable attorneys' fees), claims, damages, liabilities
and amounts paid in connection with certain threatened or actual claims,
actions, suits, proceedings or investigations. The Surviving Corporation also is
to maintain in effect, for a period of six years after the Effective Time,
directors' and officers' liability insurance currently maintained by the Company
covering the directors and officers of the Company and others covered thereby as
of the date of the Merger Agreement, with certain limitations.

Closing Extension and Adjustment to Merger Consideration

         The "Termination Date" is April 30, 1999, subject to extension by Buyer
for up to three months, in half-calendar-month intervals; however, if Buyer does
so, the Common Stock Merger Consideration will be increased by $0.125 and the
Depositary Share Merger Consideration will be increased by $0.104 for each
half-calendar month of extension. No increase will be paid, however, if (a) the
FCC Consent or the termination of the HSR Act waiting period is not obtained
(unless Buyer fails to consummate the Merger within ten business days after such
consent and termination are obtained (the "Satisfaction Date"), in which case
the increases in the merger consideration will be payable for each half-calendar
month commencing after the Satisfaction Date) after all other conditions to
Buyer's obligation to consummate the Merger have been satisfied, because of (i)
acts or omissions by the Company or its subsidiaries in conducting their
respective operations and activities (other than actions or omissions relating
to the number of licenses or amount of revenues 


                                      -19-

<PAGE>

in a particular market and other than relating to the Citadel JSA), (ii) a
breach by the Company of its obligations under the Merger Agreement or (iii)
certain statutory changes or enactments relating to radio license ownership
(collectively, "Acts or Changes") or (b) the Merger is restrained by a judicial
order, under certain circumstances.

         If a judicial order restraining the Merger is rendered in a proceeding
brought by a holder of Mandatory Preferred Stock on the basis of the treatment
of the Mandatory Preferred Stock under the Merger Agreement (a "Mandatory
Preferred Order") and has not been lifted by June 15, 1999, then Buyer may
extend the Termination Date until July 31, 1999 in half- month intervals with an
increase in the Common Stock Merger Consideration and Depositary Share Merger
Consideration as above, beginning on June 16, 1999. Under certain circumstances,
if any judicial order delaying the Merger is lifted, and if Buyer fails to
consummate the Merger within ten days thereafter (and such failure is not due to
the Company's failure to fulfill certain closing conditions), then the Common
Stock Merger Consideration shall be increased by $0.25 and the Depositary Share
Merger Consideration shall be increased by $0.208 for each half-calendar month
(or portion thereof) between the initial Termination Date and the date of
Closing. If any judicial order is not lifted by July 31, 1999, then either the
Company or Buyer may extend the date of the Closing for an additional 45 days.
However, if (a) neither the Company nor Buyer elect to extend the Closing for an
additional 45 days or (b) the order so extending the Closing is not lifted by
the end of the 45-day period, then, unless the order is a Mandatory Preferred
Order, the Merger Agreement will automatically terminate without any liability
or obligation of the parties other than obligations to split the FCC and HSR Act
filing fees. See "-- The Merger -- Termination; Fees and Expenses; Letter of
Credit."

Non-Solicitation

         Until the termination of the Merger Agreement, the Company, its
subsidiaries and their respective representatives are prohibited from
soliciting, initiating or encouraging the submission of any takeover proposal (a
"Takeover Proposal"), or discussing, negotiating or furnishing information
regarding any Takeover Proposal. However, prior to the receipt of stockholder
adoption of the Merger Agreement, the Company and its representatives may, under
certain circumstances, furnish information with respect to the Company and
participate in negotiations regarding any unsolicited Takeover Proposal meeting
certain criteria, if the Board of Directors of the Company reasonably believes
after receiving advice from its financial advisor that the Proposal provides the
Company's stockholders with superior value than the consideration provided for
in the Merger, and if the Board of Directors determines in good faith, based on
the advice of outside counsel, that it is necessary to do so in order for the
Board of Directors to comply with its fiduciary duties under applicable law. The
Merger Agreement requires the Company to keep Buyer fully informed of the status
and details of any Takeover Proposal.

         In addition, neither the Board of Directors nor any committee thereof
(including the Independent Committee) may (a) withdraw or modify, in a manner
adverse to Buyer, its approval of the Merger or (b) approve or recommend any
Takeover Proposal. However, this prohibition does not apply to certain Takeover
Proposals that are determined by the Board of Directors to be more favorable to
the Company's stockholders than the Merger, provided that the Merger Agreement
is terminated by the Company.


                                      -20-

<PAGE>

Conditions

         The obligations of each party to consummate the Merger are subject to
the satisfaction or waiver of certain conditions, including, among others: (a)
the adoption of the Merger Agreement by the stockholders of the Company (which
occured on March 24, 1999) (b) the issuance of the FCC Consent, (c) the
expiration or termination of the waiting period under the HSR Act and (d) the
absence of any injunction or other legal restraint prohibiting the Merger.

         The obligations of Buyer and Buyer Sub to consummate the Merger are
subject to the satisfaction or waiver of the following additional conditions,
among others: (a) the accuracy of the Company's representations and warranties
in the Merger Agreement, (b) the performance by the Company's of its obligations
under the Merger Agreement, (c) the finality of the FCC Consent and absence of
adverse conditions therein on account of Acts or Changes, (d) obtaining releases
of options and SARs from the Company's directors and executive officers, (e)
obtaining material third party consents to the Merger, (f) the termination by
the Company of certain affiliate relationships, and (h) the Company not having
outstanding more than a specified number of shares of certain classes of its
capital stock (including derivative securities).

         The obligations of the Company to consummate the Merger are subject to
the satisfaction or waiver of the following additional conditions: (a) the
accuracy of Buyer's and Buyer Sub's representations and warranties in the Merger
Agreement and (b) Buyer's and Buyer Sub's performance of their obligations under
the Merger Agreement.

Termination; Fees and Expenses; Letter of Credit

         The Merger Agreement may be terminated:

         (a) By the mutual written consent of the Company, Buyer and Buyer Sub.

         (b) By either the Company or Buyer, if the Company's stockholders did
not adopt the Merger Agreement at the Special Stockholders Meeting (or any
adjournment thereof) or if no stockholder vote was held before the Termination
Date (unless the Merger is permanently enjoined or prohibited). If the Merger
Agreement was terminated as set forth in this paragraph, the Company would have
been obligated to pay Buyer a termination fee of $2.5 million (and an additional
$2.5 million if, within one year of the termination, either the Company enters
into a Takeover Proposal or 50% of the capital stock of the Company is acquired
in a tender offer) and must reimburse Buyer for its reasonable out-of-pocket
expenses (not to exceed $1.0 million).

         (c) By either the Company or Buyer, if the Merger is not consummated on
or before the Termination Date.

         (d) By either the Company or Buyer, if the Merger is permanently
prohibited or enjoined for any reason, including as a result of a proceeding (a
"Mandatory Preferred Proceeding") which challenges the Mandatory Preferred Stock
Merger Consideration or the treatment of the Mandatory Preferred Stock in the
Merger Agreement.

         (e) By Buyer if (i) the Company breaches any representation or warranty
contained in the Merger Agreement, unless the individual or aggregate impact of
all such breaches of representations and warranties could not reasonably be
expected to have a material adverse effect on the Company or unless such
breaches are due to changes in the United States financial markets 

                                      -21-

<PAGE>

generally or to matters arising after the date of the Merger Agreement that
affect the broadcasting industry generally, or (ii) the Company fails to perform
in all material respects its obligations under the Merger Agreement. However,
Buyer may not terminate if the breach or failure to perform is cured within 30
days after notice thereof.

         (f) By the Company if (i) Buyer or Buyer Sub breaches any
representation or warranty contained in the Merger Agreement, unless the
individual or aggregate impact of all such breaches of representations and
warranties could not reasonably be expected to have a material adverse effect
on Buyer's ability to perform its obligations under the Transaction Documents,
or (ii) Buyer or Buyer Sub fail to perform in all material respects their
obligations under the Merger Agreement. However, the Company may not terminate
if the breach or failure to perform is cured within 30 days after notice.

         (g) By the Company if before obtaining stockholder approval of the
Merger Agreement, (i) the Board of Directors determines, in certain
circumstances, to terminate the Merger Agreement in order for the Company to
enter into an agreement relating to a Superior Proposal (as defined in the
Merger Agreement, (ii) the Company notifies Buyer of the Superior Proposal, and
(iii) within five business days from receipt of the notice, Buyer does not offer
to revise the terms of the Merger or the Board of Directors determines in good
faith, after receiving advice from its financial advisor, that the Superior
Proposal is superior to Buyer's revised offer. If the Merger Agreement is
terminated as set forth in this paragraph, the Company must pay Buyer a
termination fee of $5.0 million and must reimburse Buyer for its reasonable
out-of-pocket expenses (not to exceed $1.0 million).

         (h) By Buyer if (i) a tender or exchange offer for 50% or more of the
capital stock of the Company is commenced and the Board of Directors fails to
timely recommend that the Company's stockholders not tender their shares, or
(ii) a Takeover Proposal is announced and the Board of Directors fails to
reaffirm its recommendation of the Merger. If the Merger Agreement is terminated
as set forth in this paragraph, the Company must pay Buyer a termination fee of
$5.0 million and must reimburse Buyer for its reasonable out-of-pocket expenses
(not to exceed $1.0 million).

         (i) By Buyer if the Company has outstanding more than a certain number
of shares of certain classes of its capital stock (including derivative
securities), as specified in the Merger Agreement. If the Merger Agreement is
terminated as set forth in this paragraph, the Company must pay Buyer a
termination fee of $1,666,667.

         Simultaneously with the execution of the Merger Agreement, Buyer placed
into escrow an irrevocable letter of credit for $9.0 million. The escrowed
amount must be released to the Company, and Buyer must pay the Company the $3.0
million in cash (the "Cash Fee"), if the Merger Agreement is terminated because:
(a) the Merger is not consummated by April 30, 1999 (subject to extension) and
at such time (i) regulatory approvals for the transaction shall not have been
obtained (unless the failure to obtain such approvals is the result of Acts or
Changes); (ii) there is in effect a preliminary injunction arising out of
litigation concerning the treatment of the Mandatory Preferred Stock in the
Merger; or (iii) all conditions to Buyer's obligation to close the Merger have
been satisfied, other than that the consent of the FCC to the transfer of the
Company's radio station licenses to Buyer or Buyer Sub shall have become final,
and Buyer elects not to consummate the Merger; (b) the Merger is permanently
enjoined (i) by the federal antitrust agencies or the FCC and such injunction is
not primarily due to Acts or Changes or (ii) on the grounds of the treatment of
the Mandatory Preferred Stock in the Merger; or (c) the Company terminates the
Merger Agreement as described in paragraph (f) above. Except as otherwise
provided in the Merger Agreement, the 

                                      -22-

<PAGE>

release of the letter of credit and payment of the Cash Fee to the Company will
be its sole remedy if the Merger Agreement is terminated as discussed above.

         If the Merger Agreement is terminated for reasons other than those for
which the Merger Agreement provides liquidated damages, the non-breaching party
will be entitled to recover its damages and expenses from the other party or
parties.

FORWARD-LOOKING INFORMATION

         Except for the historical information contained in this Report, certain
items herein, including, without limitation, certain matters discussed under
"Item 3. Legal Proceedings" and under "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operation," are forward-looking
statements. The matters referred to in such statements could be affected by the
risks and uncertainties involved in the Company's business, including, without
limitation, risks and uncertainties relating to leverage, the ability to obtain
financing, the level and volatility of interest rates, integration of the
acquisitions completed during 1998, the ability of the Company to achieve
certain cost savings, the management of growth, the introduction of new
technology, changes in the regulatory environment, the popularity of radio as a
broadcasting and advertising medium, changing consumer tastes, the effect of
economic and market conditions, the impact of current or pending legislation and
regulation and the other risks and uncertainties detailed in "--Competition" and
"--Federal Regulation of Radio Broadcasting" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operation."
Furthermore, if the Merger is not consummated, stockholders should be aware that
the Company's continuing operations will involve a number of risks, including
the failure by the Company to comply with certain covenants in its credit
agreement; governmental investigation of the Citadel JSA; extensive regulation
of radio broadcasting; substantial leverage; potential inability to service
obligations; limitations on ability to pay dividends; historical losses; holding
company structure and dependence upon subsidiaries' operations; a competitive
radio broadcasting industry; control by certain large stockholders; transactions
with affiliates; and restrictions on transfer of capital stock to non-U.S.
persons. The Company undertakes no obligation to publicly release the results of
any revisions to these forward looking statements that may be made to reflect
any future events or circumstances.

BUSINESS SEGMENTS

         The Company classifies its business into two categories: Radio
Broadcasting (consisting of the Company's radio operations) and Other
(consisting of a sports network, a Muzak franchise and a real estate
subsidiary). See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Business Segments."

ITEM 2.           PROPERTIES

         The types of properties required to support each of the Company's radio
stations include offices, studios and tower sites. A station's studios are
generally housed with its offices in downtown or business districts. Tower sites
are generally located so as to provide maximum market coverage.

         No single property is material to the Company's overall operations. The
Company's corporate headquarters are leased and located at 750 B Street, Suite
1920, San Diego, California. The lease for this location will expire in January,
2000. Principally, all of the Company's radio station office, studio and
transmitter sites are leased with lease terms that expire within one to 18


                                      -23-

<PAGE>

years. The Company does not anticipate any difficulties in renewing those leases
that expire within the next five years. The Company owns substantially all of
the equipment used in its radio broadcasting business.

         There has been speculation within the broadcasting industry that the
adoption and implementation of digital television standards may create a tower
capacity shortage which would most likely affect FM radio broadcasters,
particularly those who lease FM broadcasting sites on television towers.
Although the Company leases FM broadcasting sites on television towers, the
Company presently believes that in the event that a tower capacity shortage
develops, it would not have a material adverse effect on the Company's business,
financial condition or results of operations.

         The Company believes that its properties are in good condition and
suitable for its operations; however, the Company continually looks for
opportunities to upgrade its properties.


ITEM 3.           LEGAL PROCEEDINGS

         In October 1996, the Company received a subpoena from the DOJ, seeking
information related to the Company's JSAs in the Wichita, Kansas, Spokane,
Washington and Colorado Springs, Colorado markets. The Company responded to the
subpoena in or about February 1997 and has provided supplemental information
requested by the DOJ, but the DOJ has not yet indicated its regulatory decision.
In the event that the DOJ requires the termination or modification of the
Citadel JSA, the Company believes that such termination or modification would
have a favorable long term impact on the Company's operations, although the
Company may suffer a short-term disruption in sales efforts caused by the
transition, because the Company's income from the Citadel JSA, which is a share
of the combined profits of the stations involved in the Citadel JSA, currently
is negatively impacted by a disproportionate share of the combined operating
expenses. The Company has begun preparations for an orderly transition in the
event that the Merger is not consummated and the DOJ requires the termination of
the Citadel JSA. See "Item I. Business--Citadel JSA."

         On July 24,1998, a lawsuit was commenced against the Company and its
directors in the Court of Chancery of the State of Delaware, New Castle County
(Civil Action No. 16560). The plaintiff in the lawsuit is Herbert Behrens. The
complaint alleges that the consideration to be paid in the Merger to the holders
of the Depositary Shares is unfair and that the individual defendants have
breached their fiduciary duties. The complaint seeks to have the action
certified as a class action and seeks to enjoin the Merger, or in the
alternative, seeks monetary damages in an unspecified amount. Some preliminary
discovery has occurred in the lawsuit. As of March 18, 1999, no hearings with
respect to this litigation had either been held or were scheduled. The parties
have entered into a standstill agreement pursuant to which all proceedings in
the case will be stayed unless either party gives 15 days notice that discovery
should recommence, or the plaintiff provides the Company and the individual
defendants with 15 days notice that they should respond to the complaint.

         On February 12, 1999, the parties entered into a Memorandum of
Understanding that provides for the settlement of the action. The amount to be
paid under the settlement depends upon whether the average last sale price for
the Class A Common Stock of the Company over the twenty trading days ending on
the date immediately preceding the Effective Time of the Merger (or the closing
bid price, if no sale occurs on any such day) (the "Average Closing Price") is
equal to or lower than $12.60 per share. If the Average Closing Price is equal
to or over $12.60 per share, 

                                      -24-

<PAGE>

Buyer will pay $0.11 additional consideration for each Depositary Share owned by
any class member at the Effective Time of the Merger. If the Average Closing
Price is under $12.60 per share, Buyer will pay $0.37 additional consideration
for each Depositary Share owned by any class member at the Effective Time of the
Merger. Buyer also agreed in the Memorandum of Understanding not to oppose
plaintiff's counsel's application for attorney fees and expenses in an aggregate
amount not to exceed $150,000 if Buyer pays $0.11 additional consideration for
each Depositary Share under the proposed settlement and in an aggregate amount
not to exceed $400,000 if Buyer pays $0.37 additional consideration for each
Depositary Share under the proposed settlement. The Memorandum of Understanding
also provides that the defendants deny all allegations of wrongdoing but,
recognizing the burden, expense and risk attendant to the litigation, they have
concluded that it is desirable that the claims against them be settled.

         The proposed settlement is contingent upon the completion of
confirmatory discovery by the plaintiff, execution of a definitive settlement
agreement, closing of the Merger by December 31, 1999 and court approval. There
can be no assurance that the parties will execute a definitive settlement
agreement or that the court will approve the settlement on the terms and
conditions provided for in the Memorandum of Understanding, or at all.

         Management is not currently aware of any other material threatened or
pending legal proceedings against the Company, that if adversely decided, would
have a material adverse effect on the business, financial condition or results
of operations of the Company.


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

         There were no matters submitted to a vote of security holders of the
Company during the fourth quarter of 1998.

         The Company held a Special Stockholders Meeting on March 24, 1999. At
the Special Stockholders Meeting, the Merger Agreement was adopted by the
Company's stockholders pursuant to the affirmative vote of a majority of the
stockholders entitled to vote. With respect to the Class A Common Stock, the
number of votes cast for the adoption of the Merger Agreement were 1,638,498,
the number of votes cast against the adoption of the Merger Agreement were 6,703
and there were no votes withheld, abstentions and broker non-votes. With respect
to the Depository Shares, the number of votes cast for the adoption of the
Merger Agreement were 3,885,498, the number of votes cast against the adoption
of the Merger Agreement were 211,041 and there were no votes withheld.
Additionally, there were 172,000 abstentions and no broker non-votes.






                                      -25-

<PAGE>



                                     PART II

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

MARKET INFORMATION FOR SECURITIES

         The Company's Class A Common Stock and the Depositary Shares are quoted
on the Nasdaq SmallCap Market ("Nasdaq") under the symbols TBCOA and TBCOL, 
respectively. The high and low bid prices for the Class A Common Stock and the 
Depositary Shares for the quarters indicated below are as reported by Nasdaq and
reflect interdealer prices, without retail markup, markdown or commissions and 
may not represent actual transactions.


<TABLE>
<CAPTION>
                              CLASS A COMMON STOCK
---------------------------------------------------------------------------------------
                                              1997                        1998
                                    ---------------------------------------------------

QUARTER ENDED                          HIGH           LOW          HIGH           LOW
---------------------------------   -----------  ------------  -------------  ---------
<S>                                    <C>             <C>         <C>            <C>
March 31.........................      8 3/4           7           11 1/2         9 7/8
June 30..........................      8               5 1/2       11 1/8         9 5/8
September 30.....................      9 3/16          6 7/8       14             9 1/2
December 31......................     11 1/2           8 3/16      11 13/16       8
</TABLE>

<TABLE>
<CAPTION>
                                DEPOSITARY SHARES
--------------------------------------------------------------------------------------
                                              1997                        1998
                                    --------------------------------------------------
QUARTER ENDED                          HIGH           LOW          HIGH         LOW
---------------------------------   -----------  ------------  -------------  --------
<S>                                    <C>          <C>           <C>           <C>
March 31.........................      10 1/4       8             12 1/8        10
June 30..........................       9 1/4       7 1/2         12            10
September 30.....................      10 1/4       8 1/2         12             9 1/2
December 31......................      12           8 5/8          9 7/8         9
</TABLE>

         As of March 17, 1999, there were 47 and 0 holders of record of the
outstanding shares of the Class A Common Stock and the Depositary Shares,
respectively. This information does not include beneficial owners of the Class A
Common Stock or the Depositary Shares held in the name of a broker, dealer,
bank, voting trustee or other nominee. The Company's Class B Common Stock, Class
C Common Stock and Class D Common Stock are held of record by one holder, four
holders and two holders, respectively. There is no public trading market for the
Company's Class B Common Stock, Class C Common Stock or Class D Common Stock.


                                      -26-

<PAGE>



         The Company has not paid any dividends on its common stock. The holders
of the Depositary Shares have received and are entitled to receive when, as, and
if dividends are declared on the Preferred Stock by the Company's Board of
Directors (the "Board") out of funds legally available therefore, cumulative
preferential dividends accruing at $.945 per Depositary Share per annum, payable
quarterly in arrears on each of March 31, June 30, September 30, and December
31. Dividends on the Preferred Stock will accrue whether or not the Company has
earnings, whether or not there are any funds legally available for the payment
of such dividends and whether or not dividends are declared. Dividends
accumulate to the extent they are not paid on the dividend payment date for the
quarter which they accrue. Accumulated, unpaid dividends bear interest at a rate
of 10.5% per annum. The decision whether to pay dividends will be made by the
Board in light of conditions then existing, including the Company's results of
operations, financial condition and requirements, business conditions and other
factors. Except for payment of the dividends with respect to the Depositary
Shares, the Company intends to retain future earnings, if any, to finance the
development and expansion of its business and, therefore, does not anticipate
paying any cash dividends on its other securities in the foreseeable future. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations--Amended Credit Agreement."

RECENT SALES OF UNREGISTERED SECURITIES

         On August 5, 1998, the company issued 3,112 shares of unregistered
Class A Common Stock, upon a cash-less exercise, to a holder of a warrant
certificate issued in connection with the Company's initial public offering
(the "Initial Public Offering"). The issuance of the shares was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act").

         No options granted under the Company's 1995 Stock Option Plan or 1996
Stock Option Plan (collectively, the "Plans") or those granted outside of the
Plans have been exercised as of March 17, 1999. Although the 1997 Stock Option
Plan was approved by the Board of Directors, no options have been granted.




                                      -27-

<PAGE>



ITEM 6.   SELECTED FINANCIAL DATA.

                      SELECTED CONSOLIDATED FINANCIAL DATA
                 (In Thousands, Except Share and Per Share Data)

         The following selected financial data are derived from the Consolidated
Financial Statements of the Company. The selected financial data should be read
in conjunction with "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company and Notes thereto included elsewhere herein.



<TABLE>
<CAPTION>
                                              Predecessor(1)              June 29,
                                      -----------------------------         1995
                                                           Nine          (Company's
                                       Year Ended      Months Ended    Inception) to
                                      December 31,    September 30,     December 31,          Year Ended December 31,
                                          1994             1995           1995(2)         1996         1997          1998
                                      ------------    -------------    -------------    -------      -------        -------
<S>                                   <C>             <C>              <C>              <C>          <C>            <C>
Statement of Operations
Net revenues                            $2,750           $1,756           $1,108        $18,963      $33,641       $40,583
Station operating expenses               2,814            1,900            1,015         13,678       23,415        26,727
Depreciation and amortization              395              420              145          1,427        4,134         4,795
Corporate expenses                          72              132              234          1,719        2,068         2,077
Deferred compensation                        -               81              227            366          390           141
DOJ information request costs                -                -                -            300            -             -
                                        ------           ------           ------        -------      -------       -------
Operating (loss) income                   (531)            (777)            (513)         1,473        3,634         6,843
Interest (expense) income - net           (170)            (143)              60         (1,852)      (4,365)       (5,928)
Other income (expense) (1)                   7               12                -            (60)        (138)       (1,193)
                                        ------           ------           ------        -------      -------       -------
Loss before extraordinary item and income
   tax benefit                            (694)            (908)            (453)          (439)        (869)         (278)
Income tax benefit                        (101)               -                -              -            -             -
                                        ------           ------           ------        -------      -------       -------
Loss before extraordinary item            (593)            (908)            (453)          (439)        (869)         (278)
Extraordinary item                           -                -                -           (320)        (958)            -
                                        ------           ------           ------        -------      -------       -------

                                          (593)            (908)            (453)          (759)      (1,827)         (278)
                                        ------           ------           ------        -------      -------       -------
Preferred stock dividend requirement         -                -                -         (4,414)      (5,507)       (5,507)

Net loss applicable to common stock      $(593)           $(908)          $ (453)       $(5,173)     $(7,334)      $(5,785)
                                        ======           ======           ======        =======      =======       =======
Loss per common share - basic:
Loss before extraordinary item                                            $(0.21)       $ (0.97)     $ (1.30)      $ (1.18)
Extraordinary item                                                             -          (0.10)       (0.20)            -
                                                                          ------        -------      -------       -------
Net loss per common share                                                 $(0.21)       $ (1.07)     $ (1.50)      $ (1.18)
                                                                          ======        =======      =======       =======
Weighted average common shares
   outstanding - basic                                                     2,154          4,842        4,882         4,894
                                                                          ======        =======      =======       =======
</TABLE>

-----------------------------------
(1) Includes approximately $1,017,000 in Merger related fees in 1998


                                      -28-

<PAGE>


<TABLE>
<CAPTION>
                                              Predecessor(1)              June 29,
                                      ----------------------------          1995
                                                           Nine          (Company's
                                       Year Ended      Months Ended    Inception) to
                                      December 31,    September 30,     December 31,         Year Ended December 31,
                                          1994             1995           1995(2)       1996         1997          1998
                                      ------------    -------------    -------------   -------      -------      --------
<S>                                     <C>              <C>             <C>           <C>          <C>          <C>     
Other Operating Data
Broadcast cash flow (3)                 $  (64)          $ (144)         $    93       $ 5,285      $10,226      $ 13,856
Cash capital expenditures                    6               83               55         1,555          869         1,479
Net cash (used in) provided by operating
   activities                              (70)            (183)            (682)        1,330        3,482         5,024
Net cash provided by (used in) investing
   activities                            2,091              (83)          (7,377)      (65,273)     (45,525)       (1,071)
Net cash (used in) provided by financing
   activities                           (2,036)             285          (13,105)       61,980       40,732        (4,311)
Balance Sheet Data (as of the end of                                                                                          
   the period)
Cash and cash equivalents               $   16           $   35          $ 5,046      $  3,083      $ 1,771      $  1,413
Working capital                         (1,426)          (1,470)           5,122         4,492      (55,405)          834
Intangible assets, net                   2,891            2,823            5,603        65,159      111,674       108,267
Total assets                             4,857            4,599           13,735        88,394      132,741       129,142
Long term debt (4)                       4,129            4,304                -        13,000       60,333        61,529
Stockholders' equity (deficit)             406             (363)          12,879        64,382       57,896        52,247
</TABLE>


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

(1)  Predecessor represents the combined historical financial information of the
     initial Wichita stations (consisting of KFH- AM, KWSJ-FM, KQAM-AM and
     KRBB-FM) for the year ended December 31, 1994 and for the nine months ended
     September 30, 1995.
(2)  The Company commenced radio station operations on September 13, 1995.
(3)  Although broadcast cash flow, defined as earnings before interest, taxes,
     depreciation, amortization and corporate expenses, is not a measure of
     performance calculated in accordance with generally accepted accounting
     principals, the Company believes that broadcast cash flow is accepted by
     the broadcasting industry as a generally recognized measure of performance
     and is used by analysts who report publicly on the performance of
     broadcasting companies.
(4)  Long term debt includes current portion of long term debt included in
     current liabilities.


                                      -29-

<PAGE>



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

     The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes thereto. The following discussion
contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, risks and uncertainties relating to leverage,
the ability to obtain financing, the level and volatility of interest rates, the
management of growth, the introduction of new technology, changes in the
regulatory environment, the popularity of radio as a broadcasting and
advertising medium, changing consumer tastes, the effect of economic and market
conditions, and the impact of current or pending legislation and regulation. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.


GENERAL

     The Company owns and operates radio stations primarily in medium and small
markets in the midwestern and western United States. The Company currently owns
and operates, sells advertising on behalf of or provides programming to 22 FM
and 10 AM radio stations in six markets. The Company also owns the Sports
Network.


     MARKET                                            AM                FM

     Colorado Springs, Colorado(1)                     2                 2
     Lincoln, Nebraska(2)                              -                 4
     Omaha, Nebraska(2)                                1                 3
     Spokane, Washington(3)(4)                         3                 5
     Tri-Cities, Washington(5)(6)                      2                 4
     Wichita, Kansas                                   2                 4
                                                ----------------  -------------
         Total                                         10                22
                                                ================  =============

     (1) Consists of four stations owned by the Company for which Citadel
         Broadcasting Company sells advertising pursuant to a joint sales
         agreement.
     (2) The Company also acquired the Sports Network pursuant to the Pinnacle
         Acquisition.
     (3) Includes four stations owned by the Company for which Citadel
         Broadcasting Company sells advertising pursuant to a joint sales
         agreement.
     (4) Includes one station that is not owned by the Company but on which it
         sells advertising pursuant to a joint sales agreement.
     (5) The Tri-Cities, Washington market consists of the cities of Richland,
         Kennewick and Pasco in the State of Washington.
     (6) Includes two stations that are not owned by the Company but on which it
         provides services and sells advertising pursuant to local marketing
         agreements.

         On July 23, 1998, the Company entered into the Merger Agreement
pursuant to which TBC Radio Acquisition Corp (the "Buyer Sub") will merge with
and into the Company and the Company will become a wholly-owned subsidiary of
Capstar Radio Broadcasting Partners, Inc. (the "Buyer"). Pursuant to the Merger,
each outstanding share (except for shares of holders who perfect and exercise
dissenters' appraisal rights) of the Company's (a) Common Stock will convert
into the right to receive $13.00, (b) Mandatory Preferred Stock will convert
into the right to receive $108.30, plus

                                      -30-

<PAGE>



accrued and unpaid dividends up to and including the date immediately prior to
the Effective Time and (c) Series B Convertible Preferred Stock, par value $.01
per share, will convert into the right to receive $.01. Each Depositary Share,
which represents one-tenth of a share of Mandatory Preferred Stock, will be
entitled to receive one-tenth of the Mandatory Preferred Stock Merger
Consideration, or $10.83 plus accrued and unpaid dividends up to and including
the date immediately prior to the Effective Time on one-tenth of a share of
Mandatory Preferred Stock subject to increase in certain circumstances. The
Depositary Share Merger Consideration is equivalent to .833 of the Common Stock
Merger Consideration, which represents the fraction of a share of Class A
Common Stock into which each Depositary Share is currently convertible. Each
such amount will be payable in cash, without interest. Pursuant to the Merger
Agreement, holders of derivative securities of the Company will be able to
receive an amount in respect of such securities which is generally equal to the
difference between $13.00 and the exercise price of the derivative security.

         The Company held a Special Stockholders Meeting on March 24, 1999. At
the Special Stockholders Meeting, the Merger Agreement was adopted by the
Company's stockholders pursuant to the affirmative vote of a majority of the
stockholders entitled to vote.

         Subject to the satisfaction or waiver of the closing conditions set
forth in the Merger Agreement, the Closing is expected to occur on the earlier
of (a) April 30, 1999 (subject to extension under certain circumstances, as
provided in the Merger Agreement, until as late as September 14, 1999) or (b)
any other date specified by Buyer at least 5 business days in advance.

         The Merger is currently expected to be consummated in the second
quarter of 1999. While the Company has no reason to believe that the conditions
to the closing of the Merger will not be satisfied during such period, there
can be no assurance that the Merger will be consummated in the second quarter
of 1999 or at all.

         For more information about the Merger, see the definitive Proxy
Statement, dated February 12, 1999, of the Company included in the Schedule 14A
of the Company filed with the Securities and Exchange Commission (the "SEC") on
February 16, 1999 (and any supplements thereto).

         The performance of a radio station group, such as the Company, is
customarily measured by its ability to generate Broadcast Cash Flow, defined as
net revenues less station operating expenses. Although Broadcast Cash Flow is
not a measure of performance calculated in accordance with generally accepted
accounting principles ("GAAP"), the Company believes that Broadcast Cash Flow is
accepted by the broadcasting industry as a generally recognized measure of
performance and is used by analysts who report publicly on the performance of
broadcasting companies. Nevertheless, this measure should not be considered in
isolation or as a substitute for operating income, net income, net cash provided
by operating activities or any other measure for determining the Company's
operating performance or liquidity that is calculated in accordance with GAAP.

         The primary source of the Company's revenues is the sale of advertising
time on its radio stations. The Company's most significant station operating
expenses are employee salaries and commissions, programming expenses and
advertising and promotional expenditures. The Company seeks to reduce expenses
at the stations by implementing cost controls, operating the stations as groups
in their respective markets and lowering overhead by combining and centralizing
administrative and financing functions of its stations.

         The Company's revenues are primarily affected by the advertising rates
that its radio stations charge. The Company's advertising rates are in large
part based on a station's ability to attract

                                      -31-

<PAGE>



audiences in the demographic groups targeted by its advertisers, as measured
principally by The Arbitron Company (an independent rating service) on a
quarterly basis. Because audience ratings in local markets are crucial to a
station's financial success, the Company endeavors to develop strong listener
loyalty. The Company seeks to diversify the formats on its stations as a means
to insulate it from the effects of changes in the musical tastes of the public
in any particular format. The number of advertisements that can be broadcast
without jeopardizing audience levels (and the resulting ratings) is limited in
part by the format of a particular station. The Company's stations strive to
maximize revenue by constantly managing the number of commercials available for
sale and adjusting prices based upon local market conditions. In the
broadcasting industry, radio stations often utilize trade (or barter) agreements
which exchange advertising time for goods or services (such as travel or
lodging), instead of for cash. The Company generates most of its revenue from
local advertising, which is sold primarily by a station's sales staff. During
1998, approximately 69% of the Company's revenues (exclusive of Citadel JSA fees
received) were from local advertising. To generate national advertising sales,
the Company engages independent advertising sales representatives that
specialize in national sales for each of its stations.

         The radio broadcasting industry is highly competitive. The financial
results of each of the Company's stations are dependent to a significant degree
upon its audience ratings and its share of the overall advertising revenue
within the station's geographic market. See "Item 1. Business-- Competition."

         The Company's revenues vary throughout the year. As is typical in the
radio broadcasting industry, the Company's first calendar quarter generally
produces the lowest revenues for the year, and the fourth calendar quarter
generally produces the highest revenues for the year. The Company's operating
results in any period may be affected by the incurrence of advertising and
promotion expenses that do not necessarily produce commensurate revenues until
the impact of the advertising and promotion is realized in future periods. See
"Item 1. Business--Seasonality."

         Following the passage of the Telecom Act, the DOJ indicated its
intention to investigate certain existing industry practices that had not been
previously subject to antitrust review. The DOJ is investigating the Citadel JSA
in connection with the concentration of radio station ownership in the Colorado
Springs, Colorado and Spokane, Washington markets. In a case unrelated to the
Company, the DOJ has requested the termination of a radio station JSA that, in
the opinion of the DOJ, would have given a radio station owner, together with
its proposed acquisition of other radio stations in the area, control over more
than 60% of radio advertising revenue in the area. The Citadel JSA provided
approximately 15% of the Company's net revenues in 1998. In the event that the
DOJ requires the termination or modification of the Citadel JSA, the Company
believes that such termination or modification would have a favorable long term
impact on the Company's operations, although the Company may suffer a short-term
disruption in sales efforts caused by the transition because the Company's
income from the Citadel JSA, which is a share of the combined profits of the
stations involved in the Citadel JSA, currently is negatively impacted by a
disproportionate share of the combined operating expenses. The Company has begun
preparations for an orderly transition in the event that the DOJ requires the
termination of the Citadel JSA.

BUSINESS SEGMENTS

         The Company classifies its business into two categories: Radio
Broadcasting (consisting of the Company's radio operations) and Other
(consisting of a sports network, a Muzak franchise and a real estate
subsidiary). See Note 8 to the Company's Consolidated Financial Statements filed
with this report.

                                      -32-

<PAGE>



RESULTS OF OPERATIONS

         The Company's consolidated financial statements are not directly
comparable from period to period due to acquisition and disposition activity.
The Company's acquisitions and dispositions during the period from January 1,
1996 through December 31, 1997 have all been accounted for using the purchase
method of accounting. These acquisitions were as follows:

         1996 Acquisitions and Operating Agreements:

o    In January 1996, the Company acquired KTGL-FM and KZKX-FM, both operating
     in the Lincoln, Nebraska market.
o    In April 1996, the Company acquired KTNP-FM (formerly KRRK-FM) and KXKT-FM,
     both operating in the Omaha, Nebraska market, and KALE-AM and KIOK-FM, both
     operating in the Tri-Cities, Washington market.
o    In May 1996, the Company acquired KISC-FM, KNFR-FM and KAQQ-AM, each
     operating in the Spokane, Washington market. The Company had been operating
     these stations pursuant to an LMA since March 1, 1996. In addition, on
     March 1, 1996, the Company assumed the rights and obligations under two
     JSAs related to KCDA-FM and KNJY-FM, both operating in the Spokane,
     Washington market. The JSA related to KNJY-FM terminated on December 31,
     1996.
o    In June 1996, the Company acquired KIBZ-FM and KKNB-FM, both operating in
     the Lincoln, Nebraska market. The Company had sold advertising on KIBZ-FM
     and KKNB-FM pursuant to a JSA since January 1996.
o    In November 1996, the Company acquired KVOR-AM, KSPZ-FM, KTWK-AM and
     KVUU-FM, each operating in the Colorado Springs, Colorado market; KEYF-FM,
     KEYF-AM, KUDY-AM and KKZX-FM, each operating in the Spokane, Washington
     market; KEYN-FM, operating in the Wichita, Kansas market; and KEGX-FM and
     KTCR-AM, both operating in the Tri-Cities, Washington market (the
     "Tri-Cities Stations"), and assumed an LMA for radio station KNLT- FM, also
     operating in the Tri-Cities, Washington market. The Company had programmed
     the Colorado Springs and Spokane Stations acquired in November 1996 under
     an LMA since January 1996. These stations are subject to the Citadel JSA,
     pursuant to which Citadel sells all the advertising time on these stations.
     The Company had also operated the Tri-Cities Stations acquired in November
     1996 under an LMA from July 1996 to November 1996.
o    During the four months ended December 31, 1996, the Company sold
     advertising on radio stations KKRD-FM, KRZZ-FM and KNSS-AM, each operating
     in the Wichita, Kansas market, pursuant to a JSA ("Wichita JSA"), which
     terminated on December 31, 1996.

         1997 Acquisitions, Dispositions and Operating Agreements

o    In January 1997 the Company purchased radio stations KZSN-FM and KZSN-AM,
     both operating in the Wichita, Kansas market.
o    In April 1997, the Company purchased radio stations KSSN-FM and KMVK-FM,
     both operating in the Little Rock, Arkansas market.
o    In April 1997, the Company purchased radio station KOLL-FM, operating in
     the Little Rock, Arkansas market. Since March 1996, the Company had
     provided programming and sold advertising for radio station KOLL-FM
     pursuant to a LMA.
o    In May 1997, the Company purchased the Sports Network, which broadcasts all
     of the men's football, basketball and baseball games and women's basketball
     and volleyball games of the University of Nebraska.

                                      -33-

<PAGE>



o    In June 1997, the Company purchased radio stations KFAB-AM and KGOR-FM,
     each operating in the Omaha, Nebraska market, and the exclusive Muzak
     franchise for the Lincoln and Omaha, Nebraska markets.
o    In October 1997, the Company completed the disposition of radio stations
     KOLL-FM, KSSN-FM and KMVK-FM, each operating in the Little Rock, Arkansas
     market.

         There were no acquisitions, dispositions or operating agreements
consummated or entered into during the year ended December 31, 1998.

         On February 12, 1997, the Company changed its fiscal year end from
March 31st to December 31st, effective December 31, 1996. For comparative
purposes, the Company's operating results for the fiscal periods ending March 31
have been restated as of December 31 for the affected years. Accordingly, the
following compares 1998 to 1997 and 1997 to 1996.

1998 COMPARED TO 1997

         Net revenues increased approximately $7.0 million or 21% to
approximately $40.6 million for 1998 from approximately $33.6 million for 1997
as a result of acquisitions consummated during 1997 and the growth at
continuously owned and operated stations. On a same station basis for the radio
stations owned and operated as of December 31, 1998, net revenues increased to
$40.6 million for 1998 from approximately $37.1 million for 1997 which
represented a 9% increase. Despite the growth in net revenues, the Company
experienced disruptions in sales efforts as a result of restructuring of sales
management and turnover of sales staff at stations acquired during 1997 as well
as changes in direct competitive forces in selected markets resulting in
increased competition.

         Station operating expenses increased by approximately $3.3 million or
14% in 1998 to approximately $26.7 million from approximately $23.4 million for
1997 primarily due to the inclusion of expenses related to the acquisitions
consummated during 1997. On a same station basis for the radio stations owned
and operated by the Company as of December 31, 1998, operating expenses for 1998
increased to approximately $26.7 million from $26.1 million for 1997, which
represented a 2% increase. The increase in operating expenses related
principally to a larger volume of business during 1998 reduced by the improved
cost structure of stations acquired during 1997 and continuing implementation of
the Company's cost reduction programs and efficiencies of combined operations.


         Broadcast Cash Flow for 1998 increased to approximately $13.9 million
from approximately $10.2 million for 1997, an increase of 36%. Broadcast Cash
Flow Margin for 1998 increased to 34%, an increase over the Broadcast Cash Flow
Margin of 30% for 1997, due to increases in net revenues exceeding increases in
operating expenses as described above. On a same station basis, Broadcast Cash
Flow for 1998 increased approximately 25% as compared to 1997, primarily due to
increased revenue in all markets and the cost reduction programs implemented by
the Company.

         Depreciation and amortization expense for 1998 was approximately $4.8
million versus approximately $4.1 million for 1997. The increase was
attributable to the additional depreciation of fixed assets and amortization of
intangible assets resulting from capital expenditures and acquisitions
consummated during 1997.

         Corporate expenses consisted primarily of officers' salary, financial
consulting and professional fees and expenses. Corporate expenses were
approximately $2.1 million for 1998 and 1997. Included in corporate expense are
fees accrued to SFX Broadcasting and SFX


                                      -34-

<PAGE>



Entertainment, Inc. ("SFX Entertainment") for services rendered by The Sillerman
Companies, Inc. ("TSC") under the Amended and Restated SCMC Agreement (as 
defined herein) of approximately $530,000 and $554,000 for 1998 and 1997, 
respectively.

         The Company recorded deferred compensation expense of approximately
$141,000 for 1998 and approximately $390,000 for 1997. This recurring expense is
related to stock, stock options and stock appreciation rights granted to
officers, directors and advisors in prior periods, but is not currently
affecting cash flow.

         Operating income for 1998 was approximately $6.8 million as compared to
approximately $3.6 million for 1997. The increase in operating income results
principally from factors described above and to a lesser extent the inclusion of
results of operations for stations acquired during 1997.

         Net interest expense for 1998 was approximately $5.9 million as
compared to approximately $4.4 million for 1997. The net increase in interest
expense was principally due to the associated interest expense incurred as a
result of the increased borrowings to complete the Company's acquisition of
radio stations during 1997.

         Net loss before extraordinary item for 1998 was approximately $278,000
versus a loss of approximately $869,000 for 1997. The Company incurred an
extraordinary loss of approximately $958,000 in 1997 in connection with the
early extinguishment of debt. Net loss for 1998 and 1997 was approximately
$278,000 and $1.8 million, respectively. Net loss applicable to common stock was
approximately $5.8 million for 1998 as compared to a net loss applicable to
common stock of approximately $7.3 million for 1997. The decrease in the net
loss applicable to common stock was principally due to increased revenues and
lesser increases in operating expenses, depreciation, amortization and interest
expense as described above.

1997 COMPARED TO 1996

         Net revenues increased approximately $14.7 million or 77% to
approximately $33.6 million for 1997 from approximately $19.0 million for 1996
as a result of acquisitions consummated during 1997, a full year of revenues
from acquisitions consummated during 1996 and the growth at continuously owned
and operated stations. On a same station basis for the radio stations owned and
operated as of December 31, 1997, net revenues increased to $37.1 million for
1997 from approximately $32.4 million for 1996 which represented a 15% increase.
Despite the growth in net revenues, the Company's revenues were adversely
impacted by disruptions in sales efforts as a result of the pending sales of
radio stations to the Company prior to the Company's ownership and the
restructuring of sales management and turnover of sales staff during the periods
after the acquisitions of stations. Revenues also increased during 1997 due to
the inclusion in net revenues of the reimbursement for operating expenses under
the Citadel JSA, beginning November 22, 1996, the date of acquisition of the
stations involved in the Citadel JSA. No reimbursement was recorded during the
period when the Company operated those radio stations pursuant to an LMA.

         Station operating expenses increased by approximately $9.7 million or
71% in 1997 to approximately $23.4 million from approximately $13.7 million for
1996 primarily due to the inclusion of expenses related to the acquisitions
consummated during 1997 and due to a full year of station operating expenses
related to the acquisitions consummated during 1996. On a same station basis for
the radio stations owned and operated by the Company as of December 31, 1997,
operating expenses for 1997 increased to approximately $26.1 million from $23.3
million for 1996, which represented a 12% increase. Station operating expenses
during the period prior to the 


                                      -35-

<PAGE>


Company's operation and/or ownership lack comparability in some instances as a
result of the absence of certain costs including salaries for owner-management.
The benefits of continuing implementation of the Company's cost reduction
programs and efficiencies of combined operations in the markets served during
1997 did not fully offset the impact of the additional required costs not
incurred in the prior year by the former owners such as the addition of a
General Manager to a station that was managed personally by the prior owner.
Further, station operating expenses during 1997 include amounts expended for
radio stations subject to the Citadel JSA, beginning November 22, 1996, the date
of acquisition of the stations involved in the Citadel JSA. No expenses were
recorded during the period when the Company operated these stations pursuant to
an LMA.

         Broadcast Cash Flow for 1997 increased to approximately $10.2 million
from approximately $5.3 million for 1996, an increase of 92%. Broadcast Cash
Flow Margin for 1997 increased to 30%, an increase over the Broadcast Cash Flow
Margin of 28% for 1996, due to increases in net revenues exceeding increases in
operating expenses as described above. On a same station basis, Broadcast Cash
Flow for 1997 increased approximately 22% as compared to 1996, primarily due to
increased revenue in all markets and the cost reduction program implemented by
the Company. Broadcast Cash Flow Margin in 1997 was reduced by approximately
three percentage points by the impact of recording as revenues the reimbursement
of expenses under the Citadel JSA and including the related expenses in station
operating expenses.

         Depreciation and amortization expense for 1997 was approximately $4.1
million versus approximately $1.4 million for 1996. The increase was
attributable to the additional depreciation of fixed assets and amortization of
intangible assets resulting from acquisitions consummated during 1997 and a full
year of depreciation and amortization associated with the acquisitions
consummated during 1996.

         Corporate expenses consisted primarily of officer's salary, financial
consulting and professional fees and expenses. Corporate expenses for 1997 were
approximately $2.1 million as compared to approximately $1.7 million for 1996.
The increase is due to the loss of reimbursement of expenses by Pourtales
pursuant to the Shared Expense Agreement (as defined) as a result of the
Company's acquisition of the Pourtales owned stations and increased expenses
related to acquisitions completed in 1997. Included in corporate expense are
fees paid to SFX Broadcasting for services rendered by TSC under the Amended and
Restated SCMC Agreement (as defined) of approximately $554,000 and $359,000 for
1997 and 1996, respectively.

         The Company recorded deferred compensation expense of approximately
$390,000 for 1997 and approximately $366,000 for 1996. This recurring expense is
related to stock, stock options and stock appreciation rights granted to
officers, directors and advisors in prior periods, but is not currently
affecting cash flow.

         Operating income for 1997 was approximately $3.6 million as compared to
approximately $1.5 million for 1996. The increase in operating income results
principally from the inclusion of results of operations for stations acquired
during 1997 and from the results of a full year of operations for the
acquisitions consummated during 1996.

         Net interest expense for 1997 was approximately $4.4 million as
compared to $1.9 million for 1996. The net increase in interest expense was
principally due to the associated interest expense incurred as a result of the
increased borrowings to complete the Company's acquisition of radio stations
during 1997 and a full year of interest expense associated with the increased
borrowing to complete the acquisitions consummated during 1996.


                                      -36-
<PAGE>



         Net loss before extraordinary item and income taxes for 1997 was
approximately $869,000 versus a loss of approximately $439,000 for 1996. The
Company incurred extraordinary losses of $958,080 and $320,000 in 1997 and 1996,
respectively, in connection with the early extinguishment of debt. Net loss for
1997 and 1996 was approximately $1.8 million and approximately $759,000,
respectively. Net loss applicable to common stock was approximately $7.3 million
for 1997 as compared to approximately $5.2 million for 1996. The increase in the
net loss applicable to common stock was principally due to increased
depreciation, amortization and interest expense related to acquisitions
consummated during 1997, a full year of the expenses described above associated
with the acquisitions consummated during 1996, and the increased provision for
dividends in 1997 on the Depositary Shares.

LIQUIDITY AND CAPITAL RESOURCES

         Since the Company's Inception, the Company's principal sources of funds
have been the proceeds from the Initial Public Offering of approximately $12.9
million, the borrowing of $9.0 million from AT&T-Commercial Finance Corporation
("AT&T-CFC") (the "Initial Credit Agreement"), net proceeds of approximately
$56.4 million from the Preferred Stock Offering (as defined herein), the
borrowing of $40.0 million from AT&T-CFC pursuant to the Amended and Restated
Loan Agreement (the "Credit Agreement"), and the borrowing of $78.5 million
under the First Amendment to the Amended and Restated Loan Agreement (the
"Amended Credit Agreement") from AT&T-CFC and Union Bank of California, N.A.
(collectively, the "Lenders"). The cost of the acquisitions completed through
December 31, 1998, including the stations subject to the Little Rock
Disposition, of approximately $130.9 million were financed with the proceeds
from the Initial Public Offering, the Initial Credit Agreement, the Preferred
Stock Offering, the Credit Agreement and the Amended Credit Agreement. In
addition, the Company received $20 million from the consummation of the Little
Rock Disposition which was used to pay down debt from the Amended Credit
Agreement. The Company did not consummate any acquisitions or dispositions
during 1998.

         Cash flow provided by operating activities for 1998 was approximately
$5.0 million as compared to cash flow provided by operating activities for 1997
of approximately $3.5 million, which increase resulted primarily from the
increased income from operations. Cash used in investing activities was
approximately $1.1 million for 1998 and approximately $45.5 million for 1997.
Cash used in investing activities primarily related to capital expenditures
during 1998 and the acquisitions of radio stations completed during 1997. Cash
flow of approximately $4.3 million used in financing activities during 1998
related principally to the payment of dividends on the 9% Mandatory Convertible
Preferred Stock while cash flow of approximately $40.7 million provided from
financing activities during 1997 related principally to borrowings under the
Amended Credit Agreement.

         During the year ended December 31, 1999, it is anticipated that the
Company will be able to meet its capital needs, including interest expense,
dividends, corporate expenses, capital expenditures and other commitments, from
cash on hand, cash provided from operations which assumes continued improvement
in the operating results of the Company's radio stations, and additional
borrowings which may be available under the Amended Credit Agreement. There can
be no assurance, however, that the stations will achieve the cash flow levels
required to meet the Company's capital needs. The Company's ability to make
these improvements will be subject to prevailing economic conditions and to
legal, financial, business, regulatory, industry and other factors, many of
which are beyond the Company's control.


                                      -37-

<PAGE>


         Additionally, the Company may be required to incur additional
indebtedness or raise additional equity financing to fund its operations in the
event that the Merger does not occur and its operations do not improve and in
connection with possible future acquisitions of radio properties. Additionally,
the Company is likely to need to incur or raise such additional financing when
the balloon payments are due in 2004 under the Amended Credit Agreement. There
can be no assurance that the Company will be able to incur such additional
indebtedness or raise additional equity on terms acceptable to the Company, if
at all. See "Item 1. Business -- Forward-Looking Information."

         In the event the Merger is not consummated, the Company may be required
to pay Buyer termination fees ranging from $1.6 million to $6.0 million if the
Merger Agreement is terminated as a result of certain circumstances set forth
in the Merger Agreement including the Company's termination of the Merger
Agreement in order for the Company to enter into an agreement relating to a
Superior Proposal (as defined in the Merger Agreement) or the Buyer's
termination of the Merger Agreement if the Company has outstanding more than a
certain number of shares of certain classes of its capital stock (including
derivative securities). Additionally, the Buyer may be required to pay the
Company $12 million if the Merger Agreement is terminated because the Merger
Agreement is not consummated by April 30, 1999 as a result of certain
circumstances, the Merger is permanently enjoined under certain circumstances or
the Buyer or Buyer Sub breaches certain of its representations and warranties
contained in the Merger Agreement.

Amended Credit Agreement

         During 1997, the Company completed a refinancing of its credit facility
with AT&T-CFC by entering into the Amended Credit Agreement with the Lenders in
an aggregate amount of $80.0 million. Giving effect to the Little Rock
Disposition, as of December 31, 1998 the Company had borrowed $60.0 million
($59.9 million outstanding as of December 31, 1998), had $800,000 available to
finance operations and $18.5 million available to finance additional
acquisitions under the Amended Credit Agreement. The Company's ability to borrow
funds under the Amended Credit Agreement is conditioned on meeting certain
financial and coverage ratios, as well as those imposed by provisions of the
Depositary Shares, and includes restrictions on capital expenditures and other
payments. See below for description of failure of covenant. Therefore, the
maximum amounts which might become available under the Amended Credit Agreement,
and the maximum amounts actually available to the Company at any particular
time, may be less. The Amended Credit Agreement provides that, during the
pendency of an event of default, the Company's ability to pay cash dividends
with respect to the Depositary Shares will be restricted.

         The Amended Credit Agreement is comprised of four tranches. The first
tranche, in the amount of $35.0 million, is a reducing revolver where the
maximum amount available reduces quarterly beginning on July 1, 1998 with a
maturity of April 1, 2004. As of December 31, 1998, the Company owed less than
the maximum amount under this tranche, therefore, the first principal payment
will be due July 1, 1999. Future advances under this tranche would accelerate
the due date of the first principal payment. The second tranche, in the amount
of $25.0 million, is a term loan, with quarterly principal payments which
commenced on July 1, 1998 with a maturity of July 1, 2004. The third tranche, in
the amount of $20.0 million, was a bridge loan which was fully repaid on October
1, 1997 in connection with the Little Rock Disposition. The fourth tranche (the
"Acquisition Loan"), in the amount of $20.0 million, is an acquisition loan with
the same terms as the second tranche.


                                      -38-

<PAGE>

         Loans under the Amended Credit Agreement bear interest at a floating
rate equal to either, at the option of the Company, a base rate which
approximates prime plus an applicable margin, or the LIBOR rate plus an
applicable margin. As of December 31, 1998, the applicable margin for (i) the
first tranche was 1.00% for base rate loans and 2.00% for LIBOR rate loans and
(ii) the second and fourth tranches was 2.50% for base rate loans and 3.50% for
LIBOR rate loans. The applicable margin for the third tranche, which was repaid
in full on October 1, 1997, was 2.25% for base rate loans and 3.25% for LIBOR
rate loans.

         On June 30, 1998, the Company entered into the First Amendment to the
Amended Credit Agreement ("First Amendment") with the Lenders. The purpose of
the First Amendment was to enable the Lenders to fund an acquisition loan of
$1.0 million which was used by the Company to refinance a portion of the
indebtedness related to the acquisition of Pinnacle Sports Productions, LLC in
1997. The First Amendment also included modifications to certain financial
covenants.

         On December 29, 1998, the Company borrowed $500,000 under the
Acquisition Loan of the Amended Credit Agreement to finance an escrow deposit
required under an agreement with Saga Communications of Iowa, Inc. ("Saga") for
the downgrade of Saga's signal for KIOA-FM operating in the Des Moines, Iowa
market and the upgrade by the Company of its signal for KTNP-FM, operating in
the Omaha, Nebraska market.

         As of December 31, 1998, the Company did not meet its corporate
overhead financial covenant with respect to the Amended Credit Agreement. The
Company's Lenders have granted it a waiver as of December 31, 1998 with respect
to this covenant.

Other Debt

         In connection with the Pinnacle Acquisition, the Company delivered to
the sellers, at the time of acquisition, promissory notes in the amount of
approximately $1.8 million which accrue interest at 6% per annum and are payable
in two installments in May 1998 and 1999. The Company remitted the May 1998
payment in accordance with the terms of the promissory notes. Additionally, the
Company assumed a note payable to a bank in the amount of $525,000 which bore
interest at a rate 1/2 of 1% under prime. This note payable was subsequently
repaid in November 1997. The purchase price of the Pinnacle Acquisition may be
increased by $1.7 million if the University of Nebraska renews its contract with
the Company in 2001 for a minimum of an additional three year term and the
payment of such would be required at the time the renewal is obtained. While
renewal of the contract with the University of Nebraska cannot be assured, based
on discussions the Company has had with the University of Nebraska, the Company
presently knows of no reason why the contract would not be renewed.
Additionally, under the Company's broadcast rights agreement with the University
of Nebraska, annual rights fee payments of approximately $1.7 million during the
year ended December 31, 1999 and approximately $1.8 million during the year
ended December 31, 2000 are due on October 1 of each year, or, at the option of
the Company each year, may be paid in seven equal principal installments plus
interest at the prime rate.


                                      -39-

<PAGE>


         On September 15, 1998, the Company borrowed $650,000 from Buyer for the
purpose of acquiring certain real property in Lincoln, Nebraska as required by
the Merger Agreement. The loan is secured by the acquired real property. The
Company occupied a substantial portion of the property as a tenant prior to
September 15, 1998 and continues to occupy the property. The loan accrues
interest at the rate of 12% per annum which is payable, along with the
principal, on the earlier of the consummation of the Merger, which is expected
during the second quarter of 1999, or the termination of the Merger Agreement.

YEAR 2000

         The Year 2000 problem is the result of computer software and hardware,
as well as chips and processors embedded in various products, (collectively
referred to as "Computer Applications") using two digits rather than four digits
to define the applicable year. Any of the Company's Computer Applications may
recognize a date using "00" as the Year 1900 rather than the Year 2000, which
could result in miscalculations or system failures.

         The Company's critical information technology ("IT") systems using
Computer Applications consist of sales, scheduling, accounting and broadcast
automation systems. These IT systems rely heavily on specialized software
provided by third parties. The Company is in the process of examining and
testing its IT systems and letters of compliance are being obtained from all
vendors of standard systems. The majority of these systems have been or are in
the process of being upgraded through routine scheduled software and hardware
upgrades. Based on internal assessments completed to date and upon third party
representations, the Company believes that its critical IT systems are expected
to be Year 2000 compliant by May 1999.

         The Company's non-IT systems consist of telephone systems and any other
equipment which contain embedded computer chips or processors. The Company has
not begun an examination of its non-IT systems. The Company plans to conduct and
complete its assessment of its non-IT systems that operate at its facilities by
mid-year 1999.

         In addition to its internal systems, the Company also relies, directly
and indirectly, on the systems of third parties, such as its banks, for the
accurate exchange of data and for financial processing capabilities. The
Company's primary financial institution has indicated that it is actively
working to resolve its Year 2000 compatibility issues.

         The Company has not incurred any costs to date that are specifically
attributable to resolving Year 2000 compliance issues. The Company cannot
accurately estimate its future costs relating to readying its Computer
Applications until it has completed examinations of all systems containing
Computer Applications which will occur by June 1999.

         Although the Company believes that it will be able to discover and
correct all its Year 2000 compatibility problems, there can be no guarantee that
the Company will not experience any adverse impact. Additionally, with respect
to third parties, there can be no assurance that their systems will be rendered
Year 2000 compliant on a timely basis or that any resulting Year 2000 issues
would not have an adverse effect on the results of operations of the Company.
The most likely negative impact, if any, could include delays in receipt of
payments from customers and delays in future advertising commitments from
customers experiencing compatibility problems.

         The Company believes that the Year 2000 compliance of its IT and non-IT
systems should minimize the business difficulties encountered as a result of the
Year 2000 issue. Consequently, the 

                                      -40-

<PAGE>


Company does not anticipate the need to formulate contingency plans to deal with
Year 2000 issues and has not formulated such plans. If this assessment changes,
the Company will develop contingency plans as deemed necessary.


RECENT ACCOUNTING PRONOUNCEMENTS

Reporting on the Costs of Start-Up Activities

         In June 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5"). Under SOP 98-5, the costs of start-up activities,
including organizational costs, would be expensed as incurred. SOP 98-5 broadly
defines start-up activities as those one-time activities related to opening a
new facility, introducing a new project or service, conducting business in a new
territory, conducting business with a new class of customer or beneficiary,
initiating a new process in an existing facility or beginning a new operation.
Although, SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998, earlier application is encouraged. The
initial application of SOP 98-5 is to be reported as a cumulative effect of a
change in accounting principle. The Company will adopt SOP 98-5 in the first
quarter of 1999 which will result in a charge of approximately $119,000
resulting from the write-off of organization costs which will be recorded as the
cumulative effect of a change in accounting principle.

ITEM 7a.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
           RISK

         In the normal course of business, the Company is exposed to market risk
associated with fluctuations in interest rates. The Company does not enter into
market risk sensitive instruments for trading purposes. The Company's exposure
as a result of variable interest rates relates primarily to outstanding floating
rate debt instruments that are indexed to U.S. or European Monetary Union
short-term money market rates. The Company purchased, as required by the Amended
Credit Agreement, an interest rate cap which gives the Company protection
against interest rate increases over a certain level. The cap protects against
increases in the 6 Month LIBOR rate over 7.5% on $30.0 million of the debt
currently outstanding under the Amended Credit Agreement and expires in
September 1999. A 10% increase in the average cost of the Company's variable
rate debt would increase the Company's net loss attributable to common stock by
approximately $500,000 or $.01 per share of outstanding stock and could increase
the likelihood that the Company may be required to incur additional indebtedness
or raise additional equity financing to fund its operations in the event that
its operations do not improve. Additional information relating to the Company's
outstanding financial instruments is included in "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."


ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Information required by Item 8 of Part II is incorporated herein by
reference to the Consolidated Financial Statements filed with this report. See
"Item 14. Exhibits, Financial Statement Schedules, Lists and Reports on Form
8-K."



                                      -41-

<PAGE>

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

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



                                      -42-
<PAGE>

                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The directors and executive officers of the Company are as follows:


       NAME                     AGE              POSITION
----------------------      ------------    --------------------------

John D. Miller                  54          Chairman of the Board
Norman Feuer                    61          Chief Executive Officer,
                                            President and Director
William G. Thompson             38          Chief Financial Officer
Kraig G. Fox                    30          Secretary
Dennis R. Ciapura               53          Director
Frank E. Barnes III             49          Director
Jeffrey W. Leiderman            52          Director



         The Amended and Restated Certificate of Incorporation of the Company
authorizes the Board to fix the number of directors from time to time, but at no
less than two directors. The Board has fixed the number of directors at five.
The holders of the Depositary Shares and the Class A Common Stock voting
together as a single class, with each Depositary Share entitled to 4/5 of a vote
and each share of Class A Common Stock entitled to one vote, are entitled to
elect two of the Company's directors (the "Independent Directors"). The
remaining directors are elected by the holders of the Depositary Shares, the
Class A Common Stock and the Class B Common Stock, with the holders of the
Depositary Shares having 4/5 of a vote per share, the holders of the Class A
Common Stock having one vote per share and the holders of the Class B Common
Stock having ten votes per share. Directors hold office until the next annual
meeting of stockholders following their election or until their successors are
elected and qualified. Officers are elected annually by the Board and serve at
the discretion of the Board. In the event that dividends on the Depositary
Shares are in arrears and unpaid for six consecutive quarterly dividend periods,
the holders of the Depositary Shares (voting separately as a class) will be
entitled to vote for the election of two additional directors of the Company,
subject to certain limitations.

CERTAIN INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS

         John D. Miller has served as Chairman of the Board of the Company since
June 1995. He has also served as the President of StarVest Management, Inc., a
private investment group, since May 1998. Mr. Miller served as the President of
Rothschild Ventures, Inc., a private investment group, from July 1995 to April
1998, on the board of directors of LNR, Inc., a company engaged in the satellite
communications hardware industry from December 1997 to April 1998 and is
currently on the board of directors of International Keystone Entertainment,
Inc. since September 1998. In addition, Mr. Miller was the President of
Starplough, Inc. from February 1994 to June 1995. Mr. Miller formed Starplough,
Inc. as a private investment company focusing on investing


                                      -43-
<PAGE>

in medium-sized companies. He was the Managing Director of Clipper Group, a
private equity investment group, from March 1993 to March 1994. From 1969 to
1993, Mr. Miller served in various capacities with The Equitable Companies
Incorporated (the "Equitable"), a full service insurance and investment company.
Immediately prior to his retirement from The Equitable in 1993, Mr. Miller
served as the President and Chief Executive Officer of Equitable Capital
Management Corp., an investment and advisory subsidiary of The Equitable.

         Norman Feuer has served as President, Chief Executive Officer and a
Director of the Company since June 1995. In addition, Mr. Feuer served as acting
Chief Financial Officer and Treasurer from June 1996 until November 1996. From
September 1992 to September 1995, Mr. Feuer served as the Chief Operating
Officer responsible for the day-to-day operations of all of the radio stations
owned by Pourtales which sold radio stations to the Company. From 1990 to 1992,
Mr. Feuer served as a consultant to numerous radio broadcasting companies. From
1985 to 1990, Mr. Feuer served as the Executive Vice President and Chief
Operating Officer of Noble Broadcasting Group, then one of the largest
independently owned radio companies in the United States. From 1983 to 1985, Mr.
Feuer served as the President of the Radio Division of Viacom, Inc. From 1970 to
1983, Mr. Feuer served as vice president and general manager of several radio
station properties. From 1967 to 1970, Mr. Feuer served in various capacities
for CBS Radio.

         William G. Thompson has served as Chief Financial Officer of the
Company since September 1997 after serving as Corporate Controller for the
Company since October 1995. Mr. Thompson served as the Corporate Controller for
Pourtales from October 1995 until November 1996, and served in other accounting
management positions with Pourtales since 1992. From 1986 to 1992, Mr. Thompson
held various accounting management positions including Chief Financial Officer
of Unicom Broadcasting, Inc. from 1991 to 1992.

         Kraig G. Fox has served as the Secretary of the Company since June
1996. Since December 1993, Mr. Fox has been Manager-Business and Legal Affairs
for TSC. Since May 1998, Mr. Fox has been Vice President, Business Affairs for
SFX Entertainment, a publicly-traded company engaged in the ownership of live
entertainment venues, the promotion and presentation of diversified live
entertainment and the representation of professional athletes. Since July 1995,
Mr. Fox has been Secretary of The Marquee Group, Inc. ("Marquee"), a
publicly-traded company engaged in various aspects of sports-related media,
until March 16, 1999 when Marquee was acquired by SFX Entertainment, and had
served as Secretary to Multi-Market Radio, Inc., a publicly-traded company
engaged in the ownership and operation of radio stations ("MMR"), from April
1995 until November 1996, when Multi-Market Radio, Inc. was acquired by SFX
Broadcasting. Mr. Fox earned a J.D. degree from Hofstra University in 1993.

         Dennis R. Ciapura has served as a Director of the Company since October
1995. He is the President of Performance Broadcasting, which has provided
consulting services from October 1995 to May 1998 to SFX Broadcasting in the
area of capital planning and control, acquisition due diligence and technology
management. From January 1995 to October 1995, Mr. Ciapura was Senior Vice
President of SFX Broadcasting. From August 1986 to December 1995, he was an
Executive Vice President for Noble Broadcasting Group.

         Frank E. Barnes III has served as a Director of the Company since
October 1995. He has been the Executive Director of Carolina Barnes Corporation,
an investment and merchant banking firm, since August 1989. Carolina Barnes
Corporation, through its affiliate, Carolina Barnes Capital, Inc., which is
owned by Mr. Barnes, has provided corporate financial services for companies in
media, entertainment, communications, maritime transportation and real estate
since



                                      -44-
<PAGE>

1989. His previous experience includes senior corporate finance positions at
major Wall Street firms and he currently serves on the boards of B&H Bulk
Carriers Ltd. and Carolina Barnes Capital, Inc.

         Jeffrey W. Leiderman has served as a Director of the Company since
October 1995. Since 1970, he has been the President of Leiderman Associates,
which provides insurance and financial consulting services. From 1982 to 1987,
he served as the Chairman of the Board of two public companies, American Medical
Technology, Inc. and American Pipeline & Exploration Co. He was a board member
of Minami International Corp., a Japanese trading and manufacturing company,
from 1987 to 1991.

PRINCIPAL EXECUTIVE OFFICERS OF THE SILLERMAN COMPANIES

         Information is set forth below with respect to Messrs. Robert F. X.
Sillerman and Howard J. Tytel, who make significant contributions to the
business of the Company through their positions with TSC, which provides
consulting and advisory services to the Company, and with Sillerman
Communications Management Corporation ("SCMC"). TSC provides services to the
Company on behalf of SCMC which has retained final responsibility for the
performance of its agreement with the Company. Messrs. Sillerman and Tytel,
under the direction of the Chief Executive Officer and the Board, have
assisted the Company in planning and negotiating acquisitions of radio
stations as well as obtaining financing and maintaining the Company's ongoing
relationships with financial institutions. See "Item 13. Certain Relationships
and Related Transactions--Termination of Financial Consulting Agreement with
SCMC" and "--Additional Arrangements with SCMC, SFX Broadcasting and Radio
Investors."

         Robert F. X. Sillerman, 50, has been the Executive Chairman of the
Board of SFX Entertainment since May 1998 and was Executive Chairman of the
Board of SFX Broadcasting from July 1995 to May 1998; and from 1992 through June
1995, he served as the Chairman of the Board and Chief Executive Officer of SFX
Broadcasting. Mr. Sillerman has been the Chairman of the Board and Chief
Executive Officer of SCMC, a private investment company which makes investments
in and provides financial consulting services to companies engaged in the media
business, and of TSC, a private company that makes investments in and provides
financial advisory services to media-related companies, since their formation
more than five years ago. In addition, Mr. Sillerman has been the Chief
Executive Officer of Radio Investors, Inc. ("Radio Investors") since February
1995 and, through privately held entities, controls the general partner of
Sillerman Communication Partners, L.P. Mr. Sillerman is also the Chairman of the
Board and a founding stockholder of Marquee. For the last twenty years, Mr.
Sillerman has been a senior executive of and principal investor in numerous
entities operating in the broadcasting business. In 1993, Mr. Sillerman became
the Chancellor of the Southampton campus of Long Island University.

         Howard J. Tytel, 52, has been a Director and the Executive Vice
President, Secretary and General Counsel of SFX Entertainment since May 1998 and
was a Director and the Executive Vice President, Secretary and General Counsel
of SFX Broadcasting since 1992 and Executive Vice President and General Counsel
of SCMC and TSC since their formation more than five years ago. In addition, Mr.
Tytel has been Executive Vice President and General Counsel of Radio Investors
since February 1995 and is a Director and a founder of Marquee. Mr. Tytel was a
Director of Country Music Television from 1988 to 1991. From March 1995 until
March 1997, Mr. Tytel was a Director of Interactive Flight Technologies, Inc., a
publicly-traded company providing computer-based in-flight entertainment. For
the last twenty years, Mr. Tytel has been associated 


                                      -45-
<PAGE>

with Mr. Sillerman in various capacities with entities operating in the
broadcasting business. From 1993 to May, 1998, Mr. Tytel was Of Counsel to the
law firm of Baker & McKenzie, which currently represents the Company, SFX
Entertainment and other entities with which Messrs. Sillerman and Tytel are
affiliated on various matters.

         There are no family relationships among the Company's executive
officers and directors.

SECTION 16(A) BENEFICIAL OWNERSHIP OF REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who beneficially own more than ten percent of a registered class of the
Company's equity securities (collectively, the "Covered Stockholders"), to file
with the SEC initial reports of ownership and reports of changes of ownership of
certain equity securities of the Company. The Covered Stockholders are required
by the SEC's regulations to furnish the Company with copies of all Section 16(a)
forms they file. Section 16(b) of the Exchange Act requires the Covered
Stockholders to return to the Company any profit resulting from the purchase and
sale or the sale and purchase of the Company's securities consummated within a
period of less than six months.

         Based solely on a review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that, during 1998, the Covered Stockholders complied with all
of the filing requirements applicable to them as indicated in the above
paragraph, except that a Form 5 for each of William G. Thompson and Dennis
Ciapura with respect to 1998 was not filed on a timely basis.


ITEM 11.      EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The table below sets forth all reportable compensation awarded to,
earned by or paid to the Chief Executive Officer and the Chief Financial Officer
for services rendered in all capacities to the Company and its subsidiaries. No
other individual officer received annual compensation in excess of $100,000 for
1998.



                                      -46-
<PAGE>



                                            SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                           LONG TERM COMPENSATION
                                                                                  ---------------------------------------

                                         ANNUAL COMPENSATION                                       AWARDS
                     ----------------------------------------------------------------------------------------------------
                                                                                                           SECURITIES
     NAME AND                                                   OTHER ANNUAL          RESTRICTED           UNDERLYING
     PRINCIPAL                     SALARY        BONUS          COMPENSATION             STOCK            OPTIONS/SARS
     POSITION          YEAR         ($)           ($)              ($)(3)            AWARD(S) ($)              (#)
-------------------------------------------------------------------------------------------------------------------------
<S>                    <C>        <C>          <C>              <C>                  <C>                  <C>
Norman Feuer,          1998       158,269         --                 --                   --                   --
   Chief
   Executive
   Officer
                       1997       154,675      50,000 (1)            --                   --                   --
                       1996       150,900      70,000 (2)            --               60,000 (4)           15,000 (5)

William G.             1998        80,000        25,000              --                   --                4,200 (6)
Thompson,
   Chief
   Financial
   Officer
                       1997        74,000         --                 --                   --                   --
                       1996        64,200         --                 --                   --                3,300 (7)
</TABLE>
---------------------------


(1)      On April 30, 1997, the Board approved a bonus for Mr. Feuer in the
         amount of $50,000 in recognition of the Company's performance during
         1996 and pursuant to the bonus clauses in Mr. Feuer's employment
         agreement. The bonus was offset against loans granted to Mr. Feuer
         prior to March 31, 1997. See "--Feuer Employment Agreement."

(2)      On April 30, 1996, the Board approved a bonus for Mr. Feuer in the
         amount of $70,000 in recognition of the Company's performance during
         the period from the Company's inception through March 31, 1996 and
         pursuant to the bonus clauses in Mr. Feuer's employment agreement. A
         portion of this bonus was used to offset loans granted to Mr. Feuer
         prior to March 31, 1997. See "--Feuer Employment Agreement."

(3)      The aggregate amount of perquisites and other personal benefits did not
         exceed the lesser of $50,000 or 10% of the salary and bonus for the
         Chief Executive Officer during 1998, 1997, and 1996.

(4)      On February 8, 1996, Mr. Feuer received an award of 60,000 shares of
         Series B Convertible Preferred Stock (the "Compensation Stock"), which
         converts into an equal number of shares of Class A Common Stock upon
         the occurrence of certain events. The Compensation Stock is non-voting
         and vests in equal installments over five years beginning on February
         8, 1997. One half of the Compensation Stock automatically converts into
         shares of Class A Common Stock if the market price per share of Class A
         Common Stock equals or exceeds $14.00 for 20 consecutive trading days,
         and the balance of the Compensation Stock automatically converts into
         Class A Common Stock if the market price equals or exceeds $15.00 for
         20 consecutive trading days. Assuming the Compensation Stock converted
         into 60,000 shares of Class A Common Stock, based on the closing sales
         price on December 31, 1998, this award would have had a value of
         approximately $675,000.

(5)      These options were granted on October 30, 1995 and vested in two equal
         annual installments on October 30, 1996 and October 30, 1997. In
         addition to the options, on October 30, 1995, Mr. Feuer received the
         right to a cash bonus in the amount of $90,000, representing the
         difference between $5.50 (the price of the Class A Common Stock at the
         Initial Public Offering) and $11.50 (the closing price of the Class A
         Common Stock on October 30, 1995) multiplied by 15,000. The bonus
         vested in two equal installments on October 30, 1996 and October 30,
         1997 and will be paid upon exercise of Mr. Feuer's options. Mr. Feuer
         has not exercised any options.



                                      -47-
<PAGE>



(6)      These options were granted April 29, 1998 and vest 40% on the second
         anniversary and 20% on each of the third through fifth anniversaries of
         the option grant.

(7)      These options were granted August 7, 1996 and vest 40% on the second
         anniversary and 20% on each of the third through fifth anniversaries of
         the option grant.

         The following table provides information with respect to stock options
granted to the Chief Executive Officer and Chief Financial Officer during the
year ended December 31, 1998.

                                       OPTION GRANTS IN THE LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                  Number of                                                                                        
                                  Securities         % of Total                                          Potential Realized Value
                                  Underlying           Options                                              at Assumed Annual
                                   Options           Granted to         Exercise                           Rates of Stock Price
                                   Granted          Employees in          Price          Expiration            Appreciation
            Name                     (#)             Fiscal Year        ($/Share)           Date            for Option Term($)
            ----                    ----            -------------      -----------         ------          -------------------
<S>                                <C>              <C>                <C>               <C>               <C>           <C>
                                                                                                             5%           10%
                                                                                                            ----         ----
William G. Thompson                 4,200               4,200            10.625          4/29/2008         28,064        71,121

</TABLE>

FEUER EMPLOYMENT AGREEMENT

         Mr. Feuer has entered into an employment agreement with the Company
(the "Employment Agreement"), pursuant to which he has agreed to serve as the
Company's President and Chief Executive Officer for an initial term of five
years, beginning on September 13, 1995. Mr. Feuer receives an annual base salary
of $150,000, adjusted by annual increases based on increases in the consumer
price index and pursuant to the Board's recommendation. Mr. Feuer also receives
an annual bonus of $25,000 if there are no defaults during the year under any of
the Company's financing agreements with its lenders; and, if there are any
defaults thereunder which are waived or cured with no material cost to the
Company, then Mr. Feuer will receive one-half of such bonus and shall receive
the remaining one-half at the sole discretion of the Board. Mr. Feuer will also
receive an annual bonus of $25,000 upon the Company's achievement of performance
goals to be mutually agreed upon, and an additional bonus at the discretion of
the Board (the "Discretionary Bonus"). If the Discretionary Bonus is less than
$50,000 in any year, then the Company will loan to Mr. Feuer an amount equal to
$50,000 less the Discretionary Bonus. If Mr. Feuer remains employed by the
Company for the full term of his five year employment agreement, then such loan
amounts will be forgiven.

         In 1997, the Company loaned Mr. Feuer (the Company's President and
Chief Executive Officer), $150,000 which accrues interest at a rate of 7.25%,
for which he pledged 35,294 shares of Class B Common Stock. All interest and
principal are due September 9, 2002. Additionally, in 1998, the Company loaned
Mr. Feuer $50,000 which accrues interest at a rate of 7.25% due on April 29,
2003. The loans have been recorded as a notes receivable from officer in the
accompanying consolidated balance sheets. The Company loaned to Mr. Feuer
$25,000 on October 12, 1995, and an additional $25,000 on January 10, 1996.
These two loans were offset against the bonus in the amount of $70,000 which was
approved by the Board on April 30, 1996 in recognition of the Company's
performance in 1996 and pursuant to the bonus clauses described above. In
addition, the Company loaned to Mr. Feuer $25,000 in each of May, July and
October 1996, and in January 1997. The loans granted in May and July 1996 were
offset against the bonus in the amount of $50,000 which was approved by the
Board on April 30, 1997. On that date, the Board also granted to Mr. Feuer an
additional loan in the amount of $50,000 (the "Additional Loan"). The loans
granted in October 1996 and January 1997 have been restated to provide, and the
Additional Loan


                                      -48-
<PAGE>



provides, that such loans do not bear interest and mature at September 13,
2000, or, if extended, at the end of the extension period. The loans further
provide that, in the event of a change of control or upon termination of Mr.
Feuer's employment agreement prior to September 13, 2000, unless extended, these
loans will be forgiven. Additionally, the Company loaned to Mr. Feuer $25,000 in
each of April, July and October of 1997 and January, April, July and October of
1998 as advance payments of his future bonus. See "Item 13. Certain
Relationships and Related Transactions--Loans to Chief Executive Officer and
Director."

         The Employment Agreement provides that in the event that Mr. Feuer's
employment is terminated without "Cause" or in the event of a "Constructive
Termination Without Cause," Mr. Feuer will be entitled to a payment equal to 12
months of his base salary and bonuses (excluding the Discretionary Bonus) for
the year, prorated through the date of termination. In the event that Mr. Feuer
becomes disabled, the Company is obligated to pay his full base salary and
bonuses (excluding the Discretionary Bonus) for the first six months of such
disability and 75% of his base salary for the remainder of the term of the
Employment Agreement. The Employment Agreement defines "Cause" as conviction of
a felony involving moral turpitude which would render Mr. Feuer unable to
perform his duties under the Employment Agreement or conduct that constitutes
willful gross neglect or willful gross misconduct. "Constructive Termination
Without Cause" is defined in the Employment Agreement as a reduction of Mr.
Feuer's base salary or the failure of the Company to pay Mr. Feuer's bonuses,
the failure to reelect Mr. Feuer to, or the removal of Mr. Feuer from, his
position as an officer and director of the Company, a diminution of his duties
and responsibilities, or the failure of the Company to obtain a written
assumption of its obligations under the Employment Agreement by any successor to
all or substantially all of the Company's assets within 15 days after a merger
or similar transaction.

         In the event that Mr. Feuer voluntarily terminates his employment for
reasons other than death or disability or a "Constructive Termination Without
Cause," Mr. Feuer will be required to surrender to the Company certain of his
shares of Class B Common Stock. If the voluntary termination occurs prior to two
and one-half years from the date of employment, then Mr. Feuer must surrender
all of his shares of Class B Common Stock. If the termination occurs after two
and one-half years but prior to three and one-half years, after three and
one-half years but prior to four and one-half years, or after four and one-half
years but prior to five years, then he must surrender 50%, 25% and 20%,
respectively, of his shares of Class B Common Stock.


FEUER TERMINATION AGREEMENT


         Concurrently with the execution of the Merger Agreement and as an
inducement and a condition to Buyer entering into the Merger Agreement, Mr.
Feuer entered into the Termination Agreement with Buyer and the Company (the
"Termination Agreement"). Pursuant to the Termination Agreement, effective as of
the Effective Time, Mr. Feuer has tendered his resignation as an officer and
director of the Company and its subsidiaries, and his Employment Agreement will
be terminated in full (other than certain indemnification obligations of the
Company in respect of actions taken by Mr. Feuer on behalf of the Company or
legal proceedings to which he may be made a party on account of his having been
an officer and/or director of the Company).

         Mr. Feuer has released the Company and its subsidiaries and their
respective stockholders, directors, officers, employees, agents, insurance
carriers, employee benefit plans, predecessors, successors, assigns, executors,
administrators, attorneys and representatives from all claims and



                                      -49-
<PAGE>



damages based on any matters occurring on or before the date
of the Termination Agreement, other than (a) Mr. Feuer's (i) entitlement to
continued group medical coverage, (ii) vested account balances in the Company's
employee benefit plans, (iii) rights arising under the Transaction Documents,
(iv) accrued and unpaid salary, severance (subject to certain conditions) and
expenses incurred prior to the Effective Time and (v) consideration payable to
Mr. Feuer under the Termination Agreement; (b) claims related to or arising from
Mr. Feuer's capacity as an officer or director of the Company or its
subsidiaries to which he has a statutory, contractual or other right of
indemnification; and (c) in the event that Mr. Feuer is terminated by the
Company prior to the Effective Time and the consideration payable to Mr. Feuer
under the Termination Agreement has not been paid, any claims Mr. Feuer may have
against the Company related to such termination of his employment.

         The foregoing release is effective as of the Effective Time or as of
the payment of such consideration payable to Mr. Feuer under the Termination
Agreement if not paid to Mr. Feuer prior to or contemporaneously with the
Effective Time (the "Release Date"). Under the Termination Agreement, Mr. Feuer
is required to deliver to the Company an additional release as above relating to
matters occurring on or before the Release Date.

         The Termination Agreement prohibits Mr. Feuer from making any
unauthorized use or disclosure of any Confidential Information and Trade Secrets
for five years commencing at the Effective Time. "Confidential Information and
Trade Secrets" is defined to include the Company's and its subsidiaries'
contracts, books, records, and documents, their technical information concerning
their services, pricing techniques, and computer system and software, and the
names of and other information concerning their customers and business
affiliates (excluding information that is or becomes generally available in the
public domain other than through any unauthorized disclosure by Mr. Feuer, is
generally known to the industry as a whole or is not specific to the operations
and business of the Company and its subsidiaries). Mr. Feuer must notify the
Company if he is requested or required by applicable law to disclose any
Confidential Information and Trade Secrets, but is not prohibited from complying
with any such request unless an appropriate protective order is in place.

         Contemporaneously with the Effective Time, provided Mr. Feuer has
fulfilled his obligations under the Employment Agreement up to such time, the
Company will pay Mr. Feuer the following consideration: (a) cash in one lump-sum
amount of $850,000, plus (i) accrued but unpaid salary and expenses and (ii)
cash in the amount of $25,000 payable per calendar quarter from July 23, 1998 to
the first to occur of the Effective Time or the date upon which Mr. Feuer's
employment is terminated subsequent to the Merger Agreement but prior to the
Effective Time (prorated for the calendar quarter in which the Effective Time
occurs), but excluding (x) any other bonuses to which Mr. Feuer may be entitled
unless payment thereof has been declared by the Board of Directors but not made
prior to the Effective Time and is permitted by the Merger Agreement, and (b)
forgiveness of certain loans in the aggregate principal amount of $450,000.

         If Mr. Feuer is terminated by the Company prior to the Effective Time,
he is to receive only the compensation specified in the Employment Agreement.
The Employment Agreement requires the Company to pay Mr. Feuer any unpaid base
salary (currently $161,218 per annum) and bonus (a minimum of $25,000 provided
the Company is not in default under any credit agreement, plus a $25,000
achievement bonus and an additional bonus determined at the sole discretion of
the Board of Directors) earned through the date of termination of his employment
for cause, plus a payment equal to 12 months base salary if he is terminated
without cause (other than due to disability or death).



                                      -50-
<PAGE>



         The Termination Agreement provides that if (i) the Company notifies
Buyer of a Superior Proposal pursuant to Section 7.01(c) of the Merger
Agreement, (ii) Buyer offers to revise the terms of the Merger which would
result in an increase in the consideration currently provided for in the Merger
Agreement and (iii) the Company accepts Buyer's offer, then the Company and Mr.
Feuer will restructure the Termination Agreement or enter into other
arrangements substantially similar to the arrangements proposed to be entered
into with Mr. Feuer in connection with the Superior Proposal.

DIRECTORS' COMPENSATION

         Each of Messrs. Miller, Barnes and Leiderman receive $1,000 for each
meeting of the Board that he attends. In addition, each of Messrs. Barnes and
Leiderman receive $750 for any committee meeting that he attends which is not
held in conjunction with a meeting of the Board In connection with the Merger,
John D. Miller, Frank E. Barnes III and Jeffrey W. Leiderman served as members
of the Independent Committee, which evaluated the fairness of the terms of the
Merger and other acquisition proposals involving the Company to the holders of
Class A Common Stock. Each Independent Committee member received an aggregate of
$35,000 for serving as a member of the Independent Committee ($20,000 of which
was paid in February and $15,000 of which was paid in July 1998, following the
execution of the Merger Agreement). The payment of the fee was not dependent
upon the adoption of the Merger Agreement by the stockholders of the Company. No
other compensation is paid to directors for attending meetings of the Board
meetings or its committees.

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT

         The following table gives information concerning the beneficial
ownership of the Company's Voting Stock and Class D Common Stock as of March 17,
1999 by: (i) each person known to the Company to own more than 5% of any class
of Common Stock or Depositary Shares of the Company, (ii) the Chief Executive
Officer, the Chief Financial Officer and each of the directors and (iii) all
directors and executive officers of the Company as a group.

CONVERSION OF CLASS D COMMON STOCK INTO CLASS B COMMON STOCK; VOTING TRUST 
AGREEMENTS

         The table below gives effect to the conversion on August 5, 1998 by
Robert F.X. Sillerman, Howard J. Tytel and Tomorrow Foundation (the
"Foundation") of an aggregate of 641,921 shares of Class D Common Stock into an
equal number of shares of Class B Common Stock. (Mr. Sillerman converted
136,852.06 shares, Mr. Tytel converted 185,068.94 shares and the Foundation
converted 320,000 shares.) Such conversion was effected pursuant to the
Stockholder Agreements entered into by these stockholders concurrently with the
execution of the Merger Agreement. The Company's Certificate of Incorporation
permits the holders of shares of Class D Common Stock, which has no voting
rights except as required by law, to convert such shares into an equal number of
shares of Class B Common Stock, which generally has ten votes per share, in the
event that the Company is in default for borrowed money from an institutional
lender, which default has not been cured or waived. As of June 30, 1998, the
Company had breached certain covenants in its Credit Agreement, which breaches
permitted the conversion of the Class D Common Stock into Class B Common Stock.


         Prior to the conversion, on March 12, 1998, Messrs. Sillerman and Tytel
had entered into a Voting Trust Agreement with Mr. Feuer, as voting trustee,
pursuant to which they had transferred 


                                      -51-
<PAGE>


to Mr. Feuer the right to vote an aggregate of 100,000 shares of Class B Common
Stock held by them. The aggregate of 321,921 shares of Class B Common Stock
received by Messrs. Sillerman and Tytel in the conversion of Class D Common
Stock into Class B Common Stock are subject to a Voting Trust Agreement, dated
August 5, 1998, with Mr. Feuer, as voting trustee. The shares of Class B Common
Stock that Mr. Feuer may vote pursuant to the two Voting Trust Agreements,
together with the shares beneficially owned by Mr. Feuer, entitled Mr. Feuer
to direct the vote of approximately 33.9% of the voting power of the Voting
Stock on the proposal to adopt the Merger Agreement.

         The two Voting Trust Agreements provide that Mr. Feuer is entitled to
exercise the power to vote the shares of Class B Common Stock he holds as voting
trustee in favor or against substantially all actions or resolutions presented
to the Company's stockholders. Each Voting Trust Agreement will continue in
effect until the tenth anniversary of its respective execution, unless prior to
such time (i) the stockholders of the Company shall vote to dissolve the Company
and wind up its affairs, (ii) the Company shall repurchase all of the Class B
Common Stock, (iii) the Company shall file a registration statement with respect
to its Class B Common Stock under the Securities Act, or (iv) in the case of the
Voting Trust Agreement dated August 5, 1998, the stockholders of the Company
shall vote in favor of the Company's consolidation with or merger into any other
entity.

         Messrs. Feuer, Sillerman and Tytel and the Foundation own all of the
outstanding shares of Class B Common Stock, which represents approximately 53%
of the combined voting power of the Company's voting stock. Mr. Feuer exercises
the voting power with respect to the Class B Common Stock owned by Messrs.
Sillerman and Tytel pursuant to a Voting Trust Agreement, as described above.
Mr. Feuer and the Foundation have agreed to vote all such shares in favor of the
Merger, and, therefore, approval of the Merger was assured.



                                      -52-
<PAGE>

<TABLE>
<CAPTION>
                                        Class A               Class B              Class D              Depository       PERCENT OF
            NAME AND                  Common Stock        Common Stock (2)     Common Stock (2)         Shares (3)         VOTING
            ADDRESS OF             -------------------  -------------------  -------------------   -------------------    POWER ON
            BENEFICIAL               NUMBER   PERCENT   NUMBER OF   PERCENT  NUMBER OF   PERCENT     NUMBER    PERCENT       THE 
            OWNER (1)              OF SHARES  OF CLASS   SHARES    OF CLASS   SHARES    OF CLASS   OF SHARES  OF CLASS  MERGER(2)(3)
---------------------------------  ---------  --------  ---------  --------  ---------  --------   ---------  --------  ------------
<S>                                <C>        <C>       <C>        <C>       <C>        <C>        <C>        <C>       <C>
Directors and Executive Officers:
     John D. Miller............     25,000(4)     *          --       --        --         --           --       --            *
     Norman Feuer..............     15,000(5)     *     566,811(6)  63.9%       --         --           --       --           33.9%
     William G. Thompson.......      3,820(7)     *          --       --        --         --           --       --            *
     Dennis R. Ciapura.........      5,000(8)     *          --       --        --         --           --       --            *
     Jeffrey W. Leiderman......      1,000(9)     *          --       --        --         --           --       --            *
     Frank E. Barnes III.......         --(9)    --          --       --        --         --           --       --            *
     All Directors and Executive                                                                                           
         Officers as a Group                                                                                                
         (6 persons)...........     48,820(10)   1.5%   566,811     63.9%       --         --           --       --           34.2%
Others:
     Robert F.X. Sillerman.....     60,200(11)   1.9%   542,852(12) 61.2%  680,000(13)   84.7%          --       --            *
     C. Terry Robinson.........     10,000(14)    *          --       --   122,445       15.3%          --       --            *
     Howard J. Tytel...........      9,800(15)    *     199,069(16) 22.4%       --         --           --       --            *
     Tomorrow                                                                                                              
         Foundation(17)........         --       --     320,000     36.1%  680,000       84.7%          --       --           19.1%
     Wellington Management                                                                                                  
         Company, LLP(18)......    690,806      17.9%        --       --        --         --      829,000     14.2%           4.0%
     Wynnefield Partners Small     628,600                                                                                 
         Cap Value, L.P. et al.(19)             18.4%        --       --        --         --      300,000      5.1%           3.7%
     Putnam Investments,                                                                                            
         Inc.(20)..............    379,156      11.9%        --       --        --         --           --       --            2.3%
     General Motors Employees                                                                                              
              Domestic Group Pe    362,855                                                                                  
         Trust(21).............nsion            11.4%        --       --        --         --           --       --            2.2%
     Morgan Stanley Dean Witter                                                                                         
            & Co.(22)..........    325,703      10.3%        --       --        --         --           --       --            1.9%
     Wellington Trust Company,                                                                                        
         NA(23)................    335,820       9.6%        --       --        --         --      403,000      6.9%           1.9%
     State Retirement and                                                                                            
         Pension System of                                                                                                  
         Maryland(24)..........    199,992       5.9%        --       --        --         --     240,000       4.1%           1.1%
     Third Point Management                                                                                                
         Company L.L.C. &                                                                                                   
         Daniel S. Loeb(25)....    182,400       5.7%        --       --        --         --          --        --            1.1%
     P. Schoenfeld Asset           179,400                                                                              
         Management LLC &                                                                                                   
         Peter M. Schoenfeld(26)                 5.6%        --       --        --         --          --        --            1.1%
     Lawrence M. Blau and                                                                                                  
         Mark Metzger(27)......    174,000       5.5%        --       --        --         --          --        --            1.0%
     Loeb Partners Corporation     173,325       5.5%        --       --        --         --          --        --            1.0%
         and Loeb Arbitrage
         Fund(28)..............
</TABLE>
------------------
*      Less than 1%

(1)      Except as otherwise noted, the address of each of the persons named is
         c/o Triathlon Broadcasting Company, Symphony Towers, 750 B Street,
         Suite 1920, San Diego, California 92101. The information as to
         beneficial ownership is based on statements furnished to the Company by
         the beneficial owners. As used in this table, "beneficial ownership"
         means the sole or shared power to vote, or to direct the disposition
         of, a security. For purposes of this table, a person is deemed as of
         March 17, 1999 to have "beneficial ownership" of any security 

                                      -53-
<PAGE>

       that such person has the right to acquire within 60 days of March 17
       1999. Unless noted otherwise, stockholders possess sole voting and
       dispositive power with respect to shares listed on this table. This table
       does not include the Class C Common Stock of the Company, which is
       non-voting and convertible into Class A Common Stock upon transfer. There
       were 24,750 shares of Class C Common Stock outstanding on March 17, 1999.
       This table also does not include 565,000 shares of Series B Preferred
       Stock issued on February 8, 1996 which vests in equal parts over a five
       year period beginning on February 8, 1997. The Series B Preferred Stock
       is non-voting and convertible into 565,000 shares of Class A Common Stock
       in the event that the market price of the Class A Common Stock exceeds
       certain levels.

(2)    Each share of Class B Common Stock has ten votes and each share of Class
       B Common Stock and Class D Common Stock (non-voting) automatically
       converts into one share of Class A Common Stock upon the sale of such
       stock to a non-affiliate of the Company. In addition, each share of Class
       D Common Stock is convertible into one share of Class B Common Stock or
       Class A Common Stock at the option of the holder (subject to any required
       FCC approval) provided that the Company is in default for borrowed money
       from an institutional lender and such default has not been cured or
       waived by such lender. Except as disclosed herein, the Company is not
       aware of the existence of any arrangements that would result in a change
       of control of the Company. See "-Conversion of Class D Common Stock into
       Class B Common Stock; Voting Trust Agreements."

(3)    Each Depositary Share has four-fifths (0.8) of a vote and is convertible
       into 0.833 shares of Class A Common Stock. The numbers in the column
       entitled "Percent of Voting Power on the Merger" assume no conversion of
       Depositary Shares into Class A Common Stock. The figures in the column
       showing the percentage ownership of Class A Common Stock assume the
       conversion of any Depositary Shares held by such person into Class A
       Common Stock, but do not assume any such conversion by any other holder
       of Depositary Shares.

(4)    Does not include 3,000 shares of Series B Preferred Stock, of which 50%
       become convertible into 1,500 shares of Class A Common Stock once the
       market price of Class A Common Stock has been greater than $14.00 for 20
       consecutive days, and the remaining 50% of which become convertible into
       1,500 shares of Class A Common Stock once the market price of Class A
       Common Stock has been greater than $15.00 for 20 consecutive days. Also
       does not include 5,000 SARs granted on October 30, 1995 which when
       exercised will be equal to the difference between the market price of the
       Class A Common Stock on October 30, 2000 and $5.50.

(5)    Consists of options to purchase 15,000 shares of Class A Common Stock
       granted pursuant to the Company's 1995 Stock Option Plan, all of which
       are fully vested. In addition to the options, on October 30, 1995 Mr.
       Feuer received the right to a cash bonus in the amount of $90,000,
       representing the difference between $5.50 (the price of the Class A
       Common Stock at the Company's initial public offering) and $11.50 (the
       closing price of the Class A Common Stock on October 30, 1995),
       multiplied by 15,000. The bonus vested in two equal installments on
       October 30, 1996 and October 30, 1997 and will be paid upon exercise of
       Mr. Feuer's options. Mr. Feuer has not exercised any options. Does not
       include 60,000 shares of Series B Preferred Stock, of which 50% become
       convertible into 30,000 shares of Class A Common Stock once the market
       price of Class A Common Stock has been greater than $14.00 for 20
       consecutive days, and the remaining 50% of which become convertible into
       30,000 shares of Class A Common Stock once the market price of Class A
       Common Stock has been greater than $15.00 for 20 consecutive days.

(6)    Includes 86,000 shares of Class B Common Stock owned by Mr. Sillerman and
       14,000 shares of Class B Common Stock owned by Mr. Tytel. Mr. Feuer may
       be deemed to beneficially own such 100,000 shares of Class B Common Stock
       because he retains power to vote such 100,000 shares pursuant to a Voting
       Trust Agreement entered into on March 12, 1998. Mr. Feuer had previously
       pledged such shares to Radio Investors, Inc., a corporation controlled by
       Mr. Sillerman, to secure Mr. Feuer's obligation to deliver 40.835% of the
       consideration received from the sale of all or a portion of the 244,890
       shares of Class B Common Stock which had been owned by Mr. Feuer. On
       March 12, 1998, the 100,000 shares of Class B Common Stock subject to the
       pledge were transferred to Messrs. Sillerman and Tytel subject to the
       Voting Trust Agreement (which expires on March 12, 2008, or at any prior
       such time that the shareholders vote to dissolve the Company, or the
       outstanding Class B Common Stock is either repurchased or registered
       under the Securities Act). At the same time, Mr. Feuer's pledge to Radio
       Investors, Inc. was terminated. Also includes 136,852 shares of Class B
       Common Stock owned by Mr. Sillerman and 185,069 shares of Class B Common
       Stock owned by Mr. Tytel which Mr. Feuer may be deemed to beneficially
       own because he retains power to vote such shares pursuant to a second
       Voting Trust Agreement entered into on August 5, 1998 (which expires on
       August 5, 2008, or at any prior such time that the shareholders vote to
       dissolve, consolidate, or merge the Company, or the outstanding Class B
       Common Stock is either repurchased or registered under the Securities
       Act). In addition, varying percentages of Mr. Feuer's shares are subject
       to surrender to the Company in the event that he voluntarily terminates
       his employment prior to the expiration of the term of his employment
       agreement. Mr. Feuer has pledged 35,294 shares to the Company to secure a
       loan from the Company in the amount of $150,000.


                                      -54-
<PAGE>

(7)    Consists of options to purchase 2,500 shares of Class A Common Stock
       granted pursuant to the Company's 1995 Stock Option Plan, all of which
       are fully vested. Also consists of 1,320 vested options out of a total of
       3,300 options to purchase shares of Class A Common Stock granted pursuant
       to the Company's 1996 Stock Option Plan; does not include the remaining
       1,980 options, which will vest in 20% increments on August 7 in each of
       1999, 2000 and 2001. Also does not include options to purchase 4,200
       shares of Class A Common Stock granted in 1998 outside any stock option
       plan, 40% of which vest on April 29, 2000, another 40% of which vest on
       April 29, 2002, and the remaining 20% of which vest on April 29, 2003.
       All of Mr. Thompson's unvested stock options will vest immediately upon
       any change in control of the Company, including the Merger.

(8)    Consists of options to purchase 5,000 shares of Class A Common Stock
       granted pursuant to the Company's 1995 Stock Option Plan, all of which
       are fully vested. Does not include options to purchase 3,500 shares of
       Class A Common Stock granted in 1998 outside any stock option plan, 40%
       of which vest on April 29, 2000, another 40% of which vest on April 29,
       2002, and the remaining 20% of which vest on April 29, 2003, all of which
       will vest immediately upon any change in control of the Company,
       including the Merger. In addition to the options, on October 30, 1995 Mr.
       Ciapura received the right to a cash bonus in the amount of $30,000,
       representing the difference between $5.50 (the price of the Class A
       Common Stock at the Company's initial public offering) and $11.50 (the
       closing price of the Class A Common Stock on October 30, 1995),
       multiplied by 5,000. The bonus vested in two equal installments on
       October 30, 1996, and October 30, 1997 and will be paid upon exercise of
       Mr. Ciapura's options. Mr. Ciapura has not exercised any options. Does
       not include 2,000 shares of Series B Preferred Stock, of which 50% become
       convertible into 1,000 shares of Class A Common Stock once the market
       price of Class A Common stock has been greater than $14.00 for 20
       consecutive days, and the remaining 50% of which become convertible into
       1,000 shares of Class A Common Stock once the market price of Class A
       Common Stock has been greater than $15.00 for 20 consecutive days.

(9)    Does not include 1,000 SARs granted on October 30, 1995 which when
       exercised will be equal to the difference between the market price of the
       Class A Common Stock on October 30, 2000 and $5.50. Nor does it include
       2,000 SARs granted on January 31, 1996 which when exercised will be equal
       to the sum, if any, of (1) the market price of the Class A Common Stock
       on January 31, 2001 - $.01 (if the stock trades higher than $14.00 for 20
       consecutive days before January 31, 2001) plus (2) the market price of
       the Class A Common Stock on January 31, 2001 - $.01 (if the stock trades
       higher than $15.00 for 20 consecutive days before January 31, 2001).

(10)   Includes 23,820 vested options out of a total of 33,500 options to
       purchase shares of Class A Common Stock granted pursuant to the Company's
       1995 Stock Option Plan, the Company's 1996 Stock Option Plan, or granted
       outside of any stock option plan. Does not include the remaining 9,680
       stock options, which will vest at intervals extending to April 29, 2003,
       all of which will vest immediately upon any change in control of the
       Company, including the Merger (see footnotes 5, 7, and 8).

(11)   Consists of options to purchase 60,200 shares of Class A Common Stock
       granted pursuant to the Company's 1995 Stock Option Plan, all of which
       have vested. Does not include 404,200 shares of Series B Preferred Stock,
       of which 50% become convertible into 202,100 shares of Class A Common
       Stock once the market price of Class A Common Stock has been greater than
       $14.00 for 20 consecutive days, and the remaining 50% of which become
       convertible into 202,100 shares of Class A Common Stock once the market
       price of Class A Common Stock has been greater than $15.00 for 20
       consecutive days.

(12)   Includes 320,000 shares of Class B Common Stock owned by Tomorrow
       Foundation, of which Mr. Sillerman is a Vice President and Director (see
       footnote 17). Also includes 86,000 shares of Class B Common Stock owned
       by Mr. Sillerman but over which Mr. Feuer exercises the right to vote
       pursuant to a Voting Trust Agreement dated March 12, 1998, and 136,852
       shares of Class B Common Stock owned by Mr. Sillerman but over which Mr.
       Feuer exercises the right to vote pursuant to a Voting Trust Agreement
       dated August 5, 1998. (See footnote 6).

(13)   Includes 680,000 shares of Class D Common Stock owned by Tomorrow
       Foundation, of which Mr. Sillerman is a Vice President and Director (see
       footnote 17).

(14)   Consists of options to purchase 10,000 shares of Class A Common Stock
       granted pursuant to the Company's 1995 Stock Option Plan, all of which
       have vested. Does not include 30,000 shares of Series B Preferred Stock,
       of which 50% become convertible into 15,000 shares of Class A Common
       Stock once the market price of Class A Common Stock has been greater than
       $14.00 for 20 consecutive days, and the remaining 50% of which become
       convertible into 15,000 shares of Class A Common Stock once the market
       price of Class A Common Stock has been greater than $15.00 for 20
       consecutive days.

(15)   Consists of options to purchase 9,800 shares of Class A Common Stock
       granted pursuant to the Company's 1995 Stock Option Plan, all of which
       have vested. Does not include 65,800 shares of Series B Preferred Stock,
       of which 50% become convertible into 32,900 shares of Class A Common
       Stock once the market price of Class A Common Stock has been greater than
       $14.00 for 20 consecutive days, and the remaining 50% of which become


                                      -55-
<PAGE>

       convertible into 32,900 shares of Class A Common Stock once the market
       price of Class A Common Stock has been greater than $15.00 for 20
       consecutive days.

(16)   Includes 14,000 shares of Class B Common Stock owned by Mr. Tytel but
       over which Mr. Feuer exercises the right to vote pursuant to a Voting
       Trust Agreement dated March 12, 1998, and 185,069 shares of Class B
       Common Stock owned by Mr. Tytel but over which Mr. Feuer exercises the
       right to vote pursuant to a Voting Trust Agreement dated August 5, 1998.
       (See footnote 6).

(17)   On June 29, 1998, Robert F.X. Sillerman transferred 1,000,000 shares of
       Class D Common Stock to the Foundation, a charitable organization.
       Pursuant to a Stockholder Agreement dated July 23, 1998, the Foundation
       agreed to convert 320,000 of its Class D Common Stock into Class B
       Common Stock. Robert F.X. Sillerman is the Vice President and a Director
       of the Foundation, and therefore may be deemed a beneficial owner of the
       shares owned by the Foundation. Likewise, Mr. Sillerman's wife, Laura B.
       Sillerman, who is the President of the Foundation, and Mitch Nelson, a
       Director of the Foundation, may also be deemed beneficial owners of the
       shares owned by the Foundation. On December 30, 1998, the Foundation
       entered into a "forward purchase contract" with an investment bank
       pursuant to which the Foundation agreed to deliver its shares of the
       Company stock to the investment bank at a future date in return for the
       payment of the purchase price for such shares on the date of execution
       of the forward purchase contract. Until delivered to the investment bank
       (which is not anticipated to occur until after the Merger), the
       Foundation will retain the right to vote the shares.

(18)   Data regarding beneficial ownership of Class A Common Stock includes
       335,699 shares of Class A Common Stock (through the potential conversion
       of 403,000 Depositary Shares) beneficially owned by Wellington Trust
       Company, NA, which number includes 199,920 shares of Class A Common Stock
       (through the potential conversion of 240,000 Depositary Shares) owned by
       the State Retirement and Pension System of Maryland. Data based on
       information contained in Schedules 13G/A filed with the SEC on February
       9, 1999 and February 11, 1999. The address of Wellington Management
       Company, LLP ("Wellington Management") is 75 State Street, Boston,
       Massachusetts 02109. Wellington Management, in its capacity as investment
       advisor, may be deemed to own 690,557 shares of Class A Common Stock
       through the potential conversion of 829,000 Depositary Shares which are
       held of record by clients of Wellington Management. Wellington Management
       has shared power to vote with respect to 274,057 shares of Class A Common
       Stock and 329,000 Depositary Shares and shared power to dispose of
       690,557 shares of Class A Common Stock and 829,000 Depositary Shares.

(19)   Data based on information contained in an amendment to a Schedule 13D
       filed with the SEC on October 23, 1998, and information contained in a
       Schedule 13D filed with the SEC on October 16, 1997. The address of
       Wynnefield Partners Small Cap Value, L.P. ("Wynnefield Partnership") and
       Wynnefield Partners Small Cap Value, L.P. I ("Wynnefield Partnership I")
       is One Penn Plaza, Suite 4720, New York, New York 10119. The address of
       Wynnefield Small Cap Value Offshore Fund, Ltd. ("Wynnefield Offshore") is
       c/o Olympia Capital (Cayman) Ltd., Williams House, 20 Reid Street,
       Hamilton HM 11, Bermuda. Wynnefield Partnership, Wynnefield Partnership
       I, and Wynnefield Offshore own 180,926, 121,274, and 76,500 shares of
       Class A Common Stock, respectively. Wynnefield Partnership, Wynnefield
       Partnership I, and Wynnefield Offshore have sole voting and dispositive
       power over their respective shares of Class A Common Stock. Wynnefield
       Partnership, Wynnefield Offshore, and Wynnefield Partnership I also own
       159,746, 55,000, and 85,254 Depositary Shares, respectively, the
       potential conversion of which is included in the total ownership of
       628,600 Class A Common Stock. Wynnefield Partnership, Wynnefield
       Offshore, and Wynnefield Partnership I have sole voting and dispositive
       power over their Depositary Shares. Nelson Obus, Joshua Landes, and
       Robert Melnick are the general partners of Wynnefield Partnership and
       Wynnefield Partnership I and also serve as executives of the investment
       manager of Wynnefield Offshore.

(20)   Data based on information contained in a Schedule 13G filed with the SEC
       on January 28, 1998. The address of Putnam Investments, Inc. ("Putnam")
       is One Post Office Square, Boston, Massachusetts 02109. Putnam, a
       wholly-owned subsidiary of Marsh & McLennan Companies, Inc., may be
       deemed to beneficially own 379,156 shares of Class A Common Stock. Putnam
       has shared voting power over 84,337 shares of Class A Common Stock and
       shared dispositive power over 379,156 shares of Class A Common Stock.
       Putnam Investment Management, Inc., a wholly-owned subsidiary of Putnam,
       is the investment advisor to the Putnam family of mutual funds and has
       shared dispositive power over 257,826 shares of Class A Common Stock. The
       Putnam Advisory Company, Inc., a wholly-owned subsidiary of Putnam, is
       the investment advisor to Putnam's institutional clients and has shared
       voting and dispositive power over 121,330 shares of Class A Common Stock.
       Shares of Class A Common Stock referenced in this footnote are
       beneficially owned by clients of Putnam Investment Management, Inc. and
       Putnam Advisory Company, Inc.

(21)   Data based on information contained in a Schedule 13G filed with the SEC
       on February 13, 1998. The address of General Motors Employees Domestic
       Group Pension Trust ("GM Trust") is 767 Fifth Avenue, New York, New York
       10153. GM Trust, a trust formed under and for the benefit of one or more
       employee benefit plans of General Motors Corporation and its
       subsidiaries, may be deemed to beneficially own 362,855 shares of Class A


                                      -56-
<PAGE>

       Common Stock because it has shared voting and dispositive power over
       them. General Motors Investment Management Corporation is the investment
       advisor to GM Trust. General Motors Investment Management Corporation has
       shared voting and dispositive power over the 362,855 shares of Class A
       Common Stock, and therefore may be deemed to beneficially own them.

(22)   Data based on information contained in an amendment to a Schedule 13G
       filed with the SEC on February 5, 1999 on behalf of Morgan Stanley Dean
       Witter & Co. ("Morgan") and Morgan Stanley Dean Witter Advisors, Inc.
       ("Morgan Advisors"). The address of Morgan is 1585 Broadway, New York,
       New York, 10036. Morgan and Morgan Advisors may be deemed to beneficially
       own 325,703 shares of Class A Common Stock. Morgan and Morgan Advisors
       have shared voting power over 325,703 shares of Class A Common Stock and
       shared dispositive power over 325,703 shares of Class A Common Stock.

(23)   Data regarding beneficial ownership of Class A Common Stock includes
       199,920 shares of Class A Common Stock (through the potential conversion
       of 240,000 Depositary Shares) owned by the State Retirement and Pension
       System of Maryland. Data based on information contained in Schedules
       13G/A filed with the SEC on February 11, 1999. The address of the
       Wellington Trust Company, NA ("Wellington Trust") is 75 State Street,
       Boston, Massachusetts 02109. Wellington Trust, in its capacity as
       investment advisor, may be deemed to beneficially own 335,699 shares of
       Class A Common Stock and 403,000 Depositary Shares, which are held of
       record by its clients. Wellington Trust has shared voting power over
       135,779 shares of Class A Common Stock and over 163,000 Depositary
       Shares, and has shared dispositive power over 335,699 shares of Class A
       Common Stock and 403,000 Depositary Shares.

(24)   Data based on information contained in a Schedule 13G filed with the SEC
       on February 11, 1999. The address of the State Retirement and Pension
       System of Maryland ("SRPS") is 301 West Preston Street, Baltimore,
       Maryland 21201. SRPS may be deemed to beneficially own 199,920 shares of
       Class A Common Stock through the potential conversion of 240,000
       Depositary Shares. SRPS has shared voting and dispositive power over
       199,920 shares of Class A Common Stock through the potential conversion
       of 240,000 Depositary Shares.

(25)   Data based on information contained in a Schedule 13D filed with the SEC
       on February 5, 1998. The address of Third Point Management Company L.L.C.
       ("Third Point") is 277 Park Avenue, 26th Floor, New York, New York 10172.
       Third Point, in its capacity as discretionary investment manager, and
       Daniel S. Loeb, as sole managing member of Third Point, may be deemed to
       beneficially own 182,400 shares of Class A Common Stock, which are held
       of record by its clients. Third Point and Mr. Loeb have shared voting and
       dispositive power over 182,400 shares of Class A Common Stock.

(26)   Data based on information contained in a Schedule 13D filed with the SEC
       on July 24, 1998. The address of P. Schoenfeld Asset Management LLC
       ("PSAM") is 1330 Avenue of the Americas, 34th Floor, New York, New York
       10019. PSAM, in its capacity as discretionary investment manager, and
       Peter M. Schoenfeld, as sole managing member of PSAM, may be deemed to
       hold 179,400 shares of Class A Common Stock which are held of record by
       PSAM's clients. PSAM and Mr. Schoenfeld share voting and dispositive
       power over 179,400 shares of Class A Common Stock.

(27)   Data based on information contained in an amendment to a Schedule 13G
       filed with the SEC on January 28, 1999. The business address of Messrs.
       Blau and Metzger is 520 Madison Avenue, New York, New York 10022. Messrs.
       Blau and Metzger are the managing partners of BEM Partners, L.P. ("BEM").
       Messrs. Blau and Metzger may be deemed to beneficially own 174,000 shares
       of Class A Common Stock because they are primarily responsible for
       managing the assets of BEM, which holds 174,000 shares of Class A Common
       Stock. Messrs. Blau and Metzger have shared voting and dispositive power
       over 174,000 shares of Class A Common Stock.

(28)   Data based on information contained in a Schedule 13D filed with the SEC
       on August 4, 1998. The address of both Loeb Partners Corporation ("LPC")
       and Loeb Arbitrage Fund ("LAF") is 61 Broadway, New York, New York 10006.
       LPC and LAF are registered broker/dealers. LPC has sole voting and
       dispositive power over 13,419 shares of Class A Common Stock, and shared
       voting and dispositive power over 8,579 shares of Class A Common Stock.
       LAF has sole voting and dispositive power over 151,327 shares of Class A
       Common Stock. Mr. Arthur E. Lee is the President of Loeb Arbitrage
       Management, Inc., the general partner of LAF, and he is also the
       Executive Vice President of LPC. Mr. Thomas L. Kempner is the President,
       Chief Executive Officer, and a Director of LPC.



ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



                                      -57-
<PAGE>

LOANS TO CHIEF EXECUTIVE OFFICER AND DIRECTOR

                In 1997, the Company loaned Mr. Feuer (the Company's President
and Chief Executive Officer) $150,000 which accrues interest at a rate of 7.25%,
for which he pledged 35,294 shares of Class B Common Stock. All interest and
principal are due September 9, 2002. Additionally, in 1998, the Company loaned
Mr. Feuer $50,000 which accrues interest at a rate of 7.25% and is due on April
29, 2003. The loans have been recorded as long-term notes receivable from the
officer in the accompanying consolidated balance sheets. The Company loaned to
Mr. Feuer $25,000 on October 12, 1995, and an additional $25,000 on January 10,
1996. These two loans were offset against the bonus in the amount of $70,000
which was approved by the Board on April 30, 1996 in recognition of the
Company's performance in 1996 and pursuant to the bonus clauses described
above. See "Item 10. Directors and Executive Officers of the Registrant-Feuer
Employment Agreement." In addition, the Company loaned to Mr. Feuer $25,000 in
each of May, July and October 1996, and in January 1997. The loans granted in
May and July 1996 were offset against the bonus in the amount of $50,000 which
was approved by the Board on April 30, 1997. On that date, the Board also
granted to Mr. Feuer an additional loan in the amount of $50,000 (the
"Additional Loan"). The loans granted in October 1996 and January 1997 have been
restated to provide, and the Additional Loan provides, that such loans do not
bear interest and mature at September 13, 2000, or, if extended, at the end of
the extension period. The loans further provide that, in the event of a change
of control or upon termination of Mr. Feuer's employment agreement prior to
September 13, 2000, unless extended, these loans will be forgiven. Additionally,
the Company loaned to Mr. Feuer $25,000 in each of April, July and October of
1997 and January, April, July and October of 1998 as advance payments of his
future bonus.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Feuer Termination Agreement

       Concurrently with the execution of the Merger Agreement, Mr. Feuer
entered into the Termination Agreement with Buyer and the Company. Pursuant to
and subject to the terms of the Termination Agreement, Mr. Feuer tendered his
resignation as an officer and director of the Company, effective as of the
Effective Time, and agreed that his employment agreement with the Company (other
than the provisions requiring the Company to indemnify Mr. Feuer for his actions
as an officer and director of the Company) would be terminated as of that time.
Mr. Feuer agreed to release the Company, effective as of the Effective Time,
from all claims he may have then against the Company, whether arising out of his
employment agreement or otherwise, with certain specified exceptions, including
the right to receive the merger consideration in respect of shares of capital
stock of the Company owned by him. Mr. Feuer also agreed in the Termination
Agreement not to disclose confidential information of the Company for a period
of five years after the Effective Time.

       In the Termination Agreement, the Company agreed to pay Mr. Feuer, at the
Effective Time, $850,000 plus any accrued but unpaid salary and expenses. The
Company also agreed to forgive loans totaling $450,000 made by the Company to
Mr. Feuer and to make a cash payment of $25,000 per calendar quarter to him on
the first day of each calendar quarter, starting October 1, 1998 and ending on
the first day of the calendar quarter in which the Merger occurs.



                                      -58-
<PAGE>

Termination of Financial Consulting Agreement with SCMC

       On June 30, 1995, the Company and SCMC, a company controlled by Robert
F.X. Sillerman, a substantial stockholder of the Company, entered into an
agreement (which was amended and restated on February 1, 1996) pursuant to which
SCMC agreed to serve as the Company's financial consultant and to provide
customary financial and advisory services to the Company (the "Amended and 
Restated SCMC Agreement"). Howard J. Tytel, another substantial stockholder of
the Company, is an executive officer of SCMC. Each of Mr. Sillerman and Mr.
Tytel executed a Stockholder Agreement in which they agreed, among other
things, to vote all of their shares of capital stock of the Company in favor of
the Merger.

       Pursuant to the financial consulting agreement with the Company, SCMC has
agreed to perform, or assist the Company in performing, among other things: (i)
the placement of financing; (ii) the generation of financial reports and other
data for the Company that are required for presentation to the lenders of the
Company under the Company's senior credit agreements and the Company's investors
as required under the securities laws; (iii) assistance with the preparation of
the Company's regular books and records for audit by the Company's independent
public accountants; (iv) the maintenance of relationships and connections with
financial institutions participating in the financing of the Company; (v)
preparation and delivery to the Company of quarterly reports and analyses of
regional and national advertising activity in small and medium radio markets;
(vi) the design and implementation of accounting systems appropriate and
necessary for the operation of the Company; (vii) the purchase, installation and
implementation of hardware and software appropriate to the accounting system to
be utilized by the Company; (viii) the implementation of cash management systems
to facilitate the collection of revenues for the Company and to maximize the
investment income available from cash balances; (ix) the establishment of
regularized procedures for the payment of trade payables and the accumulation of
cash balances available for interest and other debt service payments as they
come due; and (x) the engagement of bookkeeping, accounting and other personnel
necessary for the implementation of the Company's accounting systems.

       SCMC has also agreed to advise the Company from time to time with respect
to any investment banking services that the Company may require. In the event
that SCMC provides such services to the Company, the fees payable to SCMC shall
not exceed (i) 1 1/2% of the total acquisition price as to any transaction in
which SCMC provides merger and acquisition advice, (ii) 1 1/2% of the principal
amount of any senior credit facility obtained by the Company, (iii) 4% of the
proceeds to the Company from the issuance of any subordinated debt, and (iv) 7%
of the proceeds to the Company from the sale of equity securities, provided that
the total investment banking fees will not exceed 10% of the proceeds of any
such sale of equity securities. These fees may be reduced to lower levels by
mutual agreement between the Company and SCMC.

       The Company's agreement with SCMC requires the Company to pay to SCMC
(whose right to receive such payments was assigned to SFX Entertainment), as
compensation for its services, an annual advisory fee until June 1, 2005 of
$500,000 per year. In addition, the Company is obligated to advance an
additional $500,000 per year to SCMC (whose right to receive such payment was
assigned to SFX Entertainment) as an advance against fees earned by SCMC for
investment banking services rendered to the Company, which advance, to the
extent not earned, must be repaid at the termination of the financial consulting
agreement or the acquisition by any entity of a majority of the capital stock of
the Company.



                                      -59-
<PAGE>

       Pursuant to the terms of the Merger Agreement, the financial consulting
agreement with SCMC is to be terminated and, in connection therewith, the
Company is required to pay SFX Entertainment $2.0 million cash. (In April 1996,
SCMC assigned to SFX Broadcasting its right to receive fees under its financial
consulting agreement with the Company in connection with the termination of
SCMC's financial consulting agreement with SFX Broadcasting. SFX Broadcasting
subsequently assigned its rights to SFX Entertainment.) The termination
arrangement was approved by the Independent Committee. The $2.0 million cash
payment will compensate SCMC for its loss of its future rights under the
financial consulting agreement, which is being terminated, and also is in lieu
of any investment banking fees otherwise due SCMC in connection with the Merger.


ADDITIONAL ARRANGEMENTS WITH SCMC AND SFX BROADCASTING AND SFX ENTERTAINMENT

       In 1998, the Company paid to SFX Broadcasting and SFX Entertainment an
aggregate of $2,500 per month as compensation for services provided to the
Company by TSC for the functions of Secretary, accounting and investor
relations. In addition, Kraig G. Fox, the Company's Secretary, is an employee of
SFX Entertainment and does not receive any compensation directly from the
Company. SFX Entertainment compensates Mr. Fox for services rendered on behalf
of the Company. SCMC provided these services to the Company prior to April 15,
1996, the date when the SCMC assigned its right to receive fees from the Company
to SFX Broadcasting.





                                      -60-
<PAGE>



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

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

(a)(2)          Exhibits.

<TABLE>
<CAPTION>
 EXHIBIT                                                                                                            
 NUMBER              DESCRIPTION OF EXHIBIT
 -------             ----------------------
<S>                  <C>
2.1 (9)              -- Agreement and Plan of Merger, dated as of July 23, 1998, among Capstar Radio
                        Broadcasting Partners, Inc., TBC Radio Acquisition Corp. and Triathlon
                        Broadcasting Company.
3.1 (2)              -- Amended and Restated Certificate of Incorporation of Triathlon Broadcasting
                        Company
3.2 (6)              -- Certificate of Amendment to the Amended and Restated Certificate of
                        Incorporation of Triathlon Broadcasting Company
3.3 (1)              -- By-laws of the Company
4.1 (2)              -- IPO Underwriters' Warrant
4.2 (1)              -- Specimen Stock Certificate for Class A Common Stock
4.3 (2)              -- Certificate of Designations of the Series B Convertible Preferred Stock
4.4 (2)              -- Form of Certificate of Designations of the 9% Mandatory Convertible Preferred
                        Stock
4.5 (2)              -- Form of Deposit Agreement relating to the 9% Mandatory Convertible Preferred
                        Stock
4.6 (2)              -- Form of Stock Certificate for 9% Mandatory Convertible Preferred Stock
4.7 (2)              -- Form of Depositary Receipt Evidencing Depositary Shares
10.1 (1)             -- Purchase and Sale Agreement dated March 23, 1995 by and between the
                        Triathlon Broadcasting Company and Pourtales Radio Partnership
10.2 (1)             -- Asset Purchase Agreement dated February 9, 1995 by and between Wichita
                        Acquisition Corp. and Marathon Broadcasting Corporation
10.3 (1)             -- Amendment to Purchase and Sale Agreement dated June 30, 1995 by and
                        between Triathlon Broadcasting Company and Pourtales Radio Partnership
10.4 (1)             -- Advertising Brokerage Agreement for Radio Station KEYN-FM by and between
                        Triathlon Broadcasting Company and Pourtales Radio Partnership



                                      -61-
<PAGE>



 EXHIBIT                                                                                                            
 NUMBER              DESCRIPTION OF EXHIBIT
 -------             ----------------------
10.5 (1)             -- Purchase and Sale Agreement among Triathlon Broadcasting Company,
                        Pourtales Radio Partnership, Pourtales Holdings, Inc. and KVUU/KSSS, Inc.
10.6 (2)             -- Subscription Agreements dated June 30, 1995, effective as of May 1, 1995
10.7 (1)             -- Office Lease by and between Knightsbridge Associates and Force II
                        Communications
10.8 (2)             -- First Amendment to Office Lease by and between Knightsbridge Associates and
                        Force II Communications
10.9 (2)             -- Assignment of Office Lease among Knightsbridge Associates, Force II
                        Communications and the Triathlon Broadcasting Company
10.10 (2)            -- Shared Expense Agreement dated September 13, 1995 by and between Triathlon
                        Broadcasting Company and Pourtales Radio Partnership
10.11 (1)            -- Financial Consulting Agreement dated June 30, 1995 by and between Triathlon
                        Broadcasting Company and SCMC
10.12(1)(12)         -- Triathlon Broadcasting Company 1995 Stock Option Plan
10.13(1)(12)         -- Employment Agreement by and between Triathlon Broadcasting Company and
                        Norman Feuer
10.14 (1)            -- Promissory Note dated June 15, 1995, issued to Radio Investors, Inc.
10.15 (1)            -- Agreement by and between Norman Feuer and Radio Investors, Inc.
10.16 (1)            -- Pledge Agreement by and between Norman Feuer and Radio Investors, Inc.
10.17 (1)            -- Form of Consulting Agreement among Triathlon Broadcasting Company and the
                        IPO Underwriters
10.18 (1)            -- Amendment to Purchase and Sale Agreement dated August 4, 1995 by and
                        between the Triathlon Broadcasting Company and Pourtales Radio Partnership
10.19 (1)            -- Amendment to Asset Purchase Agreement dated May 3, 1995 by and between
                        Wichita Acquisition Corp. and Marathon Broadcasting Corporation
10.20 (1)            -- Amendment and Extension Agreement dated August 15, 1995 by and between
                        Wichita Acquisition Corp. and Marathon Broadcasting Corporation
10.21 (1)            -- Amendment to Purchase and Sale Agreement dated March 23, 1995 by and
                        between Triathlon Broadcasting Company and Pourtales Radio Partnership


                                      -62-
<PAGE>


 EXHIBIT                                                                                                            
 NUMBER              DESCRIPTION OF EXHIBIT
 -------             ----------------------
10.22 (1)            -- Second Amendment and Extension Agreement dated August 28, 1995 by and
                        between Wichita Acquisition Corp. and Marathon Broadcasting Corporation
10.23 (2)            -- Amended and Restated Purchase and Sale Agreement dated January 16, 1996
                        among Triathlon Broadcasting Company, Pourtales Radio Partnership, Pourtales
                        Holdings, Inc., Springs Radio, Inc., and KVUU/KSSS, Inc.
10.24 (2)            -- Local Market Agreement dated as of January 15, 1996 among Pourtales Radio
                        Partnership, Springs Radio, Inc., KVUU/KSSS, Inc. and Triathlon Broadcasting
                        Company
10.25 (2)            -- Letter agreement dated January 12, 1996 among Citadel Broadcasting Company
                        and Triathlon Broadcasting Company, Pourtales Radio Partnership, Pourtales
                        Holdings, Inc., Spring Radio, Inc. and KVUU/KSSS, Inc.
10.26 (2)            -- Joint Sales Agreement dated as of December 15, 1995 among Pourtales Radio
                        Partnership, Pourtales Holdings, Inc., Springs Radio, Inc., KVUU/KSSS, Inc.
                        and Citadel Broadcasting Company
10.27 (2)            -- Programming Affiliation Agreement dated as of April 14, 1993 by and between
                        KOTY-FM, Inc. and KUJ Limited Partnership
10.28 (2)            -- Asset Purchase Agreement dated as of December 8, 1995 among Valley
                        Broadcasting, Inc., Meridien Wireless, Inc. and Triathlon Broadcasting
                        Company
10.29 (2)            -- Asset Purchase Agreement dated as of December 8, 1995 by and between 93.3,
                        Inc. and Triathlon Broadcasting Company
10.30 (2)            -- Asset Purchase Agreement dated as of September 5, 1995 by and between Rock
                        Steady, Inc. and Lincoln Radio Acquisition Corp.
10.31 (2)            -- Joint Selling Agreement dated as of January 29, 1996 by and between Rock
                        Steady, Inc. and Lincoln Radio Acquisition Corp.
10.32 (2)            -- Asset Purchase Agreement dated as of February 8, 1996 by and between
                        Sterling Realty Organization Co. and Triathlon Broadcasting Company
10.33 (2)            -- Asset Purchase Agreement dated as of February 21, 1996 by and between
                        Silverado Broadcasting Company and Triathlon Broadcasting Company
10.34 (2)            -- Sales Representation Agreement dated June 9, 1993 by and between Silverado
                        Broadcasting Company and Lance International, Inc.
10.35 (2)            -- Sales Representation Agreement dated as of October 1, 1993 by and between
                        Silverado Broadcasting Company and Rook Broadcasting of Idaho, Inc.


                                      -63-
<PAGE>

 EXHIBIT                                                                                                            
 NUMBER              DESCRIPTION OF EXHIBIT
 -------             ----------------------
10.36 (2)            -- Asset Purchase Agreement dated as of February 8, 1996 among Southern Skies
                        Corporation, Arkansas Skies Corporation, Triathlon Broadcasting of Little
                        Rock, Inc. and Triathlon Broadcasting Company
10.37 (2)            -- Letter agreement with respect to KOLL-FM dated January 17, 1996 by and
                        between Triathlon Broadcasting Company and Multi-Market Radio, Inc.
10.38 (2)            -- Amended and Restated Financial Consulting Agreement dated as of February 1,
                        1996 by and between Triathlon Broadcasting Company and Sillerman
                        Communications Management Corporation
10.39 (2)            -- Loan Agreement dated as of January 23, 1996 among AT&T Commercial
                        Finance Corporation and Triathlon Broadcasting of Wichita, Inc., Wichita
                        Acquisition Corp. and Triathlon Broadcasting of Lincoln, Inc.
10.40 (2)            -- Letter from AT&T Commercial Finance Corporation dated February 6, 1996
10.41 (2)            -- First Amendment to Loan Agreement dated as of February 22, 1996 among
                        AT&T Commercial Finance Corporation and Triathlon Broadcasting of Wichita,
                        Inc., Wichita Acquisition Corp. and Triathlon Broadcasting of Lincoln, Inc.
10.42 (2)            -- Security Agreement dated as of January 23, 1996 between Triathlon
                        Broadcasting Company and AT&T Commercial Finance Corporation
10.43 (2)            -- Guaranty dated as of January 23, 1996 by Triathlon Broadcasting Company to
                        and with AT&T Commercial Finance Corporation relating to $3.5 million term
                        loan
10.44 (2)            -- Guaranty dated as of January 23, 1996 by Triathlon Broadcasting Company to
                        and with AT&T Commercial Finance Corporation relating to $5.5 million term
                        loan
 10.45 (2)           -- Pledge Agreement dated January 23, 1996 from Triathlon Broadcasting
                        Company to AT&T Commercial Finance Corporation
10.46 (2)            -- Stock Purchase Warrant dated as of September 15, 1993 between Rook
                        Broadcasting of Idaho, Inc. and Silverado Broadcasting Company
10.47 (2)            -- Put and Call Agreement effective as of September 15, 1993 between Silverado
                        Broadcasting Company and Rook Broadcasting of Idaho, Inc.
10.48 (2)            -- Time Brokerage Agreement dated as of February 21, 1996 by and between
                        Triathlon Broadcasting Company and Silverado Broadcasting Company
10.49 (2)            -- Letter Agreement between Triathlon Broadcasting Company and Sillerman
                        Communications Management Corporation dated February 21, 1996 amending
                        the Amended and Restated Financial Consulting Agreement


                                        -64-
<PAGE>

 EXHIBIT                                                                                                            
 NUMBER              DESCRIPTION OF EXHIBIT
 -------             ----------------------
10.50 (2)            -- Form of Cash-only Stock Appreciation Rights Agreement dated October 30,
                        1995 by and between Triathlon Broadcasting Company and Jeffrey Leiderman
10.51 (2)            -- Form of Cash-only Stock Appreciation Rights Agreement dated October 30,
                        1995 by and between Triathlon Broadcasting Company and Frank E. Barnes III
10.52 (2)            -- Form of stock option agreement issued pursuant to the 1995 Stock Option Plan
                        to each of Norman Feuer, John D. Miller, Dennis R. Ciapura, Radio Investors,
                        Inc., Radio Analysis Associates and Sillerman Communications Management
                        Corporation
10.53 (2)            -- Form of Cash-only Stock Appreciation Rights Agreements dated January 31,
                        1996 by and between Triathlon Broadcasting Company and Jeffrey Leiderman
10.54 (2)            -- Form of Cash-only Stock Appreciation Rights Agreements dated January 31,
                        1996 by and between Triathlon Broadcasting Company and Frank E. Barnes III
10.55 (2)            -- Assignment dated February 21, 1996 from Silverado Broadcasting Company to
                        Triathlon Broadcasting Company
10.56 (3)            -- Amendment dated November 26, 1996 to the Asset Purchase Agreement dated
                        as of February 8, 1996 by and between Triathlon Broadcasting of Little Rock,
                        Inc., Triathlon Broadcasting Company, Southern Skies Corporation and
                        Arkansas Skies Corporation
10.57 (4)            -- Asset Purchase Agreement dated as of October 17, 1996 between Triathlon
                        Broadcasting of Omaha, Inc. and American Radio Systems Corporation
10.58 (4)            -- Asset Purchase Agreement dated as of July 15, 1996 between Triathlon
                        Broadcasting of Little Rock, Inc. and Southern Starr of Arkansas, Inc.
10.59 (3)            -- Loan Agreement dated November 19, 1996 among AT&T Commercial Finance
                        Corporation and Triathlon Broadcasting of Wichita, Inc., Triathlon Broadcasting
                        of Lincoln, Inc., Triathlon Broadcasting of Omaha, Inc., Triathlon Broadcasting
                        of Spokane, Inc., Triathlon Broadcasting of Tri- Cities, Inc., Triathlon
                        Broadcasting of Colorado Springs, Inc. and Triathlon Broadcasting of Little
                        Rock, Inc.
10.60 (5)            -- Letter agreement dated May 21, 1996 between Sillerman Communications
                        Management Corporation and Triathlon Broadcasting Company
10.61 (6)            -- Letter agreement dated April 3, 1997 between Sillerman Communications
                        Management Corporation and Triathlon Broadcasting Company
10.62 (6)            -- Asset Purchase Agreement dated as of April 11, 1997 among Triathlon
                        Broadcasting of Little Rock, Inc., Clear Channel Radio, Inc. and Clear Channel
                        Radio Licenses, Inc.

                                      -65-
<PAGE>


 EXHIBIT                                                                                                            
 NUMBER              DESCRIPTION OF EXHIBIT
 -------             ----------------------
10.63 (6)            -- Purchase and Sale Agreement dated as of April 23, 1997 by and between Paul
                        R. Aaron, Triathlon Sports Programming and TSPN, Inc.
10.64 (6)            -- Purchase and Sale Agreement dated as of April 23, 1997 by and between Dale
                        M. Jensen and Triathlon Sports Programming, Inc.
10.65 (7)            -- Sales Representation Agreement dated as of April 1, 1997 by and between
                        Triathlon Broadcasting of Spokane, Inc. and Rook Broadcasting of Idaho, Inc.
10.66 (8)            -- Amended and Restated Loan Agreement dated May 30, 1997 among AT&T
                        Commercial Finance Corporation and Union Bank of California, N.A. and
                        Triathlon Broadcasting of Wichita, Inc., Triathlon Broadcasting of Lincoln, Inc.,
                        Triathlon Broadcasting of Omaha, Inc., Triathlon Broadcasting of Spokane,
                        Inc., Triathlon Broadcasting of Tri-Cities, Inc., Triathlon Broadcasting of
                        Colorado Springs, Inc., and Triathlon Broadcasting of Little Rock, Inc.
10.67 (9)            -- Local Marketing Agreement dated February 11, 1998 by and between Triathlon
                        Broadcasting of Tri-Cities, Inc. and Mark Jacky Broadcasting
10.68 (9)            -- Stockholder Agreement, dated as of July 23, 1998, among Robert F.X.
                        Sillerman, Capstar Radio Broadcasting Partners, Inc., TBC Radio Acquisition
                        Corp. and Triathlon Broadcasting Company.
10.69 (9)            -- Stockholder Agreement, dated as of July 23, 1998, among Tomorrow
                        Foundation, Capstar Radio Broadcasting Partners, Inc., TBC Radio Acquisition
                        Corp. and Triathlon Broadcasting Company.
10.70 (9)            -- Stockholder Agreement, dated as of July 23, 1998, among Norman Feuer,
                        Capstar Radio Broadcasting Partners, Inc., TBC Radio Acquisition Corp. and
                        Triathlon Broadcasting Company.
10.71 (9)            -- Stockholder Agreement, dated as of July 23, 1998, among Howard Tytel,
                        Capstar Radio Broadcasting Partners, Inc., TBC Radio Acquisition Corp. and
                        Triathlon Broadcasting Company.
10.72 (10)           -- First Amendment to the Amended and Restated Loan Agreement dated June 30,
                        1998 among AT&T Commercial Finance Corporation, Union Bank of
                        California, N.A., City National Bank and The CIT Group/Equipment Financing,
                        Inc. and Triathlon Broadcasting of Wichita, Inc., Triathlon Broadcasting of
                        Lincoln, Inc., Triathlon Broadcasting of Omaha, Inc., Triathlon Broadcasting of
                        Spokane, Inc., Triathlon Broadcasting of Tri-Cities, Inc., Triathlon Broadcasting
                        of Colorado Springs, Inc., and Triathlon Broadcasting of Little Rock, Inc.
10.73 (10)           -- First Amendment to Stockholder Agreement, dated as of August 5, 1998,
                        among Robert F.X. Sillerman, Capstar Radio Broadcasting Partners, Inc., TBC
                        Radio Acquisition Corp. and Triathlon Broadcasting Company.



                                      -66-
<PAGE>

 EXHIBIT                                                                                                            
 NUMBER              DESCRIPTION OF EXHIBIT
 -------             ----------------------
10.74 (10)           -- First Amendment to Stockholder Agreement, dated as of August 5, 1998,
                        among Norman Feuer, Capstar Radio Broadcasting Partners, Inc., TBC Radio
                        Acquisition Corp. and Triathlon Broadcasting Company
10.75 (10)           -- First Amendment to Stockholder Agreement, dated as of August 5, 1998,
                        among Howard Tytel, Capstar Radio Broadcasting Partners, Inc., TBC Radio
                        Acquisition Corp. and Triathlon Broadcasting Company.
10.76 (11)           -- Termination Agreement, dated as of July 23, 1998, among Norman Feuer,
                        Capstar Radio Broadcast Partners, Inc. and Triathlon Broadcasting Company.
10.77 (11)           -- Promissory Note dated September 15, 1998 executed by 4630 Realty, Inc., a
                        wholly owned subsidiary of the Company, and payable to the order of Capstar
                        Radio Broadcasting Partners, Inc.
10.78 (11)           -- Security Agreement dated September 15, 1998 between 4630 Realty, Inc., a
                        wholly owned subsidiary of the Company, and Capstar Radio Broadcasting
                        Partners, Inc.
10.79 (11)           -- Deed of Trust, Assignment, Security Agreement and Financing Statement, dated
                        as of September 15, 1998, executed by the Company in favor of Capstar Radio
                        Broadcasting Partners, Inc.
10.80 (11)           -- Station Reimbursement and Compensation Agreement dated August 1998,
                        between Saga Communications of Iowa, Inc. and Triathlon Broadcasting of
                        Omaha, Inc.
10.81 (11)           -- Escrow Agreement dated August 1998, among Saga Communications of Iowa,
                        Inc., Triathlon Broadcasting of Omaha, Inc. and James K. Edmondson
10.82                -- Promissory Note dated December 29, 1998 executed by Triathlon Broadcasting
                        of Omaha, Inc., a wholly owned subsidiary of the Company, and payable to the
                        order of AT&T Commercial Finance Corporation.
21                   -- List of subsidiaries of the Company
23                   -- Consent of Ernst & Young LLP
24                   -- Power of Attorney (included on the signature page to this Report) 
27                   -- Financial Data Schedule for year ended December 31, 1998

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

</TABLE>

(1)    Incorporated by reference to the Registrant's Registration Statement on
       Form SB-2 (File No. 33-94316), as amended, originally filed with the SEC
       on July 6, 1995.



                                      -67-
<PAGE>



(2)    Incorporated by reference to the Registrant's Registration statement on
       Form SB-2 (File No. 333-1186), as amended, originally filed with the SEC
       on February 9, 1996.

(3)    Incorporated by reference to the Registrant's Report on Form 8-K filed
       with the SEC on December 9, 1996.

(4)    Incorporated by reference to the Registrant's Quarterly Report on Form
       10-QSB for the nine months ended on September 30, 1996 filed with the SEC
       on November 14, 1996.

(5)    Incorporated by reference to the Registrant's Annual Report on Form
       10-KSB for the year ended on March 31, 1996 filed with the SEC on June
       24, 1996.

(6)    Incorporated by reference to the Registrant's Annual Report on Form
       10-KSB for the transition period from April 1, 1996 to December 31, 1996,
       filed with the Securities and Exchange Commission on May 13, 1997.

(7)    Incorporated by reference to the Registrant's Quarterly Report on Form
       10-QSB for the six months ended on June 30, 1997 filed with the SEC on
       August 14, 1997.

(8)    Incorporated by reference to the Registrant's Report on Form 8-K filed
       with the SEC on June 17, 1997.

(9)    Incorporated by reference to the Registrant's Report on Form 8-K filed
       with the Securities and Exchange Commission on July 31, 1998.

(10)   Incorporated by reference to the Registrant's Quarterly Report on Form
       10-QSB for the six months ended on June 30, 1998 filed with the SEC on
       August 14, 1998.

(11)   Incorporated by reference to the Registrant's Quarterly Report on Form
       10-QSB for the nine months ended on September 30, 1998 filed with the SEC
       on November 14, 1998.

(12)   Identifies a management contract or compensatory plan or arrangement of
       the Registrant.

(b)    No reports on Form 8-K were filed during the fourth quarter ended
       December 31, 1998.

       Form 8-K filed with Securities and Exchange Commission on March 23, 1999,
       whereby the Registrant announced its financial results for the year ended
       December 31, 1998.




                                      -68-
<PAGE>



                                   SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated: March 31, 1999                 TRIATHLON BROADCASTING COMPANY


                                      By: /s/ NORMAN FEUER                     
                                          -------------------------------------
                                          Norman Feuer
                                          President and Chief Executive Officer


                                      By: /s/ WILLIAM G. THOMPSON              
                                          -------------------------------------
                                          William G. Thompson
                                          Chief Financial Officer

                                POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Norman Feuer and William G. Thompson,
jointly and severally, as his or her attorney-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report and to file the same, with exhibits thereto and other documents
in connection therewith, with the SEC, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities 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/ John D. Miller                           Chairman of the Board of Directors                   March 31, 1999
-------------------------------------------
John D. Miller

/s/ Norman Feuer                             President, Chief Executive Officer and               March 31, 1999
-------------------------------------------  Director (Principal Executive Officer)
Norman Feuer                                 

/s/ William G. Thompson                      Chief Financial Officer (Principal Financial         March 31, 1999
-------------------------------------------  and Accounting Officer)
William G. Thompson                          

                                             Secretary                                            March 31, 1999
-------------------------------------------
Kraig G. Fox

/s/ Frank E. Barnes III                      Director                                             March 31, 1999
-------------------------------------------
Frank E. Barnes III

/s/ Dennis R. Ciapura                        Director                                             March 31, 1999
-------------------------------------------
Dennis R. Ciapura

/s/ Jeffrey Leiderman                        Director                                             March 31, 1999
-------------------------------------------
Jeffrey Leiderman
</TABLE>


                                      -69-
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

                   Index to Consolidated Financial Statements



Report of Independent Auditors.........................................    F-2

Consolidated Financial Statements:

Consolidated Balance Sheets at December 31, 1997 and 1998..............    F-3
Consolidated Statements of Operations for the years ended
   December 31, 1996, 1997 and 1998....................................    F-4
Consolidated Statements of Cash Flows for the
   years ended December 31, 1996, 1997 and 1998........................    F-5
Consolidated Statements of Stockholders' Equity for the
   years ended December 31, 1996, 1997 and 1998........................    F-6

Notes to Consolidated Financial Statements.............................    F-7

Schedule II Valuation and Qualifying Accounts..........................    S-1


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
Triathlon Broadcasting Company

We have audited the accompanying consolidated balance sheets of Triathlon
Broadcasting Company and Subsidiaries as of December 31, 1997 and 1998, and the
related consolidated statements of operations, cash flows and stockholders'
equity for the three years in the period ended December 31, 1998. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and the schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Triathlon Broadcasting Company and Subsidiaries at December 31, 1997 and 1998,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. 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 herein.


                                                               Ernst & Young LLP


New York, New York
February 18, 1999



                                      F-2
<PAGE>


                             Triathlon Broadcasting Company and Subsidiaries

                                       Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                           DECEMBER 31
                                                                                     1997              1998
                                                                                ---------------- -----------------
<S>                                                                             <C>              <C>            
ASSETS
Current assets:
   Cash and cash equivalents                                                    $     1,771,409  $     1,412,894
   Accounts receivable, net of allowance for doubtful accounts of $589,860 in
     1997 and $613,918 in 1998                                                        7,510,020        7,404,361
   Notes receivable from officer                                                         75,000          175,000
   Prepaid expenses                                                                     857,640          843,824
   Other current assets                                                                  17,038          569,687
                                                                                ---------------- -----------------
Total current assets                                                                 10,231,107       10,405,766

Property and equipment, net of accumulated depreciation and amortization             10,279,780       10,133,966
Intangible assets, net of accumulated amortization                                  111,673,866      108,266,568
Notes receivable from officer                                                           250,000          300,000
Long-term note receivable                                                               266,333                -
Other assets                                                                             40,258           35,903
                                                                                ================ =================
                                                                                $   132,741,344  $   129,142,203
                                                                                ================ =================

LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:
   Accounts payable and accrued expenses                                        $     6,055,947  $     6,608,948
   Due to affiliates                                                                     40,195          485,833
   Current portion of Amended Credit Agreement                                       58,500,000          733,594
   Current portion of other long-term debt                                              889,996        1,593,396
   Current portion of non-compete payable                                               150,000          150,000
                                                                                ---------------- -----------------
Total current liabilities                                                            65,636,138        9,571,771

Amended Credit Agreement, less current portion                                                -       59,202,344
Other long-term debt, less current portion                                              943,396                -
Non-compete payable, less current portion                                               481,250          331,250
Deferred compensation                                                                   155,000          160,250
Deferred taxes                                                                        7,629,550        7,629,550

Stockholders' equity:
   Preferred stock, par value $.01; 4,000,000 shares authorized:
     Series B Convertible Preferred Stock; 600,000 shares designated;
       565,000 shares issued and outstanding                                              5,650            5,650
     9% Cumulative Mandatory Convertible Preferred Stock; 583,400
       shares issued and outstanding                                                      5,834            5,834
   Class A Common Stock, par value $.01; 30,000,000 shares authorized;
     3,172,533 and 3,175,645 shares issued and outstanding in 1997 and 1998,
     respectively                                                                        31,725           31,756
   Class B Convertible Common Stock, par value $.01; 1,689,256 shares
     authorized; 244,890 and 886,811 shares issued and outstanding in 1997
     and 1998, respectively                                                               2,449            8,868
   Class C Convertible Common Stock, par value $.01; 367,344 shares
     authorized; 31,000 shares issued and outstanding                                       310              310
   Class D Convertible Common Stock, par value $.01; 1,444,366 shares
     authorized; 1,444,366 and 802,445 shares issued and outstanding in 1997
     and 1998, respectively                                                              14,444            8,025
   Additional paid-in capital                                                        61,236,312       55,728,985
   Deferred compensation                                                               (362,667)        (226,667)
   Accumulated deficit                                                               (3,038,047)      (3,315,723)
                                                                                ---------------- -----------------
Total stockholders' equity                                                           57,896,010       52,247,038
                                                                                ================ =================
                                                                                $   132,741,344  $   129,142,203
                                                                                ================ =================
</TABLE>

See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>


                             Triathlon Broadcasting Company and Subsidiaries

                                  Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31
                                                                  1996            1997             1998
                                                             --------------- ---------------- ---------------
<S>                                                          <C>             <C>              <C>          
Broadcast revenues                                           $  21,199,549   $  37,173,722    $  45,024,865
Less agency commissions                                         (2,236,448)     (3,532,530)      (4,442,292)
                                                             --------------- ---------------- ---------------
Net revenues                                                    18,963,101      33,641,192       40,582,573

Operating expenses:
   Station operating expenses                                   13,678,117      23,414,919       26,727,063
   Depreciation and amortization                                 1,426,759       4,134,523        4,794,393
   Corporate expenses, including $359,000, $554,000 and
     $530,000 of related party advisory fees in 1996, 1997
     and 1998, respectively                                      1,719,283       2,068,085        2,077,139
   Deferred compensation                                           365,992         389,759          141,250
   DOJ information request costs                                   300,000               -                -
                                                             --------------- ---------------- ---------------
Total operating expenses                                        17,490,151      30,007,286       33,739,845
                                                             --------------- ---------------- ---------------

Income from operations                                           1,472,950       3,633,906        6,842,728

Interest expense                                                (2,581,423)     (4,766,153)      (5,994,459)
Interest income                                                    729,403         401,294           66,810
Other expense, including approximately $1,017,000 of 
   Merger related fees in 1998                                     (59,766)       (137,572)      (1,192,755)
                                                             --------------- ---------------- ---------------

Loss before extraordinary item                                    (438,836)       (868,525)        (277,676)
Extraordinary item                                                (320,000)       (958,080)               -
                                                             --------------- ---------------- ---------------

Net loss                                                          (758,836)     (1,826,605)        (277,676)
Preferred stock dividend requirement                             4,414,523       5,507,296        5,507,296
                                                             --------------- ---------------- ---------------

Net loss applicable to common stock                          $  (5,173,359)  $  (7,333,901)   $  (5,784,972)
                                                             =============== ================ ===============

Loss per common share--basic:
Loss before extraordinary item                               $       (0.97)  $       (1.30)   $       (1.18)
Extraordinary item                                                   (0.10)          (0.20)              -
                                                             --------------- ---------------- ---------------
Net loss per common share--basic                              $       (1.07)  $       (1.50)   $       (1.18)
                                                             =============== ================ ===============

Weighted average common shares outstanding--basic                 4,841,600       4,882,000        4,893,966
                                                             =============== ================ ===============

</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>


                             Triathlon Broadcasting Company and Subsidiaries

                                  Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31
                                                                    1996             1997            1998
                                                               ---------------- --------------- ---------------
<S>                                                             <C>             <C>             <C>           
CASH FLOWS FROM OPERATIONS
Net loss                                                        $   (758,836)   $  (1,826,605)  $    (277,676)
Adjustments to reconcile net loss to net cash  provided by
   operating activities:
     Depreciation and amortization                                 1,426,759        4,134,523       4,794,393
     Loss on sale of property, plant and equipment                         -                -          96,600
     Deferred compensation                                           365,992          389,759         141,250
     Loss on early extinguishment of debt                            320,000          958,080               -
     Imputed interest expense                                      1,705,556                -               -
     Other noncash expense                                                 -           42,761               -
     Changes in assets and liabilities, net of amounts acquired:
         Accounts receivable                                      (3,367,449)      (2,987,063)        105,659
         Prepaid expenses and other current assets                     9,378         (190,000)       (538,833)
         Notes receivable from officer                               (50,000)        (250,000)       (150,000)
         Other assets                                                      -                -           4,355
         Accounts payable and accrued expenses                     1,885,213        3,092,978         403,001
         Due to affiliates                                          (207,088)         117,868         445,638
                                                               ---------------- --------------- ---------------
Net cash provided by operating activities                          1,329,525        3,482,301       5,024,387
                                                               ---------------- --------------- ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions and dispositions of radio stations, net of
   cash acquired                                                 (59,920,836)     (44,243,045)              -
Due to affiliates                                                 (3,797,517)        (413,125)              -
Long-term note receivable                                                  -                -         266,333
Sale of property, plant and equipment                                      -                -         140,640
Capital expenditures                                              (1,554,614)        (868,781)     (1,478,521)
                                                               ---------------- --------------- ---------------
Net cash used in investing activities                            (65,272,967)     (45,524,951)     (1,071,548)
                                                               ---------------- --------------- ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
Deferred financing costs                                          (2,994,308)      (1,725,809)              -
Borrowings                                                        22,000,000      108,608,393       2,150,000
Debt repayment                                                    (9,000,000)     (60,643,750)       (954,058)
Net proceeds from sale of preferred stock                         56,388,612                -               -
Preferred stock dividends paid                                    (4,414,523)      (5,507,296)     (5,507,296)
                                                               ---------------- --------------- ---------------
Net cash provided by (used in) financing activities               61,979,781       40,731,538      (4,311,354)
                                                               ---------------- --------------- ---------------

Net decrease in cash and cash equivalents                         (1,963,661)      (1,311,112)       (358,515)
Cash and cash equivalents at beginning of period                   5,046,182        3,082,521       1,771,409
                                                               ---------------- --------------- ---------------
Cash and cash equivalents at end of period                      $  3,082,521    $   1,771,409   $   1,412,894
                                                               ================ =============== ===============


SUPPLEMENTAL ITEMS
Interest paid                                                   $    371,210    $   4,377,029   $   6,095,213
                                                               ================ =============== ===============
Issuance of Class A Common Stock in connection
   with acquisitions                                            $          -    $     486,250   $           -
                                                               ================ =============== ===============
</TABLE>

See accompanying notes to consolidated financial statements.



                                      F-5
<PAGE>


                             Triathlon Broadcasting Company and Subsidiaries
                             Consolidated Statements of Stockholders' Equity
                               Years ended December 31, 1996, 1997 and 1998

<TABLE>
<CAPTION>
                                              Series B    Mandatory                Class B     Class C     Class D
                                             Convertible Convertible   Class A   Convertible Convertible Convertible  Additional  
                                              Preferred   Preferred    Common      Common      Common      Common       Paid-in   
                                                Stock       Stock       Stock       Stock       Stock       Stock       Capital   
                                             -------------------------------------------------------------------------------------

<S>                                            <C>         <C>         <C>         <C>         <C>         <C>         <C>        
Balances at December 31, 1995                  $       -   $       -   $  27,850   $   2,449   $  3,673    $  14,444   $13,056,854

Issuance of 565,000 shares of Series B
  Convertible Preferred Stock                      5,650           -           -           -          -            -             -
Issuance of 583,400 shares of Mandatory
  Convertible Preferred Stock                          -       5,834           -           -          -            -    56,382,778
Conversion of 317,344 shares of Class C
  Common Stock into Class A Common Stock               -           -       3,173           -     (3,173)           -             -
Grant of Stock Options to certain
  officers, directors and advisors                     -           -           -           -          -            -     1,190,000
Deferred compensation                                  -           -           -           -          -            -             -
Dividends on Mandatory Convertible
  Preferred Stock ($0.77 per share)                    -           -           -           -          -            -    (4,414,523)
Net loss                                               -           -           -           -          -            -             -
                                             -------------------------------------------------------------------------------------
Balances at December 31, 1996                      5,650       5,834      31,023       2,449        500       14,444    66,215,109

Issuance of 46,189 shares of Common Stock
  upon acquisition of stations                         -           -         462           -          -            -       485,788
Issuance of 5,000 shares of Class A
  Common Stock pursuant to JSA                         -           -          50           -          -            -        42,711
Conversion of 19,000 shares of Class C
  Common Stock into Class A Common Stock               -           -         190           -       (190)           -             -
Deferred compensation                                  -           -           -           -          -            -             -
Dividends on Mandatory Convertible
  Preferred Stock ($0.945 per share)                   -           -           -           -          -            -    (5,507,296)
Net loss                                               -           -           -           -          -            -             -
                                             -------------------------------------------------------------------------------------
Balances at December 31, 1997                      5,650       5,834      31,725       2,449        310       14,444    61,236,312

Conversion of 641,921 shares of Class D
  Common Stock to Class B Common Stock                 -           -           -       6,419          -       (6,419)            -
Exercise of warrants for 3,112 shares of
  Class A Common Stock                                 -           -          31           -           -           -           (31)
Deferred compensation                                  -           -           -           -           -           -             -
Dividends on Mandatory Convertible
  Preferred Stock ($0.945 per share)                   -           -           -           -           -           -    (5,507,296)
Net loss                                               -           -           -           -           -           -             -
                                             =====================================================================================
Balances at December 31, 1998                   $  5,650   $   5,834   $  31,756    $  8,868    $   310    $   8,025  $ 55,728,985
                                             =====================================================================================
</TABLE>

<PAGE>

<TABLE>
<CAPTION>




                                      Total         
     Deferred       Accumulated   Stockholders'     
   Compensation       Deficit        Equity         
--------------------------------------------------  
<S>                 <C>           <C>               
   $     226,583    $  (452,606)  $   12,879,247    
                                                    
                                                    
               -              -            5,650    
                                                    
               -              -       56,388,612    
                                                    
               -              -                -    
                                                    
      (1,190,000)             -                -    
         281,417   -                     281,417    
                                                    
               -              -       (4,414,523)   
               -   (758,836)            (758,836)   
--------------------------------------------------  
        (682,000)  (1,211,442)        64,381,567    
                                                    
                                                    
               -              -          486,250    
                                                    
               -              -           42,761    
                                                    
               -              -                -    
         319,333   -                     319,333    
                                                    
               -              -       (5,507,296)   
               -   (1,826,605)        (1,826,605)   
--------------------------------------------------  
        (362,667)  (3,038,047)        57,896,010    
                                                    
                                                    
               -              -                -    
                                                    
               -              -                -    
         136,000              -          136,000    
                                                    
               -              -       (5,507,296)   
               -       (277,676)        (277,676)   
==================================================  
   $    (226,667)   $(3,315,723)  $   52,247,038    
==================================================  
</TABLE>









                                      F-6

<PAGE>


                 Triathlon Broadcasting Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 1998

1. ORGANIZATION, DESCRIPTION OF BUSINESS AND MERGER AGREEMENT

Triathlon Broadcasting Company (the "Company") was incorporated in Delaware on
June 29, 1995 and, on that date, the stockholders of Triathlon Broadcasting
Company, Inc., a New York corporation ("Triathlon New York"), contributed all of
their shares of Triathlon New York's Common Stock to the Company in exchange for
all of the Company's Common Stock. The exchange of common stock was accounted
for as a business combination among companies under common control. The Company
was organized for the purpose of owning and operating radio stations primarily
in medium and small-sized markets in the Midwest and Western United States. The
Company commenced radio station ownership and operations on September 13, 1995.

As of February 18, 1999, the Company owns and operates and sells advertising
pursuant to Joint Sales Agreements ("JSAs") or provided programming pursuant to
Local Marketing Agreements ("LMAs") on 22 FM and 10 AM radio stations in six
markets: Wichita, Kansas; Lincoln, Nebraska; Omaha, Nebraska; Colorado Springs,
Colorado; Tri-Cities, Washington and Spokane, Washington. In addition, the
Company owns a network which originates broadcasts of all of the men's football,
basketball and baseball games and women's basketball and volleyball games of the
University of Nebraska (the "University").

On July 23, 1998, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Capstar Radio Broadcasting Partners, Inc. ("Capstar")
and TBC Radio Acquisition Corp., a wholly-owned subsidiary of Capstar ("Sub"),
pursuant to which Sub would merge with and into the Company and the Company
would become a wholly-owned subsidiary of Capstar (the "Merger"). Pursuant to
the Merger Agreement, upon the consummation of the Merger, each outstanding
share of each class of Common Stock of the Company shall be converted into the
right to receive $13.00 subject to adjustment, each outstanding depositary share
of the Company, representing one-tenth interest in a share of 9% Mandatory
Convertible Preferred Stock, par value $.01 per share, of the Company
("Depositary Shares") shall be converted into the right to receive $10.83,
subject to adjustment, and each outstanding share of the Series B Convertible
Preferred Stock, par value $.01 per share, of the Company shall be converted
into the right to receive $.01.

As a condition precedent to the execution of the Merger Agreement, Capstar, Sub,
the Company and certain stockholders of the Company have entered into
stockholder agreements (the "Stockholder Agreements"), whereby each of such
stockholders has agreed to vote all shares of the capital stock of the Company
beneficially owned by each in favor of the Merger and against any competing
transaction. In order to facilitate the Merger and pursuant to the Stockholder
Agreements, on August 5, 1998, such stockholders converted an aggregate of
641,921 shares of Class D Common Stock into Class B Common Stock based on the
existence of certain covenant defaults under the Amended Credit Agreement (as
defined in Note 6) at the time of the conversion. As a 


                                      F-7


<PAGE>


                 Triathlon Broadcasting Company and Subsidiaries

                   Notes to Consolidated Financial Statements (continued)

1. ORGANIZATION, DESCRIPTION OF BUSINESS AND MERGER AGREEMENT (CONTINUED)

result of the conversion of the Class D Common Stock into Class B Common Stock
and the terms of the Stockholder Agreements, such stockholders have agreed to
vote the majority of the voting power of the outstanding voting capital stock of
the Company in favor of the Merger and against any competing transaction. On
March 24, 1999, the shareholders approved the Merger Agreement.

The consummation of the Merger is subject to the satisfaction of a number of
conditions set forth in the Merger Agreement, including, but not limited to, the
approval by the stockholders of the Company which was obtained on March 24,
1999, the expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
receipt of all applicable consents to the Merger from the Federal Communications
Commission. During the year ended December 31, 1998, the Company incurred
approximately $1.0 million of Merger related expenses which has been included in
the accompanying consolidated statements of operations. The Merger is currently
expected to be consummated in the second quarter of 1999.

The Company's revenues vary throughout the year. As is typical in the radio
broadcasting industry, the first calendar quarter generally produces the lowest
revenues for the year and the fourth calendar quarter generally produces the
highest revenues for the year. The Company's operating results in any period may
be affected by the incurrence of advertising and promotion expenses that do not
necessarily produce commensurate revenues until the impact of the advertising
and promotion is realized in future periods.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts and
transactions of the Company and its wholly-owned subsidiaries. All significant
intercompany transactions and accounts have been eliminated.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of short-term, highly liquid investments which
are readily convertible into cash and have an original maturity of three months
or less when purchased. The Company's cash and cash equivalents as of December
31, 1997 and 1998 include approximately $1.2 million and $405,000, respectively,
in money market funds. The carrying amounts of cash and cash equivalents
reported in the consolidated balance sheets approximate their fair values.



                                      F-8

<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment are stated at their fair value estimated at the date of
acquisition or cost if purchased subsequently. Depreciation is provided on the
straight-line method over the estimated useful life of the assets ranging from
27.5 years for buildings and related improvements, 15 years for towers, 7 years
for technical equipment, and 5 to 7 years for furniture, other equipment and
vehicles. Property and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                                               DECEMBER 31
                                                                        1997                 1998
                                                                 -------------------- -------------------
 <S>                                                               <C>                 <C>
   Land                                                            $      678,767       $      671,257
   Building and improvements, including assets under a
     capital lease of $148,684 as of December 31, 1997
     and 1998                                                           1,879,041            2,447,732
   Towers and technical equipment                                       7,231,611            7,758,641
   Furniture and other equipment, including assets under capital leases of
     $195,444 and $211,084 as of December 31, 1997 and 1998,
     respectively                                                       1,489,253            1,567,133
   Vehicles                                                               195,193              219,742
   Construction in progress                                               544,738              576,571
                                                                 -------------------- -------------------
                                                                       12,018,603           13,241,076
   Less accumulated depreciation                                       (1,738,823)          (3,107,110)
                                                                 ==================== ===================
                                                                  $    10,279,780       $   10,133,966
                                                                 ==================== ===================
</TABLE>

Amortization of assets recorded under capital leases is included in depreciation
and amortization expense in the accompanying consolidated statements of
operations. Maintenance and repairs which do not improve or extend the lives of
the respective assets are expensed in the period incurred.

INTANGIBLE ASSETS

Intangible assets include the portion of the purchase price allocable to radio
broadcasting licenses granted by the Federal Communications Commission ("FCC")
and goodwill which is amortized on a straight-line basis over 40 years, except
for the goodwill associated with the Pinnacle Acquisition which is being
amortized over a ten year period due to the nature and life of the University
contract; costs related to financings which are amortized over the


                                      F-9
<PAGE>

               Triathlon Broadcasting Company and Subsidiaries
            Notes to Consolidated Financial Statements (continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

term of the related debt and certain professional fees and other expenses
incurred in connection with the Company's formation which are amortized on a
straight-line basis over five years. (See below--Reporting on the Costs of
Start-Up Activities).

It is the Company's policy to account for intangible assets under Financial
Accounting Standards Board Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." As part of an
ongoing review of the valuation and amortization of intangible assets,
management assesses the carrying value of the Company's intangible assets if
facts and circumstances suggest they may be impaired. If this review indicates
that the intangibles will not be recoverable as determined by a nondiscounted
cash flow analysis over the remaining amortization period, the carrying value of
the Company's intangibles will be reduced to their estimated fair value. The
Company also takes into consideration recent acquisition patterns within the
broadcast industry, the impact of recently enacted or potential FCC rules and
regulations and any other events or circumstances which might indicate potential
impairment. At this time, in the opinion of management, no impairment has
incurred.

REVENUE RECOGNITION

The Company's primary source of revenues is the sale of airtime to advertisers.
Revenues from the sale of airtime are recorded when the advertisements are
broadcast.

BARTER TRANSACTIONS

Revenue from barter transactions (advertising provided in exchange for goods and
services) is recognized as income based on the fair value of goods or services
received when advertisements are broadcast; goods and services received are
accounted for when used. Barter transactions charged to operations were as
follows:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31
                                                   1996                1997                 1998
                                            ------------------- -------------------- --------------------
<S>                                           <C>                 <C>                  <C>            
   Barter revenue                             $    886,778        $     1,322,777      $     1,421,162
   Barter expense                                 (890,134)            (1,476,840)          (1,401,693)
                                            =================== ==================== ====================
   Net barter transactions                    $     (3,356)       $      (154,063)     $        19,469
                                            =================== ==================== ====================
</TABLE>




                                      F-10
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ADVERTISING COSTS

The Company expenses advertising costs related to its radio station operations
as they are incurred. Advertising expenses for the years ended December 31,
1996, 1997 and 1998 amounted to approximately $373,000, $1.0 million and
$635,000, respectively.

LOSS PER COMMON SHARE

Basic loss per common share is based upon the net loss applicable to common
shares after preferred dividend requirements and upon the weighted average of
common shares outstanding during the period. Diluted loss per common share
adjusts for the effect of convertible securities and stock options only in the
periods presented where such effect would have been dilutive. There was no such
dilutive effect during the years ended December 31, 1996, 1997 and 1998.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

LMA AND JSA AGREEMENTS

The Company has entered into LMAs and JSAs with respect to radio stations owned
by third parties and, from time to time, radio stations which it intends to
acquire. Terms of the agreements generally require the Company to pay a monthly
fee in exchange for the right to provide stations programming and sell related
advertising time in the case of an LMA or sell advertising in the case of a JSA.
The fees are expensed as incurred. The Company classifies the fees as interest
expense to the extent that the fees paid include debt service payments of the
station owners.

RISKS AND UNCERTAINTIES

Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of bank and mutual fund money market accounts and
trade receivables. The Company's revenue is principally derived from local
broadcast advertisers who are impacted by the local economies.



                                      F-11
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company routinely assesses the financial strength of its customers and does
not require collateral or other security to support customer receivables. Credit
losses are provided for in the consolidated financial statements in the form of
an allowance for doubtful accounts.

DOJ INFORMATION REQUEST

Following the passage of the Telecommunications Act of 1996, the Department of
Justice (the "DOJ") indicated its intention to investigate certain existing
industry practices that had not been previously subject to antitrust review. In
1996, the Company received information requests regarding the Wichita JSA and
the Citadel JSAs. These information requests also cover another JSA which the
Company has in Spokane, Washington. Following receipt of the information
request, the Company terminated the Wichita JSA. While the DOJ inquiry
continues with regard to the Citadel JSA, the Company does not believe the
investigation will have any material impact on the Company. Although the DOJ has
not required termination of the Citadel JSA in connection with its review of
the Merger under the HSR Act, the Company has begun preparations for an orderly
transition in the event that the Merger is not consummated and the DOJ
thereafter requires the termination of the Citadel JSA. Following consultation
with legal counsel, the Company does not believe that any reasonable likely
outcome of the investigation of the Spokane, Washington and Colorado Springs,
Colorado JSAs will result in a material negative impact on the Company. During
1996, the Company provided $300,000 in connection with the estimated legal
costs related to compliance with the DOJ information requests.

REPORTING ON THE COSTS OF START-UP ACTIVITIES

In 1998, the American Institute on Certified Public Accountants issued Statement
of Position No. 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP
98-5"). Under SOP 98-5, the costs of start-up activities, including
organizational costs, would be expensed as incurred. SOP 98-5 broadly defines
start-up activities as those one time activities related to opening a new
facility, introducing a new product or service, conducting business in a new
territory, conducting business with a new class of customer or beneficiary,
initiating a new process in an existing facility or beginning a new operation.
Although SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998, earlier application is encouraged. The
initial application of SOP 98-5 is to be reported as a cumulative effect of a
change in accounting principle. The Company will adopt SOP 98-5 in the first
quarter of 1999 which will result in a charge of approximately $119,000
resulting from the write-off of organization costs which will be recorded as the
cumulative effect of a change in accounting principle.

SEGMENT INFORMATION

In 1998, the Company adopted Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information"
("FASB 131").


                                      F-12
<PAGE>


                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FASB 131 superceded FASB 14, "Financial Reporting for Segments of a Business
Enterprise," replacing the "industry segment" approach with the "management"
approach. The management approach designated the internal organization used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. FAS 131 also requires disclosures
about products and services, geographic areas and major customers. The adoption
of FASB 131 did not have an effect on the Company's primary financial
statements, but did affect the disclosure of segment information contained
elsewhere herein (see Note 8).

RECLASSIFICATIONS

Certain amounts for the years ended December 31, 1996 and 1997 have been
reclassified to conform with the current period presentation.

3. PREFERRED STOCK OFFERING

In March and April 1996, the Company completed an offering of 5,834,000
Depository Shares each representing a one-tenth interest in a share of 9%
Mandatory Convertible Preferred Stock (the "Preferred Stock") at a price of
$10.50 per share (the "Preferred Stock Offering") (see Note 7). The Company used
the net proceeds from the Preferred Stock Offering of approximately $56,400,000
to repay the outstanding borrowings and accrued interest under an existing
$9,000,000 credit agreement with AT&T Commercial Finance Corporation
("AT&T-CFC") and finance a portion of certain acquisitions as described in Note
4.

4. ACQUISITIONS AND OPERATING AGREEMENTS

LINCOLN ACQUISITIONS

On January 24, 1996, the Company acquired, in a stock acquisition, KTGL-FM and
KZKX-FM from Pourtales Radio Partnership ("Pourtales") each operating in the
Lincoln, Nebraska market for an aggregate purchase price of $9,650,000. This
acquisition was financed principally from the net proceeds of a $9.0 million
credit agreement with AT&T-CFC. The Company repaid the loan and accrued interest
prior to December 31, 1996 utilizing proceeds from the Preferred Stock Offering,
recognizing an extraordinary loss of $320,000 resulting from the write-off of
fees associated with the financing in the accompanying statement of operations
for the year ended December 31, 1996.

On June 13, 1996, the Company acquired the assets of KIBZ-FM and KKNB-FM from
Rock Steady, Inc. ("Rock Steady"), each operating in the Lincoln, Nebraska
market, for


                                      F-13
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

4. ACQUISITIONS AND OPERATING AGREEMENTS (CONTINUED)

an aggregate purchase price of approximately $3,275,000. The Rock Steady
acquisition was financed from the proceeds of the Preferred Stock Offering.
Sillerman Communications Management Company ("SCMC"), on behalf of the Company,
provided a deposit in the form of a letter of credit in the amount of $200,000
in favor of the owner of Rock Steady. The Company subsequently paid SCMC
$200,000 and SCMC assigned its rights related to the letter of credit to the
Company. From January 29, 1996, until the date of acquisition, the Company sold
advertising on KIBZ-FM and KKNB-FM pursuant to a JSA which was terminated with
the acquisition of the stations by the Company.

OMAHA ACQUISITIONS

On April 10, 1996, the Company acquired the assets of KTNP-FM (formerly KRRK-FM)
from 93.3 Inc., operating in the Omaha, Nebraska market, for a purchase price of
$2,700,000 and the assets of KXKT-FM from Valley Broadcasting Company, also
operating in the Omaha, Nebraska market, for a purchase price of $8,100,000. The
acquisitions were financed from the proceeds of the Preferred Stock Offering.

On June 2, 1997, the Company purchased radio stations KFAB-AM and KGOR-FM,
operating in the Omaha, Nebraska market, and the exclusive Muzak franchise for
the Lincoln and Omaha, Nebraska markets, from American Radio Systems Corporation
for an aggregate purchase price of $38.0 million (the "KFAB/KGOR Acquisition").
The KFAB/KGOR Acquisition was financed through borrowings available under the
Amended Credit Agreement (see Note 6).

On August 12, 1998, pursuant to the Merger Agreement, the Company entered into
an agreement with Saga Communications of Iowa, Inc. ("Saga") for the decrease of
the operating power, if necessary, of Saga's signal for KIOA-FM operating in the
Des Moines, Iowa market and the increase of the operating power of the Company's
signal for KTNP-FM operating in the Omaha, Nebraska market. The contemplated
changes in operating power requires the approval of the FCC which was applied
for in September 1998. In accordance with the agreement, the Company agreed to
compensate Saga $500,000 at such time which the FCC consents to the downgrade
and upgrade. Accordingly, the Company has deposited $500,000 in an escrow
account which is included in other current assets in the consolidated balance
sheets.

TRI-CITIES ACQUISITION

On April 19, 1996, the Company acquired the assets of KALE-AM and KIOK-FM from
Sterling Realty Organization, each operating in the Tri-Cities, Washington
market, for an aggregate purchase price of $1,200,000. The acquisition was
financed from the proceeds of the Preferred Stock Offering.



                                      F-14
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

4. ACQUISITIONS AND OPERATING AGREEMENTS (CONTINUED)


On February 1, 1998, the Company entered into a five year LMA with Mark Jacky
Broadcasting, with respect to KUJ-FM, operating in the Tri-Cities, Washington
market. Pursuant to the LMA, the Company provides programming and sells
advertising with respect to KUJ-FM for a monthly fee of $5,500.

SPOKANE ACQUISITIONS

On May 15, 1996, the Company acquired the assets of KISC-FM, KNFR-FM and
KAQQ-AM, each operating in the Spokane, Washington market from Silverado
Broadcasting Company, Inc. ("Silverado"), for an aggregate purchase price of
approximately $8,750,000. The Silverado acquisition was financed from the
proceeds of the Preferred Stock Offering. The Company had been providing
programming and selling advertising on these stations pursuant to an LMA
agreement from March 1, 1996 to the date of acquisition. In connection with the
acquisition, the Company received the right to purchase a controlling interest
in KCDA-FM, also in Spokane, at a nominal price while the current licensee
retained the right to redeem the Company's purchase rights by paying to the
Company an amount equal to 75% of the fair market value of the station. On July
17, 1997, the Company agreed to the redemption of the right by the current
licensee of KCDA-FM in exchange for $50,000 in cash and a non-interest bearing
note receivable with a face amount of $350,000. In December 1998, the Company
accepted a discounted payment of $185,000 in full settlement of the note
resulting in a loss of $75,000 being recorded in 1998.

On March 1, 1996, the Company assumed the rights and obligations of Silverado
under two JSAs related to KNJY-FM and KCDA-FM, each operating in the Spokane,
Washington market. The JSA relating to KNJY-FM was terminated on December 29,
1996. The JSA relating to KCDA-FM, which was due to expire on October 1, 1998,
was extended to December 31, 2001. As an inducement to extend the JSA, the
Company issued 5,000 shares of the Company's Class A Common Stock valued at
approximately $43,000 to the owners of KCDA-FM. Pursuant to these JSAs, the
Company paid/pays to the station owners a fee determined pursuant to formulas
based on net collected revenues (as defined).

POURTALES ACQUISITION

On November 22, 1996, the Company acquired from Pourtales KVOR-AM, KSPZ-FM,
KTWK-AM and KVUU-FM, each operating in the Colorado Springs, Colorado market;
KEYF-FM, KEYF-AM, KUDY-AM and KKZX-FM, each operating in the Spokane, Washington
market (collectively, the "Colorado Springs and Spokane Stations"); KEYN-FM


                                      F-15
<PAGE>
                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

4. ACQUISITIONS AND OPERATING AGREEMENTS (CONTINUED)

operating in the Wichita, Kansas market and KEGX-FM and KTCR-AM, each
operating in the Tri-Cities, Washington market, and assumed an LMA for radio
station KNLT-FM, also operating in the Tri-Cities, Washington market (the
"Tri-Cities LMA") for an aggregate purchase price of $22,850,000 (the "Pourtales
Acquisition"). The Pourtales Acquisition was financed from the proceeds of the
Preferred Stock Offering and $13 million in borrowings available under the
Credit Agreement (see Note 6).

The Company has a JSA agreement with Citadel Broadcasting Corporation
("Citadel") under which Citadel sells advertising on behalf of the Colorado
Springs and Spokane Stations acquired from Pourtales (the "Citadel JSA"). Under
the Citadel JSA, Citadel, which currently owns other stations in the Colorado
Springs and Spokane markets (the "Citadel Stations"), is entitled to retain a
monthly fee (the "JSA Fee") based on the combined revenues from the sale of
advertising time on the Citadel Stations and the Colorado Springs and Spokane
Stations (the "Aggregate Revenues") and the combined operating expenses of such
stations (the "Aggregate Operating Expenses") less a monthly payment to the
Company of 45% of the difference between the Aggregate Revenues and Aggregate
Operating Expenses each month, up to and including June 1997. After June 1997,
the Company became entitled to receive 40% of such difference. The Citadel JSA
will terminate on December 31, 2000 unless extended for up to two additional
consecutive five-year terms by either party. In addition, Citadel reimburses
the Company for its stations' operating expenses. Between January 15, 1996 and
November 21, 1996 ("LMA Period"), the Company operated the Colorado Springs and
Spokane Stations under an LMA with Pourtales. The Pourtales LMA terminated on
the consummation of the sale of these stations to the Company. There was no LMA
fee paid by the Company to Pourtales during the LMA Period; however, the
Company recorded imputed interest of $1,705,000 during the LMA Period based on
the fair value of stations as determined by their purchase price.

In connection with the Pourtales Acquisition, the Company assumed Pourtales'
rights and obligations under the Tri-Cities LMA. Pursuant to the Tri-Cities LMA,
the Company pays the owner of the stations $22,950 per month, which includes
$8,000 of certain station operating expenses, subject to adjustment for actual
costs. At the end of each 12 month period, the actual expenses will be computed
and the Company will pay any shortfall to such owner or will receive a refund
from such owner for any overpayment of such expenses. The Tri-Cities LMA expires
on April 13, 2003.

WICHITA JSA

During the four months ended December 31, 1996, the Company sold advertising on
radio stations KKRD-FM, KRZZ-FM and KNSS-AM operating in the Wichita, Kansas
market pursuant to a JSA with SFX Broadcasting, Inc. ("SFX"), an affiliate, for
a monthly fee of


                                      F-16
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

4. ACQUISITIONS AND OPERATING AGREEMENTS (CONTINUED)

$75,000, plus actual operating expenses of the stations. The Wichita JSA was
terminated on December 31, 1996.

WICHITA AND LITTLE ROCK ACQUISITIONS

On January 9, 1997 and April 25, 1997, respectively, the Company purchased radio
stations KZSN-FM and KZSN-AM, both operating in the Wichita, Kansas market, and
radio stations KSSN-FM and KMVK-FM, both operating in the Little Rock, Arkansas
market, from Southern Skies Corporation ("Southern Skies") for an aggregate
purchase price of $22.6 million, 46,189 shares of the Company's Class A Common
Stock valued at approximately $486,000 and a non-competition agreement with one
of the principals of Southern Skies under which it will pay $750,000 over a five
year period which commenced on February 1, 1997 (collectively, the "Southern
Skies Acquisition"). Also, on April 25, 1997, the Company purchased radio
station KOLL-FM, operating in the Little Rock market, from SFX, an affiliate,
for an aggregate purchase price of $4.1 million. The Company had provided
services for radio station KOLL-FM pursuant to a LMA from March 15, 1996 to the
date of acquisition. The acquisitions were financed through borrowings available
under the Credit Agreement (see Note 6).

PINNACLE SPORTS PRODUCTIONS ACQUISITION

On May 15, 1997, the Company purchased Pinnacle Sports Productions, LLC (the
"Pinnacle Acquisition") which operates the Sports Network to broadcast all of
the men's football, basketball and baseball games and women's basketball and
volleyball games of the University. The purchase price of approximately $3.3
million may be increased by $1.7 million if the University renews its contract
with the Company in 2001 for a minimum of an additional three year term. While
renewal of the contract with the University cannot be assured, based on
discussions the Company has had with the University, management knows of no
reason why the contract would not be renewed. The Pinnacle Acquisition was
financed through available borrowings under the Credit Agreement and notes
payable to the sellers in the amount of $1,833,392 (see Note 6). Additionally,
the Company assumed a note payable in the amount of $525,000 which was repaid in
November 1997.

LITTLE ROCK DISPOSITION

On October 1, 1997, the Company completed the disposition of radio stations
KOLL-FM, KSSN-FM and KMVK-FM, each operating in the Little Rock, Arkansas market
(the "Little Rock Disposition") pursuant to an agreement with Clear Channel
Radio, Inc. The aggregate sale price was $20.0 million. The Company did not
recognize a gain or loss on the Little Rock Disposition. During the period from
the date of acquisition through date


                                      F-17
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

4. ACQUISITIONS AND OPERATING AGREEMENTS (CONTINUED)

of sale, the Company capitalized a loss of approximately $235,000, including
interest expense, related to the stations sold pursuant to the Little Rock
Disposition. The Company used the proceeds of the disposition to repay
outstanding indebtedness under the Amended Credit Agreement (see Note 6).

The Company's acquisitions were recorded using the purchase method of
accounting. The operating results of the acquired stations are included in the
accompanying consolidated statements of operations from their respective dates
of acquisition or from the date the respective LMA or JSA began, as appropriate.
The following unaudited supplemental pro forma information is presented as if
the Company had completed all of the acquisitions and related financings
consummated as of December 31, 1997, as if they had occurred on January 1, 1996,
and had not entered into the Wichita JSA:

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31
                                                        1996 (1)             1997
                                                   ------------------- -----------------
<S>                                                     <C>                  <C>        
  Net revenue                                           $ 32,397,000         $37,145,000
  Operating income                                           950,000           2,984,000
  Net loss applicable to common stock                    (10,412,000)         (8,378,000)
  Net loss per common share--basic                             (2.13)              (1.72)
  Common shares outstanding--basic                         4,877,000           4,882,000
</TABLE>

(1)      Includes a charge of $300,000, or $0.06 per share for DOJ information 
         request costs.

5. INTANGIBLE ASSETS

Intangible assets consist of the following:

<TABLE>
<CAPTION>
                                                            DECEMBER 31
                                                     1997                  1998
                                             --------------------- ---------------------
<S>                                               <C>                   <C>         
     FCC licenses                                 $102,601,420          $102,601,420
     Organization costs                                478,644               478,644
     Deferred financing costs                        1,699,809             1,699,809
     Goodwill                                       10,797,238            10,797,238
                                             --------------------- ---------------------
                                                   115,577,111           115,577,111
     Less accumulated amortization                  (3,903,245)           (7,310,543)
                                             ===================== =====================
                                                  $111,673,866          $108,266,568
                                             ===================== =====================
</TABLE>



                                      F-18
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

6. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                            DECEMBER 31
                                                                     1997                  1998
                                                             --------------------- ---------------------

<S>                                                            <C>                   <C>            
     Amended Credit Agreement                                  $    58,500,000       $    59,935,938
     Pinnacle Acquisition                                            1,833,392               943,396
     Capstar Loan Agreement                                                  -               650,000
                                                             --------------------- ---------------------
     Total debt                                                     60,333,392            61,529,334
     Less current portion                                          (59,389,996)           (2,326,990)
                                                             ===================== =====================
                                                               $       943,396       $    59,202,344
                                                             ===================== =====================
</TABLE>

AMENDED CREDIT AGREEMENT

In May 1997, the Company amended and restated its existing $40 million credit
facility ("Credit Agreement") with an $80 million credit facility (the "Amended
Credit Agreement") obtained from AT&T-CFC and Union Bank of California, N.A.
("UBOC") (collectively, the "Lenders"). The Amended Credit Agreement is
comprised of four tranches. The first tranche, in the amount of $35.0 million,
is a reducing revolver where the maximum amount available reduces quarterly
beginning on July 1, 1998 with a maturity of April 1, 2004. As of December 31,
1998, the Company owed less than the maximum amount under this tranche,
therefore, the first principal payment will be due July 1, 1999. Future advances
under this tranche would accelerate the due date of the first principal payment.
The second tranche, in the amount of $25.0 million, is a term loan, with
quarterly principal payments which commenced on July 1, 1998 with a maturity of
July 1, 2004. The third tranche, in the amount of $20.0 million, was a bridge
loan which was fully repaid on October 1, 1997 in connection with the Little
Rock Disposition. The fourth tranche (the "Acquisition Loan"), in the amount of
$20.0 million, is an acquisition loan with the same terms as the second tranche.

Loans under the Amended Credit Agreement bear interest at a floating rate equal
to either, at the option of the Company, a base rate which approximates prime
plus an applicable margin, or the LIBOR rate plus an applicable margin. As of
December 31, 1998, the applicable margin for (i) the first tranche was 1.00% for
base rate loans and 2.00% for LIBOR rate loans and (ii) the second and fourth
tranches was 2.50% for base rate loans and 3.50% for LIBOR rate loans. The
applicable margin for the third tranche, which was repaid in full on October 1,
1997, was 2.25% for base rate loans and 3.25% for LIBOR rate loans.

                                      F-19
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

6. LONG-TERM DEBT (CONTINUED)

The Company purchased, as required by the Amended Credit Agreement, an interest
rate cap which gives the Company protection against interest rate increases
over a certain level. The cap protects against increases in the 6 Month LIBOR
rate over 7.5% on $30.0 million of the debt currently outstanding under the
Amended Credit Agreement and expires in September 1999. A 10% increase in the
average cost of the Company's variable rate debt would increase the Company's
net loss attributable to common stock by approximately $500,000 or $.01 per
share of outstanding stock and could increase the likelihood that the Company
may be required to incur additional indebtedness or raise additional equity
financing to fund its operations in the event that its operations do not
substantially improve.

In connection with the Amended Credit Agreement, the Company wrote off all
deferred financing costs related to the Credit Agreement resulting in an
extraordinary loss of $958,080 being recorded in the accompanying consolidated
statements of operations for the year ended December 31, 1997.

The obligations of the Company's subsidiaries under the Amended Credit Agreement
are secured by a first priority security interest in all existing and after
acquired property of the Company's subsidiaries, with the exception of FCC
licenses and authorizations to the extent it is unlawful to grant a security
interest in such licenses and authorizations, and all issued and outstanding
capital stock of the Company's subsidiaries. All outstanding indebtedness under
the Amended Credit Agreement is guaranteed by the Company. The Amended Credit
Agreement also contains financial leverage and coverage ratios, and restrictions
on capital expenditures and other payments. As of December 31, 1998, the Company
did not meet its corporate overhead financial covenant. The Company's Lenders
have granted it a waiver as of December 31, 1998 with respect to this covenant.

                                      F-20
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

6. LONG-TERM DEBT (CONTINUED)


On June 30, 1998, the Company entered into the First Amendment to the Amended
Credit Agreement ("First Amendment") with the Lenders. The purpose of the First
Amendment was to enable the Lenders to fund an acquisition loan of $1.0 million
("First Advance") which was used by the Company to refinance a portion of the
indebtedness related to the acquisition of Pinnacle Sports Productions, LLC in
1997. The First Amendment also included modifications to certain financial
covenants. The Acquisition Loan is a term loan bearing interest at LIBOR + 3.50%
(or the alternative base rate + 2.50%). The principal balance of the First
Advance of the Acquisition Loan must be reduced by $6,250 per year (paid on a
quarterly basis) until the final maturity of July 1, 2004.

On December 29, 1998, the Company borrowed $500,000 under the Acquisition Loan
("Second Advance") of the Amended Credit Agreement to finance an escrow deposit
required under an agreement with Saga (see Note 4). The loan is a term loan
bearing interest at LIBOR + 3.50% (or the alternative base rate + 2.50%). The
principal balance of the Second Advance of the Acquisition Loan must be reduced
by $3,125 per year (paid on a quarterly basis) until the final maturity of July
1, 2004. The total principal reduction required under the Acquisition Loan is
currently $9,375 per year (paid on a quarterly basis).

Pursuant to the terms of the Amended Credit Agreement, the Company's
subsidiaries pay quarterly a fee of 1/2 of 1 % per annum related to the unused
portion of the $80 million facility commitment. For the years ended December 31,
1997 and 1998, approximately $30,000 and $106,000, respectively, was recorded
as interest expense in the accompanying consolidated statements of operations
in connection with the unused facility fee.

OTHER DEBT

In connection with the Pinnacle Acquisition, the Company delivered to the
sellers, at the time of acquisition, promissory notes in the amount of
approximately $1.8 million which accrue interest at 6% per annum and are payable
in two installments in May 1998 and 1999. The Company remitted the May 1998
payment in accordance with the terms of the promissory notes. Additionally, the
Company assumed a note payable to a bank in the amount of $525,000 which bore
interest at a rate 1/2 of 1% under prime. This note payable was subsequently
repaid in November 1997.

On September 15, 1998, the Company borrowed $650,000 from Capstar for the
purpose of acquiring certain real property in Lincoln, Nebraska as required by
the Merger Agreement. The loan is secured by the acquired real property. The
Company occupied a substantial portion of the property as a tenant prior to
September 15, 1998 and continues


                                      F-21
<PAGE>
                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

6. LONG-TERM DEBT (CONTINUED)

to occupy the property. The loan accrues interest at the rate of 12% per annum
which is payable, along with the principal, on the earlier of the consummation
of the Merger, which is expected during the second quarter of 1999, or the
termination of the Merger Agreement.

After reclassification, aggregate maturities of long-term debt due within the
next five years ending December 31 and thereafter are as follows:

                   1999                               $      2,326,990
                   2000                                      5,034,375
                   2001                                      7,484,375
                   2002                                      8,359,375
                   2003                                      8,884,375
                   Thereafter                               29,439,844
                                                     ====================
                                                      $     61,529,334
                                                     ====================

7.  STOCKHOLDERS' EQUITY

On July 6, 1995, the Company completed a recapitalization whereby all of its
outstanding Common Stock was exchanged for 25,000 shares of Class A Common
Stock, 244,890 shares of Class B Common Stock, and 1,444,366 shares of Class D
Common Stock. In addition, 367,344 shares of Class C Common Stock were sold to
certain investors for $3,673 in lieu of paying a commitment fee on a proposed
bridge loan that the Company later determined not to utilize. During the years
ended December 31, 1996 and 1997, respectively, 317,344 and 19,000 shares of
Class C Common Stock were converted to Class A Common Stock. During the year
ended December 31, 1998, stockholders of Class D Common Stock converted an
aggregate of 641,921 shares of Class D Common Stock into Class B Common Stock
based on the existence of certain covenant defaults under the Amended Credit
Agreement (as defined in Note 6) at the time of the conversion.

PREFERRED STOCK

The Company's authorized capital stock included 4,000,000 shares of $.01 par
value Preferred Stock of which 600,000 shares had been designated as Series A
Convertible Preferred Stock and 600,000 shares is designated as Series B
Convertible Preferred Stock. In October 1996, the shareholders approved the
redesignation of the Series A Convertible Preferred Stock to blank check
Preferred Stock (the "Blank Check Preferred"). The Series B Convertible
Preferred Stock has no voting rights. The Company may issue the Series B
Convertible Preferred Stock pursuant to compensation plans to the Company's
officers, directors and advisors.


                                      F-22
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


7. STOCKHOLDERS' EQUITY (CONTINUED)

On February 8, 1996, the Board issued to certain officers, directors and
advisors (i) 282,500 shares of Series B Convertible Preferred Stock convertible
into Class A Common Stock in the event the market price of the Class A Common
Stock is greater than or equal to $14.00 per share for 20 consecutive trading
days and (ii) 282,500 shares of Series B Convertible Preferred Stock convertible
into Class A Common Stock in the event the market price of the Class A Common
Stock is greater than or equal to $15.00 per share for 20 consecutive trading
days. The Series B Convertible Preferred Stock vests in equal installments over
a five year period beginning one year from the date of issuance. During the
period in which the Series B Convertible Preferred Stock becomes convertible,
the Company will incur substantial noncash charges to earnings based on the fair
value of the stock amortized over the remaining vesting period, if any.

The Company's Board can determine when, and on what terms, each share of Blank
Check Preferred would be issued. Accordingly, the Board may, at its discretion,
upon issuance of the shares of Blank Check Preferred, or any portion thereof,
designate rights, limitations, powers and preferences without further
authorization by stockholders.

MANDATORY CONVERTIBLE PREFERRED STOCK

The Mandatory Convertible Preferred Stock ranks senior to each other class or
series of capital stock. Holders are entitled to receive dividends accruing at
the rate of 9% per annum. On the June 30, 2000 mandatory conversion date, the
Mandatory Convertible Preferred Stock then outstanding will convert
automatically into shares of Class A Common Stock. The mandatory conversion rate
is determined by the market price of the Company's Class A Common Stock at the
time and shall not be greater than 1.15 or less than .833. The Preferred Stock,
at the option of the holder, is convertible, subject to a conversion rate, to
the Company's Class A Common Stock, after June 30, 1996. The Preferred Stock is
not redeemable by the Company prior to June 30, 1999. Each share of the
Preferred Stock is entitled to eight votes. Upon a change in control, as
defined, the holders are entitled to a special conversion right in which the
maximum conversion rate is 1.5. The liquidation preference is equal to the
greater of $10.50 per share or the current market price of the Company's Class A
Common Stock on such date. See Note 1 for the Company's shareholders'
entitlement under the Merger.

COMMON STOCK

The holders of Mandatory Convertible Preferred Stock and Class A Common Stock
voting together as a class are entitled to elect two of the Company's directors,
with each share of Mandatory Convertible Preferred Stock being entitled to eight
votes and each share of Class A Common Stock being entitled to one vote. With
respect to the election of the other three directors and other matters submitted
for a vote, the holders of


                                      F-23
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

7. STOCKHOLDERS' EQUITY (CONTINUED)

Mandatory Convertible Preferred Stock, Class A Common Stock and Class B Common
Stock shall vote as a single class, with each Mandatory Convertible Preferred
Stock being entitled to eight votes and each share of Class A Common Stock and
Class B Common Stock being entitled to one vote per share and ten votes per
share, respectively.

If one or more of Messrs. Feuer, Sillerman, Tytel or Radio Investors (each a
"Principal Stockholder") or any of their affiliates engage in or agree to
participate in a "going private" transaction, any share of Class B Common Stock
held by such person or entity engaging in or agreeing to participate in such
transaction shall be entitled to only one vote per share. For purposes of this
provision, Mr. Feuer is not deemed to be an "affiliate" of Messrs. Sillerman,
Tytel or Radio Investors. Such provision is designed to decrease the voting
power of any principal stockholder of the Company engaging in or participating
in a going private transaction.

Except as required by law, the holders of the Class C Common Stock and the Class
D Common Stock have no voting rights. Under Delaware law, the affirmative vote
of the holders of a majority of the outstanding shares of any class of Common
Stock is required to approve, among other things, a change in the designations,
preferences or limitations of the shares of such class of Common Stock.

Each share of Class B Common Stock, Class C Common Stock, and Class D Common
Stock automatically converts into one share of Class A Common Stock upon its
sale or transfer, subject to FCC approval. In addition, each share of Class D
Common Stock is also convertible into one share of Class B Common Stock, subject
to certain conditions which may include FCC approval. Except as required by law,
holders of Class C and D Common Stock and Series B Convertible Preferred Stock
have no voting rights.

Holders of shares of Common Stock are entitled to receive dividends as may be
declared by the Board of Directors. Payment of dividends is limited by the terms
of the Mandatory Convertible Preferred Stock.

At December 31, 1998, the Company had reserved (i) approximately 11.9 million
shares of Class A Common Stock for issuance under the Company's Stock Option
Plans (see Note 11), conversion of the outstanding shares of Class B Common
Stock, Class C Common Stock, Class D Common Stock, the Preferred Stock and the
Series B Convertible Preferred Stock, and issuance upon exercise of the warrants
granted to the underwriters in the Company's initial public offering, and (ii)
approximately 802,000 shares of Class B Common Stock reserved for issuance upon
the conversion of the outstanding shares of Class D Common Stock.


                                      F-24
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

7. STOCKHOLDERS' EQUITY (CONTINUED)

UNDERWRITER WARRANTS

In connection with the Company's initial public offering, the Company issued
240,000 warrants to the underwriters, each convertible into one share of the
Company's Class A Common Stock. Each warrant is exercisable for a share of Class
A Common Stock during the three year period commencing September 7, 1997 at an
exercise price equal to $7.43. During 1998, 8,784 warrants were exercised in a
cashless exercise in accordance with the terms of the warrants resulting in the
issuance of 3,112 shares of the Company's Class A Common Stock. The remaining
231,216 of outstanding warrants are currently exercisable and expire September
7, 2000.

8. SEGMENT INFORMATION

The Company classifies its businesses into two fundamental categories, Radio
Broadcasting (consisting of the Company's radio operations) and Other
(consisting of a sports network, a Muzak franchise, and a real estate
subsidiary).

The Company evaluates performance based on several factors, of which the primary
measure is business segment earnings before interest, taxes, depreciation,
amortization and corporate expenses ("Broadcast Cash Flow"). The accounting
policies of the business segments are the same as described above in the summary
of significant accounting policies (Note 2). Intersegment transactions have been
accounted for at fair value as if the transactions were with third parties.

<TABLE>
<CAPTION>
                                                               (in thousands)
                                     Radio                                     Intercompany
                                  Broadcasting      Other        Corporate     Eliminations      Total
                                 ---------------------------------------------------------------------------
              1998                               
<S>                                <C>            <C>           <C>             <C>            <C>        
Net revenue                        $    35,656    $     4,950   $         -     $       (23)   $    40,583
Broadcast cash flow                     12,570          1,285             -               -         13,855
Depreciation and amortization            4,092            365           337               -          4,794
Corporate expense                            -              -         2,077               -          2,077
Deferred compensation                        -              -           141               -            141
Interest expense                         5,491            300           203               -          5,994
Interest income                             18              -            49               -             67
Other expense                              172              -         1,021               -          1,193
                                 ---------------------------------------------------------------------------
Net income (loss) before
   extraordinary item              $     2,833    $       620   $    (3,730)    $         -    $      (277)
                                 ===========================================================================

Assets                             $   120,357    $     5,736   $   120,094     $  (117,045)   $   129,142
                                 ===========================================================================

Capital expenditures               $       796    $       682   $         1     $         -    $     1,479
                                 ===========================================================================
</TABLE>



                                      F-25
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

8. SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                               (in thousands)
                                     Radio                                     Intercompany
                                  Broadcasting      Other        Corporate     Eliminations      Total
                                 ---------------------------------------------------------------------------
              1997
<S>                                <C>             <C>           <C>             <C>            <C>
Net revenue                        $    30,839    $     2,802   $         -     $         -    $    33,641
Broadcast cash flow                      9,731            495             -               -         10,226
Depreciation and amortization            3,579            203           352               -          4,134
Corporate expense                            -              -         2,068               -          2,068
Deferred compensation                        -              -           390               -            390
Interest expense                         4,583             95            88               -          4,766
Interest income                            171              -           230               -            401
Other expense                               91              -            47               -            138
                                 ---------------------------------------------------------------------------
Net income (loss) before
   extraordinary item              $     1,649    $       197   $    (2,715)    $         -    $      (869)
                                 ===========================================================================

Assets                             $   124,250    $     5,010   $   117,074     $  (113,593)   $   132,741
                                 ===========================================================================

Capital expenditures               $       853    $        13   $         3     $         -    $       869
                                 ===========================================================================

              1996
Net revenue                        $    18,963    $         -   $         -     $         -    $    18,963
Broadcast cash flow                      5,285              -             -               -          5,285
Depreciation and amortization            1,288              -           139               -          1,427
Corporate expense                            -              -         1,719               -          1,719
Deferred compensation                        -              -           366               -            366
DOJ information request costs                -              -           300               -            300
Interest expense                           862              -         1,719               -          2,581
Interest income                              -              -           729               -            729
Other expense                                -              -            60               -             60
                                 ---------------------------------------------------------------------------
Net income (loss) before
   extraordinary item              $     3,135    $         -   $    (3,574)    $         -    $      (439)
                                 ===========================================================================

Assets                             $    85,958    $         -   $    67,207     $   (64,771)   $    88,394
                                 ===========================================================================

Capital expenditures               $     1,555    $         -   $         -     $         -    $     1,555
                                 ===========================================================================
</TABLE>

9. COMMITMENTS AND CONTINGENCIES

COMPENSATION AND OTHER AGREEMENTS

The Company and Mr. Feuer entered into an employment agreement commencing
September 13, 1995, which provides that Mr. Feuer will serve as the Company's
President and Chief Executive Officer for a five year term, and provides for an
annual base compensation of $150,000, with annual increases tied to the Consumer
Price Index. Mr. Feuer will also receive a minimum annual bonus and additional
amounts based upon achievement of mutually agreed upon performance goals and
discretionary amounts.


                                      F-26
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

9. COMMITMENTS AND CONTINGENCIES (CONTINUED)

During 1996, 1997 and 1998, the Company made loans to Mr. Feuer which have been
partially offset by bonuses earned (see Note 10).

Concurrently with the execution of the Merger Agreement and a condition to
Capstar entering into the Merger Agreement, Mr. Feuer entered into the
Termination Agreement with Capstar and the Company (the "Termination Agreement")
which as of the Effective Time (as defined in the Merger Agreement), Mr. Feuer
has tendered his resignation as an officer and director of the Company and its
subsidiaries, and his Employment Agreement will be terminated in full in
exchange for a lump-sum payment of $850,000 plus forgiveness of certain loans by
the Company. In the event the Merger is not completed, the Termination Agreement
will terminate without any further obligation by any of the parties.

The Company has a financial consulting agreement with The Sillerman Companies
("TSC"), a related party, by assignment from SCMC, pursuant to which TSC
provides financial and advisory services. The TSC agreement, as amended in
November 1996, provides for annual advisory fees of $500,000 per year. The
Company also pays $2,500 per month as compensation for services provided by TSC
for the Corporate Secretary and investor relations functions. Accrued
liabilities for services under these arrangements aggregated approximately
$47,000, $40,000 and $486,000 as of December 31, 1996, 1997 and 1998,
respectively. Further, TSC may provide additional investment banking and
advisory services for specifically designated projects for fees to be mutually
agreed upon subject to approval by the members of the Board of Directors elected
by the Class A Common Stockholders. Payments under this arrangement in
connection with radio stations acquired and the placement of financing and
issuance of equity were approximately $2,259,000 and $797,000 for the years
ended December 31, 1996 and 1997, respectively. In connection with this
agreement, the Company is required to make advance payments of $500,000 annually
for these investment advisory services which will be repaid only out of fees
earned under the TSC agreement or upon a change of control, as defined.

TSC and the Company have agreed that two thirds of the fees will be deferred
during any period for which the Company is in arrears with respect to payment of
dividends on the Preferred Stock. TSC is entitled to be reimbursed for all
reasonable out of pocket disbursements incurred by TSC in connection with the
performance of services. The Company will also indemnify TSC and its directors,
officers, employees, affiliates and agents, and any person controlling such
persons, with respect to any and all losses, claims, damages or liabilities,
joint or several, to which any such indemnified party may be subject, and any
and all expenses incurred in connection with any such claim, action or
proceedings, insofar as such losses, claims, damages, liabilities, actions,
proceedings or expenses arise out of or are based upon any matters that are the
subject of this agreement,


                                      F-27
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

9. COMMITMENTS AND CONTINGENCIES (CONTINUED)

except with respect to such indemnified amounts that arise out of reckless or
willful misconduct of such indemnified person.

Pursuant to the terms of the Merger Agreement, the financial consulting
agreement with TSC will be terminated and, in connection therewith, the Company
will be required to pay SFX Entertainment, Inc. $2.0 million in cash at the
Effective Time (as defined in the Merger Agreement). (In April 1996, TSC
assigned to SFX Broadcasting its right to receive fees under its financial
consulting agreement with the Company in connection with the termination of
TSC's financial consulting agreement with SFX Broadcasting. SFX Broadcasting
subsequently assigned its rights to SFX Entertainment.) In the event the Merger
is not completed, the financial consulting agreement with TSC will not be
terminated.

LEASE OBLIGATIONS

The Company has entered into various operating and capital leases for the rental
of office space, property and equipment. Future minimum rental payments under
leases with terms greater than one year as of December 31, 1998 are as follows:

<TABLE>
<CAPTION>
                                                    OPERATING LEASES        CAPITAL
                                                                             LEASES
                                                   ------------------- -------------------
<S>                                                 <C>                  <C>        
    1999                                            $      750,765       $    42,684
    2000                                                   581,537            46,448
    2001                                                   435,698            22,518
    2002                                                   389,170                 -
    2003                                                   359,749                 -
    Thereafter                                           2,297,289                 -
                                                   ------------------- -------------------

    Total minimum lease payments                         4,814,208           111,650
    Less imputed interest                                        -           (16,197)
                                                   =================== ===================
    Present value of minimum lease payments         $    4,814,208       $    95,453
                                                   =================== ===================
</TABLE>

Rent expense for the years ended December 31, 1996, 1997 and 1998 was
approximately $416,000, $795,000 and $890,000, respectively. The present value
of minimum capital lease payments is included in accounts payable and accrued
expenses in the accompanying consolidated balance sheets.



                                      F-28
<PAGE>
                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

9. COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Company has entered into various sub-leases to generate income from surplus
tower and office space. Future minimum rental income receipts the Company will
receive under sub-leases with terms greater than one year as of December 31,
1998 are as follows:

                                                           OPERATING
                                                             LEASES
                                                       -------------------

          1999                                           $       140,558
          2000                                                   123,768
          2001                                                   100,800
          2002                                                    84,301
          2003                                                    62,400
          Thereafter                                             301,600
                                                       ===================
          Future minimum rental income receipts          $       813,427
                                                       ===================

In July 1998, a shareholder filed a lawsuit against the Company and its
directors which claimed the consideration to be paid to the holders of the
Depositary Shares, as specified in the Merger Agreement, is unfair. In February
1999, a Memorandum of Understanding was signed that provides for the settlement
of the action in principle. The amount of the settlement, ranging from $0.11 to
$0.37 additional consideration for each Depositary Share depends upon whether
the average last sale price for the Class A Common Stock of the Company over the
twenty trading days ending on the date immediately preceding the Effective Time
(as defined in the Merger Agreement). The additional consideration will be paid
by Capstar. The Memorandum of Understanding provides that the defendants deny
all allegations of wrongdoing but, recognizing the burden, expense and risk
attendant to the litigation, they have concluded that it is desirable that the
claims against them be settled. The proposed settlement is contingent upon
confirmatory discovery by the plaintiff, execution of a definitive settlement
agreement, and court approval. There can be no assurance that the parties will
execute a definitive settlement agreement or that the court will approve the
settlement on the terms and conditions provided for in the Memorandum of
Understanding, or at all.

The Merger Agreement contains termination fees ranging from $1.6 million to $6.0
million, which would be payable by the Company to Capstar, in the event the
Merger Agreement is terminated for certain reasons including the Company's
termination of the Merger Agreement in order for the Company to enter into an
agreement relating to a Superior Proposal (as defined in the Merger Agreement)
or the Capstar's termination of the Merger Agreement if the Company has
outstanding more than a certain number of shares of certain classes of its
capital stock (including derivative securities). Additionally, the Buyer may be
required to pay the Company $12 million if the Merger Agreement is terminated
because the Merger Agreement is not consummated by April 30, 1999 as a result
of certain circumstances, the Merger is permanently enjoined under certain
circumstances or the Buyer or Buyer Sub breaches certain of its representations
and warranties contained in the Merger Agreement. Liabilities to affiliates as
of December 31, 1997 and 1998 include approximately $40,000 and $486,000,
respectively, relating to the financial consulting agreement with TSC.


                                      F-29
<PAGE>
                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

9. COMMITMENTS AND CONTINGENCIES (CONTINUED)

In 1997, the Company loaned Mr. Feuer (Company's President and Chief Executive
Officer), $150,000 which accrues interest at a rate of 7.25%, for which he
pledged 35,294 shares of Class B Common Stock. All interest and principal are
due September 9, 2002. Additionally, during 1998 the Company loaned Mr. Feuer
$50,000 which accrues interest at a rate of 7.25% and is due on April 29, 2003.
The loans have been recorded as long term notes receivable from officer in the
accompanying consolidated balance sheets. In addition, the Company loaned to Mr.
Feuer $25,000 in each of May, July and October 1996, and January 1997. The loans
granted in May and July 1996 were offset against a bonus in the amount of
$50,000 which was approved by the Board on April 30, 1997. On that date, the
Board also granted to Mr. Feuer an additional loan in the amount of $50,000 (the
"Additional Loan"). The loans granted in October 1996 and January 1997 have been
restated to provide, and the Additional Loan provides, that these loans do not
bear interest and mature at September 13, 2000 or, if extended, at the end of
the extension period. The

10. RELATED PARTY TRANSACTIONS

loans further provide that, in the event of a change of control or upon
termination of Mr. Feuer's employment agreement prior to September 13, 2000,
unless extended, these loans will be forgiven. The loans have been recorded as a
long-term notes receivable from officer in the accompanying consolidated balance
sheets. Additionally, the Company loaned to Mr. Feuer $25,000 in each of April,
July and October of 1997 and January, April, July and October of 1998 as advance
payments of his future bonus. These loans to Mr. Feuer have been classified as a
notes receivable from officer in the accompanying consolidated balance sheets.

11. STOCK OPTIONS AND OTHER COMPENSATION PLANS

STOCK OPTION PLANS

The Company's stockholders have approved the Triathlon Broadcasting Company 1995
and 1996 Stock Option Plans (the "Plans"). The Plans provide for a grant of
nonqualified and incentive stock options to purchase up to 600,000 shares of
Class A Common Stock to eligible employees and advisors. Under the 1995 Plan,
options with respect to 111,500 shares of Class A Common Stock were granted on
October 30, 1995 and were comprised of (i) options to purchase 31,500 shares of
Class A Common Stock granted to certain officers, directors and employees are
exercisable at $11.50 per share, have a ten year term and vest in equal
installments on October 30, 1996 and October 30, 1997, and (ii) options to
purchase 80,000 shares of Class A Common Stock granted to Radio Investors and
other affiliates of SCMC are exercisable at $5.50 per share, have a ten year
term and vest in equal installments on October 30, 1996 and 1997.



                                      F-30
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

11. STOCK OPTIONS AND OTHER COMPENSATION PLANS (CONTINUED)

Under the 1996 Plan, options with respect to 136,950 shares of Class A Common
Stock were granted on August 7, 1996 and 2,000 options were granted on July 30,
1997 to certain officers, directors and employees. The options are exercisable
from $7.50 to $7.63 and vest gradually over various periods in accordance with
the terms of the individual awards.

The 1997 Stock Option Plan was approved by the Company's Board of Directors.
However, the Company has not granted any options under that plan.

On April 29, 1998, the Board of Directors granted a total of 7,700 options to
certain officers and directors with an exercise price of $10.625 vesting
gradually over a 5 year period.

In 1996, the Financial Accounting Standards Board issued Statement No. 123,
"Accounting for Stock Based Compensation"("FAS 123") which established financial
accounting and reporting standards for stock based employee compensation plans,
including stock purchase plans, stock options, restricted stock and stock
appreciation rights. As permitted by FAS 123, the Company elected to continue
accounting for stock based compensation in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees."

The Company has adopted the disclosure-only provisions of FAS 123. Accordingly,
no compensation cost has been recognized for the Plans. Had compensation cost
for the Company's Plans been determined based on the fair market value at the
date of grant for the awards in 1996, 1997 and 1998, consistent with the
provisions of FAS 123, the Company's net loss and net loss per common share
would have been as follows:

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                        1996              1997               1998
                                                  ----------------- ------------------ ------------------
<S>                                               <C>               <C>                <C>
   Pro forma net loss applicable to common
     stockholders                                 $(5,453,000)        $(7,612,000)     $  (5,867,000)
   Pro forma loss per basic
     common share                                       (1.13)              (1.56)             (1.20)
</TABLE>

These pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period and additional amounts may be granted in future years. The fair
value of the options was


                                      F-31
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

11. STOCK OPTIONS AND OTHER COMPENSATION PLANS (CONTINUED)

estimated at the date of grant using the Black Scholes model with the following
weighted average assumptions:

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                         1996              1997              1998
                                                   ----------------- ----------------- -----------------

<S>                                                <C>                <C>              <C>
   Expected dividend yield                                    -               -                 -
   Expected stock price volatility                        48.2%             44.7%             40.3%
   Risk free interest rate                                6.43%             6.04%           5.78%
   Expected life of options                               7 years           7 years         5 years
</TABLE>

A summary of the Company's stock option activity, and related information is as
follows:

<TABLE>
<CAPTION>
                                                                       DECEMBER 31
                                                         1996              1997              1998
                                                   ----------------- ----------------- -----------------
<S>                                                <C>               <C>                <C>
   Options outstanding at beginning
     of year                                            111,500           248,450           237,350
   Weighted average option exercise price
                                                          $7.20             $7.43             $7.38
   Options granted                                      136,950             2,000             7,700
   Weighted average option exercise price
                                                          $7.63             $7.50            $10.63
   Options expired or canceled                                -           (13,100)            6,450
   Options outstanding at end of year                   248,450           237,350           238,600
   Weighted average option exercise price
                                                          $7.43             $7.38             $7.47
   Options exercisable at end of year                    55,750           110,400           160,760
</TABLE>

At December 31, 1998, options outstanding had a weighted average exercise price
of $7.47 and expiration dates of October 30, 2005, August 7, 2006, July 30, 2007
and April 29, 2008.

OTHER COMPENSATION PLANS

On October 30, 1995, certain officers and directors received the right to a cash
bonus in the amount of $120,000, representing the difference between $5.50, the
price of the Class A Common Stock at the initial public offering, and $11.50,
the closing price of the Class A Common Stock on October 30, 1995, multiplied by
20,000. The bonus vested in two equal installments on October 30, 1996 and 1997
and will be paid upon the exercise of the


                                      F-32
<PAGE>
                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

11. STOCK OPTIONS AND OTHER COMPENSATION PLANS (CONTINUED)

options. In addition to the option grants under the 1995 Stock Option Plan, on
October 30, 1995, the Company's Board of Directors granted "cash only stock
appreciation rights" with respect to 7,000 shares of Class A Common Stock to
other directors. The amount due for the cash only stock appreciation rights will
be calculated by multiplying the number of shares by the difference between
$5.50 and the price of the Class A Common Stock on October 30, 2000. The rights
vested over the two year period ending October 30, 1997 and will be paid on
October 30, 2000.

On January 31, 1996, the Company granted "cash only stock appreciation rights"
with respect to 4,000 shares of Class A Common Stock to directors of the
Company. The value of these cash only stock appreciation rights will be
calculated by adding the sum of (i) one half of the number of shares times the
difference between $.01 and the price of the Class A Common Stock on January 31,
2001 if, prior to such date, the price of the Class A Common Stock was equal to
or greater than $14.00 for 20 consecutive trading days and (ii) one half of the
number of shares times the difference between $.01 and the price of the Class A
Common Stock on January 31, 2001 if, prior to such date, the price of the Class
A Common Stock was equal to or greater than $15.00 for 20 consecutive trading
days. The cash only stock appreciation rights will be paid on January 31, 2001.

Each cash only stock appreciation right of the Company, whether or not then
exercisable, will be canceled at the Effective Time. Each holder of a canceled
cash only stock appreciation right will be entitled to receive, in
consideration for the cancellation, an amount of cash, without interest, equal
to: (a) with respect to each then outstanding cash only stock appreciation
rights granted January 31, 1996, 50% of the difference between $0.01 and the
Common Stock Merger Consideration or (b) with respect to all other outstanding
cash only stock appreciation rights, the difference between the Common Stock
Merger Consideration and the per share base price of such cash only stock
appreciation rights, in every case less any applicable withholding taxes.

During the years ended December 31, 1996, 1997 and 1998, noncash compensation
charges relating to the issuance of options, Series B Convertible Preferred
Stock and cash only rights aggregated approximately $366,000, $390,000 and
$141,000, respectively.

12. INCOME TAXES

The Company accounts for income taxes using the liability method. Deferred tax
assets and liabilities are recognized for the expected future tax consequences
of events that have been recognized in the consolidated financial statements or
tax returns. For the years ended December 31, 1996, 1997 and 1998, the Company
generated tax losses. Accordingly, no provision for income taxes was recorded.

The Pourtales Acquisition which occurred during 1996 resulted in the recognition
of deferred tax liabilities of approximately $5,128,000 under the purchase
method of accounting. This amount was based upon the excess of the financial
statement basis over the tax basis in net assets, principally FCC Licenses. In
connection with the Pourtales Acquisition, the Company succeeded to
approximately $3,955,000 of net operating loss ("NOL") carryforwards, the
utilization of which are subject to various limitations.

As of December 31, 1998, the Company has approximately $13.0 million of total
remaining NOL carryforwards. Some or all of the Company's NOL carryforwards may
be subject to an annual limitation on future utilization resulting from
historical changes in the


                                      F-33
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

12. INCOME TAXES (CONTINUED)

Company's ownership. Management believes that the imposition of such limitations
would not have a material effect on its consolidated financial position or the
results of operations. Future changes in the Company's ownership could have the
effect of imposing a limitation on the future utilization of the NOLs. The
Company's NOL carryforwards expire at various dates during the seven year period
beginning in 2006.

The principal components of the Company's deferred tax assets and liabilities at
December 31, 1997 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                              DECEMBER 31
                                                                        1997                1998
                                                                 ------------------- -------------------
<S>                                                              <C>                 <C>
    Deferred tax assets:
      Deferred compensation                                       $       226,959     $       184,059
      Net operating loss                                                3,870,144           4,907,593
      Allowance for doubtful accounts                                     230,045             239,405
                                                                 ------------------- -------------------
                                                                        4,327,148           5,331,057
      Valuation allowance                                              (1,951,391)         (1,548,304)
                                                                 ------------------- -------------------
    Total deferred tax assets                                           2,375,757           3,782,753

    Deferred tax liabilities:
      Fixed assets                                                        610,520             836,055
      Intangible assets                                                 9,394,787          10,576,248
                                                                 ------------------- -------------------
    Total deferred tax liabilities                                     10,005,307          11,412,303
                                                                 ------------------- -------------------
    Net deferred tax liabilities                                  $     7,629,550     $     7,629,550
                                                                 =================== ===================
</TABLE>

 The reconciliation of income tax attributable to operations before the
extraordinary item computed at the U.S. federal statutory tax rates to income
tax expense is:


<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                         1996              1997              1998
                                                   ----------------- ----------------- -----------------
<S>                                                 <C>               <C>               <C>          
    Benefit at statutory rate of 35%                $   (248,100)     $   (639,312)     $    (97,187)
    Valuation allowance adjustments                      135,400           452,491          (364,691)
    Restructuring Fees                                         -                 -           350,000
    Deferred compensation                                104,130            68,449            49,488
    Goodwill amortization                                      -            49,920            44,820
    Meals, entertainment and other                         8,570            68,452            17,570
                                                   ================= ================= =================
                                                    $          -      $          -      $          -
                                                   ================= ================= =================
</TABLE>



                                      F-34
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


13. 401(K) PLAN

During 1995, the Company established a 401(k) Plan (the "Plan") for the benefit
of all eligible employees. Eligible participants under the Plan are defined as
all full-time employees with 90 days of service. All eligible participants may
elect to contribute a portion of their compensation to the Plan subject to
Internal Revenue Service limitations. The Company may make discretionary
matching contributions to the Plan, subject to Board of Director approval. No
contributions were made during the Plan years ended December 31, 1996, 1997 and
1998.












                                      F-35
<PAGE>

                 Triathlon Broadcasting Company and Subsidiaries


               Schedule II - Valuation and Qualifying Accounts For
                the years ended December 31, 1996, 1997 and 1998

 
<TABLE>
<CAPTION>
                                                       Additions
                                        Balance at     Charged to                                 Balance at
                                       Beginning of    Costs and                                    End of
Description                               Year         Expenses     Deductions    Acquisitions      Year
-----------                               ----         --------     ----------    ------------      ----
<S>                                   <C>           <C>            <C>           <C>            <C>
Allowance for doubtful accounts:
  Year ended December 31, 1996        $  106,841    $  298,591     $  124,026    $  123,994     $  405,400
  Year ended December 31, 1997           405,400       561,409        376,949             -        589,860
  Year ended December 31, 1998           589,860       239,338        215,280             -        613,918
</TABLE>



                                      S-1