<PAGE>   1
                                                                 EXHIBIT 10.34.1



                                                         [Conformed as Executed]







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




                           LETTER OF CREDIT AGREEMENT


                                      among


                                 R. STEVEN HICKS


                                       and


                              BANKERS TRUST COMPANY



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

                          Dated as of February 12, 1998

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


                                   $8,500,000


--------------------------------------------------------------------------------
<PAGE>   2





                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                                Page
                                                                                                                ----

<S>     <C>                                                                                                       <C>
SECTION 1.  Standby Letter of Credit............................................................................  1
         1.01  Standby Letter of Credit.........................................................................  1
         1.02  Letter of Credit Request.........................................................................  1
         1.03  Agreement to Repay Letter of Credit Drawings.....................................................  2
         1.04  Increased Costs..................................................................................  2

SECTION 2.  Other Credit Terms..................................................................................  3
         2.01  Fees.............................................................................................  3
         2.02  Method and Place of Payment......................................................................  3
         2.03  Net Payments; Taxes..............................................................................  3

SECTION 3.  Conditions Precedent................................................................................  4
         3.01  Effective Date...................................................................................  4
         3.02  Opinion of Counsel...............................................................................  5
         3.03  Adverse Change, etc..............................................................................  5
         3.04  Litigation.......................................................................................  5
         3.05  Approvals, etc...................................................................................  5
         3.06  Payment of Fees..................................................................................  5
         3.07  Guaranty and Purchase Agreement..................................................................  5
         3.08  Settlement Documents.............................................................................  6

SECTION 4.  Representations, Warranties and Agreements..........................................................  6
         4.01  No Violation.....................................................................................  6
         4.02  Litigation.......................................................................................  6
         4.03  Governmental Approvals...........................................................................  6
         4.04  Use of Credit; Margin Regulations................................................................  7
         4.05  True and Complete Disclosure.....................................................................  7
         4.06  Capacity.........................................................................................  7

SECTION 5.  Events of Default...................................................................................  7
         5.01  Payments.........................................................................................  7
         5.02  Representations, etc.............................................................................  7
         5.03  Bankruptcy, etc..................................................................................  8
         5.04  Judgments........................................................................................  8
         5.05  Guaranty and Purchase Agreement..................................................................  8
</TABLE>




                                       (i)


<PAGE>   3

<TABLE>

                                                                                                               Page
                                                                                                               -----
        <S>                                                                                                      <C>
         5.06  Default Under Other Agreements...................................................................  8
         5.07  Change of Ownership..............................................................................  9

SECTION 6.  Definitions.........................................................................................  9

SECTION 7.  Miscellaneous....................................................................................... 14
         7.01  Payment of Expenses, etc......................................................................... 14
         7.02  Right of Setoff.................................................................................. 15
         7.03  Notices.......................................................................................... 15
         7.04  Benefit of Agreement............................................................................. 16
         7.05  No Waiver; Remedies Cumulative................................................................... 16
         7.06  Computations..................................................................................... 16
         7.07  Governing Law; Submission to Jurisdiction; Venue................................................. 16
         7.08  Counterparts..................................................................................... 17
         7.09  Effectiveness.................................................................................... 17
         7.10  Headings Descriptive............................................................................. 17
         7.11  Amendment or Waiver; etc......................................................................... 17
         7.12  Survival......................................................................................... 17
         7.13  Confidentiality.................................................................................. 17
         7.14  Waiver of Jury Trial............................................................................. 18
         7.15  Limitation on Additional Amounts, etc............................................................ 18
</TABLE>

EXHIBIT A - Form of Letter of Credit 
EXHIBIT B - Form of Letter of Credit Request 
EXHIBIT C - Form of Opinion of Vinson & Elkins L.L.P. 
EXHIBIT D - Form of Guaranty and Purchase Agreement



                                      (ii)


<PAGE>   4







                  LETTER OF CREDIT AGREEMENT, dated as of February 12, 1998,
between R. STEVEN HICKS ("Hicks") and BANKERS TRUST COMPANY (the "Bank"). Unless
otherwise defined herein, all capitalized terms used herein and defined in
Section 6 are used herein as so defined.


                              W I T N E S S E T H :


                  WHEREAS, Hicks desires that the Settlement Obligations be
supported by a letter of credit; and

                  WHEREAS, subject to and upon the terms and conditions herein
set forth, the Bank is willing to issue a letter of credit at the request of and
for the account of Hicks;


                  NOW, THEREFORE, IT IS AGREED:


                  SECTION 1. Standby Letter of Credit.

                  1.011 Standby Letter of Credit. (a) Subject to and upon the
terms and conditions herein set forth, Hicks may request the Bank to issue, at
any time and from time to time, on and after the Effective Date and no later
than February 12, 1998, for the account of Hicks and in support of the
Settlement Obligations, and the Bank agrees to issue, subject to and upon the
terms and conditions herein set forth, at any time and from time to time, on
and after the Effective Date and no later than February 12, 1998 following its
receipt of a Letter of Credit Request, an irrevocable standby letter of credit,
in the form of Exhibit A hereto (such letter of credit, the "Letter of Credit").

                  (b) The Stated Amount of the Letter of Credit shall not exceed
the Letter of Credit Commitment.

                  1.012 Letter of Credit Request. When Hicks desires that the
Letter of Credit be issued, Hicks shall give the Bank written notice (or
telephonic notice confirmed in writing) thereof prior to 12:00 Noon (New York
time) at least one Business Day (or such shorter period as may be acceptable to
the Bank) prior to the proposed date of issuance (which shall be a Business
Day), which written notice shall be in the form of Exhibit B hereto (the "Letter
of Credit Request"). The Letter of Credit Request shall include any other
documents as the Bank may reasonably request in connection therewith.

                  1.013 Agreement to Repay Letter of Credit Drawings. (a) Hicks
hereby agrees to



<PAGE>   5



reimburse the Bank, by making payment to the Bank in immediately available funds
at the Payment Office, for any payment or disbursement made by the Bank under
the Letter of Credit (any such amount so paid or disbursed until reimbursed, an
"Unpaid Drawing") on the date of such payment or disbursement, with interest on
the amount so paid or disbursed by the Bank, to the extent not reimbursed prior
to 12:00 Noon (New York time) on the date of such payment or disbursement, from
and including the date paid or disbursed to but not including the date the Bank
is reimbursed therefor at a rate per annum which shall be 2% plus the Base Rate
as in effect from time to time (plus an additional 2% per annum if not
reimbursed by the third Business Day after the date of such payment or
disbursement), such interest also to be payable on demand. The Bank shall
provide Hicks prompt notice of any payment or disbursement made by it under the
Letter of Credit, although the failure of, or delay in, giving any such notice
shall not release or diminish the obligations of Hicks under this Section
1.03(a) or under any other Section of this Agreement.

                  (b) Hicks's obligation under this Section 1.03 to reimburse
the Bank with respect to Unpaid Drawings (including, in each case, interest
thereon) shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which Hicks may
have or have had against the Bank, or any party to the Settlement Documents or
any other Person, including, without limitation, any defense based upon the
failure of a drawing under the Letter of Credit to conform to the terms of the
Letter of Credit or any non-application or misapplication by the beneficiary of
the proceeds of such drawing; provided, however, that Hicks shall not be
obligated to reimburse the Bank for any wrongful payment made by the Bank under
the Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence as determined by a court of competent
jurisdiction on the part of the Bank.

                  1.014 Increased Costs. If after the date hereof, the adoption
or effectiveness of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law) by any such
authority, central bank or comparable agency shall either (i) impose, modify or
make applicable any reserve, deposit, capital adequacy or similar requirement
against the Letter of Credit or (ii) impose on the Bank any other conditions
affecting this Agreement or the Letter of Credit, and the result of any of the
foregoing is to increase the cost to the Bank of issuing or maintaining the
Letter of Credit, or to reduce the amount of any sum received or receivable by
the Bank hereunder, then, upon written demand to Hicks by the Bank, accompanied
by the certificate described in the last sentence of this Section 1.04, Hicks
agrees to pay to the Bank, subject to Section 7.15 (to the extent applicable),
such additional amount or amounts as will compensate the Bank for such increased
cost or reduction. A certificate submitted to Hicks by the Bank, setting forth
the basis for the determination of such additional amount or amounts necessary
to compensate the Bank as aforesaid shall be final, conclusive and binding on
Hicks absent manifest error, although the failure to deliver any such
certificate shall not release or diminish Hicks's obligations to pay additional
amounts pursuant to this Section 1.04 upon subsequent receipt of such
certificate.



                                       -2-


<PAGE>   6


                  SECTION 2. Other Credit Terms.

                  1.021 Fees. (a) Hicks shall pay to the Bank a fee in respect
of the Letter of Credit (the "Letter of Credit Fee") for the period from and
including the date of issuance of the Letter of Credit to and including the
Termination Date of the Letter of Credit, computed at a rate per annum equal to
the Applicable Margin from time to time on Revolving Loans under the Credit
Agreement which bear interest at the Eurodollar Rate therein on the daily Stated
Amount of the Letter of Credit. Accrued Letter of Credit Fees shall be due and
payable quarterly in arrears and on the Termination Date.

                  (b) Hicks shall pay to the Bank a facility fee in respect of
the Letter of Credit issued (the "Issuance Fee"), equal to $85,000. The Issuance
Fee shall be due and payable on the Issuance Date.

                  (c) Hicks hereby agrees to pay to the Bank upon each issuance
of, drawing under, and/or amendment of, the Letter of Credit such amount as
shall at the time of such issuance, drawing or amendment be the administrative
charge which the Bank is customarily charging for issuances of, drawings under
or amendments of, letters of credit issued by it.

                  (d) Hicks shall pay to the Bank such other fees (if any) as
may be agreed to from time to time between Hicks and the Bank, when and as due.

                  (e) All computations of Fees shall be made in accordance with
Section 7.06.

                  1.022 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made to
the Bank not later than 12:00 Noon (New York time) on the date when due and
shall be made in immediately available funds and in U.S. Dollars at the Payment
Office. Any payments under this Agreement which are made later than 12:00 Noon
(New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.

                  1.023 Net Payments; Taxes. (a) All payments made by Hicks
hereunder will be made without setoff, counterclaim or other defense. All such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein with respect
to such payments (but excluding, except as provided in the second succeeding
sentence, any tax imposed on or measured by the net income or net profits of the
Bank, pursuant to the laws of the jurisdiction in which it is organized or the
jurisdiction in which the principal office or applicable lending office of the
Bank is



                                       -3-


<PAGE>   7

located or any subdivision thereof or therein) and all interest, penalties or
similar liabilities with respect to such non-excluded taxes, levies, imposts,
duties, fees or other charges (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, Hicks agrees to pay the full
amount of such Taxes, and such additional amounts as may be necessary so that
every payment of all amounts due under this Agreement, after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein. If any amounts are payable in respect of Taxes pursuant to
the preceding sentence, Hicks agrees to reimburse the Bank, upon the written
request of the Bank, for taxes imposed on or measured by the net income or net
profits of the Bank pursuant to the laws of the jurisdiction in which the Bank
is organized or in which the principal office or applicable lending office of
the Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the Bank is organized or in which
the principal office or applicable lending office of the Bank is located and for
any withholding of income or similar taxes as the Bank shall determine are
payable by, or withheld from, the Bank in respect of such amounts so paid to or
on behalf of the Bank pursuant to the preceding sentence and in respect of any
amounts paid to or on behalf of the Bank pursuant to this sentence. Hicks will
furnish to the Bank within 45 days after the date the payment of any Taxes is
due pursuant to applicable law certified copies of tax receipts evidencing such
payment by Hicks. Hicks agrees to indemnify and hold harmless the Bank, and 
reimburse the Bank upon its written request, for the amount of any Taxes so 
levied or imposed and paid by the Bank.

                  (b) If Hicks pays any additional amount under this Section
2.03 to the Bank and the Bank receives or realizes in connection therewith any
refund or any reduction of, or credit against, its Tax liabilities in or with
respect to the taxable year in which the additional amount is paid, the Bank
shall pay to Hicks an amount equal to the net benefit, after tax, which was
obtained by the Bank in such year as a consequence of such refund, reduction or
credit. The Bank will notify Hicks promptly of any such refund, reduction or
credit.

                  SECTION 3. Conditions Precedent. The obligation of the Bank to
issue the Letter of Credit hereunder is subject, at the time of such issuance to
the satisfaction of the following conditions:

                  1.031 Effective Date. The Effective Date shall have occurred.

                  1.032 Opinion of Counsel. The Bank shall have received an
opinion, addressed to the Bank and dated the date of such issuance, from Vinson
& Elkins L.L.P. counsel to Hicks and the Borrower, which opinion shall cover the
matters contained in Exhibit C and such other matters, including the
enforceability of the Guaranty and Purchase Agreement, incident to the
transactions contemplated herein as the Bank may reasonably request.

                  1.033 Adverse Change, etc. Nothing shall have occurred (and
the Bank shall have become aware of no facts or conditions not previously known)
which the Bank shall determine (a) has,



                                       -4-


<PAGE>   8


or could reasonably be expected to have, a material adverse effect on the rights
or remedies of the Bank, or on the ability of Hicks or the Borrower to perform
his or its respective obligations to the Bank hereunder or under the other L/C
Documents, as applicable.

                  1.034 Litigation. There shall be no actions, suits or
proceedings pending or threatened (a) with respect to the issuance of the Letter
of Credit or this Agreement or (b) which the Bank shall determine could
reasonably be expected to have a material adverse effect on the rights or
remedies of the Bank hereunder or under the other L/C Documents or on the
ability of Hicks or the Borrower to perform his or its obligations to the Bank
hereunder or under the other L/C Documents, as applicable.

                  1.035 Approvals, etc. All necessary governmental (domestic and
foreign) and third party approvals in connection with this Agreement and the
other L/C Documents and otherwise referred to herein or therein shall have been
obtained and remain in full force and effect and evidence thereof shall have
been provided to the Bank. Additionally, there shall not exist any judgment,
order, injunction or other restraint issued or filed or a hearing seeking
injunctive relief or other restraint pending or notified prohibiting or imposing
materially adverse conditions upon the issuance of any Letter of Credit or the
transactions contemplated by this Agreement and the other L/C Documents.

                  1.036 Payment of Fees. All costs, fees and expenses, and all
other compensation contemplated by this Agreement, due to the Bank (including,
without limitation, legal fees and expenses) shall have been paid to the extent
due.

                  1.037 Guaranty and Purchase Agreement. A Guaranty and Purchase
Agreement (as may be amended, restated or modified from time to time, the
"Guaranty and Purchase Agreement") shall have been entered into between Capstar
Radio Broadcasting Partners, Inc. (the "Borrower") and the Bank, dated as of
February 12, 1998, in respect of Hicks's obligations under this Agreement, under
which the Borrower, in certain circumstances as fully described therein, shall
be required to make certain payments on behalf of Hicks, which Guaranty and
Purchase Agreement shall be in the form attached hereto as Exhibit D.

                  1.038 Settlement Documents. The Bank shall receive true and
correct copies of the Settlement Documents and the provisions relating to the
Settlement Obligations and the Letter of Credit shall be satisfactory to the
Bank.

                  The acceptance of the benefits of the issuance of the Letter
of Credit shall constitute a representation and warranty by Hicks to the Bank
that all of the applicable conditions specified above exist as of the date of
such issuance. All of the certificates, legal opinions and other documents and
papers referred to in this Section 3, unless otherwise specified, shall be
delivered to the Bank at its Notice Office and shall be satisfactory in form and
substance to the Bank.

                  SECTION 4. Representations, Warranties and Agreements. In
order to induce the



                                       -5-


<PAGE>   9


Bank to enter into this Agreement and to issue the Letter of Credit provided for
herein, Hicks makes the following representations, warranties and agreements
with the Bank, all of which shall survive the execution and delivery of this
Agreement and the issuance of the Letter of Credit.

                  1.041 No Violation. Neither the execution, delivery or
performance by Hicks of the L/C Documents to which he is a party nor compliance
by him with the terms and provisions thereof, nor the consummation of the
transactions contemplated therein, (i) will contravene any applicable provision
of any law, statute, rule or regulation, or any order, writ, injunction or
decree of any court or governmental instrumentality or (ii) will conflict or be
inconsistent with or result in any breach of, any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien upon
any of the property or assets of Hicks pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement, credit agreement or any other agreement
or instrument to which Hicks is a party or by which he or any of his property or
assets are bound or to which he may be subject.

                  1.042 Litigation. To the knowledge of Hicks, there are no
actions, suits or proceedings pending or threatened, (i) with respect to any
Document or (ii) that could reasonably be expected to have a material adverse
effect on the rights or remedies of the Bank or on the ability of Hicks or the
Borrower to perform his or its respective obligations to the Bank hereunder or
under the other L/C Documents. Additionally, to the knowledge of Hicks, there
does not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the issuance of the Letter of Credit.

                  1.043 Governmental Approvals. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any foreign or domestic governmental or public body or
authority, or any subdivision thereof, or any other third party, is required to
authorize or is required in connection with (i) the execution, delivery and
performance of any L/C Document to which Hicks is a party or (ii) the legality,
validity, binding effect or enforceability of such L/C Document.

                  1.044 Use of Credit; Margin Regulations. Neither the Letter of
Credit nor the proceeds of any extension of credit under this Agreement will be
used for the purpose, whether immediate, incidental or ultimate, of buying or
carrying any margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System) or to extend credit to others for the
purpose of buying or carrying any such margin stock. The issuance of the Letter
of Credit will not violate or be inconsistent with the provisions of Regulation
G, T, U or X of the Board of Governors of the Federal Reserve System.

                  1.045 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
Hicks or the Borrower in writing to the Bank for purposes of or in connection
with this Agreement, the other L/C Documents or any transaction contemplated
herein or therein is, and all other such factual information (taken as a whole)



                                       -6-


<PAGE>   10


hereafter furnished by or on behalf of any such Persons in writing to the Bank
will be, true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading in any
material respect at such time in light of the circumstances under which such
information was provided.

                  1.046 Capacity. Hicks has the mental and legal capacity to
execute, deliver and perform the terms and provisions of each of the Documents
to which he is a party. Hicks has duly executed and delivered each of the L/C
Documents to which he is a party, and each of such L/C Documents constitutes the
legal, valid and binding obligation of Hicks enforceable in accordance with its
terms, except to the extent that the enforceability thereof may be limited by
applicable bankruptcy or similar laws generally affecting creditors' rights and
by equitable principles (regardless of whether enforcement is sought in equity
or at law).

                  SECTION 5. Events of Default. Upon the occurrence of any of
the following specified events (each, an "Event of Default"):

                  1.051 Payments. Hicks shall default in the payment when due of
(i) any Unpaid Drawing for two or more Business Days after the date the drawing
was made or (ii) any interest on any Unpaid Drawing, or any Fees or any other
amounts owing to the Bank hereunder or under any other L/C Document, and such
default shall continue unremedied for a period of three or more Business Days;
or

                  1.052 Representations, etc. Any representation, warranty or
statement made by Hicks herein or by Hicks or the Borrower in any other L/C
Document or in any certificate delivered pursuant hereto or thereto shall prove
to be untrue in any material respect on the date as of which made or deemed
made; or

                  1.053 Bankruptcy, etc. Hicks or the Borrower shall commence a
voluntary case concerning himself or itself under Title 13 or Title 11 of the
United States Code entitled "Bankruptcy," as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Hicks or the Borrower and the petition is not controverted within 10
days, or is not dismissed within 60 days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of Hicks or the Borrower, or Hicks
or the Borrower commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to Hicks or the Borrower, or there is commenced against Hicks or
the Borrower or any such proceeding which remains undismissed for a period of
60 days, or Hicks or the Borrower is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or Hicks or the Borrower suffers any appointment of any custodian or the like
for any substantial part of his property to continue undischarged or unstayed
for a period of 60 days; or Hicks or the



                                       -7-


<PAGE>   11


Borrower makes a general assignment for the benefit of creditors; or

                  1.054 Judgments. One or more judgments or decrees shall be
entered against Hicks involving a liability (not paid or fully covered by a
reputable and solvent insurance company) and such judgments and decrees either
shall be final and non-appealable or shall not be vacated, discharged or stayed
or bonded pending appeal for any period of 60 consecutive days, and the
aggregate amount of all such judgments exceeds $2,500,000; or

                  1.055 Guaranty and Purchase Agreement. The Borrower shall
breach or default in the performance of its obligations under the Guaranty and
Purchase Agreement, or the Borrower, or any Person acting on behalf of the
Borrower, shall deny or disaffirm the Borrower's obligation thereunder, or a
"Guarantor Event of Default" shall have occurred thereunder; or

                  1.056 Default Under Other Agreements. Hicks or the Borrower
shall (i) default in any payment with respect to any Indebtedness (including the
Credit Agreement) beyond the period of grace, if any, applicable thereto or (ii)
default in the observance or performance of any agreement or condition relating
to any such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition results in acceleration
or the renegotiation of the material payment terms of any such Indebtedness to
become due prior to its stated maturity, or (iii) any such Indebtedness of Hicks
or the Borrower shall be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment, prior to the
stated maturity thereof, provided that it shall not be a Default or Event of
Default under this Section 5.06 unless the aggregate principal amount of all
Indebtedness as described in preceding clauses (i) through (iii), inclusive, is
at least $100,000; or

                  1.057 Change of Ownership. A Change of Ownership shall occur;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Bank, may by written notice to Hicks, take any or
all of the following actions (provided that, if an Event of Default specified in
Section 5.03 shall occur with respect to Hicks, the result which would occur
upon the giving of written notice by the Bank to Hicks as specified in clause
(i) below shall occur automatically without the giving of any such notice): (i)
declare all Obligations (including Unpaid Drawings) owing hereunder to be,
whereupon the same shall become, forthwith due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
Hicks; and (ii) direct Hicks to pay (and Hicks agrees that upon receipt of such
notice, or upon the occurrence of an Event of Default specified in Section 5.03,
he will pay) to the Bank at the Payment Office such additional amount of cash,
to be held as security by the Bank, as is equal to the aggregate Stated Amount
of the issued and outstanding Letter of Credit; provided that the Bank shall
return such additional amount of cash held as security to Hicks on the date upon
which the Letter of Credit has been terminated, and all Obligations have been
paid in full.




                                       -8-


<PAGE>   12



                  SECTION 6. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:

                  "Adjusted Certificate of Deposit Rate" shall mean, on any day,
the sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by
dividing (x) the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market as
published in the most recent Federal Reserve System publication entitled "Select
Interest Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Bank on the basis of quotations for such
certificates received by it from three certificate of deposit dealers in New
York of recognized standing or, if such quotations are unavailable, then on the
basis of other sources reasonably selected by the Bank, by (y) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements as
specified in Regulation D applicable on such day to a three-month certificate of
deposit of a member bank of the Federal Reserve System in excess of $100,000
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves), plus (2) the then daily net annual assessment rate as
estimated by the Bank for determining the current annual assessment payable by
the Bank to the Federal Deposit Insurance Corporation for insuring three month
certificates of deposit.

                  "Affiliate" shall mean, with respect to any Person, any other
Person (including for purposes of the definition of HMTF Group only, all
directors, officers and partners of such Person) directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
such Person. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such other Person, whether through the ownership
of voting securities, by contract or otherwise.

                  "Agreement" shall mean this Letter of Credit Agreement, as the
same may be from time to time modified, amended and/or supplemented.

                  "Bank" shall have the meaning provided in the first paragraph
of this Agreement.

                  "Bankruptcy Code" shall have the meaning provided in Section
5.03

                  "Base Rate" at any time shall mean the higher of (x) the rate
which is 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate and (y)
the Prime Lending Rate.

                  "Borrower" shall have the meaning set forth in Section 3.07.

                  "Business Day" shall mean any day excluding Saturday, Sunday
and any day which shall be in the City of New York a legal holiday or a day on
which banking institutions are authorized



                                       -9-


<PAGE>   13






by law or other governmental actions to close.

                  "Change of Ownership" shall mean a "Change of Ownership" as
defined in the Credit Agreement.

                  "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder. Section references to the Code are to the Code, as in effect
at the Effective Date, and to any subsequent provision of the Code, amendatory
thereof, supplemental thereto or substituted therefor.

                  "Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of any such primary obligation or
(y) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made (or, if less, the maximum
amount of such primary obligation for which such Person may be liable pursuant
to the terms of the instrument evidencing such Contingent Obligation) or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.

                  "Credit Agreement" shall mean the Amended and Restated Credit
Agreement, dated as of February 20, 1997 and amended and restated as of August
12, 1997, among Capstar Broadcasting Corporation, Capstar Broadcasting Partners,
Inc., the Borrower, the lenders party thereto from time to time, BankBoston,
N.A., as Managing Agent, Nationsbank of Texas, N.A., as Syndication Agent, The
Bank of New York, as Documentation Agent, and Bankers Trust Company, as
Administration Agent, as in effect on the Effective Date and without giving
effect to any amendment, modification, supplement or waiver thereof (unless
expressly consented to by the Bank).

                  "Default" shall mean any event, act or condition which with
notice or lapse of time or both would constitute an Event of Default.

                  "Effective Date" shall have the meaning provided in Section
7.09.



                                      -10-


<PAGE>   14






                  "Escrow Agreement" shall mean the Deposit Escrow Agreement
dated as of February 9, 1998 among Elinor Lewis Stephens, August Communications,
Inc., Grass Roots Radio, Inc. and R. Steven Hicks, and Norwest Bank Texas, N.A.,
as Escrow Agent.

                  "Event of Default" shall have the meaning provided in Section
5.

                  "Fees" shall mean all amounts payable pursuant to, or referred
to, in Section 2.01.

                  "GAAP" shall mean generally accepted accounting principles in
the United States.

                  "Hicks" shall have the meaning provided in the first paragraph
of this Agreement.

                  "Indebtedness" shall mean, as to any Person, without
duplication, (i) all indebtedness (including principal, interest, fees and
charges) of such Person for borrowed money, (ii) the maximum amount available to
be drawn under all letters of credit issued for the account of such Person and
all unpaid drawings in respect of such letters of credit, (iii) all Indebtedness
of the types described in clause (i), (ii) or (iv) of this definition secured by
any Lien on any property owned by such Person, whether or not such Indebtedness
has been assumed by such Person (to the extent of the value of the respective
property) and (iv) all Contingent Obligations of such Person.

                  "Issuance Date" shall mean the date upon which the conditions
set forth in Section 3 have been satisfied and the Letter of Credit is issued
hereunder.

                  "Issuance Fee" shall have the meaning provided in Section
2.01(b).

                  "L/C Documents" shall mean this Agreement, the Letter of
Credit, Letter of Credit Request and the Guaranty and Purchase Agreement.

                  "Letter of Credit" shall have the meaning provided in Section
1.01.

                  "Letter of Credit Commitment" shall mean $8,500,000.

                  "Letter of Credit Fee" shall have the meaning provided in
Section 2.01(a).

                  "Letter of Credit Request" shall have the meaning provided in
Section 1.02.

                  "Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other) or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any



                                      -11-


<PAGE>   15


of the foregoing).

                  "Notice Office" shall mean the office of the Bank located at
One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006 Attention:
Mary Kay Coyle or such other office as the Bank may designate to the Hicks from
time to time.

                  "Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Bank pursuant to the terms of this Agreement or any other L/C
Document.

                  "Payment Office" shall mean the office of the Bank located at
One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006 or such
other office as the Bank may designate to Hicks from time to time.

                  "Person" shall mean any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or instrumentality
thereof.

                  "Prime Lending Rate" shall mean the rate which the Bank
announces from time to time as its prime lending rate, the Prime Lending Rate to
change when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. The Bank may make commercial loans or other
loans at rates of interest at, above or below the Prime Lending Rate.

                  "Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.

                  "Returns" shall have the meaning provided in Section 4.07.

                  "Settlement Agreement" shall mean the Settlement Agreement
made as of January 30, 1998 by and between Elinor Lewis Stephens, August
Communications Group, Inc., Grass Roots Radio, Inc. and Hicks.

                  "Settlement Documents" shall mean the Settlement Agreement,
the Escrow Agreement and all other agreements, instruments and documents entered
into or to be entered into in connection therewith which the Bank in its
discretion may reasonably request to review.

                  "Settlement Obligations" shall mean the obligation of Hicks to
pay the Settlement Sum as described in the Settlement Agreement.

                  "Stated Amount" shall mean, for the Letter of Credit, at any
time, the maximum



                                      -12-


<PAGE>   16



amount available to be drawn thereunder (determined without regard to whether
any conditions for drawing could then be met).

                  "Stated Expiry Date" shall have the meaning provided in the
Letter of Credit.

                  "Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.

                  "Taxes" shall have the meaning provided in Section 2.03.

                  "Termination Date" shall mean the earlier of (i) the date on
which the Letter of Credit is terminated in accordance with its terms and (ii)
the date on which the Letter of Credit is returned to the Bank undrawn for
cancellation.

                  "UCC" shall mean the Uniform Commercial Code as in effect from
time to time in the relevant jurisdiction.

                  "Unpaid Drawing" shall have the meaning provided in Section
1.03(a).

                  "U.S. Dollars" and the sign "$" shall each mean freely
transferable lawful money of the United States of America.

                  "Written," "written" or "in writing" shall mean any form of
written communication or a communication by means of telex, facsimile device,
telegraph or cable.

                  SECTION 7.  Miscellaneous.

                  1.071 Payment of Expenses, etc. Hicks shall: (i) whether or
not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Bank (including, without limitation, the
reasonable fees and disbursements of White & Case) in connection with the
preparation, execution and delivery of this Agreement and the other L/C
Documents and the documents and instruments referred to herein and therein and
any amendment, waiver or consent relating hereto or thereto, and of the Bank in
connection with the enforcement of this Agreement and the other L/C Documents
and the documents and instruments referred to herein and therein (including,
without limitation, the reasonable fees and disbursements of counsel (including
in-house counsel) for the Bank; (ii) pay and hold the Bank harmless from and
against any and all present and future stamp, excise and other similar taxes
with respect to the foregoing matters and



                                      -13-


<PAGE>   17



save the Bank harmless from and against any and all liabilities with respect to
or resulting from any delay or omission (other than to the extent attributable
to the Bank) to pay such taxes; and (iii) indemnify the Bank and each of its
officers, directors, employees, representatives and agents from and hold each
of them harmless against any and all liabilities, obligations (including
removal or remedial actions), losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses and disbursements (including reasonable
attorneys' and consultants' fees and disbursements) incurred by, imposed on or
assessed against any of them as a result of, or arising out of, or in any way
related to, or by reason of, (a) any investigation, litigation or other
proceeding (whether or not the Bank is a party thereto) related to the entering
into and/or performance of this Agreement or any other L/C Document or the use
of any Letter of Credit or the consummation of any transactions contemplated
herein or in any other L/C Document or the exercise of any of their rights or
remedies provided herein or in the other L/C Documents, or (b) the actual or
alleged presence of hazardous materials in the air, surface water or
groundwater or on the surface or subsurface of any real property owned, leased
or at any time operated by Hicks, the release, generation, storage,
transportation, handling or disposal of hazardous materials at any location,
whether or not owned, leased or operated by Hicks, the non-compliance of any
real property with foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable to any real
property, or any environmental claim asserted against Hicks, his operations or
any real property owned, leased or at any time operated by Hicks, including, in
each case, without limitation, the reasonable fees and disbursements of counsel
and other consultants incurred in connection with any such investigation,
litigation or other proceeding (but excluding any losses, liabilities, claims,
damages or expenses to the extent incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified). To the extent that the
undertaking to indemnify, pay or hold harmless the Bank set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Hicks shall make the maximum contribution to the payment and
satisfaction of each of the indemnified liabilities which is permissible under
applicable law.


                  1.072 Right of Setoff. In addition to any rights now or 
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of an Event of Default, the
Bank is hereby authorized at any time or from time to time, without 
presentment, demand, protest or other notice of any kind to Hicks or to any
other Person, any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by the Bank (including, without
limitation, by branches and agencies of the Bank wherever located) to or for
the credit or the account of Hicks against and on account of the Obligations
and liabilities of Hicks to the Bank under this Agreement or under any of the
other L/C Documents, and all other claims of any nature or description arising
out of or connected with this Agreement or any other L/C Document, irrespective
of whether or not the Bank shall have made any demand hereunder and although
said Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.

                  1.073 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or



                                      -14-


<PAGE>   18

cable communication) and mailed, telecopied or delivered, if to Hicks, at the
address specified opposite its signature below; if to the Bank, at the Notice
Office; or, at such other address as shall be designated by any party in a
written notice to the other parties hereto. All such notices and communications
shall, when mailed or telecopied or sent by overnight courier, be effective when
deposited in the mails, delivered to the overnight courier, or sent by
telecopier, except that notices and communications to the Bank shall not be
effective until received by the Bank.

                  1.074 Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided, however, Hicks may not assign or
transfer any of his rights, obligations or interest hereunder or under any other
L/C Document without the prior written consent of the Bank.

                  1.075 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Bank in exercising any right, power or privilege hereunder or
under any other L/C Document and no course of dealing between Hicks and the Bank
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder or under any other L/C Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights, powers and remedies herein or
in any other L/C Document expressly provided are cumulative and not exclusive
of any rights, powers or remedies which the Bank would otherwise have. No notice
to or demand on Hicks in any case shall entitle Hicks to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Bank to any other or further action in any circumstances without
notice or demand.

                  1.076 Computations. All computations of interest and Fees
hereunder shall be made on the actual number of days elapsed over a year of 360
days.

                  1.077 Governing Law; Submission to Jurisdiction; Venue. (a)
THIS AGREEMENT AND THE OTHER L/C DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE LETTER OF CREDIT
IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993
REVISION) ICC PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL, AS TO
MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING, WITHOUT LIMITATION,
ARTICLE 5 OF THE UCC AS IN EFFECT IN THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Agreement or any other L/C Document may be
brought in the courts of the State of New York or of the United States for the
Southern District of New York, and, by execution and delivery of this Agreement,
Hicks hereby irrevocably accepts for himself and in respect of his property,
generally and unconditionally, the jurisdiction of the aforesaid courts. Hicks
hereby further irrevocably waives any claim that any such courts lack
jurisdiction over Hicks, and agrees not to plead or claim, in any legal action
or proceeding



                                      -15-


<PAGE>   19

with respect to this Agreement brought in any of the aforesaid courts, that any
such court lacks jurisdiction over Hicks. Hicks irrevocably consents to the
service of process in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to Hicks at its
address set forth opposite its signature below, such service to become effective
30 days after such mailing. Hicks hereby irrevocably waives any objection to
such service of process and further irrevocably waives and agrees not to plead
or claim in any action or proceeding commenced hereunder that service of process
was in any way invalid or ineffective. Nothing herein shall affect the right of
the Bank to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against Hicks in any other jurisdiction.

                  (b) Hicks hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other L/C
Document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.

                  1.078 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A
complete set of counterparts executed by all the parties hereto shall be lodged
with Hicks and the Bank.

                  1.079 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which Hicks and the Bank shall have executed
and delivered a counterpart hereof (whether the same or different counterparts).

                  7.10 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.

                  7.11 Amendment or Waiver; etc. Neither this Agreement, nor any
other L/C Document, nor any terms hereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by Hicks and the Bank.

                  7.12 Survival. All indemnities set forth herein including,
without limitation, in Sections 1.04, 2.03 and 7.01, shall survive the execution
and delivery of this Agreement, the issuance of any Letter of Credit and the
repayment of all Obligations.

                  7.13 Confidentiality. (a) Subject to the provisions of clause
(b) of this Section 7.13, the Bank agrees that it will use its best efforts not
to disclose without the prior consent of Hicks (other than to its employees,
auditors, counsel or other professional advisors or to Affiliates if the Bank or
the Bank's holding or parent company in its reasonable discretion determines
that any such party



                                      -16-


<PAGE>   20

should have access to such information, provided such Persons shall be subject
to the provisions of this Section 7.13 to the same extent as the Bank) any
information with respect to Hicks which is furnished pursuant to this Agreement
and which is designated by Hicks to the Bank in writing as confidential;
provided that the Bank may disclose any such information (i) as has become
generally available to the public or has become available to the Bank on a
non-confidential basis, (ii) as may be required or appropriate in any report,
statement or testimony submitted to any municipal, state or Federal regulatory
body having or claiming to have jurisdiction over the Bank or to the Federal
Reserve Board or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their successors,
(iii) as may be required or appropriate in response to any summons or subpoena
or in connection with any litigation, (iv) in order to comply with any law,
order, regulation or ruling applicable to the Bank, and (v) to any prospective
participant in any Letter of Credit; provided that such prospective participant
shall be subject to the provisions of this Section 7.13 to the same extent as
the Bank.

                  (b) Hicks hereby acknowledges and agrees that the Bank may
share with any of its affiliates any information related to Hicks (including,
without limitation, any nonpublic customer information regarding the
creditworthiness of Hicks), provided that such Persons shall be subject to the
provisions of this Section 7.13 to the same extent as the Bank.

                  7.14 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
OTHER L/C DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

                  7.15 Limitation Additional Amounts, etc. Notwithstanding
anything contained in Section 1.04, unless the Bank gives notice to Hicks that
it is obligated to pay any amount under such Section within six months after the
date the Bank incurs any increased costs or reduction in amounts received or
receivable hereunder, then the Bank shall only be entitled to be compensated for
such amount by Hicks pursuant to said Section 1.04 to the extent such increased
cost or reduction in amounts received or receivables hereunder are incurred or
suffered on or after the date which occurs six months prior to the Bank giving
notice to Hicks that is obligated to pay any such additional amount pursuant to
Section 1.04; provided that if the circumstances giving rise to such claims have
a retroactive effect then such six month period shall be extended to include the
period of such retroactive effect.



                                      -17-


<PAGE>   21


                  IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.




[Address]                                             R. STEVEN HICKS

                                                       /s/ R. STEVEN HICKS
                                                      -----------------------



One Bankers Trust Plaza                               BANKERS TRUST COMPANY
130 Liberty Street
New York, New York  10006
Attn: Mary Kay Coyle                                 By        /s/
                                                       ----------------------
                                                              Title: